<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 8, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AVNET, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEW YORK 5065 11-1890605
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
2211 SOUTH 47TH STREET
PHOENIX, ARIZONA 85034
(480) 643-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAVID R. BIRK, ESQ.
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
AVNET, INC.
2211 SOUTH 47TH STREET
PHOENIX, ARIZONA 85034
(480) 643-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
RICHARD R. HOWE, ESQ. D. STEPHEN ANTION, ESQ.
SULLIVAN & CROMWELL 1999 AVENUE OF THE STARS, SUITE 700
125 BROAD STREET LOS ANGELES, CALIFORNIA 90067-6035
NEW YORK, NEW YORK 10004-2498 (310) 553-6700
(212) 558-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement and the effective time of the merger of Avnet, Inc. and Marshall
Industries as described in the Amended and Restated Agreement and Plan of Merger
dated as of June 25, 1999.
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. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ------------
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE(3)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1.00
per share................... 7,624,003 shares N/A $612,774,516 $170,351.32
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the estimated maximum number of shares of Avnet, Inc. ("Avnet")
common stock that may be issued upon consummation of the merger (the
"Merger") of Marshall Industries ("Marshall") with and into Avnet based upon
the highest exchange ratio possible in the merger (0.91765 shares of Avnet
common stock for 8,308,182 shares of Marshall common stock).
(2) Pursuant to Rules 457(f)(1) and 457(c) under the Securities Act of 1933, as
amended, the registration fee is based on the market value of Marshall
shares to be received by Avnet in the merger, as established by the average
of the high and low sale prices on September 2, 1999 of the Marshall common
stock on the New York Stock Exchange, which was $36.875.
(3) Calculated by multiplying .000278 by the proposed maximum aggregate offering
price. Pursuant to Rule 457, a portion of the registration fee is offset by
$130,830 of fees previously paid in connection with the Schedule 14A filed
jointly by the Registrant and Marshall Industries on August 20, 1999.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
MARSHALL INDUSTRIES AVNET, INC.
JOINT PROXY STATEMENT/PROSPECTUS
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
Dear Fellow Shareholders:
The boards of directors of Marshall Industries and Avnet, Inc. have each
called special meetings of shareholders for October 19, 1999 at which you will
be asked to consider and to vote upon the merger of our companies. As a result
of the merger, Avnet, the surviving company, will be one of the largest
electronics distribution businesses in the world.
In the merger, holders of Marshall common stock will receive, in exchange
for each share they hold, either $39.00 in cash or 0.81569 of a share of common
stock of Avnet (subject to variation between 0.74772 and 0.91765 of a share
depending upon closing prices of Avnet common stock before the date of the
Marshall special meeting) or a combination of cash and Avnet common stock. Each
share of Avnet common stock outstanding before the merger will remain
outstanding and will not be changed by the merger. The merger will be tax-free
to Marshall shareholders except to the extent that they receive cash as part of
the merger consideration or in lieu of fractional shares.
YOUR VOTE IS VERY IMPORTANT. We cannot complete the merger unless the
shareholders of both companies adopt the merger agreement. You are cordially
invited to attend your shareholders' meeting. Whether or not you plan to attend,
please complete and mail the enclosed proxy card to us or, to the extent
available, provide your voting instructions by telephone or through the Internet
in accordance with the accompanying instructions. IF YOU DO NOT RETURN YOUR CARD
OR INSTRUCT YOUR BROKER HOW TO VOTE ANY SHARES HELD IN YOUR BROKER'S NAME, THE
EFFECT WILL BE THE SAME AS A VOTE AGAINST THE MERGER AGREEMENT.
The dates, times and places of the special meetings are as follows:
<TABLE>
<S> <C>
FOR MARSHALL SHAREHOLDERS: FOR AVNET SHAREHOLDERS:
9320 Telstar Avenue The Pointe Hilton at South Mountain
El Monte, California 91731 Resort Hotel
10:00 a.m., October 19, 1999 7777 South Pointe Parkway
Phoenix, Arizona 85044
10:00 a.m., October 19, 1999
</TABLE>
This Joint Proxy Statement/Prospectus gives you detailed information about
the merger. It includes the merger agreement attached as Appendix A. You can
also obtain information about our companies from publicly available documents
that we have filed with the Securities and Exchange Commission. We encourage you
to read this entire document carefully.
WE ENTHUSIASTICALLY SUPPORT THIS MERGER OF OUR COMPANIES AND JOIN WITH OUR
OTHER DIRECTORS IN RECOMMENDING THAT YOU VOTE "FOR" THE APPROVAL OF THE MERGER
AGREEMENT.
<TABLE>
<S> <C>
GORDON MARSHALL ROY VALLEE
Chairman of the Board Chairman of the Board
Marshall Industries and Chief Executive Officer
Avnet, Inc.
</TABLE>
PLEASE SEE PAGE 13 FOR RISK FACTORS RELATING TO THE MERGER WHICH YOU SHOULD
CONSIDER.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued under this
Joint Proxy Statement/ Prospectus or determined if this Joint Proxy
Statement/Prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
This Joint Proxy Statement/Prospectus is dated September 8, 1999
and was first mailed to shareholders on or about September 10, 1999
<PAGE> 3
[MARSHALL LOGO]
MARSHALL INDUSTRIES
9320 TELSTAR AVENUE
EL MONTE, CALIFORNIA 91731
-------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 19, 1999
-------------------------
To the Shareholders of Marshall Industries:
Marshall Industries will hold a special meeting of shareholders on October
19, 1999 at 10:00 a.m. at the company's offices at 9320 Telstar Avenue, El
Monte, California 91731 to vote on:
- A proposal to approve the Amended and Restated Agreement and Plan of
Merger, dated as of June 25, 1999, between Avnet, Inc. and Marshall
Industries; and
- Any other business that may properly come before the special meeting or
any adjournments, postponements, continuations or reschedulings of the
special meeting.
Only shareholders of record on September 7, 1999 will receive notice of and
be entitled to vote at the special meeting.
You are cordially invited to attend the special meeting in person.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE. RECORD HOLDERS MAY ALSO SUBMIT THEIR PROXY WITH VOTING
INSTRUCTIONS BY TELEPHONE IN ACCORDANCE WITH THE INSTRUCTIONS ACCOMPANYING THE
ENCLOSED PROXY CARD. BENEFICIAL HOLDERS WHO HOLD SHARES IN STREET NAME MAY BE
ABLE TO VOTE BY TELEPHONE OR THROUGH THE INTERNET IN ACCORDANCE WITH THE
INSTRUCTIONS THEY RECEIVE FROM THE NOMINEES HOLDING THEIR SHARES.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL
OF THE AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER.
Gordon Marshall
Chairman of the Board
September 7, 1999
Please vote your shares promptly. You can find instructions for voting on
the enclosed proxy card.
-------------------------
THE INFORMATION AGENT FOR MARSHALL SHAREHOLDERS IS:
CORPORATE INVESTOR COMMUNICATIONS, INC.
CALL TOLL FREE 1-877-393-4961
-------------------------
YOUR VOTE IS IMPORTANT. PLEASE SUBMIT A PROXY WITH YOUR VOTING INSTRUCTIONS BY
RETURNING YOUR SIGNED AND DATED PROXY BY MAIL OR, IF AVAILABLE, BY TELEPHONE OR
THROUGH THE INTERNET.
<PAGE> 4
[AVNET LOGO]
AVNET, INC.
2211 SOUTH 47TH STREET
PHOENIX, ARIZONA 85034
-------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 19, 1999
-------------------------
To all Shareholders of Avnet, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Avnet,
Inc. will be held on October 19, 1999 at 10:00 a.m., local time, at the Bisbee
Room at the Pointe Hilton at South Mountain Resort Hotel, 7777 South Pointe
Parkway, Phoenix, Arizona 85044, to consider and to vote upon the following
matters:
1. A proposal to adopt the Amended and Restated Agreement and Plan of
Merger dated as of June 25, 1999 between Avnet and Marshall Industries
pursuant to which Marshall will merge into Avnet, which will be the
surviving corporation.
2. Any other business related to the foregoing proposal that may properly
come before the meeting or any adjournments, postponements,
continuations or reschedulings thereof.
Adoption of the merger agreement requires the affirmative vote of the
holders of at least two-thirds of the shares of Avnet common stock outstanding
on September 3, 1999, the record date for the determination of Avnet
shareholders entitled to notice of and to vote at the meeting. Only Avnet
shareholders of record on that date will be entitled to notice of and to vote at
the meeting.
Whether or not you plan to attend the meeting, please promptly complete,
sign, date and return the accompanying proxy card in the enclosed
self-addressed, stamped envelope. You may also submit your proxy with voting
instructions by telephone or through the Internet in accordance with the
instructions on the accompanying proxy card. If you attend the meeting and
desire to revoke your proxy in writing and vote in person, you may do so. In any
event, a proxy may be revoked in writing at any time before it is exercised.
-------------------------
THE BOARD OF DIRECTORS OF AVNET HAS APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT AVNET SHAREHOLDERS VOTE "FOR" THE ADOPTION OF THE MERGER
AGREEMENT.
By Order of the Board of Directors,
David R. Birk
Secretary
September 7, 1999
-------------------------
THE INFORMATION AGENT FOR AVNET SHAREHOLDERS IS:
GEORGESON SHAREHOLDER COMMUNICATIONS, INC.
CALL TOLL FREE 1-800-223-2064
-------------------------
YOUR VOTE IS IMPORTANT. PLEASE SUBMIT A PROXY WITH YOUR VOTING
INSTRUCTIONS BY TELEPHONE OR THROUGH THE INTERNET OR BY
RETURNING YOUR SIGNED AND DATED PROXY BY MAIL.
<PAGE> 5
SOURCES OF ADDITIONAL INFORMATION
This Joint Proxy Statement/Prospectus incorporates important business and
financial information about Marshall and Avnet from documents that are not
included in or delivered with this document. This information is available to
you without charge upon your written or oral request. You can obtain documents
incorporated by reference in this Joint Proxy Statement/Prospectus (other than
certain exhibits to those documents) by requesting them in writing or by
telephone from the appropriate company at the following addresses:
Marshall Industries
9320 Telstar Avenue
El Monte, California 91731-2895
(626) 307-6000
Attention: Henry Chin
Avnet, Inc.
2211 South 47th Street
Phoenix, Arizona 85034
(480) 643-2000
Attention: Raymond Sadowski
If you would like to request documents, please do so by October 7, 1999 in
order to receive them before the Marshall special meeting or the Avnet special
meeting, as applicable.
See "Where You Can Find More Information" (page 77)
i
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Sources of Additional
Information................... i
Questions and Answers About the
Merger........................ 1
Summary......................... 3
Market Price and Dividend
Information................... 8
Selected Historical and
Unaudited Pro Forma Condensed
Consolidated Financial
Information................... 9
Risk Factors.................... 13
Cautionary Statement Regarding
Forward-Looking Statements.... 15
The Marshall Special Meeting.... 16
The Avnet Special Meeting....... 21
The Companies................... 26
The Merger...................... 30
The Merger Agreement............ 52
Material Federal Income Tax
Consequences of the Merger.... 60
Unaudited Pro Forma Condensed
Consolidated Financial
Statements.................... 62
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Avnet Common
Stock......................... 69
Description of Marshall Common
Stock......................... 69
Comparison of Shareholder
Rights........................ 69
Experts......................... 75
Validity of Shares.............. 76
Additional Information for
Marshall Shareholders......... 76
Where You Can Find More
Information................... 77
Appendix A -- Amended and
Restated Agreement and Plan of
Merger........................ A-1
Appendix B -- Opinion of
Donaldson, Lufkin & Jenrette
Securities Corporation........ B-1
Appendix C -- Opinion of Merrill
Lynch, Pierce, Fenner & Smith
Incorporated.................. C-1
Appendix D -- Chapter 13 of the
California General Corporation
Law........................... D-1
</TABLE>
ii
<PAGE> 7
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT SHOULD I DO?
A: After you have carefully read this document, mail your signed proxy card in
the enclosed envelope, or, to the extent available, submit your proxy with
voting instructions by telephone or through the Internet in accordance with
the instructions on or with the accompanying proxy card, so that your shares
will be represented at the Marshall special meeting or the Avnet special
meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will not be able to vote your shares without instructions from
you. You should instruct your broker to vote your shares, following the
directions provided by your broker. Failure to instruct your broker to vote
your shares is equivalent to voting against the merger agreement.
Q: CAN I CHANGE MY VOTE AFTER I HAVE SUBMITTED MY PROXY WITH VOTING
INSTRUCTIONS?
A: Yes. There are three ways in which you may revoke your proxy and change your
vote at any time before the meeting:
- You may send a written notice to the party you gave your proxy to stating
that you are revoking your proxy.
- You may complete and submit a new proxy card by mail or, to the extent
available, submit your proxy with new voting instructions by telephone or
through the Internet. The latest vote actually received prior to the
shareholders' meeting will be recorded and any earlier votes will be
revoked.
- You may attend the special meeting of your company and vote in person.
Simply attending the shareholders meeting, however, will not revoke your
proxy. If you have instructed a broker to vote your shares, you must
follow directions received from your broker to change or revoke your
proxy.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES?
A: Marshall shareholders who elect to receive Avnet common stock for some or
all of their shares must send in their stock certificates with the non-cash
election form described below.
Marshall shareholders who want to receive cash for all of their shares
should not send in their certificates. Instructions for forwarding
certificates will be provided after the merger becomes effective.
Avnet shareholders will not exchange their certificates in the merger.
The certificates currently representing Avnet common stock will represent
the same shares of Avnet common stock after the merger.
Q: WHO ARE THE PARTIES TO THIS MERGER?
A: Marshall Industries will merge into Avnet, Inc. Avnet will remain after the
merger as the surviving corporation.
Q: WHAT WILL MARSHALL SHAREHOLDERS RECEIVE FOR EACH SHARE OF MARSHALL COMMON
STOCK?
A: Marshall shareholders will receive $39.00 in cash or 0.81569 of a share of
common stock of Avnet, subject to adjustment, or a combination of cash and
Avnet common stock in exchange for each share of Marshall common stock. The
number of shares of Avnet common stock may vary between 0.74772 and 0.91765
per share for each share of Marshall common stock depending upon the average
closing price of Avnet common stock for the twenty trading days ending five
days before the date of the Marshall special meeting.
Q: HOW MANY MARSHALL SHARES WILL BE CONVERTED INTO AVNET SHARES?
A: 8,308,182 shares of Marshall common stock will be converted into Avnet
common stock.
1
<PAGE> 8
Q: WHAT WILL HAPPEN IF MARSHALL SHAREHOLDERS ELECT TO RECEIVE TOO FEW SHARES OF
AVNET COMMON STOCK?
A: If Marshall shareholders elect to convert, in the aggregate, less than
8,308,182 Marshall shares into Avnet shares, then the difference between
8,308,182 and the number of shares Marshall shareholders have elected to
convert into Avnet shares will be converted into Avnet shares and allocated
pro rata among Marshall shareholders who did not elect Avnet shares.
Q: WHAT WILL HAPPEN IF MARSHALL SHAREHOLDERS ELECT TO RECEIVE TOO MANY SHARES
OF AVNET COMMON STOCK?
A: If Marshall shareholders elect to convert, in the aggregate, more than
8,308,182 shares of Marshall common stock into Avnet common stock, the
number of shares of Marshall common stock in excess of 8,308,182 will be
converted into cash. Each Marshall shareholder electing Avnet shares will
receive a proportionate amount of this cash in exchange for the
corresponding number of Marshall shares.
Q: HOW CAN I MAKE MY ELECTION BETWEEN CASH AND AVNET COMMON STOCK?
A: Marshall shareholders are receiving a non-cash election form with this
document. Any Marshall shareholders that want to elect to receive Avnet
common stock for some or all of their Marshall shares must return the
non-cash election form to The Bank of New York, 101 Barclay Street, New
York, N.Y. 10286 not later than 5:00 p.m., New York time, on October 18,
1999. If no non-cash election form is received by The Bank of New York by
such time, or if the election has not been properly made, the shareholder
will be treated as having made the cash election.
Q: IF I MAKE THE ELECTION TO RECEIVE AVNET COMMON STOCK FOR SOME OR ALL OF MY
MARSHALL SHARES, CAN I REVOKE MY ELECTION?
A: You can revoke your election by providing written notice of revocation to
The Bank of New York, 101 Barclay Street, New York, N.Y. 10286 not later
than 5:00 p.m., New York time, on October 18, 1999.
Q: WILL THE MERGER BE CONSUMMATED IF SHAREHOLDERS OF MARSHALL OR AVNET DO NOT
APPROVE THE MERGER?
A: No. The merger must be approved by the shareholders of Marshall and Avnet.
In the event shareholders of either or both of Marshall and Avnet do not
approve of the merger, it will not be consummated.
Q: WILL SHARES OF AVNET COMMON STOCK BE LISTED ON THE NEW YORK STOCK EXCHANGE?
A: Yes. Avnet common stock is currently listed on the New York Stock Exchange
and the Pacific Exchange under the symbol "AVT." After the merger Avnet
common stock will continue to be listed on both exchanges under the symbol
"AVT."
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO MARSHALL SHAREHOLDERS?
A: The exchange of shares will be a tax-free transaction for federal income tax
purposes for Marshall shareholders who receive solely Avnet common stock.
However, Marshall shareholders will recognize any realized gain for tax
purposes to the extent any cash is received as merger consideration or in
lieu of fractional shares.
Q: WHOM SHOULD SHAREHOLDERS CALL WITH QUESTIONS?
A: Marshall shareholders should call Henry Chin, Chief Financial Officer, at
(626) 307-6000 with any questions about the merger. Avnet shareholders
should call Raymond Sadowski, Chief Financial Officer, at (480) 643-2000
with any questions about the merger.
2
<PAGE> 9
SUMMARY
This summary, together with the preceding Question and Answer section,
highlights selected information contained in this document and may not contain
all of the information that is important to you. We urge you to read carefully
this entire document and the other documents to which this document refers to
understand fully the merger. See "Where You Can Find More Information" on page
77. Each item in this summary includes a page reference directing you to a more
complete description of that item.
THE COMPANIES
MARSHALL INDUSTRIES (PAGE 26)
Marshall, together with its subsidiaries, is one of the largest
distributors of industrial electronic components and production supplies in
North America. Marshall had net sales of $1.7 billion in its fiscal year ended
May 31, 1999.
AVNET, INC. (PAGE 27)
Avnet is one of the world's largest industrial distributors of electronic
components and computer products, with net sales for its fiscal year ended July
2, 1999 of $6.35 billion. It has distribution operations in the Americas,
Europe, South Africa and the Asia/Pacific region.
THE MERGER (PAGE 30)
We are proposing a merger in which Marshall will merge into Avnet and will
cease to exist, and Avnet will remain as the surviving corporation. After the
merger, Marshall will be a part of Avnet's Electronics Marketing Group. We
expect the combined company to benefit from Marshall's electronic components
distribution business and leadership in Internet business and e-commerce.
We believe that the merger will offer both companies' shareholders the
opportunity to benefit from the growth of the two companies. The financial
advisers of both companies have provided opinions as to the fairness of the
merger consideration to the respective shareholders of Marshall and Avnet. For a
more detailed discussion of the reasons for the merger, see pages 36 through 37.
After the merger, Avnet shareholders will own approximately 84% of the
Avnet common stock outstanding, and Marshall shareholders will own approximately
16% of the Avnet common stock outstanding.
WHAT YOU WILL RECEIVE
MARSHALL SHAREHOLDERS (PAGE 52)
Under the merger agreement, a total of 8,308,182 shares of Marshall common
stock will be converted into the right to receive common stock of Avnet at the
rate of 0.81569 of a share of Avnet for each share of Marshall, subject to
variation between 0.74772 and 0.91765 of a share depending upon the average
closing prices of Avnet common stock for the twenty trading days ending five
trading days before the date of the Marshall special meeting. All remaining
shares of Marshall common stock will be converted into the right to receive
$39.00 per share in cash. Marshall shareholders have the right to elect either
common stock of Avnet or cash, subject to certain proration procedures.
To illustrate, assuming an exchange ratio of 0.81569, a Marshall
shareholder who owns 100 shares of Marshall common stock could elect to receive
81 common shares of Avnet and a cash payment in lieu of a 0.569 fractional share
interest, or the shareholder could elect to receive $3,900 in cash, in each case
subject to proration.
The rate at which shares of Marshall common stock will be converted into
common stock of Avnet will vary depending upon the average closing price of
Avnet common stock for the twenty trading days ending five trading days before
the date of Marshall's special shareholders' meeting. The following table illus-
3
<PAGE> 10
trates how the average closing price of Avnet common stock will affect the
exchange ratio:
<TABLE>
<CAPTION>
AVERAGE NUMBER OF AVNET
CLOSING PRICE OF AVNET SHARES RECEIVED FOR
COMMON STOCK EACH MARSHALL SHARE
- ---------------------- ---------------------
<S> <C>
Greater than $57.375 0.74772
Greater than $52.59375 $42.90
and less than or ---------------------
equal to $57.375 Average Closing Price
Greater than or equal 0.81569
to $43.03125 and
less than or equal
to $52.59375
Greater than or equal $35.10
to $38.25 but less ---------------------
than 43.03125 Average Closing Price
Less than $38.25 0.91765
</TABLE>
If the average closing price of Avnet common stock is less than $38.25 per
share, either Avnet or Marshall will have the option to terminate the merger
agreement unless Avnet agrees either (1) to increase the exchange ratio so that
it is equal to $35.10 divided by the average closing price or (2) to make a cash
payment equal to the difference between (A) $35.10 and (B) 0.91765 multiplied by
the closing price.
AVNET SHAREHOLDERS (PAGE 52)
Common stock of Avnet held by Avnet shareholders immediately prior to the
merger will remain issued and outstanding after the merger.
RECOMMENDATIONS TO SHAREHOLDERS
The boards of directors of Marshall and Avnet have determined that the
merger is fair to and in the best interests of their shareholders.
MARSHALL (PAGE 36)
The Marshall board of directors recommends that you vote "FOR" the adoption
of the merger agreement.
AVNET (PAGE 37)
The Avnet board of directors recommends that you vote "FOR" the adoption of
the merger agreement.
OPINIONS OF FINANCIAL ADVISERS (PAGES 37 AND 42)
Donaldson, Lufkin & Jenrette Securities Corporation, financial adviser to
Marshall, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, financial
adviser to Avnet, delivered opinions to the respective boards of directors of
Marshall and Avnet as to the fairness of the consideration in the merger from a
financial point of view. The full texts of these opinions are attached as
Appendices B and C to this document and should be read carefully in their
entirety to understand the procedures followed, assumptions made, matters
considered and limitations on the review undertaken by each of Donaldson, Lufkin
& Jenrette and Merrill Lynch in providing their opinions. THE OPINIONS OF
DONALDSON, LUFKIN & JENRETTE AND MERRILL LYNCH ARE DIRECTED TO THE BOARD OF
DIRECTORS OF MARSHALL AND AVNET AND ARE NOT RECOMMENDATIONS TO ANY SHAREHOLDER.
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND POSSIBLE CONFLICTS OF INTEREST
(PAGE 46)
In considering the recommendation of the Marshall Board of Directors that
the merger agreement be adopted, Marshall shareholders should be aware that a
number of Marshall officers and directors have interests in the merger that are,
or may be, different from other Marshall shareholders. They include the
following:
- Approval by Marshall's shareholders of the merger with Avnet will
constitute a change in control of Marshall under the change in control
agreements of certain Marshall executive officers, triggering certain
rights of those officers, including the right to receive certain cash
payments if their employment is terminated or if there are certain
material
4
<PAGE> 11
changes in the officers' positions (as defined) following the merger.
- In general, under Marshall's stock option plans, outstanding options will
become vested and fully exercisable upon the approval of the merger by
Marshall's shareholders. However, some individuals may have different
results based on agreements they have entered into with Marshall. Upon
completion of the merger, Avnet will convert each outstanding Marshall
option into an Avnet option using the exchange ratio for the merger (with
a corresponding change in the exercise price).
- Avnet has offered to make Robert Rodin, Marshall's President and Chief
Executive Officer, an advisory member of Avnet's Board of Directors. In
addition, Mr. Rodin has been offered a position as a senior executive
officer of Avnet. Avnet is currently in discussions with other executive
officers of Marshall concerning future employment.
- Avnet has agreed to indemnify Marshall's directors and officers for
serving in their capacities as directors and officers and has agreed to
maintain directors' and officers' liability insurance coverage for up to
six years following the merger.
THE MARSHALL SPECIAL MEETING
TIME, PLACE AND MATTERS TO BE VOTED UPON (PAGE 16)
The Marshall special meeting will be held on October 19, 1999 at 10:00
a.m., local time, at Marshall's offices at 9320 Telstar Avenue, El Monte,
California 91731. At the Marshall special meeting, you will be asked:
1. to adopt the merger agreement; and
2. to act on any other business that may properly come before the special
meeting or any adjournments, postponements, continuations or
reschedulings of it.
RECORD DATE AND VOTE REQUIRED (PAGE 16)
You may cast one vote for each share of common stock of Marshall that you
owned at the close of business on September 7, 1999, the record date for the
Marshall special meeting. Adoption of the merger agreement requires the
affirmative vote of the holders of a majority of the shares of Marshall common
stock outstanding on the record date.
On September 7, 1999 there were 16,621,364 shares of Marshall common stock
outstanding and entitled to vote. Adoption of the merger agreement requires the
affirmative vote of holders of a majority of the shares of Marshall common stock
outstanding on September 7, 1999.
THE AVNET SPECIAL MEETING
TIME, PLACE AND MATTERS TO BE VOTED UPON (PAGE 21)
The Avnet special meeting will be held on October 19, 1999 at 10:00 a.m.,
local time, at the Bisbee Room at the Pointe Hilton at South Mountain Resort
Hotel, 7777 South Pointe Parkway, Phoenix, Arizona 85044. At the Avnet special
meeting, Avnet shareholders will be asked:
1. to adopt the merger agreement; and
2. to act on any other matters relating to the foregoing proposal as may
properly come before the meeting or any adjournments, postponements,
continuations or reschedulings of it.
RECORD DATE AND VOTE REQUIRED (PAGE 21)
You may cast one vote at the Avnet special meeting for each share of Avnet
common stock that you owned at the close of business on September 3, 1999.
On September 3, 1999 there were 35,218,933 shares of Avnet common stock
outstanding and entitled to vote. Adoption of the merger agreement requires the
affirmative vote of the holders of not less than two-thirds of the shares of
Avnet common stock outstanding on September 3, 1999.
5
<PAGE> 12
THE MERGER AGREEMENT
The merger agreement is attached to this Joint Proxy Statement/Prospectus
as Appendix A. Please read the merger agreement carefully and in its entirety.
It is the legal document that governs the merger.
EFFECTIVE TIME OF THE MERGER (PAGE 54)
The merger will occur shortly after all the conditions to the completion of
the merger have been satisfied or waived. Although no assurances can be given,
it is currently expected that the merger will be completed shortly after the
conclusion of the shareholders' meetings.
CONDITIONS TO THE MERGER (PAGE 54)
The completion of the merger depends on a number of conditions being
satisfied, including the following:
- approval of the merger agreement by the shareholders of Marshall and
Avnet;
- accuracy in all material respects of the representations and warranties
of each company and performance in all material respects by each company
of all its obligations under the merger agreement;
- receipt by each company of legal opinions confirming that the United
States federal income tax treatment will be as described in this
document; and
- receipt of all approvals required by law.
We have furnished information and materials to the Antitrust Division of
the Department of Justice and the Federal Trade Commission, and the waiting
period has been terminated. However, the Antitrust Division of the Department of
Justice and the Federal Trade Commission have the power to challenge the merger
on antitrust grounds before or after the merger is completed.
If the law permits, either of us may choose to waive a condition to our
obligation to complete the merger even though that condition has not been
satisfied. We cannot be certain when or if the conditions to the merger will be
satisfied or waived or whether the merger will be completed.
TERMINATION (PAGE 57)
We may agree in writing to terminate the merger agreement at any time prior
to completing the merger, even after the shareholders of both our companies have
approved it.
In addition, either of us may decide, without consent of the other, to
terminate the merger agreement, even after adoption of the merger agreement by
our shareholders, if:
- any legal restriction prohibiting the merger has become final and non-
appealable;
- the merger has not been completed by December 31, 1999;
- the Marshall or the Avnet shareholders fail to adopt the merger
agreement;
- either company materially breaches any representation, warranty,
covenant, agreement, condition or obligation in the merger agreement and
the breach or failure of the covenant, agreement, condition or obligation
is not cured within 10 days of written notice from the other party or
cannot be cured; or
- the average closing price of Avnet common stock for the twenty
consecutive trading days ending on the fifth trading day before the date
of the Marshall special meeting is less than $38.25 and Avnet does not
agree to increase the exchange ratio or make a cash payment to increase
aggregate consideration payable to Marshall shareholders who have elected
to receive common stock of Avnet in the merger.
In addition, Marshall may terminate the merger agreement if another company
makes a proposal superior to the merger described in this Joint Proxy
Statement/Prospectus and the board of directors of Marshall determines that the
new proposal is better for Marshall shareholders.
6
<PAGE> 13
Avnet may terminate the merger agreement without the consent of Marshall if
the board of directors of Marshall withdraws or modifies its approval or
recommendation of the merger agreement or recommends another offer for the
purchase of Marshall common stock.
FEES AND EXPENSES (PAGE 58)
Whether or not the merger is completed, each company will pay its own fees
and expenses.
TERMINATION FEE (PAGE 58)
Marshall will pay Avnet a termination fee of $30 million in cash if:
- the merger agreement is not approved by Marshall shareholders and the
shareholders are aware of another acquisition proposal; or
- the board of directors of Marshall withdraws or modifies its approval or
recommendation of the merger agreement or recommends another offer for
the purchase of Marshall common stock; or
- the board of directors of Marshall terminates the merger agreement
because it has received a superior proposal for the purchase of Marshall
common stock that it determines is more favorable to Marshall
shareholders than the merger described in this Joint Proxy Statement/
Prospectus, and O'Melveny & Myers LLP, counsel to Marshall, has advised
the board of directors that failure to terminate the merger agreement
could violate the duties of the board of directors to protect the
interests of Marshall shareholders.
OTHER
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (PAGE 60)
In general, no gain or loss will be recognized for federal income tax
purposes by Marshall shareholders who receive solely Avnet common stock in the
merger. Shareholders who receive cash for their shares will recognize the
realized gain to the extent of the cash.
We have conditioned the merger on our receipt of legal opinions that the
merger will be treated for federal income tax purposes as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code of 1986. Like
other conditions to the merger, either of us could choose to waive receipt of
these legal opinions. However, if the receipt of the legal opinion is waived and
there is a material difference in the tax consequences to you from what we have
described in this document, we will recirculate revised proxy materials and
resolicit the vote of shareholders.
This tax treatment may not apply to certain Marshall shareholders and may
depend on your specific situation and on variables not within our control. We
urge you to consult your own tax adviser for a full understanding of the tax
consequences of the merger.
APPRAISAL RIGHTS (PAGE 49)
If holders of 5% or more of the outstanding shares of Marshall common stock
vote against the merger, make a written demand to Marshall for the purchase of
their shares and take certain other actions to secure their rights, they will be
entitled to receive the fair market value in cash of their shares of Marshall
common stock.
COMPARISON OF SHAREHOLDERS' RIGHTS (PAGE 69)
The rights of Marshall shareholders currently are governed by California
law, the Marshall articles of incorporation and the Marshall by-laws. The rights
of Avnet shareholders are governed by New York law, the Avnet certificate of
incorporation and the Avnet by-laws. After the merger, the rights of Marshall
shareholders who receive Avnet common stock will be governed by New York law,
the Avnet certificate of incorporation and the Avnet by-laws, which differ in
material respects from Marshall's current articles of incorporation and by-laws.
LISTING OF AVNET COMMON STOCK (PAGE 49)
Avnet common stock is listed on the New York Stock Exchange and the Pacific
Exchange under the symbol "AVT." After consummation of the merger, shares of
Avnet common stock will continue to be listed on these Exchanges under the "AVT"
symbol.
7
<PAGE> 14
MARKET PRICE AND DIVIDEND INFORMATION
The table below sets forth, for the calendar quarters indicated, the high
and low sales prices per share for Marshall common stock and Avnet common stock,
as reported in the consolidated reporting system for New York Stock Exchange
issues and as adjusted for applicable stock dividends, splits and combinations.
<TABLE>
<CAPTION>
MARSHALL AVNET
COMMON STOCK COMMON STOCK
------------- -------------
CALENDAR QUARTER HIGH LOW HIGH LOW
- ---------------- ----- ---- ----- ----
<S> <C> <C> <C> <C>
1996
First Quarter.................................. 32 7/8 29 1/4 50 7/8 38
Second Quarter................................. 32 1/2 28 54 3/8 41 5/8
Third Quarter.................................. 30 1/2 25 5/8 50 1/4 39 1/8
Fourth Quarter................................. 32 1/4 27 3/4 61 1/2 47 7/8
1997
First Quarter.................................. 34 1/8 30 1/4 64 7/8 55 1/4
Second Quarter................................. 38 1/8 30 1/8 64 7/8 55 1/8
Third Quarter.................................. 43 1/8 37 1/8 72 1/2 57 3/4
Fourth Quarter................................. 39 3/4 30 74 1/4 59 1/2
1998
First Quarter.................................. 34 5/16 28 3/8 66 1/4 57
Second Quarter................................. 34 13/16 27 64 5/16 53 11/16
Third Quarter.................................. 28 3/4 22 1/8 58 1/2 35 1/4
Fourth Quarter................................. 32 1/2 21 1/2 60 5/8 34 15/16
1999
First Quarter.................................. 26 3/4 13 60 15/16 35 5/8
Second Quarter................................. 36 1/4 12 3/8 51 34
Third Quarter (through September 3, 1999)...... 38 9/16 36 52 7/16 43 7/8
</TABLE>
The last sales price for Avnet common stock on the New York Stock Exchange
on September 3, 1999 was $44.125. The last sales price for Marshall common stock
on the New York Stock Exchange on September 3, 1999 was $37.25. The closing
sales prices per share of Marshall common stock and Avnet common stock on the
New York Stock Exchange on June 25, 1999, the last trading day before public
announcement of the merger, were $20.125 and $47.8125, respectively.
DIVIDEND INFORMATION
Avnet has paid a cash dividend on its common stock of 15 cents per share
during each quarter in 1999, 1998, 1997 and 1996. In the same period Marshall
paid no dividends on its common stock.
NUMBER OF SHAREHOLDERS
As of September 3, 1999, there were approximately 5,400 shareholders of
record who held common stock of Avnet, as shown on the records of Avnet's
transfer agent.
As of September 7, 1999, there were approximately 530 shareholders of
record who held Marshall common stock, as shown on the records of Marshall's
transfer agent.
8
<PAGE> 15
SELECTED HISTORICAL AND UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following table presents selected historical financial information of
Marshall and Avnet and selected unaudited pro forma condensed consolidated
financial information after giving effect to the merger assuming that the merger
is accounted for as a purchase.
All per share amounts set forth in the Unaudited Pro Forma Condensed
Consolidated Financial Statements beginning on page 62 give effect to the
exchange of 8,308,182 shares of Marshall common stock for Avnet common stock at
the ratio of 0.81569 shares of Avnet for each share of Marshall, and to the
exchange of the remaining shares of Marshall common stock for $39.00 per share
in cash. The pro forma information set forth below is presented for illustrative
purposes only and is not necessarily indicative of the financial position or
operating results that would have occurred if the merger had been consummated
earlier or that will occur after consummation of the merger. Management of Avnet
and Marshall are currently assessing non-recurring merger charges which would be
material to the combined company's results of operations and financial condition
for the period in which the charges occur. No estimate of these charges has been
reflected in the selected pro forma condensed consolidated financial
information.
The following selected financial information should be read in conjunction
with the related historical and pro forma condensed consolidated financial
statements and notes thereto incorporated by reference or included herein. See
"Sources of Additional Information" (page i), "Where You Can Find More
Information" (page 77) and "Unaudited Pro Forma Condensed Consolidated Financial
Statements" (page 62).
9
<PAGE> 16
AVNET, INC.
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
---------------------- --------------------------------------------------------
APRIL 2, MARCH 27, JUNE 26, JUNE 27, JUNE 28, JUNE 30, JULY 1,
1999 1998 1998 1997 1996 1995 1994
-------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Sales.............. $4,707.7 $4,371.7 $5,916.3 $5,390.6 $5,207.8 $4,300.0 $3,547.7
Gross profit....... 704.5(2) 740.1(4) 980.4(5) 961.8 969.1 816.4 696.1
Income taxes....... 51.7(2) 102.7(4) 115.9(5) 130.7 136.8 103.1 66.7(6)
Net income......... 67.9(2) 134.9(4) 151.4(5) 182.8 188.3 140.3 85.3(6)
Financial position
(at end of period):
Working capital.... $1,496.3 $1,536.0 $1,461.3 $1,319.0 $1,293.9 $1,057.1 $ 888.0
Total assets....... 2,795.3 2,765.5 2,733.7 2,594.1 2,521.7 2,125.6 1,787.7
Total debt......... 920.3 768.7 810.9 514.6 497.5 419.5 303.1
Shareholders'
equity.......... 1,300.5(3) 1,445.8(3) 1,315.9(3) 1,502.2(3) 1,505.2 1,239.4 1,108.5
Per share:
Basic
earnings(1)..... $ 1.90(2) $ 3.36(4) $ 3.85(5) $ 4.29 $ 4.34 $ 3.44 $ 2.10(6)
Diluted
earnings(1)..... 1.88(2) 3.32(4) 3.80(5) 4.25 4.31 3.32 2.09(6)
Book value......... 36.99 37.39 36.09 36.55 34.67 30.38 27.26
</TABLE>
- -------------------------
(1) Earnings per share have been restated to conform with the provisions of SFAS
No. 128, "Earnings Per Share."
(2) After $26.5 pre-tax ($7.9 cost of sales and $18.6 operating expenses) and
$15.7 after-tax ($0.43 per share on a diluted basis) of incremental special
charges associated principally with the reorganization of the Electronics
Marketing Group in Europe.
(3) After the cumulative impact of Avnet's stock repurchase program amounting to
$147.4, $317.8, $450.0 and $520.1 through June 27, 1997, March 27, 1998,
June 26, 1998 and April 2, 1999, respectively.
(4) After gain on sale of Channel Master amounting to $33.8 pre-tax, offset
somewhat in operating expenses by costs relating to the divestiture of Avnet
Industrial, the closure of Avnet's corporate headquarters in Great Neck, NY
and the anticipated loss on the sale of company-owned real estate, amounting
to $13.3 in the aggregate. The effect of these items was to increase income
before taxes, net income and diluted earnings per share by approximately
$20.5, $8.7 and $0.21, respectively.
(5) After (a) gain on sale of Channel Master amounting to $33.8 pre-tax, (b)
operating expenses relating to the divestiture of Avnet Industrial, the
closure of Avnet's corporate headquarters in Great Neck, NY and the
anticipated loss on the sale of company-owned real estate amounting to $13.3
million in the aggregate and (c) $35.4 pre-tax ($9.7 cost of sales and $25.7
operating expenses) of incremental special charges associated with the
reorganization of the Electronics Marketing Group, primarily in the
Americas. The effect of these items was to decrease income before taxes, net
income and diluted earnings per share by approximately $14.9, $12.5 and
$0.32, respectively.
(6) After special charges of $16.8 ($0.41 per share on a diluted basis) for (a)
restructuring and integration charges amounting to $13.5 or $0.33 per share,
(b) the retroactive impact of the change in U.S. tax rates amounting to $0.5
or $0.01 per share and (c) the cumulative effect of a change in the method
of accounting for income taxes amounting to $2.8 or $0.07 per share.
10
<PAGE> 17
MARSHALL INDUSTRIES
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
----------------------------------------------------------
1999(1)(2) 1998(1) 1997 1996 1995
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income:
Sales................................. $1,722.6 $1,461.4 $1,184.6 $1,164.8 $1,009.3
Gross profit.......................... 265.4 229.3 196.2 209.5 188.7
Income taxes.......................... 19.9 25.0(3) 28.9 35.3 29.1
Net income............................ 2.3 33.3(3) 39.7 50.1 40.4
Financial position (at end of period):
Working capital....................... $ 371.6 $ 435.6 $ 331.0 $ 284.5 $ 254.4
Total assets.......................... 772.5 853.8 539.7 472.6 423.3
Long-term debt........................ 144.0 245.5 50.0 25.0 45.2
Shareholders' equity.................. 410.2 400.4 348.9 330.0 279.8
Per share:
Basic earnings(4)..................... $ 0.14 $ 2.01(3) $ 2.35 $ 2.90 $ 2.34
Diluted earnings(4)................... 0.14 1.99(3) 2.33 2.87 2.33
Book value............................ 24.69 24.10 21.00 19.10 16.21
</TABLE>
- -------------------------
(1) Fiscal 1998 and 1999 amounts reflect the acquisition of Sterling Electronics
Corporation as of January 16, 1998.
(2) Fiscal 1999 amounts include a write-down of $19.5 million, or $1.17 per
share, in Marshall's investment in Eurotronics B.V. recorded in the fourth
quarter of fiscal 1999.
(3) Net income and diluted earnings per share exclude $14.6 million and $0.87
($0.88 basic), respectively, of an extraordinary gain from the termination
of a joint venture.
(4) Earnings per share have been restated to conform with the provisions of SFAS
No. 128, "Earnings Per Share."
11
<PAGE> 18
AVNET, INC. AND MARSHALL INDUSTRIES
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
APRIL 2, 1999 JUNE 26, 1998
----------------- -------------
<S> <C> <C>
AVNET:
Pro forma results of operations:
Sales.................................................. $5,997.2 $7,377.6
Net Income............................................. 71.2 162.5
Pro forma financial position (at end of period):
Total assets........................................... 3,819.4 (1)
Total debt............................................. 1,420.3 (1)
Book value per share (at end of period):
Historical............................................. 36.99 36.09
Pro forma(2)........................................... 38.74 (1)
Net income per share (diluted):
Historical............................................. 1.88 3.80
Pro forma(2)........................................... 1.66 3.49
Cash dividends declared per share(3):
Historical............................................. 0.45 0.60
Pro forma.............................................. 0.38 0.51
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
APRIL 2, 1999 JUNE 26, 1998
----------------- -------------
<S> <C> <C>
MARSHALL (PRO FORMA PER CONVERTED SHARE)(2):
Book value per share (at end of period)................... $31.60 (1)
Net income per share (diluted)............................ 1.35 $2.85
Cash dividends declared per share(3)...................... 0.31 0.42
</TABLE>
- -------------------------
(1) Not required.
(2) Based on the conversion, pursuant to the merger agreement, of each of
8,308,182 shares of Marshall common stock into 0.81569 of a share of Avnet
common stock and of each remaining share of Marshall common stock into
$39.00 in cash.
(3) Pro forma cash dividends per share are based on (a) the total historical
dividends paid by Avnet (Marshall has not paid dividends) divided by (b) the
pro forma weighted average number of shares outstanding as if the merger had
occurred at the beginning of the period.
12
<PAGE> 19
RISK FACTORS
MARSHALL SHAREHOLDERS WHO RECEIVE AVNET COMMON STOCK AND AVNET SHAREHOLDERS
CANNOT BE SURE WHAT THE MARKET VALUE OF AVNET COMMON STOCK WILL BE AFTER THE
MERGER HAS BEEN COMPLETED.
Upon consummation of the merger, approximately 50% of Marshall's
outstanding common stock will be converted into Avnet common stock. The merger
agreement provides for the exchange ratio to be adjusted based upon the average
closing price of Avnet common stock, defined as the average of the closing
prices of Avnet common stock as reported on the New York Stock Exchange
composite tape for the twenty consecutive trading days ending on the fifth
trading day before the date of the Marshall special meeting, as follows:
- if the average closing price is greater than $57.375, the exchange ratio
will be 0.74772 of a share of Avnet common stock for each share of
Marshall common stock;
- if the average closing price is greater than $52.59375 and less than or
equal to $57.375, the exchange ratio will be $42.90 divided by the
average closing price;
- if the average closing price is greater than or equal to $43.03125 and
less than or equal to $52.59375, the exchange ratio will be 0.81569;
- if the average closing price is greater than or equal to $38.25 but less
than $43.03125, the exchange ratio will be $35.10 divided by the average
closing price; and
- if the average closing price is less than $38.25, the exchange ratio will
be 0.91765.
If the average closing price of Avnet common stock is less than $38.25,
either Avnet or Marshall will have the option to terminate the merger agreement
unless Avnet agrees either (1) to increase the exchange ratio so that it is
equal to $35.10 divided by the average closing price or (2) to make a cash
payment equal to the difference between (A) $35.10 and (B) 0.74772 multiplied by
the average closing price.
The market prices of Avnet common stock and Marshall common stock at the
effective time of the merger may be different from the market price of each
company's common stock, and in relation to each other's market price, as of the
date the merger agreement was signed, the date of this document or the date of
the special meetings. For example, during the second calendar quarter of 1999,
the closing price of Avnet common stock ranged from a low of $34 to a high of
$51, and the closing price of Marshall common stock ranged from a low of $12.375
to a high of $36.25, all as reported on the New York Stock Exchange National
Market Composite Transactions Tape. See "Market Price and Dividend Information"
on page 8. These market prices may vary depending upon changes in the business,
operations or prospects of Marshall or Avnet, market assessments of the
likelihood that the merger will be consummated and the timing thereof, general
market and economic conditions and other factors both within and beyond the
control of Marshall or Avnet. At the time of the special meetings, Avnet and
Marshall shareholders will not know the price at which shares of Avnet common
stock that will be issued in connection with the merger will trade at the time
of their issuance.
If the market price of Avnet common stock declines below $43.03125 per
share during the period between September 15, 1999 and October 12, 1999, the
period over
13
<PAGE> 20
which the average closing price of Avnet common stock will be calculated, the
aggregate value of the Avnet stock received by Marshall shareholders will
decline. For example:
- If the average closing price of Avnet common stock is $47 per share, a
Marshall shareholder owning 100 shares of Marshall common stock will
receive 81 shares of Avnet common stock with a market value of $3,807.
- However, if the average closing price of Avnet common stock declines to
$40 per share, a Marshall shareholder owning 100 shares of Marshall
common stock will receive 87 shares of Avnet common stock with a market
value of $3,480.
AVNET MAY NOT REALIZE FULLY THE COST SAVINGS AND OTHER BENEFITS WE EXPECT TO
REALIZE AS A RESULT OF THE MERGER. THIS MAY ADVERSELY AFFECT AVNET'S EARNINGS
AND FINANCIAL CONDITION.
Although Marshall and Avnet expect significant benefits to result from the
merger, the surviving corporation may not realize any of these anticipated
benefits. The merger involves the integration of two companies that have
previously operated independently. The value of Avnet common stock following
consummation of the merger may be affected by the ability to achieve the
benefits expected to result from consummation of the merger. Achieving these
benefits will depend in part upon meeting the challenges inherent in the
successful combination of two business enterprises of the size and scope of
Marshall and Avnet and upon the possible resulting diversion of management
attention for an extended period of time. Challenges like these may not be met
and may negatively impact the operations of Avnet following the merger. Delays
encountered in the transition process could have a material adverse effect upon
the sales, level of expenses, operating results and financial condition of
Avnet. See "The Merger -- Marshall's Reasons for the Merger; Recommendations of
the Marshall Board of Directors" on page 36 and "The Merger -- Avnet's Reasons
for the Merger; Recommendations of the Avnet Board of Directors" on page 37.
AFTER THE MERGER, CUSTOMERS OF AVNET MAY SEEK ALTERNATIVE ELECTRONICS
DISTRIBUTORS.
Because some customers of Avnet after the merger may have been customers of
both Avnet and Marshall before the merger, these customers may begin to purchase
some or all of their electronics requirements from third parties in order to
seek competitive bids or ensure continuity of supply. We cannot predict whether
this will occur or to what extent.
AFTER THE MERGER, SUPPLIERS MAY TERMINATE SUPPLY AGREEMENTS WITH AVNET OR ADD
OTHER DISTRIBUTORS.
Because some suppliers do not like to maintain supply agreements with
distributors that also distribute the products of their competitors, some
suppliers of Marshall or Avnet may terminate their supply agreements with Avnet
after the merger. Alternatively, some other suppliers might consider adding
additional distributors for their products. We cannot predict whether this will
occur or to what extent.
14
<PAGE> 21
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Joint Proxy Statement/Prospectus contains forward-looking statements
with respect to the financial condition, results of operations and business of
each of Marshall and Avnet. These statements may be made directly in this
document referring to Marshall or Avnet, or may be made part of this document by
reference to other documents filed with the Securities and Exchange Commission
by Marshall or Avnet, which is known as "incorporation by reference," and may
include statements for the period following the consummation of the merger. You
can find many of these statements by looking for words like "believes,"
"expects," "anticipates," "estimates" or similar expressions in this document or
in documents incorporated by reference.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties. Factors that may cause actual results to differ materially
from those contemplated by the forward-looking statements include, among others,
the following:
- Competitive pressures in the industry may increase significantly through
industry consolidation, entry of new competitors or otherwise.
- General economic or business conditions, domestic and foreign, may be
less favorable than expected, resulting in lower sales than expected.
- Costs or difficulties related to the integration of the businesses of
Marshall and Avnet may be greater than expected.
- Possible loss of customers or suppliers as a result of the merger.
- Legislative or regulatory changes may adversely affect the businesses in
which Marshall and Avnet are engaged.
- Adverse changes may occur in the securities markets.
- Changes in interest rates may reduce profit margins.
Because forward-looking statements are subject to risks and uncertainties,
actual results may differ materially from those expressed or implied by them.
Marshall shareholders and Avnet shareholders are cautioned not to place undue
reliance on these statements, which speak only as of the date of this Joint
Proxy Statement/Prospectus or the date of any document incorporated by
reference.
All subsequent written and oral forward-looking statements attributable to
Marshall and Avnet or any person acting on their behalf are expressly qualified
in their entirety by the cautionary statements contained or referred to in this
section. Neither Marshall nor Avnet undertakes any obligation to release
publicly any revisions to any forward-looking statements to reflect events or
circumstances after the date of this Joint Proxy Statement/ Prospectus or to
reflect the occurrence of unanticipated events.
15
<PAGE> 22
THE MARSHALL SPECIAL MEETING
GENERAL; DATE, TIME AND PLACE
The accompanying proxy is solicited on behalf of the board of directors of
Marshall Industries for use at the Marshall special meeting of shareholders to
be held on October 19, 1999 at 10:00 a.m. at Marshall's offices at 9320 Telstar
Avenue, El Monte, California 91731. The purpose of the Marshall special meeting
is to consider and to vote upon the adoption of the merger agreement and to
transact any other business that may properly come before the meeting or any
adjournments, postponements, continuations or reschedulings of the Marshall
special meeting. The expense of the solicitation of proxies for the Marshall
special meeting will be borne by Marshall. Proxies properly executed and
received by Marshall prior to the Marshall special meeting, and not revoked,
will be voted.
THE BOARD OF DIRECTORS OF MARSHALL INDUSTRIES HAS DECLARED ADVISABLE,
AUTHORIZED AND APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT THE MARSHALL
SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT.
RECORD DATE; VOTE REQUIRED
Record Date. The Marshall board of directors has fixed the close of
business on September 7, 1999 as the record date for the determination of
shareholders entitled to receive notice of and to vote at the Marshall special
meeting. On the Marshall record date, there were 16,621,364 shares outstanding.
You may vote at the meeting only if you owned Marshall common stock at that time
and you are entitled to one vote for each such share owned.
Quorum. A majority of the outstanding shares of Marshall's common stock as
of the Marshall record date, represented in person or by proxy, will constitute
a quorum at the Marshall special meeting.
Vote Required. The adoption of the merger requires the affirmative vote of
a majority of the outstanding shares entitled to vote.
Abstentions and Broker Non-Votes. Marshall intends to count shares of
Marshall common stock present in person at the Marshall special meeting but not
voting, and shares of Marshall common stock for which it has received proxies
but with respect to which holders of such shares have abstained, as present at
the Marshall special meeting for purposes of determining the presence or absence
of a quorum for the transaction of business. Brokers who hold shares of Marshall
common stock in "street" name for customers who are the beneficial owners of
such shares are prohibited from giving a proxy to vote shares held for such
customers with respect to the matters to be considered and voted at the special
meeting without specific instructions from such customers. Shares of Marshall
common stock represented by proxies returned by a broker holding such shares in
nominee or "street" name will be counted for purposes of determining whether a
quorum exists, even if such shares are broker non-votes.
Because approval of the merger agreement requires approval by a majority of
outstanding shares of Marshall common stock, abstentions and broker non-votes
will have the same effect as negative votes. Accordingly, the Marshall board of
directors urges Marshall shareholders to respond to this proxy solicitation,
whether by U.S. mail via the enclosed, postage-paid envelope, or, if available,
by telephone or the Internet.
16
<PAGE> 23
Directors' and Officers' Votes. As of the record date, approximately
338,114 shares of Marshall common stock, or approximately 2.0% of the shares
entitled to vote at the Marshall special meeting were owned by directors and
executive officers of Marshall. It is currently expected that each such director
and executive officer of Marshall will vote the shares beneficially owned by him
for approval of the merger.
VOTING AND REVOCATION OF PROXIES
Proxies for shares of Marshall common stock may be submitted by completing
and mailing the proxy card that accompanies this Joint Proxy
Statement/Prospectus or, to the extent available, by submitting your proxy
voting instructions by telephone or through the Internet. Record holders may
submit their proxy by mail or by telephone by calling toll free 1-877-393-4961.
Marshall shareholders who hold their shares through a broker, nominee, fiduciary
or other custodian may be able to vote by telephone or through the Internet.
Marshall shareholders should contact the broker or other person to determine
whether they may submit their proxy by telephone or the Internet. Shares of
Marshall common stock represented by a proxy properly signed or submitted as
described below and received at or prior to the Marshall special meeting, unless
subsequently revoked, will be voted in accordance with the holder's
instructions.
To submit a written proxy by mail, holders of Marshall common stock should
complete, sign, date and mail the proxy card provided with this Joint Proxy
Statement/ Prospectus in accordance with the instructions set forth on the card.
If a proxy card is signed and returned without indicating any voting
instructions, shares of Marshall common stock represented by the proxy will be
voted "FOR" the adoption of the merger agreement.
Instead of submitting a signed proxy card, Marshall shareholders of record
may also submit their proxy voting instructions by telephone. To submit proxy
voting instructions via telephone, shareholders should follow the instructions
that accompany or are set forth on the reverse side of their proxy card. Each
such record shareholder has been assigned a unique control number which has been
printed on each holder's proxy card. Shareholders who submit proxies by
telephone will be required to provide their assigned control number before their
proxy will be accepted. In addition to the instructions that appear on or
accompany the proxy card, step-by-step instructions will be provided by recorded
telephone message, and shareholders will receive confirmation that their proxies
have been successfully submitted. Beneficial holders who hold their shares
through a broker, nominee, fiduciary or other custodian should follow the
instructions they receive from the record holder of their shares with respect to
voting.
Any person who signs and mails the enclosed proxy may revoke it any time
before it is voted by giving written notice of revocation to Marshall, by
mailing a later dated proxy which is received by Marshall prior to the Marshall
special meeting or by voting in person at the Marshall special meeting. However,
a proxy is not revoked by simply attending the Marshall special meeting. All
written notices of revocation and other communications with respect to
revocation by Marshall shareholders should be addressed as follows: Henry Chin,
Secretary, Marshall Industries, 9320 Telstar Avenue, El Monte, California
91731-2895. To revoke a proxy previously submitted by telephone or through the
Internet, a Marshall shareholder of record can simply vote again at a later
date, using the same procedures, in which case the later submitted vote will be
recorded and the earlier vote will thereby be revoked.
17
<PAGE> 24
The Marshall board of directors is not currently aware of any business to
be acted upon at the special meeting other than as described herein. If,
however, other matters are properly brought before the meeting, the persons
appointed as proxies will have discretion to vote or to act thereon according to
their best judgment, unless otherwise indicated on any particular proxy. The
persons appointed as proxies will have discretion to vote on adjournment of the
Marshall special meeting. The adjournment may be for the purpose of soliciting
additional proxies. However, shares represented by proxies voting against
adoption of the merger agreement will be voted against a proposal to adjourn the
Marshall special meeting for the purpose of soliciting additional proxies.
SOLICITATION OF PROXIES
The solicitation of proxies for the Marshall special meeting will be made
primarily by mail. However, if necessary to ensure satisfactory representation
at the Marshall special meeting, additional solicitation may take place by
telephone, telegraph and personal interview by employees of Marshall. No such
employee will receive additional compensation for such services. Marshall has
retained Corporate Investor Communications, Inc. to assist in the solicitation
of proxies on its behalf for a fee of approximately $7,000, plus out-of-pocket
expenses. In addition, brokerage houses, nominees, fiduciaries and other
custodians will be requested to forward soliciting materials to beneficial
owners and will be reimbursed for their reasonable expenses incurred in sending
materials to beneficial owners.
NON-CASH ELECTION FORMS
Marshall has mailed to shareholders of record as of the record date for the
Marshall special meeting a form for shareholders to make an election to receive
Avnet common stock for some or all of their shares of Marshall common stock. If
you do not wish to receive shares of Avnet common stock in the merger, you
should not submit the non-cash election form, although this will not guarantee
that you will not receive shares; see "The Merger -- Terms of the Merger" on
page 52. If your shares are held in "street name" through your broker, your
broker will mail your non-cash election form under separate cover, together with
a letter of instructions. You should read your non-cash election form together
with this Joint Proxy Statement/Prospectus.
For a non-cash election form to be effective, you must properly complete
the form and send it, together with your certificates for your shares of
Marshall common stock, duly endorsed in blank or otherwise in a form which is
acceptable for transfer as described in the non-cash election form, to the
exchange agent, The Bank of New York, Tender & Exchange Department, 101 Barclay
Street, Receive and Deliver Window, New York, N.Y. 10286 (or by mail to P.O. Box
11248, Church Street Station, New York, N.Y. 10286-1248), so that it is received
by 5:00 p.m., New York time, on October 18, 1999.
Determinations by the exchange agent as to whether non-cash election forms
have been properly made or revoked, or were timely received, and all
computations as to proration will be final and binding on Marshall shareholders.
As soon as practicable after the effective time of the merger, the exchange
agent will send a letter of transmittal to each holder of Marshall common stock.
The letter of transmittal will contain instructions for the surrender of
certificates in exchange for the merger consideration, other than certificates
surrendered with non-cash election forms as described above. Unless you forward
your certificates with a non-cash election form, you
18
<PAGE> 25
should not forward your stock certificates to the exchange agent until you
receive the letter of transmittal following the merger.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of July 31, 1999 with respect
to each shareholder known by Marshall to be the beneficial owner of more than 5%
of its outstanding common stock, and share ownership of each director and each
executive officer of Marshall and of all executive officers and directors of
Marshall as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME POSITION(1) OWNERSHIP(2) CLASS
- ---- ---------------------------- ----------------- ----------
<S> <C> <C> <C>
First Pacific Advisors, Inc..... 2,545,700(3) 15.3%
11400 West Olympic Blvd.
Suite 1200
Los Angeles, California 90064
Royce & Associates, Inc......... 1,001,300(4) 6.0%
1414 Avenue of the Americas
New York, New York 10019
Gordon S. Marshall.............. Chairman of the Board 284,030 1.7%
Robert Rodin.................... Director, President and 166,000(5) *
Chief Executive Officer
Richard D. Bentley.............. Director and Executive Vice 9,584 *
President
Henry W. Chin................... Vice President, 57,250(6) *
Finance, Chief
Financial Officer and
Secretary
Richard C. Colyear.............. Director 3,250(7) *
Jean Fribourg................... Director 500 *
Lathrop Hoffman................. Director 5,450(7)(8) *
Jose Menendez................... Director 500 *
Raymond G. Rinehart............. Director 5,450(7)(9) *
Howard C. White................. Director 3,050(10) *
All executive officers and
directors as
a group (10 persons)............ 535,064(11) 3.2%
</TABLE>
- -------------------------
* Represents less than 1%.
(1) Each director is elected to serve until the next annual meeting of
shareholders or until his successor is elected to the Board. Each officer
serves at the pleasure of the Board.
(2) Except as provided under state community property laws and unless otherwise
indicated, each shareholder has sole voting and investment power with
respect to the shares shown as beneficially owned by that shareholder.
19
<PAGE> 26
(3) Pursuant to a Schedule 13G dated March 12, 1999 and filed with the
Securities and Exchange Commission, First Pacific Advisors, Inc. reported
beneficial ownership of over 5% of Marshall's common stock. Based on
information subsequently obtained from First Pacific Advisors, Inc.,
Marshall believes that on July 31, 1999 it had shared voting and
dispositive power with respect to 887,000 shares and shared dispositive
power with respect to 1,658,700 shares.
(4) Pursuant to a Schedule 13G dated February 10, 1999 and filed with the
Securities and Exchange Commission, Royce & Associates, Inc. reported
beneficial ownership of over 5% of Marshall's common stock. Based on
information subsequently obtained from Royce & Associates, Inc., Marshall
believes that on July 31, 1999, it had sole voting and dispositive power
with respect to 1,001,300 shares.
(5) Includes 137,500 shares which are subject to options that are presently
exercisable or become exercisable within 60 days of July 31, 1999.
(6) Includes 51,250 shares which are subject to options that are presently
exercisable or become exercisable within 60 days of July 31, 1999.
(7) Includes 1,250 shares which are subject to options that are presently
exercisable.
(8) Includes 200 shares held by Mr. Hoffman's wife.
(9) Includes 2,600 shares held in a revocable trust for which Mr. Rinehart is
the trustee.
(10) Includes 400 shares which are held in the retirement account of Mr. White's
wife.
(11) Includes 193,750 shares which are subject to options that are presently
exercisable or become exercisable within 60 days of July 31, 1999.
20
<PAGE> 27
THE AVNET SPECIAL MEETING
GENERAL; DATE, TIME AND PLACE
This Joint Proxy Statement/Prospectus is being furnished to holders of
Avnet common shares in connection with the solicitation of proxies by the Avnet
board of directors for use at the Avnet special meeting of shareholders to be
held on October 19, 1999 at 10:00 a.m. at the Bisbee Room at the Pointe Hilton
at South Mountain Resort Hotel, 7777 South Pointe Parkway, Phoenix, Arizona
85044. The purpose of the meeting is to consider and to vote upon the adoption
of the merger agreement and to transact any other business that may properly
come before the meeting or any adjournments, postponements, continuations or
reschedulings of the meeting.
THE AVNET BOARD OF DIRECTORS HAS DECLARED ADVISABLE, AUTHORIZED AND
APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT THE AVNET SHAREHOLDERS VOTE
FOR THE ADOPTION OF THE MERGER AGREEMENT.
Each copy of this Joint Proxy Statement/Prospectus mailed to holders of
Avnet common stock is accompanied by a form of proxy for use at the Avnet
special meeting. In addition, Avnet shareholders who owned common stock at the
close of business on September 3, 1999, the record date for the meeting, may
submit their proxies by telephone or through the Internet by following the
instructions accompanying the proxy card sent to Avnet shareholders.
RECORD DATE; VOTE REQUIRED
The Avnet board of directors has fixed the close of business on September
3, 1999 as the record date for the determination of shareholders entitled to
receive notice of and to vote at the meeting. You may vote at the meeting only
if you owned Avnet common stock at that time.
As of the Avnet record date, there were 35,218,933 shares of Avnet common
stock issued and outstanding, excluding shares held in the treasury of Avnet.
Each share is entitled to one vote on each matter properly submitted at the
meeting.
The affirmative vote of the holders of two-thirds of the shares of common
stock of Avnet issued and outstanding on the record date is required to adopt
the merger agreement. Failure to be present in person or represented by proxy at
the meeting, any abstention and any broker non-vote will have the same effect as
a vote against adoption of the merger agreement. Brokers who hold shares in
street name for customers will not have authority to vote on these matters
unless they receive specific instructions from the beneficial owners of the
shares. Shares that are not voted because brokers did not receive instructions
are known as "broker non-votes."
The presence, in person or represented by proxy, of a majority of the
shares of common stock of Avnet entitled to vote at the meeting will constitute
a quorum for the transaction of business. Abstentions and broker non-votes will
be counted as present for purposes of determining a quorum.
As of August 31, 1999 directors and executive officers of Avnet owned an
aggregate of 81,468 outstanding shares of Avnet common stock over which they had
or shared the power to vote, or approximately 0.2% of the Avnet common stock
outstanding on that date. The directors and executive officers of Avnet have
indicated their intention to vote in favor of the adoption of the merger
agreement.
21
<PAGE> 28
VOTING AND REVOCATION OF PROXIES
Proxies for shares of Avnet common stock may be submitted by completing and
mailing the proxy card that accompanies this Joint Proxy Statement/Prospectus or
by submitting your proxy voting instructions by telephone or through the
Internet. Submission of proxies by telephone may not be available to
shareholders who hold their shares through a broker, nominee, fiduciary or other
custodian. Avnet shareholders should contact the broker or other person to
determine whether they may submit their proxy by telephone or through the
Internet. Shares of Avnet common stock represented by a proxy properly signed or
submitted as described below and received at or prior to the Avnet special
meeting, unless subsequently revoked, will be voted in accordance with the
holder's instructions.
To submit a written proxy by mail, holders of Avnet common stock should
complete, sign, date and mail the proxy card provided with this Joint Proxy
Statement/Prospectus in accordance with the instructions set forth on the card.
If a proxy card is signed and returned without indicating any voting
instructions, shares of Avnet common stock represented by the proxy will be
voted "FOR" the adoption of the merger agreement.
Instead of submitting a signed proxy card, Avnet shareholders may also
submit their proxies with voting instructions by telephone or through the
Internet. To submit proxies via telephone or through the Internet, shareholders
should follow the instructions that accompany or are set forth on the reverse
side of their proxy card. Each Avnet shareholder has been assigned a unique
control number which has been printed on each holder's proxy card. Shareholders
who submit proxies by telephone or through the Internet will be required to
provide their assigned control number before their proxy will be accepted. In
addition to the instructions that appear on or accompany the proxy card,
step-by-step instructions will be provided by recorded telephone message or at
the designated website, and shareholders will receive confirmation that their
proxies have been successfully submitted.
Any person who signs and mails the enclosed proxy may revoke it any time
before it is voted by giving written notice of revocation to Avnet, by mailing a
later dated proxy which is received by Avnet prior to the Avnet special meeting
or by voting in person at the Avnet special meeting. However, a proxy is not
revoked by simply attending the Avnet special meeting. All written notices of
revocation and other communications with respect to revocation by Avnet
shareholders should be addressed as follows: David R. Birk, Esq., Secretary,
Avnet, Inc., 2211 South 47th Street, Phoenix, Arizona 85034. To revoke a proxy
previously submitted by telephone or through the Internet, an Avnet shareholder
of record can simply vote again at a later date, using the same procedures, in
which case the later submitted vote will be recorded and the earlier vote will
thereby be revoked.
If an Avnet shareholder is a participant in Avnet's employee stock purchase
plan, the Avnet proxy card will serve as voting instructions with respect to the
number of shares of Avnet common stock held in the plan on behalf of the
particular shareholder. To ensure that all shares of Avnet common stock are
voted, the shareholder must sign and return every proxy card received or provide
his or her proxy with voting instructions by telephone or through the Internet
in the manner described in each proxy card and using the assigned control
number.
The Avnet board of directors is not currently aware of any business to be
acted upon at the special meeting other than as described herein. If, however,
other matters are properly brought before the meeting, the persons appointed as
proxies will have discretion
22
<PAGE> 29
to vote or to act thereon according to their best judgment, unless otherwise
indicated on any particular proxy. The persons appointed as proxies will have
discretion to vote on adjournment of the Avnet special meeting. The adjournment
may be for the purpose of soliciting additional proxies. However, shares
represented by proxies voting against adoption of the merger agreement will be
voted against a proposal to adjourn the Avnet special meeting for the purpose of
soliciting additional proxies.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
Avnet, none of whom will be specifically compensated for these services but may
be reimbursed for reasonable out-of-pocket expenses in connection therewith, may
solicit proxies from the shareholders of Avnet personally or by telephone,
telecopy or telegram or other forms of communication. Brokerage houses,
nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable expenses incurred in sending materials to beneficial owners.
In addition, Avnet has retained Georgeson Shareholder Communication Inc. to
assist in the solicitation of proxies from its shareholders. The fees to be paid
by Avnet to Georgeson Shareholder Communication Inc. for its services will be
equal to approximately $9,000 plus reasonable out-of-pocket costs and expenses.
Avnet will bear its own expenses in connection with the solicitation of proxies
for the Avnet special meeting.
AVNET SHAREHOLDERS SHOULD NOT SEND AVNET COMMON STOCK CERTIFICATES WITH
THEIR PROXY CARDS. IF THE MERGER IS COMPLETED, AVNET SHAREHOLDERS WILL NOT
EXCHANGE THEIR STOCK CERTIFICATES.
BENEFICIAL OWNERSHIP OF COMMON STOCK BY MANAGEMENT AND OTHERS
The following table sets forth information with respect to the common stock
of Avnet beneficially owned at August 31, 1999 by (a) the only persons that, to
Avnet's knowledge, were the beneficial owners of more than 5% of its outstanding
common stock, (b) each director of Avnet and each of the five most highly
compensated executive officers of Avnet and (c) all directors and executive
officers of Avnet as a group. Except where specifically noted in the table, all
the shares listed for a person or the group are directly held by such person or
group members, with sole voting and dispositive power. The table does not
23
<PAGE> 30
reflect undelivered awards of restricted stock under the Avnet Incentive Stock
Program, which stock cannot be voted prior to delivery.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OWNERSHIP CLASS*
- ---- ----------------- ----------
<S> <C> <C>
Sanford C. Bernstein & Co. Inc.(1)............... 5,271,872 14.97%
Oppenheimer Capital(2)........................... 3,113,508 8.84%
The Prudential Insurance Company of America(3)... 1,967,026 5.59%
Eleanor Baum..................................... 1,550
J. Veronica Biggins.............................. 600
Joseph F. Caligiuri.............................. 2,650(T,S)
Steven C. Church................................. 7,293
82,750(O)
---------
90,043
Lawrence W. Clarkson............................. 1,000
Brian Hilton..................................... 100
20,000(O)
---------
20,100
Ehud Houminer.................................... 3,400
James A. Lawrence................................ 1,000
Salvatore J. Nuzzo............................... 5,400
Frederic Salerno................................. 3,400
Charles Smith.................................... 4,376
62,696(O)
---------
67,072
Roy Vallee....................................... 2,683 1.25%
422,500(O)
19,061(T,S)
---------
444,244
Richard R. Ward.................................. 3,018
49,625(O)
---------
52,643
Frederick S. Wood................................ 600
1,300(T)
---------
1,900
All directors and executive officers as a group
(20 persons)................................... 58,457 2.45%
1,300(T)
21,711(T,S)
802,821(O)
---------
884,289
</TABLE>
- -------------------------
* Less than 1% for each person except as otherwise indicated.
(T) Shares owned by trusts, custodianships and other entities as to which the
person has the power to direct voting and dispositions.
(S) Shares as to which the person shares voting and/or dispositive power with
others.
24
<PAGE> 31
(O) Shares issuable upon exercise of stock options currently exercisable or
first becoming exercisable on or prior to September 30, 1999.
(1) Sanford C. Bernstein & Co., Inc. ("Bernstein") is a registered investment
adviser and broker/dealer, with offices at 767 Fifth Avenue, New York, New
York 10153. Information as to the beneficial ownership of Avnet common
stock by Bernstein was obtained from a Schedule 13G filed on February 5,
1999, with the Securities and Exchange Commission, which disclosed that
Bernstein was the beneficial owner of 5,271,872 shares, including 2,812,683
shares as to which it had sole voting power, 650,666 shares as to which it
had shared voting power, and 5,271,872 shares as to which it had sole
dispositive power. Such filing further states that the shares were acquired
in the ordinary course of business and were not acquired for the purpose
of, and do not have the effect of, changing or influencing the control of
Avnet, and were not acquired in connection with or as a participant in any
transaction having such purpose or effect.
(2) Oppenheimer Capital ("Oppenheimer") is a registered investment adviser with
offices at Oppenheimer Tower, World Financial Center, New York, New York
10281. Information as to the beneficial ownership of Avnet common stock by
Oppenheimer was obtained from a Schedule 13G filed on February 12, 1999,
with the Securities and Exchange Commission, which disclosed that
Oppenheimer was the beneficial owner of 3,113,508 shares, as to which it
had shared voting power and shared dispositive power. Such filing further
states that the shares were acquired in the ordinary course of business and
were not acquired for the purpose of, and do not have the effect of,
changing or influencing the control of Avnet, and were not acquired in
connection with or as a participant in any transaction having such purpose
or effect.
(3) The Prudential Insurance Company of America ("Prudential") is a mutual
insurance company and a registered investment adviser with offices at 751
Broad Street, Newark, New Jersey 07102-3777. Information as to the
beneficial ownership of Avnet common stock by Prudential was obtained from
a Schedule 13G filed on February 1, 1999, with the Securities and Exchange
Commission, which disclosed that Prudential was the beneficial owner of
1,967,026 shares, including 236,200 shares as to which it had sole voting
power, 1,726,926 shares as to which it had shared voting power, 236,200
shares as to which it had sole dispositive power and 1,730,826 shares as to
which it had shared dispositive power. Such filing further states that the
shares were acquired in the ordinary course of business and were not
acquired for the purpose of, and do not have the effect of, changing or
influencing the control of Avnet, and were not acquired in connection with
or as a participant in any transaction having such purpose or effect.
25
<PAGE> 32
THE COMPANIES
MARSHALL
Marshall, together with its subsidiaries, is among the largest distributors
of industrial electronic components and production supplies in North America.
Marshall distributes approximately 200,000 different products manufactured by
over 60 major suppliers.
Major products that Marshall supplies include:
- semiconductors;
- passive components;
- connectors and interconnect products;
- computer and peripheral products; and
- production supplies.
In addition to providing its customers an extensive product offering,
Marshall is the major distributor, in sales volume, of Japanese semiconductor
products in North America. Marshall's principal suppliers include Advanced Micro
Devices, Inc., AMP Incorporated, Atmel Corporation, AVX Corporation, Cypress
Semiconductor, Inc., Conexant Systems, Inc. (formerly Rockwell Semiconductor
Systems, Inc.), Hitachi Semiconductor (America), Inc., Infineon Technologies
Corporation (formerly Siemens Microelectronics), Lattice Semiconductor
Corporation, Linear Technology Corporation, NEC Electronics, Inc., Philips
Components, Sharp Microelectronics of the Americas, Texas Instruments
Incorporated, and Toshiba America Electronic Components, Inc.
Marshall distributes products to more than 40,000 customers, including a
wide range of original equipment manufacturers, contract manufacturers, and
value-added resellers. In addition to the distribution of products, Marshall
provides its customers with a variety of value-added services, such as inventory
management, kitting, assembly, programming of programmable logic devices and EDI
data exchange. Marshall also provides technical support to its customers through
field application engineers. All of Marshall's corporate warehousing and
value-added service operations are certified to ISO 9002 standards.
Marshall is a customer-oriented company that emphasizes responsive customer
service through its network of sales and distribution facilities and corporate
support and distribution centers in the United States, Canada, and Mexico.
Marshall has sales facilities in all of the major electronic products markets in
North America. This local customer service is supported by advanced on-line
information technology systems, 24-hour sales and technical support services and
automated distribution facilities. Marshall has made substantial investments in
its information technology systems, which have increased and improved its
service capabilities, operating efficiencies and its cost competitiveness.
Marshall has been recognized as a leader in the areas of electronic
commerce and information technology, including the development of technology
interfaces for its Internet and Extranet websites, database management systems,
Lotus Notes and mainframe applications.
Marshall uses the Internet to provide its customers a variety of services.
These services include the delivery of information on product availability and
pricing, on-line order processing and tracking, part number search and cross
reference data, and technical specifications and documentation.
26
<PAGE> 33
In 1999, Marshall developed a new web site, SpotMarket.com, which includes
an on-line auction function that allows customers to negotiate for products, a
discount center for the sale of aggressively priced surplus products, and a
buyer-specified part and/or price locator capability.
Marshall's primary website (www.marshall.com) was named the number one
Business-to-Business website for two consecutive years (1997 and 1998).
Marshall's wholly owned subsidiary, ENEN Corp. (The Education News &
Entertainment Network), is a leading provider of Internet broadcasting services
for the electronics industry. ENEN's award-winning site incorporates real-time
video, audio and interactive chat technologies to deliver live, interactive
training sessions, product announcements and other events over the Internet.
In addition to its distribution operations in North America, Marshall
provides global support to customers and suppliers through its global strategic
alliances and investments. Marshall has a 16% equity interest in the electronics
distribution companies of Sonepar Electronique International ("SEI"), one of the
largest electronic components distributors in Europe. Marshall also has, as of
May 31, 1999, an investment of approximately 9% of the common stock of Serial
System Ltd. ("Serial"), a Singapore based electronic components distributor with
operations in Southeast Asia. Marshall has entered into joint marketing and
sales alliances with SEI and Serial to service its customers and suppliers
globally.
Marshall has its principal executive offices at 9320 Telstar Avenue, El
Monte, California 91731 (telephone number (626) 307-6000).
For additional information about Marshall and its business, see the
documents identified in "Where You Can Find More Information" on page 77.
AVNET
Avnet is one of the world's largest industrial distributors of electronic
components and computer products, with sales for its fiscal year ended July 2,
1999 of $6.35 billion. Avnet is a vital link in the chain that connects
suppliers of semiconductors, interconnect products, passives and
electromechanical devices to original equipment manufacturers ("OEMs") that
design and build the electronics equipment for end-market use, and to other
industrial customers. In addition, Avnet distributes a variety of computer
products to both the end user and the reseller channels. Through its electronic
components distribution activities, Avnet acts as an extension of a supplier's
sales force by marketing products to a larger base of customers than individual
suppliers could do economically. While many suppliers can only serve a few
hundred of the larger OEMs, Avnet is authorized to sell products of more than
100 of the world's leading component manufacturers to a global customer base of
approximately 100,000 OEMs. Electronic components are shipped as received from
Avnet's suppliers or with assembly or other value added. As part of its
distribution activities, Avnet adds various processes that customize products to
meet individual OEM customer specifications, and it provides material management
and logistic services.
Avnet has approximately 8,300 employees globally and maintains locations
throughout the United States, Canada, Mexico, Europe, Asia, Australia, New
Zealand, South Africa and South America.
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One of Avnet's critical strengths is the breadth and quality of the
suppliers whose products it carries. Listed below are the major product
categories and the major suppliers in each category:
- Semiconductors: Avnet's major suppliers of semiconductors are Advanced
Micro Devices, Analog Devices, Harris, Hewlett-Packard, Hitachi,
Integrated Device Technology, Intel, LSI Logic, Micron Semiconductors,
Motorola, National Semiconductor, Philips/Signetics, Texas Instruments
and Xilinx.
- Computer Products: Avnet's major suppliers of computer products are
Cabletron, Compaq Computer Corporation, Computer Associates,
Hewlett-Packard, IBM, Intel, Oracle, Seagate Technology and Wyse
Technology.
- Connectors: Avnet's major suppliers of connectors are AMP,
Amphenol/Bendix, ELCO, ITT Cannon, Molex, Pyle-National, T&B Ansley/Augat
and 3M.
- Passives, Electromechanical and Other: Avnet's major suppliers of these
products are AVX, Bourns, Cherry, Leach, Murata-Erie, Philips, Teledyne,
Valor and Vishay.
During fiscal year 1999 Avnet operated in two industry segments as
described below.
The Electronics Marketing Group ("EMG") is Avnet's largest operating group,
with fiscal year 1999 sales of $4.80 billion, representing approximately 76% of
Avnet's consolidated sales. EMG is comprised of three regional operations: EMG
Americas, EMG EMEA (Europe, Middle East and Africa) and EMG Asia.
EMG distributes electronic components (semiconductors, connectors, passives
and electromechanical devices), and EMG offers an array of value-added services
to its customers, such as inventory replenishment systems, kitting and
semiconductor programming. It is an authorized distributor of the top five
United States semiconductor manufacturers: Advanced Micro Devices, Intel,
Motorola, National Semiconductor and Texas Instruments.
Through a single account manager, customers now have complete access to the
products and services of Avnet's core distribution business, as well as complete
access to the following Avnet global brands (services):
- Avnet Design Services -- A suite of engineering and technical services
for customers, including turnkey logic designs, reference designs and
product designs, and demand creation services for suppliers.
- Avnet Integrated Material Services -- Customer specific materials
management, including leading-edge, information technology-based
services, and pin-point logistics. IMS develops and implements innovative
materials management solutions for EMG's major customers and their
contract manufacturers.
- Avnet Personal Computer Components -- Specializing in sales of
microprocessors, motherboards, memory, networking products and mass
storage to personal computer OEMs and system integrators.
Avnet's Computer Marketing Group ("CMG") is an international distributor of
computer products to value-added resellers and end users focusing primarily on
middle- to high-end, value-added computer products and services. CMG's 1999
sales were $1.55 billion, representing approximately 24% of Avnet's consolidated
sales. CMG is broadly split
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between two independent business units, Avnet Computer and Hall-Mark Global
Solutions.
Avnet Computer sells industry leading high-end systems, mid-range servers,
workstations, PCs, software, storage, networking, peripherals and services to
end user customers. Avnet Computer is one of North America's leading technology
solutions integrators, providing hardware, software, and services for
corporate-wide applications.
Hall-Mark Global Solutions concentrates on sales of computer systems,
peripherals and components to the reseller channel. Management of Avnet believes
that Hall-Mark Global Solutions is the industry's leading technical distributor
of open systems in support of a limited line card of the foremost computer and
peripherals manufacturers, which include Compaq, Hewlett-Packard, IBM and Intel.
Hall-Mark Global Solutions provides those manufacturers' products to value-added
resellers, along with complementary value-added solutions and in-house
engineering support, complex systems integration and configuration services.
CMG has also created Avnet Direct, an Internet commerce company which sells
computer systems to businesses and individuals on the World Wide Web. These
computer systems are configured from thousands of name-brand computer and
peripheral equipment products and software carried in CMG's inventories.
Recently, Avnet announced the formation of a new group, the Applied
Computing Group ("ACG"), to be effective in fiscal year 2000. ACG focuses the
resources of three existing business units, CMG's OEM Business unit and EMG's
Personal Computer Components and OEM Systems units, with combined revenues of
over $1 billion. ACG will provide technical solutions that include software,
engineering services, leadership product, supply chain management, financing and
physical distribution and integration of the end product.
Avnet's principal executive offices are located at 2211 South 47th Street,
Phoenix, Arizona 85034, telephone number (480) 643-2000.
For additional information about Avnet and its business, see the documents
identified in "Where You Find More Information" on page 77.
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THE MERGER
This discussion of the merger of Marshall into Avnet and the principal
terms of the merger agreement is subject to, and qualified in its entirety by
reference to, the Amended and Restated Agreement and Plan of Merger, dated as of
June 25, 1999, between Avnet and Marshall, a copy of which is attached as
Appendix A.
GENERAL
We are furnishing this Joint Proxy Statement/Prospectus to holders of
Marshall common stock and Avnet common stock in connection with the solicitation
of proxies by the boards of directors of Marshall and Avnet for use at their
special meetings of shareholders, and at any adjournments, postponements,
continuations or reschedulings of these meetings. At the special meetings,
Marshall and Avnet shareholders will be asked to consider and to vote upon
proposals to approve the merger agreement.
The merger agreement provides for the merger of Marshall into Avnet, with
Avnet as the surviving corporation. At the effective time of the merger, the
separate corporate existence of Marshall will cease and Avnet will remain as the
surviving corporation. Each share of Avnet common stock issued and outstanding
before the merger will remain an issued and outstanding share of Avnet common
stock after the merger. Marshall common stock outstanding before the merger will
be converted by the merger into Avnet common stock or $39.00 per share in cash
or a combination of Avnet common stock and cash as described under "The Merger
Agreement -- Terms of the Merger" on page 52. The merger will become effective
when certificates of merger are filed with the Secretaries of State of
California and New York, or at a subsequent date or time that Marshall and Avnet
agree on and specify in the certificates of merger. The transaction is intended
to qualify as a tax-free "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended, and the rules and regulations
thereunder (the "Code") for federal income tax purposes.
Based on the closing price per share of Avnet common stock on the New York
Stock Exchange on June 25, 1999 of $47.8125, giving effect to the exchange
ratio, the implied per share value of Marshall common stock in the merger was
$39.00 on that date. A recent closing price per share of Avnet common stock on
the New York Stock Exchange is set forth under "Market Price and Dividend
Information" on page 8. After the merger, Marshall shareholders will own
approximately 16%, and Avnet shareholders will own approximately 84%, of Avnet
common stock, based on the numbers of shares outstanding as of September 3,
1999, and on the exchange ratio.
BACKGROUND TO THE MERGER
MARSHALL
In late 1998 and early 1999 Marshall recognized that the business of
distributing industrial electronic components was undergoing significant
changes. These changes included:
- the growth of new competitive forces affecting the industry;
- pressures imposed on distributors by suppliers and customers who wanted
their distributors to provide more services, capabilities and products;
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- the trend of major suppliers and many customers to reduce the number of
distributors with which they do business and to favor those distributors
that can provide a full line of products and that have global reach;
- the increasing role of contract manufacturers in manufacturing and
materials procurement; and
- the trend toward increasing globalization.
Additionally, the maturing and increasingly competitive nature of the
industry has resulted in pressures and narrowing of margins for most electronic
component products. In recent years, there have been more mergers among
distributors, resulting in a small number of very large, global distributors
gaining an increasingly larger share of the market. These trends indicated to
Marshall that the more successful distributors in the future will be larger than
Marshall and will have greater financial resources than Marshall. As a result of
these trends and the decline in the price per share of Marshall's common stock
from above $30 per share in October 1998 to less than $14 per share in March
1999, Marshall's board of directors considered at its March 9, 1999 meeting
whether it would be in the best interests of Marshall's shareholders for
Marshall to consider various strategic alternatives including a possible merger
or sale of Marshall to another company.
This discussion continued at Marshall's board meeting on April 21, 1999.
Earlier in April, the price per share of Marshall common stock had dropped below
$14 per share. At its April meeting, the Marshall board of directors authorized
management to engage Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
to advise Marshall on strategic alternatives. The board also created an
executive committee composed of Gordon Marshall, Robert Rodin, Richard Bentley,
Richard Colyear, Lathrop Hoffman, Raymond Rinehart and Howard White. The board
empowered the executive committee to consider various strategic alternatives
including a possible merger or sale of the company.
At an industry conference on May 3, 1999, Robert Rodin, Marshall's
President, mentioned to Roy Valle, Chairman of the Board and Chief Executive
Officer of Avnet, that Marshall's board of directors was considering engaging an
investment banking firm to consider potential strategic alternatives.
Marshall's executive committee met on May 13, 1999 with representatives of
DLJ and Marshall's legal counsel. The executive committee considered three
alternatives for Marshall: (1) continuing the current strategy, recognizing that
because of a lack of critical mass and resources Marshall would be at a
competitive disadvantage relative to larger companies in the industry; (2)
increasing the mass of Marshall by making acquisitions, but recognizing that
there were only a limited number of feasible acquisition candidates; and (3) a
sale of Marshall. After an extensive discussion, the executive committee
authorized management and DLJ to contact prospective acquirors to determine
their level of interest in a possible acquisition of Marshall.
During May 1999, Mr. Rodin and representatives of DLJ contacted Avnet and
other potential strategic buyers to determine their level of interest in a
possible acquisition of Marshall. One potential strategic buyer expressed an
interest in considering the opportunity, but Marshall believed that, because of
the size of the transaction, this buyer might have difficulty obtaining
financing, and Marshall ultimately did not pursue discussions with this
potential buyer. The second potential buyer expressed no serious interest. Two
others, Avnet and another electronic components distributor ("ECD"), expressed
significant interest.
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On May 25, 1999 Marshall entered into confidentiality agreements with Avnet
and ECD and began providing them with detailed information concerning Marshall
so that they could commence due diligence. Mr. Rodin and Henry Chin, Marshall's
chief financial officer, and representatives of DLJ met with ECD on May 26 to
discuss the possible acquisition of Marshall by ECD. They had a similar meeting
with Avnet on June 7. For the next two weeks there were a series of meetings and
telephone conferences between Mr. Rodin, Mr. Chin and representatives of DLJ, on
the one hand, and executives of Avnet and ECD and their respective financial
advisers, on the other hand.
On June 16, following the completion of its initial due diligence, Avnet
proposed a 50% stock/50% cash merger valued at $26.50 per share of Marshall
common stock. On June 17, ECD proposed a 50% stock/50% cash merger valued at
$27.50 per share of Marshall common stock. At the request of Marshall,
representatives of DLJ advised both Avnet and ECD that their proposals were
inadequate and would have to be increased significantly before they would be
seriously considered by Marshall's executive committee and board of directors.
Avnet said that it would reconsider its proposal after reviewing a draft of the
proposed merger agreement. On June 18, legal counsel for Marshall forwarded to
Avnet a draft merger agreement. They requested Avnet to indicate any changes it
would require to the agreement as part of its next proposal. On June 19, legal
counsel for Marshall forwarded a draft merger agreement to ECD with the same
request.
On June 21, Avnet proposed a 50% stock/50% cash merger with a value of
$32.50 per share of Marshall common stock and indicated that it would complete
its due diligence in time to be ready to sign a definitive merger agreement by
the end of the week. Avnet also submitted a mark-up of the draft merger
agreement. ECD advised DLJ that it would make a revised proposal on the next
day. On the evening of June 21, Mr. Rodin, Mr. Chin and DLJ met with members of
the executive committee and Marshall's legal counsel to report on the status of
the negotiations with Avnet and ECD.
On June 22, ECD submitted a revised proposal for a 50% stock/50% cash
merger with a value of $32.50 per share of Marshall common stock. It said that
it would need seven to ten days to conclude its due diligence and that it
believed it would be in a position to announce a merger on or about July 20.
ECD's legal counsel submitted a mark-up of the draft merger agreement which
included their "principal comments," which were less favorable to Marshall than
those contained in Avnet's draft. Marshall believed that both Avnet and ECD
could make more attractive proposals. Accordingly, Marshall instructed DLJ to
advise both Avnet and ECD that their revised proposals were inadequate.
On June 23, Avnet submitted a new proposal for a 50% stock/50% cash merger
valued at $36.50 per share of Marshall common stock and ECD submitted a revised
proposal for a 50% stock/50% cash merger proposal valued at $36 per share of
Marshall common stock. The Marshall executive committee met with DLJ and
Marshall's legal counsel on the afternoon of June 23 to consider the two
proposals. Factors discussed included the economic value of the two proposals;
the accretion to earnings per share each proposal would provide to the acquiror;
the likely reaction of the rating agencies and investment community to the
increased indebtedness which each acquiror would incur to consummate the merger;
the principal differences in the changes proposed by each to the draft merger
agreement; and the fact that Avnet had virtually completed its due diligence,
was satisfied with the information received to date and was prepared to move
promptly to the signing of a merger agreement while ECD would require
significant additional due diligence and only be prepared to sign an agreement
several weeks in the future. After an
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extensive discussion of the foregoing, the executive committee authorized DLJ to
advise Avnet that, if it were prepared to increase its offer to $38 per share,
Marshall would be prepared to use its best efforts through 5:00 p.m. on June 25
to negotiate with Avnet on an exclusive basis to determine whether a mutually
satisfactory merger agreement could be agreed upon. Later that evening, Avnet
increased its proposal to a 50% stock/50% cash merger valued at $38 per share of
Marshall common stock.
Beginning on the morning of June 24, Mr. Rodin, Mr. Chin and
representatives of DLJ and Marshall's legal counsel met with Avnet and its
financial and legal advisers to negotiate the terms of a merger agreement.
Meanwhile, on the afternoon of June 24, ECD submitted an unsolicited proposal
raising its offer to a 50% stock/50% cash merger valued at $40 per share of
Marshall's common stock. ECD's letter said that further due diligence and
contract negotiations would require "relatively few days" and that negotiation
of the definitive agreement should require only a "limited number of days," but
that an announcement of the merger could not occur until July 20. The letter
also said that ECD was prepared to have its counsel mark up the draft merger
agreement in detail.
Marshall's executive committee met with DLJ and Marshall's legal counsel on
the afternoon of June 24 to discuss the status of negotiations with Avnet and
the revised proposal received from ECD. They considered the relative certainty
of being able to reach a definitive agreement with Avnet in the near future as
compared with the contingencies, including further due diligence, a delay in
signing and announcing a definitive agreement and other open issues in the ECD
proposal. They also considered the relative investment values of Avnet's and
ECD's shares including their multiples, recent performance and the pro forma
effect of the merger on the earnings and balance sheets of Avnet and ECD.
Marshall's executive committee met again on the afternoon of June 25 to
consider the status of negotiations with Avnet and the proposal from ECD. They
discussed further the relative merits of the two proposals; the likelihood of
reaching agreement with Avnet quickly; and the contingencies involved in ECD's
proposal. The executive committee instructed DLJ to meet again with Avnet
management to request its best and final offer. DLJ did so and, as a result of
such meeting, Avnet increased its proposal to a 50% stock/ 50% cash merger with
a value of $39 per share of Marshall common stock. ECD submitted two additional
unsolicited letters to Marshall and a detailed mark-up of the draft merger
agreement. However, the terms of ECD's proposal did not improve. ECD stated that
it would require further due diligence and that it thought that a merger
agreement could be signed and announced by the end of the week of June 28.
The board of directors of Marshall met on the evening of June 25 with DLJ
and Marshall's legal counsel to consider the revised Avnet proposal together
with the existing proposal from ECD. The directors discussed the economic value
of the two proposals; the strategic fit of Marshall with Avnet and ECD; the
likely view of the investment community and rating agencies with respect to
Avnet and ECD with the increased borrowings required to consummate the merger;
the pro forma earnings and operating results of Avnet and ECD after the merger;
the fact that Avnet was prepared to sign a definitive agreement while ECD wished
to do further due diligence, add more provisions to the draft merger agreement
and delay announcing signing of the agreement. The Company's legal counsel
summarized the fiduciary duties of the board of directors in considering such a
transaction, the terms of the proposed merger agreement with Avnet and the open
issues on the draft merger agreement submitted by ECD.
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DLJ advised the board of directors on the financial aspects of the two
proposals. DLJ noted that Avnet's stock had historically and currently tended to
trade at a higher multiple than ECD's stock and that the pro forma financial
impact of the transaction was more favorable to Avnet than to ECD. Based upon
the terms of the merger agreement to which Avnet had agreed, including Avnet's
completion of its due diligence and its readiness to sign immediately, and upon
the advice of DLJ regarding the relative investment values of Avnet's and ECD's
shares, including their multiples, recent performance and the pro forma effect
of the merger on the earnings and balance sheets of Avnet and ECD, Marshall's
board of directors concluded that Avnet's proposal was superior to that of ECD.
At Marshall's board of directors' request, DLJ delivered its opinion to the
effect that the merger consideration proposed by Avnet was fair to Marshall's
shareholders from a financial point of view.
Following extensive discussion, Marshall's board of directors unanimously
approved the merger with Avnet and authorized Marshall's officers to execute the
merger agreement and take all other appropriate actions to consummate the
transaction. Later on the evening of June 25, Mr. Rodin signed the merger
agreement on behalf of Marshall and Mr. Vallee signed it on behalf of Avnet.
After the merger agreement was executed by Marshall and Avnet, the two
companies agreed to make various immaterial changes in the agreement and then
signed an amended and restated merger agreement which is attached to this
document as Appendix A.
AVNET
The first time that Avnet learned that Marshall might be a candidate for
acquisition was at an industry conference on May 3, 1999, when Roy Vallee,
Chairman of the Board and Chief Executive Officer of Avnet, met Robert Rodin,
President and Chief Executive Officer of Marshall, and learned that the board of
directors of Marshall was considering engaging an investment banker to consider
potential strategic alternatives.
As a result of this conversation, Mr. Vallee and Avnet senior management
commenced a study of Marshall based upon publicly available documents and
determined that an acquisition of Marshall would complement and strengthen
Avnet's position in the industry. Mr. Vallee also engaged in informal
conversations with Merrill Lynch, Pierce, Fenner & Smith Inc. ("Merrill Lynch"),
Avnet's financial adviser, regarding the possible merger of the two companies.
On May 18, 1999, Marshall offered Avnet the opportunity to enter into a
confidentiality agreement to obtain confidential information about Marshall.
Avnet entered into the confidentiality agreement on May 25, 1999 and received a
briefing book containing detailed information regarding Marshall. Avnet's senior
management then proceeded to review and study this material to become familiar
with Marshall in order to determine how much it might be prepared to offer for
the acquisition of Marshall.
At a meeting of the executive committee of the board of directors of Avnet
on May 26, 1999, Mr. Vallee discussed the possible acquisition of Marshall, and
the committee authorized management to continue to explore the possibility.
On June 7, 1999, Mr. Vallee met with Mr. Rodin and Henry Chin of Marshall
and representatives of DLJ and expressed interest in acquiring Marshall. Present
with Mr. Vallee were Brian Hilton, Kevin McGarity, Steven Church and Raymond
Sadowski of Avnet and representatives of Merrill Lynch.
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On June 16, 1999, Marshall's financial adviser, DLJ, informed Avnet that if
Avnet wished to consider acquiring Marshall it should provide DLJ with an
indicative bid for Marshall's common stock. Avnet responded with an indication
of the amount it was prepared to bid to acquire Marshall's common stock.
On June 17, 1999, DLJ, acting for Marshall, notified Mr. Vallee that the
amount Avnet had suggested as its bid would be inadequate, and it suggested that
Avnet should consider raising its bid. However, Mr. Vallee said that he would
prefer not to furnish a new bid unless Marshall could respond to the bid within
24 hours. DLJ also indicated that a proposed contract was being prepared by
Marshall's counsel, and would be sent to Avnet in order to determine whether
there might be any other issues related to the acquisition. Mr. Vallee also
indicated that he would respond to the draft contract and that Avnet would
submit a new bid if DLJ could assure him that it was prepared to provide a
response to the bid within 24 hours of receiving the bid. DLJ then suggested
that Mr. Vallee should submit Avnet's new bid on June 21, 1999.
On June 18, 1999, Marshall's counsel sent to Avnet and its counsel a draft
of a proposed merger agreement, which Avnet and its counsel reviewed. Avnet's
senior management and counsel determined that it would be advisable to discuss
certain issues regarding the contract with Marshall and its counsel. On June 21,
1999, Avnet submitted a revised bid and a marked-up copy of the merger agreement
indicating the changes that Avnet would require in order to sign the merger
agreement, and Avnet proposed that counsel for Marshall and Avnet should meet to
discuss the proposed merger agreement and work out any questions.
On June 22, 1999, Avnet's senior management and Merrill Lynch discussed the
terms of the potential Marshall transaction, and Merrill Lynch informed Avnet's
senior management that it would be prepared to provide an opinion as to the
fairness to Avnet, from a financial point of view, of the consideration to be
paid by Avnet in the proposed transaction.
On June 23, 1999, Avnet submitted a new proposal to Marshall. DLJ informed
Mr. Vallee that Marshall would agree to meet with Avnet for an exclusive period
of 48 hours in order to complete negotiations on the definitive merger agreement
if Avnet would further increase its bid. DLJ also informed Avnet that the senior
management of Marshall proposed that the transaction consist of a mix of Avnet
common stock and cash so that it would be tax free to Marshall shareholders who
elected to receive stock. On the evening of June 23, Avnet increased its
proposal to the amount specified by DLJ.
On June 24, 1999, David R. Birk, Senior Vice President, General Counsel and
Secretary of Avnet, Raymond Sadowski, Senior Vice President and Chief Financial
Officer of Avnet, and the financial and legal advisers of Avnet met in Los
Angeles with Marshall's senior management and its financial and legal advisers
to negotiate the terms of the merger agreement, and Mr. Vallee and Steven Church
joined the meetings on June 25, 1999. During the meetings various additional
changes were agreed to in the merger agreement and the bid was raised one last
time.
On the afternoon of June 25, 1999, Avnet's and Marshall's boards of
directors held separate meetings, each by telephone. The Avnet board of
directors authorized management to enter into the merger agreement, and Merrill
Lynch delivered its oral opinion to the Avnet board, which was subsequently
confirmed by delivery of a written opinion dated June 25, 1999, to the effect
that, as of the date of the opinion and based on
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and subject to the factors and assumptions set forth in the opinion, the
consideration to be paid by Avnet in the merger was fair, from a financial point
of view, to Avnet. After the discussions were completed, the merger agreement
was executed by Mr. Vallee and Mr. Rodin.
After the merger agreement was executed by Marshall and Avnet, the two
companies agreed to make various immaterial changes in the agreement and then
signed an amended and restated merger agreement which is attached to this
document as Appendix A.
MARSHALL'S REASONS FOR THE MERGER; RECOMMENDATIONS OF THE MARSHALL BOARD OF
DIRECTORS
The Marshall board of directors has unanimously determined that the merger
is fair to, and in the best interest of, Marshall and its shareholders, and the
board has unanimously adopted and approved the merger agreement. Accordingly,
the Marshall board of directors recommends that Marshall shareholders vote in
favor of the approval of the merger agreement.
Marshall believes that the merger will give its shareholders an interest in
a company that will be better able to take advantage of opportunities, both
nationally and internationally, than Marshall could do on its own. In addition,
the combined company will have greater shareholders' equity, greater debt
capacity, a lower cost of capital and deeper management than Marshall alone. In
coming to this conclusion, Marshall's board has considered the following:
- the industrial electronics component distribution industry is undergoing
significant change;
- competition is increasing and margins are narrowing;
- manufacturers are reducing their number of distributors, favoring those
that can provide a full line of products and that have global reach;
- customers are becoming more sophisticated, demanding more services,
capabilities and products, and are reducing their number of suppliers;
and
- the most successful companies in this industry in the future will have
significantly greater resources than Marshall has or is likely to acquire
on its own.
The combination of Avnet and Marshall will create a company with global
sales of more than $8 billion and significantly greater resources than Marshall
alone and 50% of the consideration in the merger will be Avnet common stock,
affording Marshall shareholders a significant opportunity to participate in the
combined company. The purchase price represents a premium of 93.8% to the
closing price of Marshall's common stock on June 25, 1999, the last closing
price prior to the announcement of the merger.
THE MARSHALL BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT MARSHALL
SHAREHOLDERS VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT.
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AVNET'S REASONS FOR THE MERGER; RECOMMENDATIONS OF THE AVNET BOARD OF DIRECTORS
Avnet's goal is to provide the highest value relationships to its
customers, suppliers, employees and shareholders, globally. The Avnet board of
directors believes that the Marshall acquisition serves Avnet's objectives to
each of these constituencies.
For customers, the Marshall acquisition gives Avnet access to a number of
suppliers, principally in Asia, that have not historically used Avnet as a
distributor, which in turn enables Avnet to offer a more comprehensive product
line to all customers. Similarly, Avnet can offer its suppliers access for their
products to customers in all regions of the world, enabling them to work with
the fewest number of distributors.
Marshall has had a heritage of innovation which is illustrated by
leadership in the field of e-commerce. The further evolution of this business
will be a top priority of the combined company, and Avnet expects this to enable
the combined company to grow globally as customers and suppliers throughout the
world are relying increasingly on the Internet and e-commerce.
Avnet believes that the combination of its employees with Marshall will
give the combined company access to a more highly skilled and competent
organization that will be the leader in the industry.
Avnet believes that its shareholders will benefit from the merger because
the combined company will be the largest in the Americas and an industry leader
globally in electronics distribution. In addition, Avnet believes that
significant cost savings and synergies will result from combining the companies,
for example in consolidating the facilities and computer systems of the
companies, and that its shareholders will benefit from increased sales and
earnings in the future.
THE AVNET BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RECOMMENDS THAT AVNET SHAREHOLDERS VOTE "FOR" THE ADOPTION OF THE MERGER
AGREEMENT.
OPINION OF MARSHALL'S FINANCIAL ADVISER
Marshall asked DLJ, its financial adviser, to render an opinion to the
Marshall board of directors as to the fairness from a financial point of view to
the holders of Marshall common stock of the consideration to be received by
these shareholders under the merger agreement. On June 25, 1999, DLJ delivered
an oral opinion, subsequently confirmed in writing, to the effect that, as of
June 25, 1999, and based upon and subject to the assumptions, limitations and
qualifications set forth in the opinion, the consideration to be received by the
Marshall shareholders was fair to those shareholders from a financial point of
view.
THE FULL TEXT OF THE DLJ OPINION IS ATTACHED AS APPENDIX B TO THIS JOINT
PROXY STATEMENT/PROSPECTUS. THE FOLLOWING SUMMARY OF THE DLJ OPINION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE DLJ OPINION. YOU
ARE URGED TO READ THE DLJ OPINION CAREFULLY AND IN ITS ENTIRETY FOR THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, OTHER MATTERS CONSIDERED AND LIMITS OF
THE REVIEW BY DLJ IN CONNECTION WITH ITS OPINION.
DLJ was not retained as an adviser or agent to the shareholders of Marshall
or any person other than Marshall. The DLJ opinion was prepared for the Marshall
board of directors and was directed only to the fairness to the holders of
Marshall common stock
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from a financial point of view, as of June 25, 1999, of the consideration to be
received by these holders. The merger consideration was determined in
arm's-length negotiations between Marshall and Avnet.
Marshall selected DLJ as its financial adviser because it is an
internationally recognized investment banking firm that has substantial
experience providing strategic advisory services. DLJ, as part of its investment
banking services, is regularly engaged in the valuation of businesses and
securities in connection with mergers, acquisitions, underwritings, sales and
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for Marshall in the past and has been compensated for
its services, including acting as financial adviser in Marshall's acquisition of
Sterling Electronics in January 1998 and the adoption of a shareholder rights
plan on February 8, 1999.
In arriving at its opinion, DLJ reviewed the merger agreement. DLJ also
reviewed financial and other information that was publicly available or
furnished to it by Marshall and Avnet, including information provided during
discussions with their managements. Included in the information provided to DLJ
were certain financial projections of Marshall for the period beginning June 1,
1998 and ending May 31, 2000 prepared by the management of Marshall and certain
financial projections of Avnet for the period beginning July 1, 1999 and ending
June 30, 2000 prepared by the management of Avnet. In addition, DLJ compared
certain financial and securities data of Marshall and Avnet with various other
companies whose securities are traded in public markets, reviewed the historical
stock prices and trading volumes of Marshall common stock and Avnet common
stock, reviewed prices and premiums paid in certain other business combinations
and conducted such other financial studies, analyses and investigations as DLJ
deemed appropriate for purposes of its opinion.
In rendering its opinion, DLJ relied upon and assumed, without independent
verification, the accuracy and completeness of all of the financial and other
information that was available to it from public sources, that was provided to
it by Marshall and Avnet or their respective representatives or that was
otherwise reviewed by it. In particular, DLJ relied upon the estimates of the
management of Marshall of the operating synergies achievable as a result of the
merger and upon DLJ's discussions of these synergies with the management of
Avnet. With respect to the financial projections and assumptions supplied to it,
DLJ assumed that they were reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of Marshall and
Avnet as to the future operating and financial performance of Marshall and
Avnet, respectively. DLJ did not assume any responsibility for making any
independent evaluation or appraisal of the assets or liabilities of Marshall or
Avnet or for making any independent verification of the information reviewed by
it.
DLJ's opinion is necessarily based on economic, market, financial and other
conditions as they existed on, and on the information made available to DLJ as
of, the date of its opinion. The DLJ opinion states that, although subsequent
developments may affect its opinion, DLJ does not have any obligation to update,
revise or reaffirm its opinion. DLJ expressed no opinion as to the prices at
which the Avnet common stock would actually trade at any time. The DLJ opinion
did not address the relative merits of the merger and other business strategies
being considered by the Marshall board, nor did it address the Marshall board's
decision to proceed with the merger. The DLJ opinion did not constitute a
recommendation to any Marshall shareholder as to how that shareholder should
vote on the merger.
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<PAGE> 45
Included in the discussion below are summaries of some of the statistical
information appearing in such discussion presented in a tabular format. While
these tables are presented for the purpose of clarity and ease of reference,
they are not substitutes for, and must be read along with, all of the
information appearing under the captions immediately preceding them as well as
all of the information under the caption "Opinion of Marshall's Financial
Adviser."
Summary of Financial Analyses Performed by DLJ
The following is a summary of the financial analyses presented by DLJ to
the Marshall board on June 25, 1999 in connection with the preparation of the
DLJ opinion.
Comparable Companies Analysis. DLJ compared publicly available selected
operating information, stock market data and financial ratios for Marshall to
the same data for the following publicly traded companies that DLJ deemed to be
comparable to Marshall:
- Arrow Electronics, Inc.;
- Avnet, Inc.; and
- Pioneer-Standard Electronics, Inc.
In examining these comparable companies, DLJ calculated the total
enterprise value of each company as a multiple of its respective LTM sales,
EBITDA and EBIT. LTM means the last twelve months. The total enterprise value of
a company (TEV) is equal to the value of its fully diluted common equity plus
debt and the liquidation value of outstanding preferred stock, if any, minus
cash and certain other assets, including minority interests in other entities.
EBITDA means earnings before interest expense, taxes, depreciation and
amortization. EBIT means earnings before interest expense and taxes. These
analyses yielded the following ranges:
<TABLE>
<CAPTION>
TEV/LTM SALES TEV/LTM EBITDA TEV/LTM EBIT
------------- -------------- ------------
<S> <C> <C> <C>
Low.................. 0.28x 5.8x 7.2x
High................. 0.42x 9.4x 11.6x
Average.............. 0.36x 7.8x 9.5x
</TABLE>
DLJ also calculated the price of each comparable company's common stock as
a multiple of its projected calendar year (CY) 1999 and 2000 earnings per share.
Estimates of 1999 and 2000 earnings per share were obtained from First Call.
These calculations yielded the following ranges:
<TABLE>
<CAPTION>
PRICE/CY 1999 EPS PRICE/CY 2000 EPS
------------------------------- -------------------------------
(BASED ON FIRST CALL ESTIMATES) (BASED ON FIRST CALL ESTIMATES)
<S> <C> <C>
Low.................. 9.8x 8.6x
High................. 15.4x 12.7x
Average.............. 12.5x 10.3x
</TABLE>
Based on these analyses and on projections for Marshall provided by the
management of Marshall, DLJ imputed a value per share of Marshall common stock
ranging from $9.50 to $38.83.
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<PAGE> 46
Comparable Transaction Analysis. DLJ reviewed the following 12 selected
acquisitions announced since April 1993 involving companies DLJ deemed to be
relevant (Acquiror/Target):
- Arrow Electronics, Inc./Anthem Electronics, Inc.;
- Arrow Electronics, Inc./Bell Industries, Inc.;
- Arrow Electronics, Inc./Gates/FA Distributing, Inc.;
- Arrow Electronics, Inc./Richey Electronics, Inc.;
- Avnet, Inc./Hall-Mark Electronics Corp.;
- Bell Industries, Inc. /Milgray Electronics, Inc.;
- Farnell Electronics PLC/Premier Industrial Corp.;
- Marshall Industries, Inc./Sterling Electronics, Inc.;
- Pioneer-Standard Electronics, Inc./Dickens Data Systems;
- Pioneer-Standard Electronics, Inc./Pioneer Technology Group;
- Raab Karcher AG/Wyle Electronics; and
- Wyle Electronics/Sylvan Ginsbury, Ltd.
In examining these acquisitions, DLJ calculated the total enterprise value
of the acquired company implied by each of these transactions as a multiple of
LTM sales, EBITDA and EBIT and calculated the equity value of the acquired
company implied by each of these transactions as a multiple of LTM net income.
DLJ's analysis of these acquisitions yielded the following ranges:
<TABLE>
<CAPTION>
EQUITY VALUE/
TEV/LTM LTM NET
TEV/LTM SALES EBITDA TEV/LTM EBIT INCOME
------------- ------- ------------ -------------
<S> <C> <C> <C> <C>
High................. 3.2x 13.2x 13.9x 24.4x
Low.................. 0.2x 6.5x 7.3x 9.8x
Average (1).......... 0.6x 9.2x 10.5x 15.5x
Median............... 0.6x 9.4x 11.0x 16.6x
</TABLE>
- -------------------------
(1) Average excludes high and low.
Based on these analyses, DLJ imputed a value per share of Marshall common
stock ranging from $18.05 to $50.48.
Premiums Paid Analyses. DLJ determined the premium over the common stock
trading prices for the following transactions:
- the comparable transactions set forth above and
- selected deals since January 1995 with transaction values between $500
million and $1 billion.
For each comparable transaction, DLJ calculated premiums over the closing
prices one day, one week and four weeks prior to the announcement of the
transaction. The median premiums for these transactions over the closing prices
one day, one week and four weeks prior to the announcement of the transactions
were 26.8%, 37.1% and 35.9%, respectively. Applying these premiums to the
closing price of Marshall common stock on June 23, 1999, DLJ imputed a value per
share of Marshall ranging from $22.27 to $24.08.
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<PAGE> 47
For each other selected deal, DLJ examined premiums (calculated by
Securities Data Company, Inc.) for one day, one week and four weeks prior to the
announcement of the transaction. The median premiums for these transactions over
the closing prices one day, one week and four weeks prior to the announcement of
the transactions were 19.9%, 24.7% and 30. 1%, respectively. Applying these
premiums to the closing price of Marshall common stock on June 23, 1999, DLJ
imputed a value per share of Marshall ranging from $21.06 to $22.84.
Accretion/Dilution Analysis. DLJ performed an accretion/dilution analysis
for the period from fiscal year 1999 to fiscal 2000 by comparing the projected
earnings per share of Avnet (based on estimates from First Call), assuming the
merger had not occurred, to the projected earnings per share of the combined
entity. Earnings per share were calculated as net income divided by the pro
forma fully diluted shares outstanding. Accretion/dilution was calculated as the
percent increase/decrease of the new company's earnings per share over Avnet's
earnings per share had the merger not occurred and takes into account estimated
cost savings as provided by the management of Marshall. The analysis does not
include the cost to achieve such cost savings.
The analysis resulted in the following:
<TABLE>
<CAPTION>
1999 2000
----- -----
<S> <C> <C>
Avnet pre-merger....................................... $3.10 $3.67
Avnet pro forma post-merger............................ $3.59 $4.44
</TABLE>
No company or transaction used in the analyses is directly comparable to
Marshall or the contemplated transaction. In addition, mathematical analysis
such as determining the mean or median is not in itself a meaningful method of
using selected company or transaction data. The analyses performed by DLJ are
not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by these analyses.
The summary set forth above does not purport to be a complete description
of the analysis performed by DLJ but describes, in summary form, the principal
elements of the presentation made by DLJ to the Marshall board of directors on
June 25, 1999. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, a fairness opinion is not readily susceptible to summary
description. Each of the analyses conducted by DLJ was carried out in order to
provide a different perspective on the merger and add to the total mix of
information available. DLJ's conclusions also involved significant elements of
judgment and qualitative analysis. DLJ did not form a conclusion as to whether
any individual analysis, considered in isolation, supported or failed to support
an opinion as to fairness from a financial point of view. Rather, in reaching
its conclusion, DLJ considered the results of the analyses in light of each
other and ultimately reached its opinion based on the results of all analyses
taken as a whole. DLJ did not place particular reliance or weight on any
individual analysis, but instead concluded that its analyses, taken as a whole,
supported its determination. Accordingly, notwithstanding the separate factors
summarized above, DLJ believes that its analyses must be considered as a whole
and that selecting portions of its analyses and the factors considered by it,
without considering all analyses and factors, could create an incomplete or
misleading view of the evaluation process underlying its opinions.
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<PAGE> 48
Pursuant to the terms of an engagement letter dated May 25, 1999, Marshall
agreed to pay DLJ:
- a retainer fee of $150,000;
- a fee of $750,000 upon delivery of the DLJ opinion; and
- a fee of approximately $7.1 million in connection with the consummation
of the merger (0.85% of the enterprise value of Marshall).
Fees paid to DLJ pursuant to the first two items above will be deducted
from any amounts to which DLJ is entitled upon consummation of the merger. In
addition, Marshall has also agreed to reimburse DLJ, upon request by DLJ from
time to time, for all out-of-pocket expenses (including reasonable fees and
expenses of counsel) incurred by DLJ in connection with its engagement and to
indemnify DLJ and related persons against certain liabilities in connection with
its engagement, including liabilities under U.S. federal securities laws. DLJ
and Marshall negotiated the terms of the fee arrangement, and the Marshall board
of directors was aware of such arrangements, including the fact that a
significant portion of the aggregate fee payable to DLJ is contingent upon
consummation of the merger.
In the ordinary course of business, DLJ may actively trade the securities
of both Marshall and Avnet for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
those securities.
OPINION OF AVNET'S FINANCIAL ADVISER
Avnet retained Merrill Lynch to act as its exclusive financial adviser in
connection with the merger. On June 25, 1999, Merrill Lynch delivered to the
Avnet board of directors an oral opinion, subsequently confirmed in writing, to
the effect that, as of that date and based on and subject to the factors and
assumptions described in its opinion, the consideration to be paid by Avnet in
the Merger with Marshall was fair, from a financial point of view, to Avnet.
THE FULL TEXT OF MERRILL LYNCH'S OPINION, DATED JUNE 25, 1999, TO THE AVNET
BOARD OF DIRECTORS, WHICH DESCRIBES THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND
QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY MERRILL LYNCH, IS
ATTACHED AS APPENDIX C TO THIS DOCUMENT AND IS INCORPORATED INTO THIS DOCUMENT
BY REFERENCE. THE SUMMARY OF MERRILL LYNCH'S OPINION SET FORTH BELOW IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION. AVNET
SHAREHOLDERS ARE URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY.
Merrill Lynch's opinion was delivered to the Avnet board of directors for
its information and is directed only to the consideration to be paid by Avnet in
the merger, does not address any other aspect of the merger, including the
merits of the underlying decision by Avnet to engage in the merger, and does not
constitute a recommendation to Avnet shareholders as to how shareholders should
vote with respect to any matter relating to the merger or the form of
consideration to be selected by any shareholder.
The consideration to be paid by Avnet in the merger was determined through
negotiations between Marshall and Avnet and was approved by the Avnet board of
directors.
In preparing its opinion to the Avnet board of directors, Merrill Lynch
performed a variety of financial and comparative analyses, including those
described below. The summary set forth below does not purport to be a complete
description of the analyses underlying Merrill Lynch's opinion or the
presentation made by Merrill Lynch to the Avnet board of directors. The
preparation of a fairness opinion is a complex analytic
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<PAGE> 49
process involving various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances, and therefore a fairness opinion is not readily
susceptible to partial analysis or summary description. In arriving at its
opinion, Merrill Lynch did not attribute any particular weight to any analysis
or factor considered by it but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. Accordingly, Merrill
Lynch believes that its analyses must be considered as a whole and that
selecting portions of its analyses and factors, or focusing on information
presented in tabular format, without considering all analyses and factors or the
narrative description of the analyses, would create a misleading or incomplete
view of the process underlying its opinion.
In performing its analyses, Merrill Lynch considered numerous factors
including industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Avnet or
Marshall. Any estimates contained in the analyses performed by Merrill Lynch are
not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
Additionally, estimates of the value of businesses or securities do not purport
to be appraisals or to reflect the prices at which such businesses or securities
might actually be sold. Accordingly, such analyses and estimates are inherently
subject to substantial uncertainty. In addition, as described above, Merrill
Lynch's opinion was among several factors taken into consideration by the Avnet
board of directors in making its determination to approve the merger agreement
and the merger. Consequently, the Merrill Lynch analysis should not be viewed as
determinative of the decision of the Avnet board of directors or Avnet's
management with respect to the fairness of the consideration to be paid by Avnet
in the merger.
In arriving at its opinion, Merrill Lynch, among other things:
(i) reviewed publicly available business and financial information
relating to Avnet and Marshall that Merrill Lynch deemed to be
relevant;
(ii) reviewed information, including financial forecasts, relating to the
business, earnings, cash flow, assets, liabilities and prospects of
each of Avnet and Marshall, as well as the amount and timing of the
cost savings, related expenses and a range of synergies expected to
result from the merger, furnished to Merrill Lynch by Avnet and
Marshall;
(iii) conducted discussions with members of senior management and
representatives of Avnet and Marshall concerning the matters
described in clauses (i) and (ii) above, as well as their respective
businesses and prospects before and after giving effect to the
merger, and the cost savings, related expenses and the range of
synergies expected to result from the merger;
(iv) reviewed the market prices and valuation multiples for Avnet common
stock and Marshall common stock and compared them with those of other
publicly traded companies that Merrill Lynch deemed to be relevant;
(v) compared the proposed financial terms of the merger with the
financial terms of other transactions which Merrill Lynch deemed to
be relevant;
(vi) participated in discussions and negotiations among representatives of
Avnet and Marshall and their financial and legal advisers;
(vii) reviewed the potential pro forma impact of the merger;
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<PAGE> 50
(viii) reviewed the merger agreement, dated June 25, 1999; and
(ix) reviewed other financial studies and analyses and took into account
other matters as Merrill Lynch deemed necessary, including Merrill
Lynch's assessment of general economic, market and monetary
conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch or publicly
available, and did not assume any responsibility for independently verifying
that information, and Merrill Lynch did not undertake an independent evaluation
or appraisal of any of the assets or liabilities of Avnet or Marshall and has
not been furnished with any evaluation or appraisal. In addition, Merrill Lynch
did not assume any obligation to conduct, and did not conduct, any physical
inspection of the properties or facilities of Avnet or Marshall. With respect to
the financial forecast information and the cost savings, related expenses and
the range of synergies expected to result from the merger furnished to or
discussed with Merrill Lynch by Avnet or Marshall, Merrill Lynch has assumed
that they have been reasonably prepared or reviewed and reflect the best
currently available estimates and judgment of Avnet's or Marshall's management
as to the expected future financial performance of Avnet or Marshall, as the
case may be, and the cost savings, related expenses and range of synergies
expected to result from the merger. Merrill Lynch also assumed that the merger
will qualify as a tax-free reorganization for United States federal income tax
purposes.
Merrill Lynch's opinion is necessarily based on market, economic and other
conditions as they existed on, and could be evaluated as of, the date of its
opinion. Merrill Lynch assumed that in the course of obtaining the necessary
regulatory or other consents or approvals, contractual or otherwise, for the
merger, no restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse effect on the
contemplated benefits of the merger. Merrill Lynch did not express any opinion
as to the value of the Avnet common stock when issued to the holders of Marshall
common stock in the merger or the prices at which the Avnet common stock will
trade after the merger. No other limitations were imposed on Merrill Lynch with
respect to the investigations made or procedures followed by Merrill Lynch in
rendering its opinion.
The following is a summary of the material analyses performed by Merrill
Lynch in connection with its opinion. THE FINANCIAL ANALYSES SUMMARIZED BELOW
INCLUDE INFORMATION PRESENTED IN TABULAR FORMAT. IN ORDER TO FULLY UNDERSTAND
MERRILL LYNCH'S FINANCIAL ANALYSES, THE TABLES MUST BE READ TOGETHER WITH THE
TEXT OF EACH SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION
OF THE FINANCIAL ANALYSES. CONSIDERING THE DATA IN THE TABLES SET FORTH BELOW
WITHOUT CONSIDERING THE FULL NARRATIVE DESCRIPTION OF THE FINANCIAL ANALYSES,
INCLUDING THE METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE ANALYSES, COULD
CREATE A MISLEADING OR INCOMPLETE VIEW OF MERRILL LYNCH'S FINANCIAL ANALYSES.
Selected Companies Analysis. Merrill Lynch compared financial, operating
and stock market data of Marshall to corresponding data of the following
publicly traded companies in the industrial electronic components and production
supplies industry:
- Arrow Electronics Inc.
- Avnet, Inc.
- Eurodis Electron PLC
- Pioneer-Standard Electronics, Inc.
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<PAGE> 51
Merrill Lynch reviewed equity values as multiples of latest twelve months
and for the twelve months ended May 31, 2000 book value, net income, sales,
earnings before interest, taxes, depreciation and amortization, commonly
referred to as EBITDA, and earnings before interest and taxes, commonly referred
to as EBIT. All multiples were based on closing stock prices on June 24, 1999.
Estimated financial data for the selected companies was based on publicly
available research analysts' estimates and estimated financial data for Marshall
was based on estimates of Avnet's management.
Merrill Lynch then applied a range of selected multiples for the selected
companies to corresponding financial data of Marshall, utilizing the estimates
of Avnet's management, both with and without potential synergies anticipated by
the managements of Avnet and Marshall to result from the merger, as well as
adjusted management case estimates. This analysis indicated the following
approximate implied equity reference ranges for Marshall:
<TABLE>
<CAPTION>
AVNET MANAGEMENT CASE ADJUSTED MANAGEMENT CASE
---------------------------------------------------------- ----------------------------
TWELVE MONTHS ENDED TWELVE MONTHS ENDED
LATEST TWELVE MONTHS JUNE 30, 2000 JUNE 30, 2000
---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Without synergies: $240 million to $350 million $290 million to $390 million $220 million to $300 million
or or or
$14.44 to $21.06 per share $17.45 to $23.47 per share $13.24 to $18.05 per share
With synergies: $540 million to $720 million $590 million to $760 million $520 million to $670 million
or or or
$31.46 to $41.94 per share $34.37 to $44.27 per share $30.29 to $39.03 per share
</TABLE>
None of the selected companies is identical to Marshall. Accordingly, an
analysis of the results of the comparable companies analysis involves complex
considerations of the selected companies and other factors that could affect the
public trading value of Marshall and the selected companies.
Selected Merger and Acquisitions Analysis. Using publicly available
information, Merrill Lynch analyzed the implied purchase prices and transaction
multiples paid or proposed to be paid in the following selected merger and
acquisition transactions in the industrial electronic components and production
supplies industry:
<TABLE>
<CAPTION>
ACQUIROR TARGET
- ------------------- ---------------------------
<S> <C>
Arrow Electronics Richey Electronics
Arrow Electronics Bell Industries' Electronic
Distribution Group
Marshall Industries Sterling Electronics
Veba Electronics Wyle Electronics
Bell Industries Milgray Electronics
Arrow Electronics Premier-Farnell's volume
distribution business
</TABLE>
Merrill Lynch compared equity values as multiples of latest twelve months'
net income, sales, EBITDA and EBIT. All multiples were based on financial
information available at the time of announcement of the relevant transaction.
Merrill Lynch then applied a range of selected multiples for the selected
transactions to corresponding financial data of Marshall, utilizing the
estimates of Avnet management, both with and without potential synergies
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<PAGE> 52
anticipated by the managements of Avnet and Marshall to result from the merger.
This analysis indicated the following approximate implied equity reference
ranges for Marshall:
<TABLE>
<CAPTION>
LATEST TWELVE MONTHS
--------------------
<S> <C>
Without synergies: $310 million to $450 million
or
$18.66 to $26.21 per share
With synergies: $610 million to $820 million
or
$35.54 to $47.99 per share
</TABLE>
Pro Forma Merger Analysis. Merrill Lynch analyzed the potential pro forma
effect of the merger on Avnet's estimated earnings per share in fiscal years
1999 and 2000, based on estimates provided by the management of Avnet, both
before and after giving effect to potential synergies anticipated by the
managements of Avnet and Marshall to result from the merger. Based on the
consideration to be paid by Avnet in the merger and assuming annual pre-tax cost
synergies anticipated by the managements of Avnet and Marshall to result from
the merger, this analysis indicated that the proposed merger would be accretive
to Avnet's earnings per share in fiscal years 1999 and 2000. There can be no
assurance that the combined company will be able to realize synergies in the
amounts estimated by management, or at all, following the merger. The actual
results achieved by the combined company may vary from projected results and the
variations may be material.
Under the terms of Merrill Lynch's engagement, Avnet has agreed to pay
Merrill Lynch for its financial advisory services in connection with the merger
an aggregate fee of $4.0 million payable in cash. Avnet also has agreed to
reimburse Merrill Lynch for all out-of-pocket expenses incurred by Merrill Lynch
in performing its services, including fees and expenses of legal counsel, and to
indemnify Merrill Lynch and related persons and entities against liabilities,
including liabilities under the federal securities laws, arising out of Merrill
Lynch's engagement.
Avnet retained Merrill Lynch based upon Merrill Lynch's experience and
expertise. Merrill Lynch is an internationally recognized investment banking and
advisory firm. Merrill Lynch, as part of its investment banking business, is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
Merrill Lynch and its affiliates have in the past provided financial
services to Avnet unrelated to the proposed merger, for which services Merrill
Lynch and its affiliates have received compensation. In the ordinary course of
business, Merrill Lynch and its affiliates may actively trade in the securities
of Avnet and Marshall for their own accounts and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND POSSIBLE CONFLICTS OF INTEREST
In considering the respective recommendations of the Marshall board of
directors and the Avnet board of directors, Marshall shareholders and Avnet
shareholders should be aware that certain members of Marshall's management and
Avnet's management and of the Marshall board of directors and the Avnet board of
directors have certain interests in the merger that
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<PAGE> 53
are different from, or in addition to, the interests of shareholders generally.
The members of the Marshall board of directors and the Avnet board of directors
knew about these additional interests, and considered them, when they approved
the merger agreement.
Stock Options
Marshall officers and directors own Marshall stock. To that extent, their
interest in the merger may be considered to be the same as other Marshall
shareholders. For information concerning such ownership, see "Security Ownership
of Certain Beneficial Owners and Management" on page 19. However, in considering
the recommendation of the Marshall Board of Directors that the merger agreement
be adopted, Marshall shareholders should be aware that a number of Marshall
officers and directors have interests in the merger that are, or may be,
different from other Marshall shareholders.
In general, under Marshall's stock option plans, all outstanding options
will become vested and fully exercisable upon the approval of the merger by
Marshall's shareholders. However, certain individuals may have different results
with respect to the acceleration of vesting of options as a result of agreements
they have entered into with Marshall. Under the terms of the merger agreement,
any option that is not exercised before the date the merger becomes effective
will be converted into a number of Avnet options resulting from multiplying the
Marshall option by the same exchange ratio used for the merger, with the
exercise price of each converted option equal to the exchange ratio divided by
the option price of the Marshall option. See "The Merger Agreement -- Additional
Agreements -- Stock Options" on page 57. In addition, Avnet will, as promptly as
practicable after the closing, register the Avnet shares issuable upon exercise
of the options under the Securities Act to enable the holders of converted
options to publicly sell any Avnet shares that they acquire by exercising their
converted options.
Change in Control Agreements
The approval by the Marshall shareholders of the merger with Avnet will
constitute a change in control of Marshall under the change in control
agreements of certain Marshall executive officers, triggering certain rights of
those officers, including the right to receive certain cash payments if their
employment is then terminated without cause or if there are certain material
changes in the officers' positions (as defined) after the merger. Those change
in control agreements are described more fully below.
Four Marshall executive officers are a party to change in control
agreements: Gordon Marshall, Robert Rodin, Richard Bentley and Henry Chin. Each
agreement provides that if there is a "change in control" of Marshall and the
officer's employment is terminated within twenty-four months of any change in
control either (i) involuntarily, without just cause, or (ii) voluntarily, if
the officer has determined in good faith that his duties have been altered in a
material respect or there has been a material reduction in, or shift in the
composition of, his compensation or the officer is required to be based at any
office or location more than thirty miles from Marshall's headquarters
immediately before the change in control, then upon termination, the officer is
entitled to receive cash compensation subject to a non-compete provision.
Approval of the merger with Avnet by the Marshall shareholders would constitute
a change in control under the agreements.
Mr. Marshall's agreement provides for a one-time cash payment equal to the
product of five times the greater of his compensation for the last full calendar
year or $750,000. The agreements with Messrs. Rodin and Chin provide for a one
time payment equal to the
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<PAGE> 54
product of 36 times the highest monthly base salary paid or payable during the
12 month period immediately preceding the month of termination. In addition,
Messrs. Rodin and Chin would receive a one-time cash payment equal to the
product of three times their average annual bonus for the last three full fiscal
years before the change in control date. Mr. Chin's agreement was amended on
February 1, 1999 by the board to increase his benefits from two times salary and
bonus to three times salary and bonus.
Mr. Bentley's agreement provides for a one-time cash payment equal to the
product of two times the greater of base salary, bonuses and other compensation
for the last full calendar year before Mr. Bentley's termination or $500,000.
The agreement with Mr. Bentley also provides that he may elect retirement from
Marshall at age 59 and become a consultant to Marshall at a monthly amount equal
to one twenty-fourth of the payment that would have been paid under a change in
control, as described above, up to a twenty-four month period. This consulting
arrangement with Mr. Bentley would terminate in the event of Mr. Bentley's death
or disability.
Following terminations under these agreements, the officers and their
families are entitled to all benefits that are generally applicable to an
executive of Marshall up to three years for Messrs. Marshall, Rodin and Chin and
up to two years for Mr. Bentley. The agreements also provide that, upon a change
in control, Marshall will cause the vesting of any stock options held to be
accelerated to the change in control date and, in the case of Mr. Bentley's
agreement, Marshall will cause the vesting of any stock options to be
accelerated upon his retirement date. The total payments payable under these
agreements could be reduced in the event that all or a portion of such payments
would be subject to the parachute provisions of Section 280G (limiting
deductibility) and Section 4999 (providing for an excise tax on the recipient)
of the Internal Revenue Code. Such reduction is designed to produce the maximum
after-tax benefit to the recipient of the payments.
Management Positions
Avnet has offered to make Robert Rodin, Marshall's President and Chief
Executive Officer, an advisory member of Avnet's board of directors. In
addition, Mr. Rodin has been offered a position as a senior executive officer of
Avnet. Mr. Rodin has served as a director of Marshall since October 1992. He has
been the President since June 1992 and the Chief Executive Officer since April
1994. He joined Marshall in 1983 and was promoted to Vice President in October
1988 and Senior Vice President in August 1989. In addition, Avnet is currently
in discussions with other executive officers of Marshall concerning future
employment with Avnet.
Indemnification; Directors' and Officers' Insurance
Avnet has agreed to indemnify each present and former Marshall officer and
director to the fullest extent permitted by California law. Avnet has also
agreed that it will maintain a policy of directors' and officers' liability
insurance coverage for up to six years following the merger on terms no less
advantageous than Marshall's existing insurance. See "The Merger
Agreement -- Additional Agreements -- Indemnification; Directors' and Officers'
Insurance" on page 57.
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PUBLIC TRADING MARKETS
Marshall common stock is currently listed on the New York Stock Exchange
under the symbol "MI." Upon consummation of the merger, Marshall common stock
will be delisted from the New York Stock Exchange and deregistered under the
Securities Exchange Act of 1934. Avnet common stock is currently listed on the
New York Stock Exchange and the Pacific Exchange under the symbol "AVT" and will
continue to be listed on both exchanges after the merger.
APPRAISAL RIGHTS
If you hold Marshall common stock and you do not wish to accept the merger
consideration, as described in this Joint Proxy Statement/Prospectus, then
Chapter 13 (Sections 1300 through 1312) of the California General Corporation
Law ("Chapter 13") provides that you may elect instead to receive cash in the
amount of the "fair market value" of your shares (exclusive of any appreciation
or depreciation in connection with the proposed merger) determined as of the day
before the first announcement of the terms of the proposed merger if dissenters'
rights are available. Dissenters' rights will be available if demands for
payment are properly filed with Marshall with respect to 5% or more of
Marshall's outstanding shares on or prior to the date of Marshall's special
meeting of shareholders. The closing price of Marshall common stock on the New
York Stock Exchange on June 25, 1999, the last trading day prior to the first
announcement of the proposed merger, was $20.125 per share.
Chapter 13 is set forth in its entirety in Appendix D to this Joint Proxy
Statement/ Prospectus. If you wish to exercise your dissenters' rights or to
preserve the right to do so, you should carefully review Appendix D. If
dissenters' rights are available and you fail to comply with the procedures
specified in Chapter 13 in a timely manner, you may lose your dissenters'
rights. Because of the complexity of these procedures, you should seek the
advice of counsel if you are considering exercising your dissenters' rights.
If you wish to exercise your dissenters' rights under Chapter 13, you must
satisfy each of the conditions described below:
Demand for Purchase. You must deliver to Marshall or its transfer agent a
written demand for purchase of your shares of Marshall common stock, and it must
be received not later than the date of Marshall's special meeting of
shareholders. This written demand is in addition to and separate from any proxy
or vote against the principal terms of the merger. Merely voting against the
approval of the principal terms of the merger will not constitute a demand for
appraisal within the meaning of Chapter 13.
The demand for purchase must be made in writing and must be mailed or
delivered to either: Marshall Industries, 9320 Telstar, El Monte, California
91731, Attention: Henry Chin, or its transfer agent, First Union National Bank,
1525 West W.T. Harris Boulevard, 3C3, Charlotte, North Carolina 28288-1153,
Attention: Kristin Knapp. The demand must state the number and class of shares
you hold of record that you demand to be purchased and the amount claimed to be
the "fair market value" of those shares on June 25, 1999, the last trading day
prior to announcement of the merger (exclusive of any appreciation or
depreciation in connection with the proposed merger). The statement of the fair
market value will constitute an offer by you to sell such dissenting shares at
that price. You may not withdraw your demand for appraisal unless Marshall gives
its consent.
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Vote Your Dissenting Shares Against the Merger. You must vote your
dissenting shares against the merger.
Submission of Stock Certificates. If it is determined that dissenters'
rights are available, you must deliver your shares for endorsement (to be
stamped or endorsed with a statement that the shares are dissenting shares)
within 30 days after the date on which notice of shareholder approval of the
merger is mailed to you by Marshall. The notice will be mailed by Marshall
within 10 days after the approval of the merger and will contain a statement of
the price which Marshall has determined to be the fair market value of Marshall
common stock on the date prior to the first announcement of the merger. The
statement of price will constitute an offer to purchase any dissenting shares at
that price.
Purchase of Shares. If you properly exercise your dissenters' rights and
you and Marshall agree that the shares are dissenting shares and agree upon the
price of the shares, you will be entitled to receive the fair market value of
your shares of Marshall common stock on the date prior to the first announcement
of the merger, plus interest at the legal rate on judgments from the date on
which the fair market value of shares of Marshall common stock has been
determined. Marshall will pay that amount within 30 days after agreement on the
price or within 30 days after the statutory or contractual conditions to the
merger are satisfied, whichever is later.
Disagreement Regarding Dissenting Shares or Fair Market Value. If Marshall
denies that the shares are dissenting shares or if you disagree with Marshall as
to the calculation of "fair market value," you must file a petition in the
Superior Court of the appropriate county demanding a determination of the fair
market value of your shares of Marshall common stock. This petition must be
filed by either you or Marshall within six months of the notice of approval of
the merger described above. If a suit is filed to determine the fair market
value of the shares of Marshall common stock, the costs of the action will be
assessed or apportioned as the court concludes is equitable, provided that
Marshall must pay all such costs if the value awarded by the court is more than
125% of the price offered by Marshall. You will continue to have all the rights
and privileges incident to your dissenting shares until the fair market value of
the shares is agreed upon or determined or you lose your dissenters' rights.
If dissenters' rights are available and you properly demand appraisal of
your shares of Marshall common stock under Chapter 13 but you fail to perfect or
withdraw your right to appraisal, your shares of Marshall common stock will be
converted as described in "The Merger Agreement -- Terms of the Merger" on page
52.
You will lose your right to require Marshall to purchase your shares of
Marshall common stock if (1) the merger agreement is terminated, (2) you
transfer the dissenting shares prior to submitting them for endorsement as
dissenting shares, (3) you and Marshall do not agree upon the status of the
shares as dissenting shares or upon the purchase price, and neither files a
complaint or intervenes in a pending action within six months after the date on
which notice of approval of merger was mailed to shareholders or (4) with the
consent of Marshall, you withdraw your demand for purchase.
Dissenters' rights cannot be validly exercised by persons other than
shareholders of record regardless of the beneficial ownership of the shares. If
you are a beneficial owner of shares that are held of record by another person,
such as a broker, a bank or a nominee, and you want to dissent from approval of
the merger, you should instruct the record holder to follow the procedures in
Appendix D for perfecting your dissenters' rights.
IF YOU ARE CONSIDERING EXERCISING YOUR DISSENTERS' RIGHTS, YOU SHOULD BE
AWARE THAT THE FAIR MARKET VALUE OF YOUR SHARES OF MARSHALL COMMON STOCK AS
DETERMINED UNDER
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CHAPTER 13 COULD BE GREATER THAN, THE SAME AS, OR LESS THAN THE MERGER
CONSIDERATION. THE OPINION DELIVERED BY DLJ IS NOT AN OPINION AS TO FAIR MARKET
VALUE UNDER CHAPTER 13.
The foregoing is a summary of the provisions of Chapter 13 of the General
Corporation Law of the Sate of California and is qualified in its entirety by
reference to the full text of Chapter 13, which is included as Appendix D.
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THE MERGER AGREEMENT
GENERAL
At the effective time of the merger, Marshall will be merged into Avnet,
the separate existence of Marshall will cease, and Avnet will be the surviving
corporation and will continue to be governed by the laws of New York. The
transaction is intended to qualify as a tax-free "reorganization" for federal
income tax purposes within the meaning of Section 368(a) of the Code.
TERMS OF THE MERGER
At the effective time of the merger, a total of 8,308,182 shares of
Marshall common stock will be converted into shares of Avnet common stock at an
exchange ratio determined as described below. The merger agreement provides for
the exchange ratio to be adjusted based upon the average closing price of Avnet
common stock, defined as the average of the closing prices of Avnet common stock
as reported on the New York Stock Exchange composite tape for the twenty
consecutive trading days ending on the fifth trading day before the date of the
Marshall special meeting, as follows:
- if the average closing price is greater than $57.375, the exchange ratio
will be 0.74772 of a share of Avnet common stock for each share of
Marshall common stock;
- if the average closing price is greater than $52.59375 and less than or
equal to $57.375, the exchange ratio will be $42.90 divided by the
average closing price;
- if the average closing price is greater than or equal to $43.03125 and
less than or equal to $52.59375, the exchange ratio will be 0.81569;
- if the average closing price is greater than or equal to $38.25 but less
than $43.03125, the exchange ratio will be $35.10 divided by the average
closing price; and
- if the average closing price is less than $38.25, the exchange ratio will
be 0.91765.
In case the average closing price is less than $38.25, either Avnet or
Marshall will have the option to terminate the merger agreement unless Avnet
agrees either (1) to increase the exchange ratio so that it is equal to $35.10
divided by the average closing price or (2) to make a cash payment equal to the
difference between (A) $35.10 and (B) 0.91765 multiplied by the average closing
price. Each share of Avnet common stock issued and outstanding immediately prior
to the effective time will remain an issued and outstanding share of Avnet
common stock after the merger.
Marshall shareholders will have the option to elect to receive either
$39.00 in cash or a number of shares of Avnet stock equal to the exchange ratio
(determined as described above) for each share of Marshall common stock they
hold. Because only 8,308,182 shares of Marshall common stock will be converted
into shares of Avnet common stock, if Marshall shareholders elect to convert
more than 8,308,182 shares of Marshall common
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stock into Avnet common stock, then the right to receive Avnet common stock will
be prorated in the following manner:
(1) a share proration factor will be calculated by dividing 8,308,182 by
the number of shares of Marshall common stock that Marshall
shareholders have elected to convert into Avnet common stock;
(2) each Marshall shareholder electing to convert Marshall common stock
into Avnet common stock will have the right to receive a number of
shares of Avnet common stock equal to the product of the proration
factor (calculated in (1) above) multiplied by the number of shares of
Marshall common stock the shareholder elected to convert into Avnet
common stock, rounded down to the nearest whole number; and
(3) each remaining share of Marshall common stock will be converted into
the right to receive $39 in cash.
If, on the other hand, Marshall shareholders as a group elect to convert
fewer than 8,308,182 shares of Marshall common stock into Avnet common stock,
the right to receive $39 per share of Marshall common stock will be prorated in
the following manner:
(1) each share of Marshall common stock that Marshall shareholders elect to
convert into Avnet common stock will be converted into the right to
receive Avnet common stock;
(2) an additional number of shares of Marshall common stock equal to the
difference between 8,308,182 and the number of shares of Marshall
common stock that Marshall shareholders elected to convert into Avnet
common stock will be converted into the right to receive Avnet common
stock;
(3) each Marshall shareholder who did not elect to convert some or all of
his or her shares into Avnet common stock will receive a pro rata
amount (based on the number of Marshall shares that the shareholder
elected not to convert into Avnet common stock) of the number of shares
of Avnet common stock calculated in (2) above in exchange for the
corresponding number of shares of Marshall common stock held by the
shareholder that the shareholder elected not to convert into Avnet
common stock; and
(4) Avnet, however, will have the option to convert all shares subject to
clause (2) above into cash, so long as such conversion does not prevent
Marshall from receiving an opinion of counsel regarding the tax
consequences of the merger as described in "Material Federal Income Tax
Consequences of the Merger," on page 60.
For example, if all Marshall shareholders elect to convert an aggregate of
12,000,000 shares of Marshall common stock into Avnet common stock, the share
proration factor would be 0.69235 (or 8,308,182 divided by 12,000,000). Assuming
you own 1,000 shares of Marshall common stock and you elect to convert all 1,000
shares to Avnet common stock, you would be permitted to convert 692 of your
shares of Marshall common stock into Avnet common stock, and the remainder would
be converted into the right to receive $39.00 per share. On the other hand, if
Marshall shareholders elect to convert only 4,000,000 shares of Marshall common
stock into Avnet common stock, an additional 4,308,182 shares of Marshall common
stock will be converted into Avnet common stock. If you own 1,000 shares of
Marshall common stock and did not elect to convert any of your
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shares into Avnet common stock, 659 of your shares would be converted into the
right to receive $39.00 per share and the remainder would be converted into the
right to receive Avnet common stock.
Fractional shares of Avnet common stock will not be issued to Marshall
shareholders pursuant to the merger agreement. Instead, Marshall shareholders
will receive in lieu of any fractional shares of Avnet common stock an amount in
cash (without interest) equal to the product obtained by multiplying (1) the
fraction of a share of Avnet common stock to which the holder would otherwise be
entitled and (2) the average of the closing prices for Avnet common stock for 20
consecutive trading days ending on the fifth trading day before the date of
Marshall's special meeting.
CLOSING; EFFECTIVE TIME OF THE MERGER
The merger agreement provides that the closing will take place on the
second business day after satisfaction or waiver of the conditions set forth in
the merger agreement, unless another time or date is agreed to by Marshall and
Avnet. On the closing date, Avnet and Marshall will acknowledge and file
certificates of merger with the Secretaries of State of California and New York.
The merger will become effective when the certificates of merger are duly filed
or such other time as is agreed upon by Avnet and Marshall and set forth in the
certificates of merger.
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION
The merger agreement provides that the certificate of incorporation and
bylaws of Avnet as in effect at the effective time will be the certificate of
incorporation and bylaws of the surviving company.
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
The merger agreement does not provide for any change in the directors and
officers of the surviving corporation. Accordingly, the directors and officers
of Avnet before the merger will remain the directors and officers of Avnet after
the merger.
CONDITIONS OF THE MERGER
The obligations of each of Marshall and Avnet to effect the merger are
subject to the satisfaction or waiver, at or prior to the effective time, of the
following conditions:
- the approval of the merger agreement by the shareholders of Marshall and
Avnet;
- receipt of all approvals required by law, including foreign regulatory
filings, and the expiration or termination of the waiting period
applicable to the merger under the Hart-Scott-Rodino Antitrust
Improvements Act;
- the absence of any judgment, order, decree, statute, law, ordinance, rule
or regulation by any court or other governmental entity that has the
effect of preventing consummation of the merger or the other transactions
contemplated by the merger agreement or is reasonably likely to have a
material adverse effect on the combined businesses of Marshall and Avnet
being in effect; and
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- the registration statement covering Avnet common stock having become
effective under the Securities Act and no stop order with respect to the
registration statement being in effect.
The obligations of each of Avnet and Marshall are also subject to the
satisfaction or waiver by each party of the following conditions:
- the representations and warranties of the other party set forth in the
merger agreement must be true and correct in all material respects both
as of the date of the merger agreement and at and as of the closing date;
- each party must be in compliance in all material respects with all
covenants requiring compliance by that party prior to the closing;
- each party must receive from its counsel an opinion stating 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
each of Marshall and Avnet will be a party to that reorganization; and
- from the date of the merger agreement, the other party shall not have
suffered a material adverse effect on its business, financial condition,
results of operation, business prospects or properties.
Avnet's obligations are also subject to the receipt by Marshall of consents
from parties to certain material contracts of Marshall necessary to allow
consummation of the merger.
Marshall's obligations are also subject to the requirement that Avnet
common stock distributed in connection with the merger be listed upon notice of
issuance on the New York Stock Exchange.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties made
by Marshall and Avnet, some of which are qualified as to materiality. Marshall
represents and warrants to Avnet and Avnet represents and warrants to Marshall
regarding the following matters, among others:
- corporate existence;
- corporate power and authority to execute, deliver and perform its
obligations under the merger agreement;
- that consummation of the merger will not result in a violation of its
organizational documents or contracts to which it is a party, or violate
any law, rule or regulation;
- consents and approvals required by any governmental agency or other third
party required in connection with consummation of the merger;
- documents filed with the Securities and Exchange Commission, including
financial statements, and the accuracy of information contained therein;
- absence of certain material adverse events, changes or effects;
- absence of pending suits, actions or other proceedings;
- employee benefits;
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- certain tax matters;
- brokers and finders; and
- environmental matters.
In addition, Marshall represents and warrants to Avnet regarding the
following matters:
- receipt of an opinion from its financial adviser; and
- material contracts.
CERTAIN COVENANTS
Conduct of Marshall's Business Prior to the Merger
Marshall has agreed that from the date of the merger agreement to the
effective time (unless Avnet otherwise agrees), among other things:
- it will conduct its business in the ordinary course consistent with past
practices and will use commercially reasonable efforts to preserve its
existing business organization, insurance coverage, material rights,
material licenses or permits, advantageous business relationships,
material agreements and credit facilities, keep available the services of
its present officers and employees and preserve the goodwill of its
customers, suppliers and others having business dealings with it;
- it will not enter into any material transaction or commitment, dispose of
or acquire material properties or assets, except purchases and sales of
inventory in the ordinary course of business consistent with past
practices, implement any new employee benefit plans or amend existing
plans, take action that would jeopardize its material supplier or
customer relationships, enter into transactions or agreements with
affiliates, enter into new borrowing arrangements in excess of specified
amounts, except transactions in the ordinary course of business, make any
tax election or make any changes in any method or period of accounting or
any material change in any accounting policy, practice or procedure;
- it will not declare or pay any dividends or make any other distributions
in respect of its capital stock; and
- it will not split, combine or reclassify its capital stock or issue,
redeem or acquire any of its equity securities except for existing
commitments.
Agreement Not to Solicit Other Offers
Marshall has also agreed that it will not, nor will it authorize or permit
any of its directors, officers or employees or any investment banker, financial
adviser, attorney, accountant or other representative retained by it, directly
or indirectly, to solicit, initiate or take any other action designed to
facilitate any inquiries or the making of any proposal intended to lead to an
acquisition or purchase of any stock or assets of Marshall, provided that
Marshall may:
- comply with Securities and Exchange Commission rules with respect to a
tender offer;
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- provide nonpublic information to a third party seeking to initiate
discussions or negotiations regarding a transaction the board of
directors of Marshall believes is reasonably capable of being completed
and is more favorable to Marshall shareholders than the merger with
Avnet, so long as the board of directors of Marshall has received written
advice from O'Melveny & Myers LLP that such action may be necessary for
the Marshall board to act in a manner consistent with its fiduciary
duties under applicable law.
ADDITIONAL AGREEMENTS
Access to Information
Each of Marshall and Avnet has agreed to afford to the other party and its
officers, directors, employees, accountants, counsel, financial advisers and
other representatives reasonable access during normal business hours during the
period prior to the effective time to all their respective properties, books,
contracts, personnel and records and all other information concerning such party
as the other party may reasonably request.
Stock Options
As of June 25, 1999, Marshall had issued 1,796,795 options to purchase
shares of Marshall common stock. In general, under Marshall's stock option
plans, all outstanding options under the plans will become vested and fully
exercisable upon the approval of the merger by Marshall's shareholders. However,
certain individuals may have different results with respect to the acceleration
of vesting of options as a result of agreements they have entered into with
Marshall. Upon completion of the merger, Avnet will convert each option to
purchase Marshall common stock that is not exercised before the merger becomes
effective into an option to purchase a number of shares of Avnet common stock
equal to the number of shares covered by the Marshall option multiplied by the
exchange ratio for the merger (as described on page 52) at an option price equal
to the option price of the Marshall stock option divided by the exchange ratio.
Marshall Benefit Plans
When the merger is completed, Avnet will offer benefit plans to former
employees of Marshall who become employed by Avnet which, in the aggregate, are
no less favorable than benefits offered by Avnet to its own employees.
Indemnification; Directors' and Officers' Insurance
Avnet has agreed to indemnify each present and former director and officer
of Marshall and their respective subsidiaries to the full extent permitted by
California law. Avnet also has agreed that it will maintain a policy of
directors' and officers' liability insurance coverage for up to six years
following the merger on terms no less advantageous than Marshall's existing
insurance.
TERMINATION
The merger agreement may be terminated at any time before the effective
time, whether before or after approval by shareholders, by the mutual written
consent of
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Marshall and Avnet. It may also be terminated by either Marshall or Avnet
without consent of the other if:
- the merger has not been consummated by December 31, 1999 unless due to
failure by the party seeking termination to perform any of its
obligations;
- the Marshall shareholders or the Avnet shareholders do not adopt the
merger agreement at their respective special meetings; or
- if the average closing price of Avnet common stock during the 20 trading
days ending five days before the Marshall special meeting is less than
$38.25, and Avnet does not agree to either (1) increase the exchange to
$35.10 divided by the average closing price or (2) make a cash payment to
Marshall shareholders receiving Avnet shares equal to $35.10 minus the
product of 0.74772 and the average closing price; or
- any governmental entity of competent jurisdiction shall have issued a
final non-appealable order denying, enjoining or otherwise prohibiting
the consummation of the merger agreement.
The merger agreement also provides that it may be terminated at any time
prior to the effective time, whether before or after adoption by shareholders,
by Avnet or Marshall if there shall have been a material breach of any of the
representations and warranties or a material breach of any covenant, agreement,
condition or obligation contained in the merger agreement and the breach or
failure of the covenant, agreement, condition or obligation is not cured within
ten days following receipt by the breaching party of written notice of the
breach from the other party or which is incapable of being cured.
Avnet may terminate the merger agreement if Marshall's board of directors
withdraws or modifies its approval or recommendation of the merger agreement or
recommends another offer for the purchase of Marshall's common stock.
Marshall may also terminate the merger agreement if Marshall has received a
superior proposal which its board of directors determines is more favorable to
its shareholders than the merger with Avnet and the board is advised in writing
by O'Melveny & Myers LLP that failure to terminate the merger agreement with
Avnet and accept the superior proposal could violate the duty of the board of
directors to protect the interests of Marshall shareholders under applicable
law.
In the event of termination of the merger agreement pursuant to the
termination provisions described above, the merger agreement will become void
and have no effect, without any liability or obligation on the part of either
party thereto; provided that the termination will not relieve a breaching party
from liability for any willful breach of the merger agreement or the obligations
of the Marshall and Avnet to indemnify the other party with respect to the
registration statement of which this Joint Proxy Statement/ Prospectus is a
part.
TERMINATION FEES AND EXPENSES
Whether or not the merger is consummated, all fees and expenses incurred in
connection with the merger agreement and the merger and the other transactions
contemplated by the merger agreement will be paid by the party incurring such
expense.
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The merger agreement provides that Marshall will pay Avnet a termination
fee of $30 million in cash if the merger agreement is terminated for one of the
following reasons:
- the merger agreement is not approved by Marshall shareholders and
the shareholders are aware of another acquisition proposal; or
- the board of directors of Marshall withdraws or modifies its
approval or recommendation of the merger agreement or recommends
another offer for the purchase of Marshall common stock; or
- the board of directors of Marshall has received a superior proposal
for the purchase of Marshall common stock that it determines is more
favorable to Marshall shareholders, and O'Melveny & Myers LLP has
advised the board of directors that failure to terminate the merger
agreement with Avnet could violate the duty of the board of
directors to protect the interests of Marshall shareholders under
applicable law.
AMENDMENT, EXTENSION AND WAIVER
The merger agreement may be amended by Marshall and Avnet, at any time
before or after the Marshall shareholders or the Avnet shareholders adopt the
merger agreement, by means of a written agreement. However, after adoption of
the merger agreement by the respective shareholders of each party, the merger
agreement cannot be amended in any way that would have a material adverse effect
on shareholders of Avnet of Marshall or by law requires further approval of such
shareholders without obtaining such further approval.
At any time prior to the effective time, Marshall or Avnet may extend the
time for performance of any of the obligations or other acts of the other party,
waive any inaccuracies in the representations and warranties of the other party
contained in the merger agreement or in any document delivered pursuant to the
merger agreement or waive compliance by the other party with any of the
agreements or conditions contained in the Merger Agreement. Any agreement of
extension or waiver must be in writing.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summary discusses the material federal income tax
consequences of the merger. The summary is based upon the Internal Revenue Code,
applicable treasury regulations thereunder and administrative rulings and
judicial authority as of the date of this Joint Proxy Statement/Prospectus. All
of the foregoing are subject to change, possibly with retroactive effect, and
any change could affect the continuing validity of the discussion. The
discussion and the opinions of Sullivan & Cromwell and O'Melveny & Myers LLP
assume that holders of shares of Avnet common stock and Marshall common stock
hold such shares as capital assets. Further, the discussion does not address the
tax consequences that may be relevant to a particular shareholder subject to
special treatment under certain federal income tax laws, such as dealers in
securities, traders in securities that elect to use a mark-to-market method of
accounting, tax-exempt organizations, foreign persons, persons that hold Avnet
common stock or Marshall common stock as part of a straddle or conversion
transaction and persons who acquired shares of Avnet common stock or Marshall
common stock through the exercise of employee stock options or rights or
otherwise as compensation or through a tax-qualified retirement plan. This
discussion does not address any consequences arising under the laws of any
state, locality or foreign jurisdiction.
Tax Opinions. It is intended that the merger will be treated as a
"reorganization" within the meaning of Section 368(a) of the Code. Avnet has
received an opinion of Sullivan & Cromwell, and Marshall has received an opinion
of O'Melveny & Myers LLP (together with Sullivan & Cromwell, "tax counsel")
that, based on the assumptions and conditions stated therein, 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 Avnet and Marshall will each be a party
to that reorganization within the meaning of Section 368(b) of the Code. It is a
condition to the obligation of each of Avnet and Marshall to complete the merger
that the relevant tax counsel confirm its opinion as of the closing date. These
opinions will not be binding on the Internal Revenue Service (the "Service"),
and there can be no assurance that the IRS will agree with the conclusions
expressed in the opinions. The opinions are and will be based in part upon
certain assumptions and certain representations made by Marshall and Avnet
customarily made and given in transactions of this type.
Tax Consequences of the Merger. In the opinion of Sullivan & Cromwell,
counsel to Avnet, and O'Melveny & Myers LLP, counsel to Marshall, assuming that
the assumptions and representations described in the preceding paragraph are
true and complete as of the effective time, the merger will be treated as a
"reorganization" within the meaning of Section 368(a) of the Code, and each of
Marshall and Avnet will be a party to that reorganization within the meaning of
368(b) of the Code. As a result, subject to the following three paragraphs below
and in general, (1) no gain or loss will be recognized by a holder of Marshall
common stock as a result of the conversion of shares of Marshall common stock
into shares of Avnet common stock pursuant to the merger, (2) the aggregate tax
basis of the shares of Avnet common stock received in the merger will be the
same as the aggregate tax basis of the shares of Marshall common stock converted
and (3) the holding period of the shares of Avnet common stock received in the
merger will include the holding period of shares of Marshall common stock
converted.
Cash Received as Part of the Merger Consideration. If a holder of shares
of Marshall common stock receives cash as part of the merger consideration, such
holder will recognize gain (but not loss) equal to the lesser of (i) the
holder's total gain realized in all of its
60
<PAGE> 67
shares of Marshall common stock and (ii) the amount of the cash. This gain will
generally be capital gain, and will be long-term capital gain if the holder's
holding period for federal income tax purposes is more than one year. Long-term
capital gain of a non-corporate U.S. shareholder is generally subject to a
maximum tax rate of 20%. The aggregate tax basis of the shares of Avnet common
stock received in the merger by a Marshall shareholder who receives cash as part
of the merger consideration will be the same as the aggregate tax basis of the
converted shares of Marshall common stock, reduced by the cash received and
increased by the amount of gain recognized.
Cash Received as All of the Merger Consideration. If a holder of shares of
Marshall common stock receives cash as all of the merger consideration, such
holder will recognize his or her full gain or loss.
Cash Received in Lieu of Fractional Shares. If a holder of shares of
Marshall common stock receives cash in lieu of a fractional share of Avnet
common stock, this fractional share interest will be treated as having been
distributed to the holder, and the cash amount will be treated as received in
redemption of the fractional share interest. In general, the holder will
recognize capital gain or loss equal to the cash amount received for the
fractional share reduced by the portion of the holder's tax basis in shares of
Marshall common stock surrendered that is allocable to the fractional share
interest in Avnet common stock. The capital gain or loss will be long-term
capital gain or loss if the holder's holding period in the fractional share
interest for federal income tax purposes is more than one year. Long-term
capital gain of a non-corporate U.S. shareholder is generally subject to a
maximum tax rate of 20%.
THE PRECEDING STATEMENTS DO NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO THE MERGER. MARSHALL AND
AVNET SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX
LAWS.
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<PAGE> 68
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements have been prepared to illustrate the effect of the merger of Marshall
into Avnet and include Unaudited Pro Forma Condensed Consolidated Statements of
Income for the nine months ended April 2, 1999 and the year ended June 26, 1998
and an Unaudited Pro Forma Condensed Consolidated Balance Sheet as of April 2,
1999. The pro forma financial statements are based on the historical
consolidated financial statements of Avnet and the historical financial
statements of Marshall.
The Unaudited Pro Forma Condensed Consolidated Statements of Income for the
nine months ended April 2, 1999 and the year ended June 26, 1998 assume that the
merger had been consummated as of the first day of the fiscal years presented,
and the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of April 2,
1999 assumes that the merger was consummated on April 2, 1999.
The pro forma adjustments are based on the merger agreement and related
agreements which provide for Marshall shareholders to receive cash or Avnet
stock for their shares of Marshall common stock. For purposes of preparing the
unaudited pro forma condensed consolidated financial statements, the value of
the Avnet common stock to be issued is based upon Avnet's last reported sale
price per share of $47.8125 on June 25, 1999 and on the total number of shares
of Marshall common stock outstanding on June 25, 1999, 16,616,364, plus the
number of shares of Marshall common stock assumed to be issued upon exercise of
options prior to the effective time of the merger, 926,000. The price per share
of Avnet common stock and the number of shares of Marshall common stock
outstanding are subject to change. As a result, the actual purchase price may
differ significantly from that presented herein. The estimated aggregate amount
to be allocated to the assets acquired consists of (in thousands):
<TABLE>
<S> <C>
Avnet common shares issued to Marshall
shareholders....................................... $324,020
Cash paid to Marshall shareholders................... 360,133
Estimated costs and expenses of the merger........... 12,600
--------
$696,753
========
</TABLE>
The pro forma adjustments are based on preliminary estimates, which are
derived from available information and certain assumptions. Although Avnet
believes, based on available information, that the fair values and allocation of
the merger consideration included in the unaudited pro forma condensed
consolidated financial statements are reasonable estimates, final purchase
accounting adjustments will be made on the basis of evaluations and estimates
made after the effective time. As a result, the final allocation of costs
related to the merger may differ significantly from that presented herein. The
Unaudited Pro Forma Condensed Consolidated Statements of Income exclude any
potential benefits that might result from the acquisition due to synergies that
may be derived and from the elimination of any duplicate costs. In addition, the
pro forma adjustments do not reflect possible acquisition related costs relating
to restructuring, integration, abandonment of assets and other similar items,
which could result in significant other charges. The unaudited pro forma
condensed consolidated financial statements do not purport to be indicative of
the results that actually would have occurred if the merger occurred on the
dates indicated or of results which may be obtained in the future. The unaudited
pro forma condensed consolidated financial statements should be read in
conjunction with the notes to the pro forma condensed consolidated financial
statements and the historical consolidated financial statements and accompanying
notes for Avnet and Marshall which are incorporated by reference in this Joint
Proxy Statement/ Prospectus.
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<PAGE> 69
AVNET, INC. AND MARSHALL INDUSTRIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED JUNE 26, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
The following unaudited pro forma condensed consolidated statement of
income for the fiscal year ended June 26, 1998 assumes that the merger was
completed as of June 28, 1997.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 26, 1998
-------------------------------------------------------
PRO FORMA
AVNET MARSHALL ADJUSTMENTS(A) PRO FORMA
---------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Sales....................... $5,916,267 $1,461,363 $7,377,630
Cost of sales............... 4,935,848 1,232,026 6,167,874
---------- ---------- ----------
Gross profit................ 980,419 229,337 1,209,756
Operating expenses.......... 709,243 163,556 $ 5,863(b) 878,662
---------- ---------- --------- ----------
Operating income............ 271,176 65,781 (5,863) 331,094
Interest expense............ (39,988) (7,189) (27,811)(c) (74,988)
Other income (expense),
net....................... 2,363 (291) 2,072
Gain on disposition......... 33,795 -- 33,795
---------- ---------- --------- ----------
Income before taxes......... 267,346 58,301 (33,674) 291,973
Income taxes................ 115,922 24,958 (11,375)(d) 129,505
---------- ---------- --------- ----------
Net income.................. $ 151,424 $ 33,343(e) $ (22,299) $ 162,468
========== ========== ========= ==========
Earnings per share(f):
Basic..................... $ 3.85 $ 3.52
========== ==========
Diluted................... $ 3.80 $ 3.49
========== ==========
Shares used to compute
earnings per share(f):
Basic..................... 39,375 46,152
========== ==========
Diluted................... 39,823 46,600
========== ==========
</TABLE>
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<PAGE> 70
AVNET, INC. AND MARSHALL INDUSTRIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED APRIL 2, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
The following unaudited pro forma condensed consolidated statement of
income for the nine months ended April 2, 1999 assumes that the merger was
completed as of June 27, 1998.
<TABLE>
<CAPTION>
NINE MONTHS ENDED APRIL 2, 1999
------------------------------------------------------
PRO FORMA
AVNET MARSHALL ADJUSTMENTS(A) PRO FORMA
---------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Sales......................... $4,707,731 $1,289,513 $5,997,244
Cost of sales................. 4,003,243 1,089,113 5,092,356
---------- ---------- ----------
Gross profit.................. 704,488 200,400 904,888
Operating expenses............ 547,008 155,583 $ 4,398(b) 706,989
---------- ---------- -------- ----------
Operating income.............. 157,480 44,817 (4,398) 197,899
Interest expense.............. (39,468) (12,184) (14,066)(c) (65,718)
Other income (expense), net... 1,658 (1,955) (297)
---------- ---------- -------- ----------
Income before taxes........... 119,670 30,678 (18,464) 131,884
Income taxes.................. 51,742 14,704 (5,779)(d) 60,667
---------- ---------- -------- ----------
Net income.................... $ 67,928 $ 15,974 $(12,685) $ 71,217
========== ========== ======== ==========
Earnings per share(f):
Basic....................... $ 1.90 $ 1.68
========== ==========
Diluted..................... $ 1.88 $ 1.66
========== ==========
Shares used to compute
earnings per share(f):
Basic....................... 35,736 42,513
========== ==========
Diluted..................... 36,093 42,870
========== ==========
</TABLE>
64
<PAGE> 71
AVNET, INC. AND MARSHALL INDUSTRIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF APRIL 2, 1999
(IN THOUSANDS)
(UNAUDITED)
The following unaudited pro forma condensed consolidated balance sheet as
of April 2, 1999 assumes that the merger was completed at that date.
<TABLE>
<CAPTION>
AS OF APRIL 2, 1999
---------------------------------------------------
PRO FORMA
AVNET MARSHALL ADJUSTMENTS PRO FORMA
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash and interest-bearing
investments............ $ 73,110 $ 2,881 $(42,225)(a) $ 33,766
Receivables.............. 909,320 218,537 1,127,857
Inventories.............. 1,044,841 345,277 1,390,118
Other.................... 43,815 28,195 72,010
---------- -------- -------- ----------
Total current assets... 2,071,086 594,890 (42,225) 2,623,751
Property, plant & equipment
at cost, net............. 175,727 41,411 217,138
Goodwill.................... 484,488 118,602 290,758(b) 893,848
Investments in
unconsolidated
affiliates............... -- 42,688 (28,823)(b) 13,865
Other assets................ 64,009 4,202 2,600(c) 70,811
---------- -------- -------- ----------
Total assets........... $2,795,310 $801,793 $222,310 $3,819,413
========== ======== ======== ==========
Liabilities:
Current liabilities:
Borrowings due within one
year................... $ 270 $ 16,250 $(16,250)(d) 270
Accounts payable......... 438,245 167,505 605,750
Accrued expenses and
other.................. 136,232 32,578 168,810
---------- -------- -------- ----------
Total current
liabilities......... 574,747 216,333 (16,250) 774,830
Long-term debt, less due
within one year............. 920,048 168,000 332,000(d) 1,420,048
---------- -------- -------- ----------
Total liabilities...... 1,494,795 384,333 315,750 2,194,878
---------- -------- -------- ----------
Shareholders' equity:
Common stock................ 44,382 16,616 (9,839)(e) 51,159
Additional paid-in
capital.................. 435,016 41,019 276,224(e) 752,259
Retained earnings........... 1,394,866 362,647 (362,647)(f) 1,394,866
Cumulative translation
adjustments.............. (40,585) (610) 610(f) (40,585)
Valuation adjustment........ -- (2,212) 2,212(f) --
Common stock held in
treasury................. (533,164) -- (533,164)
---------- -------- -------- ----------
Total shareholders'
equity.............. 1,300,515 417,460 (93,440) 1,624,535
---------- -------- -------- ----------
Total liabilities and
shareholders'
equity.............. $2,795,310 $801,793 $222,310 $3,819,413
========== ======== ======== ==========
</TABLE>
65
<PAGE> 72
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
1. AVNET HISTORICAL FINANCIAL DATA
The historical data presented represents the statements of income of Avnet
for the fiscal year ended June 26, 1998 and the nine months ended April 2, 1999
and the balance sheet of Avnet as of April 2, 1999.
2. MARSHALL HISTORICAL FINANCIAL DATA
The historical data presented represents the balance sheet of Marshall as
of February 28, 1999, and the statements of income for the fiscal year ended May
31, 1998 and the nine months ended February 28, 1999. The statements of income
for the fiscal year ended May 31, 1998 exclude an extraordinary gain from the
termination of a joint venture amounting to $14,615 after tax, or $0.87 per
share on a diluted basis. In addition, the amount included in the line entitled
"Interest expense and other" on Marshall's statements of income for the fiscal
year ended May 31, 1998 and the nine months ended February 28, 1999 which is not
interest expense has been reclassified to "Other income (expense), net" on the
Pro Forma Condensed Consolidated Statements of Income included in this Joint
Proxy Statement/Prospectus. Fiscal 1998 and 1999 amounts reflect the acquisition
of Sterling Electronic Corporation as of January 16, 1998.
3. PRO FORMA ADJUSTMENTS -- CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(a) Avnet expects to achieve operating efficiencies from the merger. It is
anticipated that cost savings will result principally from such areas
as warehousing, sales facilities, administration, operations and
computer systems. Such anticipated cost savings have not been reflected
in the accompanying pro forma condensed consolidated financial
statements.
In addition, the pro forma condensed consolidated statements of income
do not reflect any sales attrition which may result from the merger or
the portion of costs of the integration into Avnet of the Marshall
business which will be charged to operations in fiscal 2000. Such
one-time costs, which cannot be accurately estimated at this time,
represent only those integration expenses related to Avnet. Costs
related to Marshall as a result of the integration, which also cannot
be accurately estimated at this time, will eventually be included in
goodwill.
(b) Adjustment to reflect: (1) the incremental amortization of estimated
goodwill determined on a straight-line basis over 40 years resulting
from the purchase accounting related to the merger amounting to $5,603
and $4,203, respectively, for the fiscal year ended June 26, 1998 and
the nine months ended April 2, 1999 and (2) the amortization of
deferred financing costs resulting from proposed borrowings discussed
in Note (c) below amounting to $260 and $195, respectively, for the
fiscal year ended June 26, 1998 and the nine months ended April 2,
1999. The amount of the incremental amortization of estimated goodwill
takes into account the fact that the Marshall historical statements of
income already include amortization of goodwill which will be part of
the goodwill recorded by Avnet once the merger is consummated.
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<PAGE> 73
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Adjustment to reflect the net increase in interest expense, based upon
a presumption of, but not a commitment for, the execution of the two
transactions described below:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
JUNE 26, 1998 APRIL 2, 1999
------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Proposed issuance of $400,000 of
ten-year senior notes at an assumed
interest rate of 7.50% and short-term
borrowings of $100,000 at an assumed
interest rate of 5.00%............... $35,000 $26,250
Elimination of interest on certain
Marshall debt which is assumed
repaid............................... (7,480) (14,139)
------- -------
Net increase in interest expense $27,520 $12,111
======= =======
</TABLE>
A 1/8% change in interest rates will result in a change in interest
expense of $625 per annum.
(d) The income tax impact, assuming an effective tax rate of 40.525%,
applied to the deductible pro forma adjustments to the condensed
consolidated statements of income described above. (Note: the
amortization of goodwill described in note (b)(1) above is not tax
benefitted.)
(e) For the 12 months ended May 31, 1998, Marshall's net income is before
extraordinary items.
(f) Assumes the issuance of 6,777,000 shares of Avnet common stock to
consummate the merger.
4. PRO FORMA ADJUSTMENTS -- CONDENSED CONSOLIDATED BALANCE SHEET
(a) Adjustments to reflect: (1) proceeds from issuance of new debt, net of
related debt issuance costs ($497,400), (2) cash received from the
exercise of Marshall stock options assumed to be exercised in
connection with the merger ($17,358), (3) payment of the cash portion
of the merger consideration ($360,133), (4) repayment of certain
Marshall debt discussed in Note (c) to the condensed consolidated
statements of income (borrowings due within one year $16,250 and
long-term debt $168,000) and (5) payment of direct costs associated
with the merger ($12,600).
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<PAGE> 74
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(b) Adjustments to reflect the increase in cost in excess of net assets
acquired attributable to the merger, as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Components of purchase price:
Common stock portion of merger consideration............. $324,020
Cash portion of merger consideration..................... 360,133
Estimated direct costs related to the merger (excludes
write-off of assets and liabilities to be incurred as a
result of the integration of Marshall into Avnet, the
amount of which cannot be accurately estimated at this
time).................................................. 12,600
--------
696,753
Less:
Book value of net assets acquired including cost in
excess of net assets acquired on the books of Marshall
amounting to $147,425.................................. 417,460
Proceeds from exercise of Marshall options in connection
with the merger........................................ 17,358
--------
Cost in excess of net assets acquired.................... $261,935
========
</TABLE>
Note -- The total incremental goodwill on Avnet resulting from this
transaction is $409,360 ($261,935 indicated above and the $147,425 on
the books of Marshall).
(c) Adjustment to reflect debt issuance costs associated with new
borrowings.
(d) Adjustment to reflect (1) retirement of certain Marshall debt
(borrowings due within one year $16,250 and long-term debt $168,000)
and (2) proposed issuance of debt in connection with the merger as
discussed in Note (c) to the condensed consolidated statements of
income ($500,000).
(e) Adjustment to reflect: (1) issuance of Avnet common stock in exchange
for Marshall common stock assuming a market value per share of Avnet
common stock of $47.8125 as described on page 52 (common stock $6,777
and additional paid-in capital $317,243), (2) the exercise of Marshall
stock options (common stock $926 and additional paid-in capital
$16,432) and (3) elimination of Marshall common stock and additional
paid-in capital (common stock $17,542 and additional paid-in capital
$57,451).
(f) Adjustment to reflect the elimination of Marshall retained earnings,
cumulative translation adjustments and valuation adjustment.
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<PAGE> 75
DESCRIPTION OF AVNET COMMON STOCK
The holders of shares of Avnet's common stock have equal rights to
dividends from funds legally available therefor when, as and if declared by
Avnet's Board of Directors, and are entitled, upon liquidation, to share ratably
in any distribution in which holders of common stock participate. The common
stock is not redeemable, has no preemptive or conversion rights and is not
liable for assessments or further calls. The holders of shares of Avnet's common
stock are entitled to one vote for each share at all meetings of shareholders.
The Transfer Agent and Registrar for Avnet's Common Stock is the Bank of
New York. Avnet's common stock is listed on the New York Stock Exchange and the
Pacific Exchange.
DESCRIPTION OF MARSHALL COMMON STOCK
Each share of Marshall common stock is equal in all respects to every other
share of Marshall common stock. Holders of Marshall common stock are entitled to
one vote for each share held of record on each matter submitted to shareholders.
Upon giving notice as required by law, a shareholder is entitled to cumulate
votes for the election of directors (that is, cast for any one or more
candidates a number of votes equal to the number of shareholders' shares
multiplied by the number of directors to be elected). Subject to preferences
that may be applicable to any shares of preferred stock outstanding at that
time, holders of Marshall common stock are entitled to receive ratably such
dividends as may be declared by the board of directors out of legally available
funds and to share equally, on a per share basis, in all assets of Marshall
remaining after satisfaction of all liabilities in the event of dissolution and
liquidation. Common shareholders do not have preemptive rights to subscribe for
common stock or other securities of Marshall and do not have any rights to
convert their common stock into any other securities. All outstanding shares of
common stock are fully paid and nonassessable.
COMPARISON OF SHAREHOLDER RIGHTS
In connection with the merger, Marshall shareholders may elect to receive
common stock of Avnet and, even if they have not elected to receive Avnet common
stock, may receive common stock of Avnet if fewer than 8,308,182 Marshall shares
are elected to be converted into the right to receive Avnet common stock.
Marshall is a California corporation, and Avnet is a New York corporation. The
Marshall articles of incorporation and bylaws differ from those of Avnet in
significant ways. Because of differences between California and New York law and
the differences in the charter documents of Marshall and Avnet, the rights of
holders of Marshall common stock will change if they receive Avnet common stock.
Copies of the Marshall or Avnet charter documents are available upon
request. See "Where You Can Find More Information" on page 77.
Below is a summary of some of the material differences between California
and New York law and the charter documents of Marshall and Avnet. It is not
practical to summarize all differences in this Joint Proxy Statement/Prospectus,
but some of the
69
<PAGE> 76
principal differences which could materially affect the rights of Marshall
shareholders include the following:
CUMULATIVE VOTING
Marshall. California law requires corporations to provide for cumulative
voting in the election of directors unless the articles of incorporation are
amended to eliminate cumulative voting. No such amendment was adopted by
Marshall.
Avnet. Although New York law permits corporations to provide for
cumulative voting, Avnet does not do so.
CLASSIFIED BOARD OF DIRECTORS
Marshall. Under California law, a corporation may divide its board of
directors into as many as three classes, and directors can be elected to serve
staggered terms. However, Marshall has not elected to divide its directors into
classes.
Avnet. New York law permits New York corporations to divide the directors
into as many as four classes. However, Avnet has not elected to do so.
REMOVAL OF DIRECTORS
Marshall. Under California law and the Marshall charter documents, the
holders of at least 10% of the outstanding shares of any class of stock may
initiate a court action to remove any director for cause. In addition, any or
all of the directors of a California corporation may be removed without cause by
the affirmative vote of a majority of the outstanding shares entitled to vote.
However, no director may be removed, unless the entire board is removed, when
the votes cast against removal would be sufficient to elect the director if
voted cumulatively at an election at which the same total number of votes were
cast and the entire number of the directors authorized at the time of the
director's most recent election were then being elected.
Avnet. Under New York law, shareholders may remove any or all directors
for cause. New York law also allows directors to be removed without cause if
provided in the certificate of incorporation. The Avnet certificate of
incorporation authorizes any or all of the directors to be removed with or
without cause at any time by the vote of the holders of a majority of the stock
of Avnet and provides that the terms of the removed directors shall forthwith
terminate.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Marshall. Under California law, unless otherwise provided in the charter
or by-laws and except for a vacancy created by the removal of a director,
vacancies on the board of directors may be filled by approval of the board. In
addition, any vacancy not filled by the directors and any vacancies on the board
resulting from the removal of directors may be filled by approval of the
shareholders. The Marshall by-laws provide that vacancies on the board,
including those existing as a result of a removal of a director, may be filled
by a majority of the remaining directors. The shareholders may elect a director
at any time to fill any vacancy not filled by the directors.
Avnet. Pursuant to New York law, newly created directorships resulting
from an increase in the number of directors and vacancies arising for any reason
except removal of directors without cause may be filled by vote of the board of
directors. The Avnet by-laws provide that if the office of any director becomes
vacant for any reason, the directors in
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<PAGE> 77
office, whether or not constituting a quorum, may choose a successor for the
remainder of the unexpired term by majority vote, or the vacancy may be filled
by the shareholders at any meeting thereof. The by-laws also provide that
vacancies resulting from the removal of directors by the shareholders with or
without cause shall be filled by the shareholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Marshall. Under California law, a corporation has the power to indemnify,
with certain exceptions, any agent who is a party to any action, other than an
action by or in the right of the corporation to procure a judgment in its favor,
against expenses, judgments, fines and settlements if that person acted in good
faith and in a manner that person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In addition, a
corporation has the power to indemnify, with certain exceptions, any agent who
is a party to any action by or in the right of the corporation, against expenses
actually and reasonably incurred by that person in connection with the defense
or settlement of the action if that person acted in good faith and in a manner
that person believed to be in the best interests of the corporation and its
shareholders. An agent of a corporation for purposes of California law includes
directors, officers and employees of such corporation. The indemnification
authorized by California law is not exclusive and a corporation may grant its
directors certain additional rights to indemnification.
The Marshall restated articles of incorporation and by-laws provide that
Marshall shall indemnify to the maximum extent of the law each of its directors
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with a proceeding arising by reason that such
person is a director of Marshall. The indemnification rights are not exclusive
of other indemnification rights to which a director or officer may be entitled.
Avnet. New York law permits a corporation to indemnify any person made or
threatened to be made a party to any action or proceeding, other than one by or
on behalf of the corporation to procure a judgment in its favor, 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, 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 in 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 rights described above are not exclusive of other
indemnification rights to which a director or officer may be entitled, if
contained in the certificate of incorporation or by-laws, or, when authorized,
by a resolution of shareholders, a resolution of directors or an agreement
providing for such indemnification. However, no indemnification may be made to
or on behalf of any director or officer if a judgment or other final
71
<PAGE> 78
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
shall be entitled to indemnification. Except as provided in the preceding
sentence, or ordered by a court pursuant to New York law, any indemnification
provided under New York law described in the above paragraphs shall be made by
the corporation only if authorized in the specific case, and after a finding
that the director or officer met the requisite standard of conduct by the
disinterested directors if a quorum is available, or in the event a quorum of
disinterested directors is not available or an available quorum so directs, by
either the board of directors upon the written opinion of independent legal
counsel, or by the shareholders.
AMENDMENTS TO THE CERTIFICATE OF INCORPORATION
Marshall. Under California law, amendments to the charter of a corporation
generally require approval by vote of the directors and the holders of a
majority of outstanding shares entitled to vote thereon and, where their rights
are affected, by the holders of a majority of the outstanding shares of a class,
whether or not such class is entitled to vote thereon by the provision of the
charter.
Avnet. Under New York law, an amendment or change of the certificate of
incorporation may be authorized by vote of the board of directors, followed by
vote of the holders of a majority of all outstanding shares entitled to vote
thereon; provided that whenever the certificate of incorporation requires action
by vote of a greater number or proportion than is required by New York law, the
provision of the certificate of incorporation requiring the greater vote may not
be amended except by such greater vote. Certain categories of amendments which
adversely affect the rights of any holders of shares of a class of stock must be
authorized by a majority of the votes of all outstanding shares of the class.
AMENDMENT OF BY-LAWS
Marshall. Under California law, by-laws may be adopted, amended or
repealed either by the vote of a majority of the outstanding shares or by the
approval of the board of directors except (1) if the number of directors is set
forth in the charter, in which case this number may be changed only by an
amendment to the charter, and (2) after the issuance of shares, a by-law
specifying or changing a fixed number of directors or the maximum or minimum
number or changing from a fixed to a variable board or vice versa may be adopted
by approval only of the outstanding shares with specific vote requirements in
certain instances. The Marshall by-laws provide that the by-laws may be amended
either by approval of the outstanding shares or by the approval of the board of
directors.
Avnet. New York law provides that the by-laws of a corporation may be
amended or repealed by a majority of votes cast by shares entitled to vote. If
provided for in the certificate of incorporation, the by-laws may also be
amended or repealed by the board of directors. The Avnet certificate of
incorporation includes a provision authorizing the board of directors to adopt,
amend or repeal by-laws.
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POWER TO CALL SPECIAL SHAREHOLDERS MEETINGS
Marshall. California law provides that a special meeting of shareholders
may be called by the board of directors, the chairman of the board, the
president or the holders of shares entitled to cast not less than 10% of the
votes at the meeting or such additional persons as may be provided in the
charter or by-laws. Under California law and the Marshall charter, a quorum for
a special meeting of shareholders is a majority of the shares entitled to vote.
Avnet. Under New York law, a special meeting of shareholders may be called
by the board of directors and by such person or persons as may be authorized to
do so in the certificate of incorporation or by-laws. In addition, if an annual
shareholder meeting has not been held for a certain period of time and a
sufficient number of directors were not elected to conduct the business of the
corporation, the board must call a special meeting for the election of
directors. If the board fails to do so, or sufficient directors are not elected
within a certain period of time, holders of ten percent (10%) of the votes of
the shares entitled to vote in an election of directors may call a special
meeting for such an election. The Avnet by-laws provide that special meetings of
shareholders may be called by the Board of Directors or the Chairman of the
Board and shall be called by the Chairman of the Board, President or Secretary
at the written request of shareholders owning 75% of the shares entitled to vote
at the meeting.
ACTIONS BY WRITTEN CONSENT OF SHAREHOLDERS
Marshall. Under California law, unless otherwise provided in the articles
of incorporation, any action which may be taken at a meeting of shareholders may
also be taken by the written consent of the holders of at least the same number
of outstanding shares as would be necessary to take such action at a meeting at
which all shares entitled to vote were present and voted, except that the
election of directors by written consent requires the unanimous consent of all
shares entitled to vote. The Marshall articles of incorporation do not prevent
action by written consent of the shareholders.
Avnet. New York law provides that any action which may be taken by
shareholders by vote may be taken without a meeting by written consent, signed
by holders of all outstanding shares entitled to vote, or if authorized by the
certificate of incorporation, by holders of the minimum number of shares
necessary to authorize the action at a meeting of shareholders at which all
shares entitled to vote are present and voted. The Avnet certificate of
incorporation does not authorize shareholders to act by less than unanimous
written consent.
INSPECTION OF SHAREHOLDERS' LIST
Marshall. California law allows any shareholder to inspect a corporation's
shareholders' list for a purpose reasonably related to such person's interest as
a shareholder. In addition, California law provides an absolute right to inspect
and copy the corporation's shareholders' list to persons holding an aggregate of
5% or more of a corporation's voting shares, or shareholders holding an
aggregate of 1% or more of such shares who have filed a Schedule 14A with the
Securities and Exchange Commission.
Avnet. New York law provides that any shareholder of record has the right
to examine in person or by agent the record of shareholders for any purpose
reasonably related to such person's interest as a shareholder.
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DIVIDENDS AND REPURCHASES OF SHARES
Marshall. California law dispenses with the concepts of par value of
shares as well as statutory definitions of capital and surplus. Generally, a
California corporation may pay dividends or repurchase shares out of retained
earnings. Dividends or repurchases of shares may also be made if, immediately
after giving effect thereto, the sum of (1) the assets (excluding goodwill and
certain other assets) of the corporation are at least equal to 1.25 times its
liabilities (excluding certain deferred credits) and (2) the current assets of
the corporation are at least equal to its current liabilities or, if the average
of the earnings of the corporation before taxes and interest expense for the two
preceding fiscal years were less than the average of the interest expense of
such corporation for such fiscal years, at least equal to 1.25 times its current
liabilities. There are exceptions to the foregoing rules for repurchases of
shares in connection with certain rescission actions or pursuant to certain
employee stock plans.
Avnet. Under New York law, 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 a dividend or distribution must at least equal the
amount of the corporation's stated capital. A corporation may declare and pay
dividends or make other distributions except when the corporation is currently
insolvent or would thereby be made insolvent or when the declaration, payment or
distribution would be contrary to any restrictions contained in its certificate
of incorporation.
APPROVAL OF CERTAIN BUSINESS COMBINATIONS AND REORGANIZATIONS
Marshall. California law requires approval of the board of directors and a
majority of shares outstanding for mergers, exchanges, sales of assets or share
exchange tender offers. California law generally requires that, unless all
shareholders of a class or series consent, each share of a class or series of
any party to a merger must be treated equally with respect to any distribution
of cash, property, rights or securities.
Avnet. Under New York law, two-thirds of the votes of all outstanding
shares entitled to vote thereon are required to approve mergers, consolidations,
share exchanges or sales, leases or other dispositions of all or substantially
all the assets of a corporation if not made in the usual or regular course of
business. New York law was amended in 1998 to permit a New York corporation to
reduce the required vote to a majority of the outstanding shares, but Avnet has
not done so.
BUSINESS COMBINATION FOLLOWING A CHANGE IN CONTROL
Marshall. California law provides generally that if a tender offer or a
written proposal for certain business combinations is made to some or all of a
corporation's shareholders by an "interested party," an affirmative written
opinion as to the fairness of the consideration to such shareholders must be
delivered. An "interested party" is generally a control person of the target
corporation, an entity directly or indirectly controlled by an officer or
director of such corporation or an entity in which a material financial interest
is held by any director or executive officer of such corporation.
Avnet. New York 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 that beneficially owns, directly or indirectly, 20% or
more of the outstanding voting stock of a New York corporation or any person
that
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is an affiliate or associate of a New York corporation and at any time within
the past five years was a beneficial owner of 20% or more of the outstanding
voting stock) for a period of five years after the date on which the interested
shareholder first became an interested shareholder, unless the transaction is
approved by the board of directors prior to the date on which the interested
shareholder became an interested shareholder. After this five-year period, a
business combination between a New York corporation and the 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 the interested shareholder.
There is exempted from these prohibitions any business combination with an
interested shareholder that is approved by the board of directors before the
date on which the interested shareholder became an interested shareholder. Under
New York law, corporations may elect not to be governed by the statute described
above, but Avnet's certificate of incorporation does not contain such an
election.
DISSENTERS' APPRAISAL RIGHTS
Marshall. California law relating to dissenters' rights of appraisal are
described under the caption "The Merger -- Appraisal Rights" on page 49.
Avnet. Under New York law, any shareholder of a corporation has the right
to obtain payment for the fair value of the shareholder's shares in the event of
(i) certain amendments or changes to the certificate of incorporation adversely
affecting the rights of the shareholder, (ii) certain mergers or consolidation
of the corporation if the shareholder is entitled to vote thereon, (iii) a
merger or consolidation where the shareholder is not entitled to vote or if the
shareholder's shares will be canceled or exchanged for cash or other
consideration other than shares of the surviving or consolidated corporation or
another corporation, (iv) certain sales, leases, exchanges or other dispositions
of all or substantially all of the assets of the corporation which require
shareholder approval other than a transaction solely for cash, and (v) certain
share exchanges. However, no appraisal rights will be available in a merger to a
shareholder of the surviving corporation whose rights are not adversely affected
or whose shares were, at the record date to vote on the plan of merger, either
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc.
EXPERTS
The consolidated financial statements of Marshall at May 31, 1999 and 1998,
and for each of the three years in the period ended May 31, 1999, incorporated
by reference in this Joint Proxy Statement/Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated herein by reference in
reliance upon the authority of said firm as experts in giving said reports.
The consolidated financial statements and schedules of Avnet as of June 26,
1998 and June 27, 1997 and for the three years in the period ended June 26,
1998, incorporated by reference in this Joint Proxy Statement/Prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated herein by
reference in reliance upon the authority of said firm as experts in giving said
reports.
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VALIDITY OF SHARES
The validity of the Avnet common stock to be issued pursuant to the merger
agreement will be passed upon by Sullivan & Cromwell, 125 Broad Street, New
York, New York 10004.
ADDITIONAL INFORMATION FOR MARSHALL SHAREHOLDERS
INDEPENDENT AUDITORS WILL BE PRESENT AT SPECIAL MEETING
Representatives of Arthur Andersen LLP are expected to be present at the
Marshall special meeting and will have an opportunity to make a statement if
they desire to do so and are expected to be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Marshall has not scheduled an annual meeting for 1999 due to the pending
merger. Assuming the merger is completed, no 1999 annual meeting will be held
for Marshall. If the merger is not consummated, an annual meeting of
shareholders would be held in early calendar year 2000. In the event that such a
meeting is held, any proposals of Marshall shareholders intended to be included
in the Marshall proxy statement for such meeting would have to be received by
Marshall at its corporate headquarters, 9320 Telstar Avenue, El Monte,
California 91731-2895 a reasonable time before Marshall begins to print and mail
its proxy materials with respect to such meeting.
Shareholder proposals submitted outside the processes of Rule 14a-8 under
the Securities Exchange Act of 1934 (i.e., a proposal to be presented at the
next annual meeting of Marshall shareholders but not submitted for inclusion in
the Marshall proxy statement for that meeting) must be timely submitted. Until
further notice, to be timely with respect to the annual meeting (if one is
held), a shareholder's notice of business to be brought before that annual
meeting would have to be received in writing by Marshall at its principal
executive office not less than thirty (30) days nor more than ninety (90) days
prior to that annual meeting. The notice must also contain some additional
information required by Marshall's by-laws and otherwise comply with applicable
legal requirements.
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WHERE YOU CAN FIND MORE INFORMATION
Avnet has filed with the Securities and Exchange Commission a Registration
Statement under the Securities Act that registers the distribution to the
Marshall shareholders of the Avnet common stock to be issued in the merger. The
Registration Statement, including the attached exhibits and schedules, contains
additional relevant information about Avnet common stock. The rules and
regulations of the Securities and Exchange Commission allow us to omit certain
information included in the Registration Statement from this Joint Proxy
Statement/Prospectus.
In addition, Marshall and Avnet file reports, proxy statements and other
information with the Commission under the Exchange Act. You may read and copy
this information at the following locations of the Commission:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois
60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. Further
information on the operation of the Securities and Exchange Commission's Public
Reference Room in Washington, D.C. can be obtained by calling the Securities and
Exchange Commission at 1-800-SEC-0330.
The Securities and Exchange Commission also maintains an Internet world
wide web site that contains reports, proxy statements and other information
about issuers, such as Marshall and Avnet, who file electronically with the
Securities and Exchange Commission. The address of that site is
http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
Marshall and Avnet at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005 and, in the case of Avnet, the offices of the
Pacific Stock Exchange, Inc., 301 Pine Street, San Francisco, California 94104.
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this Joint Proxy Statement/Prospectus, which means
that we can disclose important information to you by referring you to another
document filed separately with the Securities and Exchange Commission. The
information incorporated by reference is deemed to be part of this Joint Proxy
Statement/Prospectus, except for any information superseded by information in
this Joint Proxy Statement/Prospectus. This Joint Proxy Statement/Prospectus
incorporates by reference the documents set forth below that we have previously
filed with the Securities and Exchange Commission. These documents contain
important information about our companies and their finances.
<TABLE>
<S> <C>
MARSHALL COMMISSION FILINGS (FILE NO. PERIOD OR DATE FILED
1-5441) --------------------------------------
- --------------------------------------
Annual Report on Form 10-K Year ended May 31, 1999
</TABLE>
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<TABLE>
<S> <C>
AVNET COMMISSION FILINGS (FILE NO. PERIOD OR DATE FILED
1-4224) --------------------------------------
- --------------------------------------
Annual Report on Form 10-K Fiscal Year ended June 26, 1998
Quarterly Reports on Form 10-Q Quarters ended October 2, 1998,
January 1, 1999 and April 2, 1999
Current Reports on Form 8-K Filed on August 5, 1998, August 21,
1998, September 16, 1998 and May 6,
1999
</TABLE>
Marshall and Avnet also incorporate by reference additional documents that
either company may file with the Securities and Exchange Commission between the
date of this Joint Proxy Statement/Prospectus and the date of the Marshall
special meeting or the Avnet special meeting, as applicable. These documents
include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.
Marshall has supplied all information contained or incorporated by reference in
this Joint Proxy Statement/Prospectus relating to Marshall, and Avnet has
supplied all such information relating to Avnet.
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APPENDIX A
AMENDED AND RESTATED
AGREEMENT
AND
PLAN OF MERGER
DATED AS OF
JUNE 25, 1999
BY AND BETWEEN
AVNET, INC.
AND
MARSHALL INDUSTRIES
<PAGE> 86
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
THE MERGER
1.1 The Merger.................................................. 1
1.2 Closing..................................................... 1
1.3 Effective Time.............................................. 2
1.4 Certificate of Incorporation................................ 2
1.5 By-Laws..................................................... 2
1.6 Officers and Directors...................................... 2
1.7 Conversion of Shares........................................ 2
1.8 Cash and Share Elections.................................... 3
1.9 Proration................................................... 4
1.10 Surrender of Shares; Transfer Books......................... 5
1.11 Dissenting Shares........................................... 7
1.12 Company Options............................................. 8
1.13 Affiliates.................................................. 8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
2.1 Organization; Subsidiaries.................................. 8
2.2 Capitalization.............................................. 9
2.3 Authority; Validity......................................... 9
2.4 No Conflict................................................. 10
2.5 Consents.................................................... 10
2.6 Financial Statements; SEC Filings........................... 10
2.7 Tax Matters................................................. 11
2.8 Absence of Certain Changes or Events........................ 12
2.9 Material Contracts; Customers and Suppliers................. 12
2.10 Title and Related Matters................................... 13
2.11 Employee Benefit Plans...................................... 13
2.12 Employment Agreements....................................... 16
2.13 Legal Proceedings........................................... 16
2.14 Compliance with Law; Accuracy of Certain Information........ 16
2.15 Accuracy of Joint Proxy Statement and Other Information..... 16
2.16 Insurance................................................... 16
2.17 Environmental Matters....................................... 17
2.18 Intangible Property......................................... 17
2.19 Fairness Opinion............................................ 17
2.20 No Brokers or Finders....................................... 17
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 Organization................................................ 18
3.2 Authority; Validity......................................... 18
3.3 No Conflict................................................. 18
3.4 Consents.................................................... 18
3.5 Legal Proceedings........................................... 18
3.6 Financial Statements, SEC Filings........................... 18
3.7 Buyer's Financing........................................... 19
3.8 Tax Returns................................................. 19
3.9 No Material Adverse Effect.................................. 20
3.10 Employee Benefit Plans...................................... 20
3.11 Compliance with Law......................................... 20
3.12 Accuracy of Proxy Statement and Other Information........... 20
3.13 Environmental Matters....................................... 20
3.14 No Brokers or Finders....................................... 20
ARTICLE IV
COVENANTS
4.1 Access and Information...................................... 21
4.2 Governmental Filings........................................ 21
4.3 Consents and Approvals...................................... 22
4.4 Meetings of Shareholders; Registration Statement; Listing
Application................................................. 22
(a) Meetings of Shareholders................................ 22
(b) Joint Proxy Statement; Registration Statement........... 22
(c) Indemnification......................................... 23
(d) Listing Application..................................... 23
4.5 Conduct of Company Business................................. 23
(a) Ordinary Course......................................... 23
(b) Charter Documents....................................... 24
(c) Dividends............................................... 24
(d) Stock................................................... 24
4.6 SEI Shareholders Agreement.................................. 24
4.7 Repayment of Debt........................................... 24
4.8 Publicity................................................... 24
4.9 Notification of Defaults and Adverse Events................. 24
4.10 Satisfy Conditions to Closing............................... 25
4.11 Termination Fee............................................. 25
4.12 Anti-takeover Statutes...................................... 25
4.13 Indemnification; Insurance.................................. 25
(a) Indemnification......................................... 25
(b) Insurance............................................... 26
4.14 Employee Benefits........................................... 26
4.15 No Solicitation............................................. 26
</TABLE>
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<TABLE>
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ARTICLE V
CONDITIONS
5.1 Conditions to Obligations of Company and Buyer.............. 27
(a) Approval................................................ 27
(b) Approval from Government Entities....................... 28
(c) Absence of Governmental Litigation...................... 28
(d) Effectiveness of Registration Statement................. 28
5.2 Conditions to Obligations of Buyer.......................... 28
(a) Representations and Compliance.......................... 28
(b) Tax Opinion............................................. 28
(c) No Material Adverse Effect.............................. 28
(d) Material Contracts...................................... 28
5.3 Conditions to Obligations of Company........................ 29
(a) Representations and Compliance.......................... 29
(b) Tax Opinion............................................. 29
(c) Listing................................................. 29
(d) No Material Adverse Effect.............................. 29
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.1 Termination and Abandonment................................. 29
6.2 Effect of Termination....................................... 30
6.3 Amendment................................................... 31
6.4 Extension;Waiver............................................ 31
ARTICLE VII
MISCELLANEOUS
7.1 Termination of Representations and Warranties............... 31
7.2 Expenses.................................................... 31
7.3 Remedies.................................................... 31
7.4 Notices..................................................... 31
7.5 Further Assurances.......................................... 32
7.6 Assignability............................................... 32
7.7 Governing Law............................................... 32
7.8 Interpretation.............................................. 32
7.9 Counterparts................................................ 32
7.10 Integration................................................. 32
ARTICLE VIII
DEFINITIONS
8.1 Definitions................................................. 32
</TABLE>
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SCHEDULES
<TABLE>
<S> <C>
Schedule 2.1(b) Capitalization of Company and Company's Subsidiaries
Schedule 2.2(a) Rights to Purchase Company Common Stock and Capital Stock
Schedule 2.4 Company Required Consents
Schedule 2.7 Certain Tax Matters
Schedule 2.8 Certain Events -- Company
Schedule 2.9 Material Contracts; Customers and Suppliers
Schedule 2.9(ii) Certain Principal Customers and Suppliers
Schedule 2.10 Certain Property or Assets
Schedule 2.11(a) Company Employee Benefit Plans
Schedule 2.11(b) Certain Company Benefit Plan Operation
Schedule 2.11(d) Certain Company Benefit Plan Contributions
Schedule 2.11(e) Certain Company Benefit Plan Matters
Schedule 2.11(i) Certain Company Benefits
Schedule 2.12 Employment Agreements
Schedule 2.13 Legal Proceedings
Schedule 2.14 Compliance with Law
Schedule 2.14(ii) Accuracy of Certain Information
Schedule 2.16 Company Insurance Policies
Schedule 2.17 Certain Environmental Matters
Schedule 2.18 Intangible Property
Schedule 4.5 Conduct of Company Business
Schedule 5.2(d) Required Company Consents
Schedule 6.1(h) Form of SEI Waiver
</TABLE>
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT (this "AGREEMENT") is entered into as
of June 25, 1999 by and between Avnet, Inc., a New York corporation ("BUYER"),
and Marshall Industries, a California corporation ("COMPANY").
RECITALS
WHEREAS, the Board of Directors of Buyer and the Board of Directors of
Company have each determined that it is in the respective best interests of
Buyer and Company for Buyer to acquire Company through the merger of Company
with and into Buyer upon the terms and subject to the conditions set forth
herein;
WHEREAS, the Parties originally entered into an Agreement and Plan of
Merger on June 25, 1999 (the "ORIGINAL AGREEMENT");
WHEREAS, the Parties desire to amend and restate in its entirety the
Original Agreement effective as of June 25, 1999, the date of the Original
Agreement; and
WHEREAS, Buyer and Company desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement and
prescribe various conditions to the Merger (as such term is defined below).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined below) Company will be merged with and into Buyer
and the separate corporate existence of Company will thereupon cease (the
"MERGER"). Buyer will be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "SURVIVING CORPORATION") and will continue to be
governed by the laws of the State of New York. The separate corporate existence
of Buyer with all its rights, privileges, immunities, powers and franchises will
continue unaffected by the Merger and Buyer will succeed to all of the rights
and properties of Company and will be subject to all of the debts and
liabilities of Company.
1.2 Closing. The closing of the transactions contemplated hereby (the
"CLOSING") will take place (i) at the offices of O'Melveny & Myers LLP, 1999
Avenue of the Stars, Suite 700, Los Angeles, California 90067 at 10:00 A.M., Los
Angeles time on the second business day after the day on which the last of the
conditions set forth in ARTICLE V is fulfilled or waived in accordance with this
Agreement or (ii) at such other place and time or on such other date as Buyer
and Company may agree.
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1.3 Effective Time. Subject to the provisions of this Agreement and
provided that this Agreement has not been terminated or abandoned pursuant to
ARTICLE VI, certificates of merger (the "CERTIFICATES OF MERGER") shall be duly
prepared, executed and verified by each of Company and Buyer, and thereafter
delivered, to the Secretary of State of New York for filing in accordance with
Section 907(d) of the New York Business Corporation Law ("NYBCL") and the
Secretary of State of California in accordance with Section 1103 of the
California General Corporations Law (the "CA CODE"), on the Closing Date. The
Merger will become effective immediately upon the filing of the Certificates of
Merger (or, if the Certificates of Merger provide for a subsequent time for
effectiveness, at the time thereafter so provided in the Certificates of
Merger); the time of such effectiveness is hereinafter referred to as the
"EFFECTIVE TIME"; and the date of such effectiveness is hereinafter referred to
as the "EFFECTIVE DATE."
1.4 Certificate of Incorporation. The Certificate of Incorporation of
Buyer in effect at the Effective Time will be the Articles of Incorporation of
the Surviving Corporation until duly amended in accordance with the terms
thereof and the applicable provisions of the NYBCL.
1.5 By-Laws. The By-Laws of Buyer in effect at the Effective Time will be
the By-Laws of the Surviving Corporation until duly amended in accordance with
the terms thereof and the applicable provisions of the NYBCL.
1.6 Officers and Directors. The officers and directors of the Surviving
Corporation will remain as such until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
By-Laws.
1.7 Conversion of Shares. Except as otherwise provided herein and subject
to proration as provided in SECTION 1.9, at the Effective Time, each outstanding
share of common stock, par value $1.00 per share, of Company (the "COMPANY
COMMON STOCK"), (other than shares canceled pursuant to this SECTION 1.7) shall
be converted into the following (the "MERGER CONSIDERATION"):
(a) for each share of Company Common Stock with respect to which an
election to receive common stock of Buyer ("BUYER STOCK") has been
effectively made and not revoked or lost pursuant to SECTION 1.8(c), (d)
and (e) ("ELECTING SHARES"), the right to receive a number of fully paid
and nonassessable shares of Buyer Stock (a "NON-CASH ELECTION SHARE") equal
to the Exchange Ratio; and
(b) for each share of Company Common Stock other than Electing Shares,
the right to receive in cash from Buyer following the Merger an amount
equal to $39.00 (the "CASH ELECTION PRICE").
(c) For purposes of calculating the Exchange Ratio in SECTION 1.7(a),
the term "CLOSING PRICE" means the average of the closing trade prices of
Buyer Stock for the twenty consecutive trading days ending on the fifth
trading day before the date of the meeting of Company's shareholders to
vote with respect to the Merger (the "Company Shareholders Meeting") and
reported on the New York Stock Exchange Composite Tape. The Exchange Ratio
shall be as follows:
If the Closing Price is:
(A) greater than or equal to $43.03125 and less than or equal
to $52.59375, then the Exchange Ratio shall be .81569;
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(B) greater than $52.59375 and less than or equal to $57.375,
then the Exchange Ratio shall be $42.90 divided by the Closing
Price;
(C) greater than $57.375, then the Exchange Ratio shall be
.74772;
(D) greater than or equal to $38.25 but less than $43.03125,
then the Exchange Ratio shall be $35.10 divided by the Closing
Price; and
(E) less than $38.25, then the Exchange Ratio shall be .91765.
(d) Any shares of Company Common Stock held at the Effective Time by
Company or Buyer or their wholly-owned subsidiaries (other than shares held
in trust) will be canceled (the "CANCELED SHARES").
(e) Before the Effective Time, Buyer and Company will jointly estimate
the amount of cash which may be required to be paid with respect to
Dissenting Shares. Based on such estimate, the respective percentages of
cash and Buyer Stock comprising the Merger Consideration (with
corresponding changes, if applicable, to the Cash Proration Factor and
Non-Cash Proration Factor) will be appropriately adjusted to the extent
required in connection with the issuance of the opinions referred to in
SECTIONS 5.2(b) and 5.3(b).
1.8 Cash and Share Elections.
(a) Each person who, on or before the Election Date referred to in (c)
below, is a record holder of shares of Company Common Stock and who does not
demand dissenters' rights in accordance with the CA Code will be entitled, with
respect to all or any portion of his shares, to make an unconditional election
(a "NON-CASH ELECTION") on or before such Election Date to receive Non-Cash
Election Shares, on the basis hereinafter set forth.
(b) Before the mailing of the Joint Proxy Statement, Buyer will appoint The
Bank of New York or another bank or trust company to act as exchange agent (the
"EXCHANGE AGENT") for the payment of the Merger Consideration.
(c) Company will, subject to any required clearance by the SEC, mail a form
of election, which form will be prepared by Buyer subject to the reasonable
approval of Company (the "FORM OF ELECTION"), with the Joint Proxy Statement to
the record holders of Company Common Stock as of the record date for the Company
Shareholders Meeting which Form of Election will be used by each record holder
of shares of Company Common Stock who wishes to elect to receive Non-Cash
Election Shares upon conversion of any or all of such holder's shares of Company
Common Stock in the Merger, subject to the provisions of SECTION 1.9. Company
will use its best efforts to make the Form of Election and the Joint Proxy
Statement available to all persons who become holders of Company Common Stock
during the period between such record date and the Election Date. Any such
holder's election to receive Non-Cash Election Shares will have been properly
made only if the Exchange Agent has received at its designated office, by 5:00
p.m., New York City time on the business day next preceding the date of the
Company Shareholders Meeting (the "ELECTION DATE"), a Form of Election properly
completed and signed.
(d) Any Form of Election may be revoked by the shareholder submitting it to
the Exchange Agent only by written notice received by the Exchange Agent before
5:00 p.m., New York City time, on the Election Date. In addition, all Forms of
Election will
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automatically be revoked if the Exchange Agent is notified in writing by Company
and Buyer that the Merger has been abandoned.
(e) The determination of the Exchange Agent will be binding on whether or
not elections to receive Non-Cash Election Shares have been properly made or
revoked pursuant to this SECTION 1.8 and when elections and revocations were
received by it. If the Exchange Agent determines that any election to receive
Non-Cash Election Shares was not properly made with respect to shares of Company
Common Stock, such shares will be treated by the Exchange Agent as shares that
were not Electing Shares at the Effective Time, and such shares will be
converted in the Merger into the right to receive cash pursuant to SECTION
1.7(b). The Exchange Agent will also make all computations as to the allocation
and the proration contemplated by SECTION 1.9, and any such computation will be
conclusive and binding on the holders of shares of Company Common Stock. The
Exchange Agent may, with the mutual agreement of Company and Buyer, make such
rules as are consistent with this SECTION 1.8 for the implementation of the
elections provided for herein as are necessary or desirable fully to effect such
elections.
1.9 Proration.
(a) Notwithstanding SECTION 1.7 and subject to SECTION 6.1(j), the
aggregate number of shares of Company Common Stock to be converted into the
right to receive Buyer Stock at the Effective Time (the "NON-CASH ELECTION
NUMBER") will be equal to 8,308,182.
(b) If the number of Electing Shares exceeds the Non-Cash Election Number,
then each Electing Share will be converted into the right to receive Non-Cash
Election Shares or cash in accordance with the terms of SECTION 1.7 in the
following manner:
(1) A proration factor (the "NON-CASH PRORATION FACTOR") will be
determined by dividing the Non-Cash Election Number by the total number of
Electing Shares.
(2) The number of Electing Shares covered by each Non-Cash Election to
be converted into the right to receive Non-Cash Election Shares will be
determined by multiplying the Non-Cash Proration Factor by the total number
of Electing Shares covered by such Non-Cash Election rounded down to the
nearest whole number.
(3) All electing Shares, other than those shares converted into the
right to receive Non-Cash Election Shares in accordance with SECTION
1.9(b)(2), will be converted into the right to receive cash (on a
consistent basis among shareholders who made the election referred to in
SECTION 1.7(a), pro rata in accordance with the number of shares as to
which they made such election) as if such shares were not Electing Shares
in accordance with the terms of SECTION 1.7(b).
(c) If the number of Electing Shares is less than the Non-Cash Election
Number, then:
(1) all Electing Shares will be converted into the right to receive
Buyer Stock in accordance with the terms of SECTION 1.7(a);
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(2) shares of Company Common Stock other than Electing Shares will be
converted into the right to receive Non-Cash Election Shares in accordance
with the terms of SECTION 1.7 in the following manner:
(i) a proration factor (the "CASH PRORATION FACTOR") will be
determined by dividing (x) the difference between the Non-Cash Election
Number and the number of Electing Shares, by (y) the total number of
shares of Company Common Stock other than Electing Shares; and
(ii) the number of shares of Company Common Stock in addition to
Electing Shares to be converted into the right to receive Non-Cash
Election Shares will be determined by multiplying the Cash Proration
Factor by the total number of shares other than Electing Shares rounded
down to the nearest whole number; and
(3) shares of Company Common Stock subject to clause (2) of this
paragraph (c) will be converted into the right to receive Non-Cash Election
Shares in accordance with SECTION 1.7(a) (on a consistent basis among
shareholders who held shares of Company Common Stock as to which they did
not make the election referred to in SECTION 1.7(a), pro rata in accordance
with the number of shares as to which they did not make such election);
provided, however, that Buyer shall have the option in its sole discretion
to require that all shares of Company Common Stock subject to clause (2) of
this paragraph (c) be converted into cash so long as such election does not
result in Company being unable to receive the tax opinion required by
paragraph (b) of SECTION 5.3.
1.10 Surrender of Shares; Transfer Books.
(a) Exchange Agent. Buyer will furnish the Exchange Agent forthwith upon
request with such number of shares of Buyer Stock and such amount of cash as the
Exchange Agent shall require in order to transmit the Merger Consideration to
shareholders surrendering their certificates for Company Common Stock in
accordance with paragraph (b) of this SECTION 1.10.
(b) Exchange Procedures for Shares of Company Common Stock. As soon as
practicable after the Effective Time, each holder of an outstanding certificate
or certificates which prior thereto represented shares of Company Common Stock
shall, upon surrender to the Exchange Agent of such certificate or certificates
and acceptance thereof by the Exchange Agent, be entitled to a certificate or
certificates representing the number of full shares of Buyer Stock, if any, to
be received by the holder thereof pursuant to this Agreement and the amount of
cash, if any, which the holder of such shares has the right to receive pursuant
to this Agreement and the cash, if any, payable in lieu of any fractional
shares. The Exchange Agent will accept such certificates upon compliance with
such reasonable terms and conditions as the Exchange Agent may impose to effect
an orderly exchange thereof in accordance with normal exchange practices. After
the Effective Time, there will be no further transfer on the records of the
Surviving Corporation or its transfer agent of certificates representing shares
of Company Common Stock which have been converted pursuant to this Agreement
into the right to receive the Merger Consideration, and if such certificates are
presented to the Surviving Corporation for transfer, they will be canceled
against delivery of cash and, if appropriate, certificates for Non-Cash Election
Shares. If any certificate for such Non-Cash Election Shares is to be issued in,
or if cash is to be remitted to, a name other than that in which the certificate
for Company Common
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Stock surrendered for exchange is registered, it will be a condition of such
exchange that the certificate so surrendered will be properly endorsed, with
signature guaranteed, or otherwise in proper form for transfer and that the
person requesting such exchange will pay to the Surviving Corporation or its
transfer agent any transfer or other taxes required by reason of the issuance of
certificates for such Non-Cash Election Shares in a name other than that of the
registered holder of the certificate surrendered, or establish to the
satisfaction of the Surviving Corporation or its transfer agent that such tax
has been paid or is not applicable. Until surrendered as contemplated by this
SECTION 1.10(b), each certificate for shares of Company Common Stock which have
been converted into the right to receive the Merger Consideration will be deemed
at any time after the Effective Time to represent only the right to receive upon
such surrender the Merger Consideration as contemplated by SECTION 1.7. No
interest will be paid or will accrue on any cash payable as Merger Consideration
or in lieu of any fractional shares of Non-Cash Election Shares.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Non-Cash Election Shares with a record date
after the Effective Time will be paid to the holder of any unsurrendered
certificate of shares of Company Common Stock with respect to the Non-Cash
Election Shares to be received in respect thereof and no cash payment in lieu of
fractional shares will be paid to any such holder pursuant to SECTION 1.10(e)
until the surrender of such certificate in accordance with this ARTICLE I.
Subject to the effect of applicable laws, following surrender of any such
certificate, there will be paid to the holder of the certificate representing
whole Non-Cash Election Shares issued in connection therewith, without interest,
(i) at the time of such surrender the amount of any cash payable in lieu of a
fractional share of Non-Cash Election Shares to which such holder is entitled
pursuant to SECTION 1.10(e) and the proportionate amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole Non-Cash Election Shares, and (ii) at the appropriate
payment date, the proportionate amount of dividends or other distributions with
a record date after the Effective Time but before such surrender and a payment
date subsequent to such surrender payable with respect to such whole Non-Cash
Election Shares.
(d) No Further Ownership Rights in Company Common Stock Exchanged For Cash.
All Merger Consideration paid upon the surrender for exchange of certificates
representing shares of Company Common Stock in accordance with the terms of this
ARTICLE I (including any cash paid pursuant to SECTION 1.10(e)) will be deemed
to have been issued and paid in full satisfaction of all rights pertaining to
the shares of Company Common Stock exchanged therefore represented by such
certificates.
(e) No Fractional Shares; Exchange Agent.
(1) No Fractional Shares. No certificates or scrip representing
fractional shares of Non-Cash Election Shares will be issued in connection
with the Merger, and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a shareholder of the Surviving
Corporation after the Merger, and
(2) Cash Payment in Lieu of Fractional Shares. Notwithstanding any
other provision of this Agreement, no certificates or scrip representing
fractional shares of Buyer Stock will be issued upon the surrender for
exchange of certificates and such fractional shares will not entitle the
owner thereof to vote. Each record holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a Non-Cash
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Election Share (after taking into account all shares of Company Common
Stock delivered by such holder) will receive, in lieu thereof, a cash
payment (without interest) in lieu of such fractional share in any amount
equal to the product of such fraction multiplied by the average of the
closing trade prices of Buyer Stock for the twenty consecutive trading days
ending on the fifth trading day before the date of the Company Shareholders
Meeting and reported on the New York Stock Exchange Composite Tape.
(3) Termination of Exchange Agent's Duties. Any holders of shares of
Company Common Stock before the Merger who have not complied with this
ARTICLE I within six months after the Effective Time will thereafter look
only to Buyer for payment of the Merger Consideration.
(4) No Liability. None of Buyer, Company or the Exchange Agent will
be liable to any person in respect of any shares of Non-Cash Election
Shares (or dividends or distributions with respect thereto) or cash
delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any certificates representing shares
of Company Common Stock immediately before the Effective Time have not been
surrendered before one year after the Effective Time or immediately before
such earlier date on which any cash, if any, in lieu of fractional shares
of Non-Cash Election Shares, any dividends or distributions with respect to
Non-Cash Election Shares in respect of such certificate would otherwise
escheat to or become the property of any Governmental Entity, any such
cash, dividends or distributions in respect of such certificate shall, to
the extent permitted by applicable law, become the property of Buyer, free
and clear of all claims or interest of any person previously entitled
thereto.
1.11 Dissenting Shares.
(a) If required under the CA Code, notwithstanding any other provision of
this Agreement to the contrary, shares of Company Common Stock that are
outstanding immediately prior to the Effective Time and which are held by
shareholders who have voted against the Merger and who shall have demanded
properly in writing appraisal for such shares in accordance with the CA Code and
who shall not have withdrawn such demand or otherwise have forfeited appraisal
rights (collectively, the "DISSENTING SHARES") shall not be converted into or
represent the right to receive the Merger Consideration. Such shareholders shall
be entitled to receive payment of the appraised value of such shares of Company
Common Stock held by them in accordance with the provisions of the CA Code,
except that all Dissenting Shares held by shareholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such shares of Company Common Stock under the CA Code shall
thereupon be deemed to have been converted into and to have become exchangeable,
as of the Effective Time, for the right to receive, without any interest
thereon, the Merger Consideration, upon surrender, in the manner provided in
SECTION 1.10, of the certificate or certificates that formerly evidenced such
shares of Company Common Stock.
(b) Company shall give Buyer (i) prompt notice of any demands for appraisal
received by Company, withdrawals of such demands, and any other instruments
served pursuant to the CA Code and received by Company and (ii) the opportunity
to direct all negotiations and proceedings with respect to demands for appraisal
under the CA Code. Company shall not, except with the prior written consent or
Buyer, make any payment with respect to any demands for appraisal, or offer to
settle, or settle, any such demands.
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1.12 Company Options. At the Effective Time, all issued and outstanding
Company Options shall be converted into options to purchase such number of
shares of Buyer Stock as are equal to the respective numbers of shares of
Company Common Stock issuable thereon multiplied by the Exchange Ratio, at an
option price determined by dividing the respective option prices at which shares
of Company Common Stock may be purchased upon exercise thereof by the Exchange
Ratio, and upon such other terms and conditions as are contained in such Company
Options. Buyer agrees to register the shares of Buyer Stock issuable upon
exercise of Company Options under the Securities Act of 1933 as promptly as
practicable after the Closing Date.
1.13 Affiliates. Certificates representing Buyer Stock issued to any
person deemed by Buyer to be an "affiliate," for purposes of Rule 145 under the
Securities Act, of Company ("COMPANY AFFILIATES") will bear an appropriate
restrictive legend. Within 90 days from the date of this Agreement, Company will
deliver to Buyer a list of all persons who are then Company Affiliates. Company
will promptly amend or supplement this list as changes occur. Company will cause
each person named in any such list, amendment or supplement and any other person
that Buyer considers to be a Company Affiliate to deliver promptly to Buyer a
letter substantially in the form of ANNEX A.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Buyer that:
2.1 Organization; Subsidiaries.
(a) Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of California, and, except as set forth in
SCHEDULE 2.1(b), each of its subsidiaries is either a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or a limited partnership duly formed
and validly existing under the laws of the State of Texas or a Dutch limited
liability company validly existing under the laws of the Netherlands and, except
as set forth in SCHEDULE 2.1(b), each of the foregoing is in good standing as a
foreign corporation or limited partnership, as the case may be, qualified to do
business in each jurisdiction where the properties owned, leased or operated, or
the business conducted by it require such qualification, except for such failure
to so qualify or to be in such good standing, which is not reasonably likely to
have a Company Material Adverse Effect. Each of Company and its subsidiaries has
the requisite corporate or partnership power and authority to carry on its
respective businesses as they are now being conducted.
(b) SCHEDULE 2.1(b) lists all subsidiaries of Company and correctly sets
forth the capitalization of each such subsidiary, the jurisdiction in which
Company and each such subsidiary is organized or formed and each jurisdiction in
which Company and each such subsidiary is qualified or licensed to do business
as a foreign corporation or limited partnership. SCHEDULE 2.1(b) correctly lists
the current directors and executive officers of Company and of each of its
subsidiaries. True, correct and complete copies of the respective charter
documents of Company and each of its subsidiaries as in effect on the date
hereof have been delivered to Buyer.
(c) All outstanding securities or other ownership interests in each of
Company's subsidiaries listed on SCHEDULE 2.1(b): (i) except as set forth on
SCHEDULE 2.1(b), are
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owned of record and beneficially by Company or another of Company's wholly-owned
subsidiaries, subject to no lien, claim, charge or encumbrance, and (ii) have
been duly authorized and are validly issued, fully paid and nonassessable.
Company does not directly or indirectly own or hold any interest in any
corporation, association or business entity other than (A) those listed on
SCHEDULE 2.1(b), (B) corporate partnering, development, cooperative marketing
and similar undertakings, and arrangements entered into in the ordinary course
of business of less than $1,000,000 and (D) other investments of less than
$1,000,000.
2.2 Capitalization.
(a) The authorized capital stock of Company consists of (i) 40,000,000
shares of Common Stock, 16,616,364 of which were issued and outstanding as of
May 31, 1999; and (ii) 200,000 shares of Preferred Stock, none of which are
issued and outstanding. All of such outstanding shares have been and any shares
outstanding at the Effective Time will be duly authorized, validly issued, fully
paid and nonassessable, and issued in compliance with all applicable Laws.
SCHEDULE 2.2(a) lists all outstanding Company Options, warrants and other rights
to purchase shares of Company Common Stock as of May 31, 1999.
(b) As of May 31, 1999, Company has reserved for issuance 1,796,795 shares
of its Common Stock upon exercise of Company Options granted (including 874,545
shares upon exercise of the SEI Option) and 218,750 shares of its Common Stock
reserved for exercise of Company Options that may be granted in the future. As
of May 31, 1999, the Company has reserved for issuance 80,000 shares of its
Preferred Stock pursuant to the Rights Plan. Since May 31, 1999: (A) no Company
Options, warrants, or other rights to purchase shares of Company Common Stock
have been granted; and (B) no shares of Company Common Stock have been issued
except for those issued pursuant to the exercise of outstanding Company Options
(other than any exercise of the SEI Option) in the ordinary course of business.
(c) Except as set forth in paragraphs (a) and (b) above and on SCHEDULE
2.2(a), Company does not have any shares of its capital stock issued or
outstanding and does not have any outstanding subscriptions, options, warrants,
convertible securities, rights or other agreements or commitments obligating
Company to issue shares of its capital stock or other securities of Company or
any of its subsidiaries.
2.3 Authority; Validity. Company has the corporate power and authority to
execute and deliver this Agreement and, subject to approval of this Agreement by
the shareholders of Company in accordance with the applicable provisions of the
CA Code (the "COMPANY SHAREHOLDERS' APPROVAL"), to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
action on the part of Company's Board of Directors. Company's Board of Directors
has directed that this Agreement and the transactions contemplated hereby be
submitted to Company's shareholders for consideration at a meeting of such
shareholders and, except for the Company Shareholders' Approval, no other
corporate proceedings on the part of Company are necessary to authorize the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. Upon execution and delivery hereof (assuming
that this Agreement is the legal, valid and binding obligation of Buyer), this
Agreement will be the valid and binding obligation of Company enforceable
against Company in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency,
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reorganization, moratorium and other similar laws and equitable principles
relating to or limiting creditors rights generally.
2.4 No Conflict. Except as set forth on SCHEDULE 2.4, neither Company nor
any of its subsidiaries nor any of its or their assets is subject to or
obligated under any charter, bylaw, Contract, or other instrument or any permit,
or subject to any law, statute, rule, regulation, judgment, order, decree or
award, which would be defaulted, breached, terminated, forfeited or violated by
or in conflict with (or upon the failure to give notice or the lapse of time, or
both, would result in a default, breach, termination, forfeiture or conflict)
Company's execution, delivery and performance under this Agreement and the
transactions contemplated hereby except where (i) as of the date hereof such
event or occurrence is not reasonably likely to result in losses, liabilities,
costs or expenses, damage or decline in value to the business, condition or
properties of Company's Business (collectively, "LOSSES") that, individually or
in the aggregate, would reasonably be likely to have a Company Material Adverse
Effect, or (ii) between the date hereof and the Closing Date would not,
individually or in the aggregate, reasonably be likely to have a Company
Material Adverse Effect. Except as set forth on SCHEDULE 2.4 and except for
compliance with the HSR Act, Company's execution, delivery and performance under
this Agreement and the transactions contemplated hereby will not result in the
creation of any lien, pledge, security interest or other encumbrance on the
assets of Company or any of its subsidiaries or result in any change in the
rights or obligations of any party under or the acceleration of (with or without
the giving of notice or the lapse of time), any provision of any Material
Contract of Company or any of its subsidiaries or any change in the rights or
obligations of Company or any of its subsidiaries under any law, statute, rule,
regulation, judgment, order, decree or award or permit or license to which
Company or any of its subsidiaries is subject except where such encumbrance or
change would not, individually or in the aggregate, reasonably be likely to have
a Company Material Adverse Effect.
2.5 Consents. Except as set forth on SCHEDULE 2.4 and other than (i) the
filing of the documents as provided in SECTION 1.3, (ii) the filing with the SEC
and the NYSE of the Joint Proxy Statement, (iii) such consents, orders,
approvals, authorizations, registrations, declarations and filings as may be
required under applicable state securities laws and the securities laws of any
foreign country, (iv) such filings as may be required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT")
and (v) such local consents, orders, approvals, authorizations, registrations,
declarations and filings which, if not obtained or made would not, individually
or in the aggregate, reasonably be likely to have a Company Material Adverse
Effect, and that would not impair, prohibit or prevent the consummation of the
transactions contemplated hereby, no consent of any Person not a party to this
Agreement, nor consent of or filing with (including any waiting period) any
Governmental Entity is required to be obtained or performed on the part of
Company to permit the Merger and the other transactions contemplated hereby.
2.6 Financial Statements; SEC Filings.
(a) Company has delivered copies of the following financial statements to
Buyer: (i) the consolidated balance sheet of Company as of May 31, 1998 and the
consolidated statements of income, shareholders' equity and changes in financial
position for the years ended May 31, 1997 and May 31, 1998, in each case
including the notes thereto and the related report of Arthur Andersen LLP,
independent certified public accountants, and (ii) the unaudited consolidated
statements of financial position of Company and its subsidiaries at February 28,
1999 and the unaudited consolidated statements of
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shareholders' equity and changes in financial position for the nine-month period
ending February 28, 1999, and the unaudited consolidated statements of income
for the nine-month period ending February 28, 1999 in each case including any
notes thereto. All financial statements delivered pursuant to this SECTION
2.6(a) are in accordance with the books and records of Company and have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated (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). All consolidated balance sheets included in
such financial statements present fairly in all material respects the
consolidated financial position of Company as of the dates thereof (subject, in
the case of the unaudited statements, to customary year-end reclassification
adjustments). Except as and to the extent reflected or reserved against in such
consolidated balance sheets (including the notes thereto) as of February 28,
1999, Company did not have any liabilities or obligations (absolute or
contingent) of a nature required by generally accepted accounting principles to
be reflected in a consolidated balance sheet as of such date. All consolidated
statements of income present fairly in all material respects the consolidated
results of operations of Company for the periods indicated. All accounts
receivable appearing on such consolidated balance sheets arose from bona fide
sales of products or services in the ordinary course of business consistent with
past practice and are current and collectible in the amounts appearing thereon,
net of any allowances for bad debts and customer returns. All inventories
appearing on such consolidated balance sheets are owned by Company or its
subsidiaries free and clear of any liens or encumbrances and are of merchantable
quality and in good condition and, to the extent such inventories are not of
merchantable quality or in good condition, appropriate reserves have been
provided therefor. Since February 28, 1999, Company has not made any changes in
the accounting principles it has followed theretofore in preparing its
consolidated financial statements, and all transactions have been recorded in
Company's accounting records in the same manner as theretofore.
(b) Since January 1, 1998, Company has filed with the SEC all material
forms, statements, reports and documents (including all exhibits, amendments and
supplements thereto) required to be filed by it under the Securities Act, the
Exchange Act and the respective rules and regulations thereunder (such forms,
statements, reports and documents are collectively referred to as the "COMPANY
SEC FILINGS"). Company has delivered or made available to Buyer accurate and
complete copies of all of the Company SEC Filings.
(c) As of their respective dates, (i) each of Company's past Company SEC
Filings was, and each of its future Company SEC Filings will be, prepared in
compliance in all material respects with the applicable requirements of the
Securities Act and the Exchange Act; and (ii) none of its past Company SEC
Filings did, and none of its future Company SEC Filings will, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.7 Tax Matters.
(a) Company and each of its subsidiaries has filed all Tax Returns required
to be filed by it, or requests for extensions to file such Tax Returns have been
timely filed and granted and have not expired, except where failures to make or
extend the time for filing such Tax Returns would not, individually or in the
aggregate, reasonably be likely to have a Company Material Adverse Effect, and
all such Tax Returns are complete and accurate in all material respects. Company
and of its each subsidiaries has paid (or Company has paid on its behalf) all
Taxes shown as due on such Tax Returns. The most recent financial
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statements referred to in SECTION 2.6 reflect an adequate reserve for all Taxes
payable by Company and its subsidiaries for all taxable periods and portions
thereof accrued through the date of such financial statements and no liabilities
for Taxes have been incurred by Company or any of its subsidiaries subsequent to
such date other than in the ordinary course of its business.
(b) Neither Company nor any of its subsidiaries has elected to be treated
as a consenting corporation under Section 341(f) of the IRC.
(c) Except as set forth on SCHEDULE 2.7, or as disclosed to Buyer in the
event of changes in circumstances between the date hereof and the Closing Date
and which, individually or in the aggregate, would not be reasonably likely to
result in a Company Material Adverse Effect: (i) no Governmental Entity has
examined or is in the process of examining any Tax Returns of Company or any of
its subsidiaries; (ii) no Governmental Entity has proposed in writing any
deficiency, assessment or claim for Taxes; and (iii) no waiver of the statute of
limitations with respect to Tax Returns of Company has been given by or
requested from Company.
2.8 Absence of Certain Changes or Events. Except as set forth on SCHEDULE
2.8 (or disclosed in the Company SEC Filings since February 28, 1999), since
February 28, 1999, there has not been (a) any event which has or is likely to
result in a Company Material Adverse Effect; (b) any declaration, setting aside
or payment of any dividend (whether in cash, stock or property) in respect of
the capital stock of Company, or any redemption or other acquisition of such
stock by Company; (c) any increase in the compensation payable or to become
payable by Company to its officers or key employees, except those occurring in
the ordinary course of business, or any material increase in any bonus,
insurance, pension or other employee benefit plan, payment or arrangement made
to, for or with any such officers or key employees; (d) any labor dispute, other
than routine matters, none of which is material to Company's Business.
2.9 Material Contracts; Customers and Suppliers. SCHEDULE 2.9 lists each
of the Contracts to which Company or any of its subsidiaries is a party or to
which Company, any of its subsidiaries or any of their respective properties is
subject or by which any thereof is bound as of the date hereof (i) that would be
required by Item 601(b)(10) of SEC Regulation S-K to be filed as an exhibit to
an Annual Report on Form 10-K, (ii) that relates to MIS (data processing)
equipment or other capital equipment in the amount of $500,000 or more, (iii)
that is in the amount of $500,000 or more and contains any provision allowing
another party to terminate or change any term or provision thereof in the event
of any change in control of Company or any of its subsidiaries, or (iv) pursuant
to which Company or any of its subsidiaries has the right to borrow money or
obtain any financial accommodation (each a "MATERIAL CONTRACT") except for those
Contracts listed as exhibits to Company's Annual Report on Form 10-K for the
fiscal year ending May 31, 1998 or disclosed in Company SEC Filings since May
31, 1998. Except as set forth on SCHEDULE 2.9, no breach or default, alleged
breach or default or event which would (with the passage of time, notice or
both) constitute a breach or default thereunder by Company or any of its
subsidiaries, as the case may be, or, to Company's knowledge, any other party or
obligor with respect thereto, has occurred, except where such breaches or
defaults, individually or in the aggregate, would not be reasonably likely to
have a Company Material Adverse Effect. To Company's knowledge, no party to any
Material Contract intends to cancel, withdraw, modify or amend such Material
Contract. SCHEDULE 2.9 also lists any customers to whom Company sold products in
an amount in excess of $17,000,000 during the fiscal year ended May 31, 1999
("PRINCIPAL CUSTOMERS").
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SCHEDULE 2.9 also lists any suppliers for whom Company sold products in an
amount in excess of $17,000,000 during the fiscal year ended May 31, 1999
("PRINCIPAL SUPPLIERS"). Except as set forth on SCHEDULE 2.9(ii), no Principal
Customers or Principal Suppliers has advised Company's Chief Executive Officer
or Chief Financial Officer that it intends to terminate its relationship with
Company as a result of the consummation of the transaction contemplated by this
Agreement.
2.10 Title and Related Matters. SCHEDULE 2.10 sets forth a list of
parcels of real property owned or leased by Company or any of its subsidiaries,
including all sales and distribution facilities and all corporate support and
distribution centers. Except as set forth in SCHEDULE 2.10, Company has good and
indefeasible title to all of its properties, interests in properties and assets,
real and personal, reflected in Company's February 28, 1999 consolidated balance
sheet or acquired after February 28, 1999 or necessary to conduct its business
as now conducted (except properties, interests on properties and assets sold or
otherwise disposed of since February 28, 1999 in the ordinary course of
business), free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except (a) the lien of current taxes not
yet due and payable, (b) liens for mechanics', carriers', workmens',
repairmens', landlord, statutory or common law liens either not delinquent or
being contested in good faith, (c) such imperfections of title, liens,
restrictions, variances and easements as do not materially detract from the
value of or interfere with the value or the present or presently contemplated
future use of the properties subject thereto or affected thereby, or otherwise
materially impair the present or presently contemplated future business
operations at such properties and (d) liens securing debt which is reflected on
Company's February 28, 1999 consolidated balance sheet. The plants and equipment
of Company that are necessary to the operation of Company's Business are in good
operating condition and repair (subject to normal wear and tear). All properties
material to the operations of Company are reflected in Company's February 28,
1999 consolidated balance sheet to the extent generally accepted accounting
principles require the same to be reflected.
2.11 Employee Benefit Plans.
(a) SCHEDULE 2.11(a) lists all employee benefit and compensation plans,
programs, policies, agreements and commitments (other than oral employment
agreements that are terminable at will by the employer without additional cost)
covering any employee or former employee, or the beneficiary of either, of
Company or any entity which would be aggregated at any relevant time with
Company pursuant to Section 414(b), (c), (m), or (o) of the IRC (referred to
herein as a "COMPANY ERISA AFFILIATE"), providing benefits in the nature of
pension, profit sharing, deferred compensation, retirement, severance, bonus,
incentive compensation, stock option, stock bonus, stock purchase, health,
medical, life, disability, sick leave, vacation, or other welfare or fringe
benefits, including, without limitation, all employee benefit plans (as defined
in Section 3(3) of ERISA (referred to herein as the "COMPANY ERISA PLANS"), and
fringe benefit plans (as defined in IRC Section 6039D) (collectively referred to
herein as the "COMPANY BENEFIT PLANS"). Except as set forth on SCHEDULE 2.11(a),
neither Company nor any Company ERISA Affiliate has ever contributed to, or been
obligated to contribute to, (i) a multiemployer plan (as defined in Section
3(37) of ERISA) or (ii) a Company Benefit Plan subject to Title IV of ERISA.
(b) Except as set forth on SCHEDULE 2.11(b), each Company Benefit Plan is
currently, and has been in the past, operated and administered in all material
respects in compliance with its terms and with the requirements of all
applicable Laws, including,
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without limitation, ERISA, the IRC and the Family and Medical Leave Act of 1993.
Each Company Benefit Plan which is, or was, intended to qualify under IRC
Section 401(a) (referred to herein as a "QUALIFIED PLAN") is, or was, so
qualified and either (i) has been determined by the IRS to be so qualified by
the issuance of a favorable determination letter a copy of which has been
furnished to Buyer, which remains in effect as of the date hereof and, to
Company's knowledge, nothing has occurred since the date of such letter to cause
such letter to be no longer valid, or (ii) is within the "remedial amendment
period" as defined in IRC Section 401(b) and the regulations thereunder. Except
as set forth on SCHEDULE 2.11(b), all reports, notices and other documents
required to be filed with any Governmental Entity or furnished to employees or
participants with respect to the Company Benefit Plans have been timely filed or
furnished. With respect to the most recent Form 5500 regarding each funded
Company Benefit Plan, benefit liabilities do not exceed assets, and no material
adverse change has occurred with respect to the financial materials covered
thereby since the last Form 5500.
(c) No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by Company or any of its subsidiaries with respect to
any ongoing, frozen or terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them,
or the single-employer plan of any Company ERISA Affiliate. Company and its
subsidiaries have not incurred and do not expect to incur any withdrawal
liability with respect to a multiemployer plan under Subtitle E of Title IV of
ERISA (regardless of whether based on contributions of an ERISA Affiliate). No
notice of a "reportable event" within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived or extended, other
than pursuant to PBGC Reg. Section 4043.66, has been required to be filed for
any Company ERISA Plan or by any Company ERISA Affiliate within the 12-month
period ending on the date hereof.
(d) Except as set forth on SCHEDULE 2.11(d), all contributions required to
be paid on or prior to the date hereof to or with respect to any Company Benefit
Plan by its terms or applicable law have been paid in full and proper form.
Neither any Company ERISA Plan nor any single-employer plan of a Company ERISA
Affiliate has an "accumulated funding deficiency" (whether or not waived) within
the meaning of IRC Section 412 or Section 302 of ERISA and no Company ERISA
Affiliate has an outstanding funding waiver. Neither Company nor any of its
subsidiaries has provided, or is required to provide, security to any Company
ERISA Plan or to any single-employer plan of a Company ERISA Affiliate pursuant
to IRC Section 401(a)(29).
(e) Except as set forth on SCHEDULE 2.11(e), the transactions contemplated
by this Agreement (i) do not constitute or result in a severance or termination
of employment under any Company Benefit Plan for which severance or termination
benefits may be payable with respect to any employee covered thereby, (ii)
accelerate the time of payment or vesting or increase the amount of benefits due
under any Company Benefit Plan or compensation to any employee of Company, or
(iii) result in any payments (including parachute payments) or funding (through
grants or otherwise) of compensation or benefits under any Company Benefit Plan
or Law or result in any obligation or liability of Company to any employee of
Company or any Company ERISA Affiliate or (iv) result in payments under any
Company Benefit Plan which would not be deductible under IRC Section 162(m) or
IRC Section 280G.
(f) Neither Company nor any Company ERISA Affiliate, nor to Company's
knowledge any other "disqualified person" or "party in interest" (as defined in
IRC
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Section 4975 and Section 3(14) of ERISA, respectively) with respect to any
Company ERISA Plan has engaged in any transaction in violation of Section 406 of
ERISA for which no class, individual or statutory exemption exists or any
"prohibited transaction" (as defined in IRC Section 4975(c)(1)) for which no
class, individual or statutory exemption exists under IRC Section 4975(c)(2) or
(d), nor has any such person who is a "fiduciary" (as defined in Section 3(21)
of ERISA) of any Company ERISA Plan breached or participated in the breach of
any fiduciary obligation imposed pursuant to Part 4 of Title I of ERISA.
(g) There are no actions, suits, disputes or claims pending or, to
Company's knowledge, threatened (other than routine claims for benefits) or
legal, administrative or other proceedings or governmental investigations
pending or, to Company's knowledge, threatened, against or with respect to any
Company Benefit Plan or the assets of any Company Benefit Plan.
(h) Under each Company ERISA Plan which is a single-employer plan, as of
the last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such Plan, and there has
been no material change in the financial condition of such Plan since the last
day of the most recent plan year. The withdrawal liability of Company and its
subsidiaries under each Company ERISA Plan which is a multiemployer plan to
which Company, any of its subsidiaries or any ERISA Affiliate has contributed
during the preceding 12 months, determined as if a "complete withdrawal," within
the meaning of Section 4203 of ERISA, had occurred as of the date hereof, does
not exceed $100,000.
(i) Except as set forth on SCHEDULE 2.11(i), no Company Benefit Plan
provides or provided health or medical benefits (whether or not insured) with
respect to current or former employees of Company or its subsidiaries beyond
their retirement or other termination of service (other than coverage mandated
by statutory law). Company or its subsidiaries may amend or terminate any such
Company Benefit Plan at any time without incurring any liability themselves.
(j) Each Company ERISA Plan that is an "employee welfare benefit plan" as
that term is defined in Section 3(1) of ERISA is either (as identified on
SCHEDULE 2.11(a)): (i) funded through an insurance company contract, (ii) funded
throughout a tax-exempt "VEBA" trust or (iii) unfunded. There is no liability in
the nature of a retroactive rate adjustment or loss-sharing or similar
arrangement, with respect to any Company ERISA Plan which is an employee welfare
benefit plan.
(k) Company has provided to Buyer true and complete copies of the following
with respect to each of the Company Benefit Plans: (i) each plan document and
summary plan description if any; (ii) each trust agreement, insurance policy or
other instrument relating to the funding thereof; (iii) the most recent Annual
Report (Form 5500 series) and associated schedules filed with the IRS or the
United States Department of Labor; (iv) the most recent audited financial
statement report, if any; (v) the most recent actuarial report if any; and (vi)
a description of each unwritten Company Benefit Plan and the individuals covered
thereby.
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(l) All Company Benefit Plans maintained outside of the United States
comply in all material respects with applicable local law. Company and its
subsidiaries have no material unfunded liabilities with respect to any such
Company Benefit Plan.
2.12 Employment Agreements. Except as set forth on SCHEDULE 2.12, none of
Company or any of its subsidiaries is a party to any employment, consulting,
non-competition, severance, or indemnification agreement with any current or
former executive officer or director or employee of Company or any of its
subsidiaries. True and complete copies of the agreements set forth on SCHEDULE
2.12 have been furnished to Buyer prior to the date hereof. Neither Company nor
any of its subsidiaries is a party to any collective bargaining agreement.
2.13 Legal Proceedings. SCHEDULE 2.13 sets forth a list of all legal
proceedings pending to which Company or any of its subsidiaries is a party,
except (i) claims for less than $100,000, (ii) all workers' compensation claims
which are fully insured, and (iii) receivables collections where Company is the
plaintiff and related countersuits. There is no pending or, to Company's
knowledge, threatened judicial or administrative proceeding or investigation
affecting Company or any of its subsidiaries that if resolved adversely to it
would reasonably be likely to result in a Company Material Adverse Effect or
could reasonably be expected to impair Company's ability to consummate the
Merger.
2.14 Compliance with Law; Accuracy of Certain Information. Except as set
forth on SCHEDULE 2.14, all licenses, franchises, permits and other governmental
authorizations held by Company that are material in connection with Company's
Business are valid and sufficient for all business presently carried on by
Company except where the failure to maintain such a valid and sufficient permit
would not reasonably be likely to result in a Company Material Adverse Effect.
No suspension, cancellation or termination of any such material, licenses,
franchises, permits and other governmental authorizations is threatened or
imminent. Except as set forth on SCHEDULE 2.14, Company's Business is being
conducted in compliance with all applicable Laws and is not being conducted in
violation of any Law, except for violations which either individually or in the
aggregate are not reasonably likely to result in a Company Material Adverse
Effect. All of the information listed on SCHEDULE 2.14(ii) is accurate and
complete in all material respects and did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein not misleading.
2.15 Accuracy of Joint Proxy Statement and Other Information. On the date
on which Company mails to its shareholders the Joint Proxy Statement, on the
date the Company Shareholders Meeting is held, and on the Effective Date, the
Joint Proxy Statement will contain all material statements concerning Company
which are required to be set forth therein in accordance with the Exchange Act;
and at such respective times, the Joint Proxy Statement will not include 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.
Notwithstanding the foregoing, Company makes no representation or warranty with
respect to any information concerning Buyer or any of its subsidiaries or
advisors included or incorporated by reference in the Joint Proxy Statement.
2.16 Insurance. SCHEDULE 2.16 lists all of Company's insurance policies.
All properties of Company and its subsidiaries are insured for their respective
benefits, in amounts customary and reasonable for the line of business of
Company and against all risks usually insured against by Persons operating
similar properties in the localities where such properties are located under
valid and enforceable policies issued by insurers of
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recognized responsibility, except where failure to so insure would not be
reasonably likely to have a Company Material Adverse Effect. Neither Company nor
any of its subsidiaries is in default under any such policy or bond, and all
such policies are in full force and effect, with all premiums due thereon paid.
Company and its subsidiaries have timely filed claims with their respective
insurers with respect to all matters and occurrences for which they believe they
have coverage except for such failures as are not reasonably likely to result in
a Company Material Adverse Effect.
2.17 Environmental Matters. Except as set forth on SCHEDULE 2.17, (a)
neither Company nor any of its subsidiaries nor, to Company's knowledge, any
third party, has disposed of, released or caused any contamination by any
Hazardous Substances on or about any properties at any time owned, leased or
occupied by Company or any of its subsidiaries and (b) neither Company nor any
of its subsidiaries has disposed of any materials at any site that could be
expected to require remediation or that is being investigated or remediated for
contamination or possible contamination of the environment. Except as set forth
on SCHEDULE 2.17, Company and each of its subsidiaries have conducted their
respective businesses in compliance with all applicable Environmental
Regulations. Except as set forth on SCHEDULE 2.17, Company has not received any
notice of any investigation, claim or proceeding against Company or any of its
subsidiaries relating to any Environmental Regulations or to Hazardous
Substances and there is no fact or circumstance which could involve Company or
any of its subsidiaries in any environmental litigation, proceeding,
investigation or claim or impose any environmental liability upon Company or any
of its subsidiaries. Neither Company nor any subsidiary is subject to any order,
decree, injunction, indemnity or agreement relating to any Environmental
Regulation or Hazardous Substance, and Company has delivered to Buyer copies of
all environmental reports, studies and assessments relating to the Business or
the current and former operations of Company and its subsidiaries.
2.18 Intangible Property. SCHEDULE 2.18 lists all Marks used by Company
or any of its subsidiaries in connection with Company's Business and denotes
whether such Marks are owned or licensed by Company or any of its subsidiaries,
and, if licensed, the payments required to be made to others with respect
thereto. Except as set forth on SCHEDULE 2.18, Company and its subsidiaries own
or have valid, binding, enforceable and adequate rights to use all Intangible
Property used or held for use in connection with Company's Business, and without
any conflict with the rights of others. Except as set forth on SCHEDULE 2.18,
neither Company nor any of its subsidiaries has received any notice from any
other Person pertaining to or challenging the right of Company or any such
subsidiary to use any Intangible Property owned or used by or licensed to
Company or such subsidiary. SCHEDULE 2.18 also lists all claims that have been
made by Company against third parties on the ground of conflict with the Marks
listed on Schedule 2.18.
2.19 Fairness Opinion. Company has received from its financial advisor,
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), an opinion, dated
the date hereof, to the effect that the Merger Consideration is fair, from a
financial point of view, to the shareholders of Company.
2.20 No Brokers or Finders. Neither Company nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory, brokerage or finder's fees or commissions
in connection with the transactions contemplated herein, except that Company has
retained DLJ as its financial advisor, whose fees and expenses will be paid by
Company, and Company's subsidiary, ENEN Corporation, has retained Huntington
Holdings, Inc as its financial advisor.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Company as follows:
3.1 Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York, and has corporate
power to carry on its business as it is now being conducted.
3.2 Authority; Validity. Buyer has all corporate power and authority to
execute and deliver this Agreement and, subject to approval of this Agreement by
the shareholders of Buyer (the "BUYER SHAREHOLDERS' APPROVAL"), to carry out its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of Buyer's Board of Directors, and Buyer's
Board of Directors has directed that this Agreement and the transactions
contemplated hereby be submitted to Buyer's shareholders for consideration at a
meeting of such shareholders and, except for the Buyer Shareholders' Approval,
no other corporate proceedings on the part of Buyer are necessary to authorize
this Agreement and the transactions contemplated hereby. Upon execution and
delivery hereof (assuming that this Agreement is the legal, valid and binding
obligation of Company), this Agreement will be the valid and binding obligation
of Buyer enforceable against Buyer in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating to or
limiting creditors rights generally.
3.3 No Conflict. Neither Buyer nor any of its assets is subject to or
obligated under any charter, bylaw, Contract, or other instrument or any permit,
or subject to any statute, rule, order or decree, which would be defaulted,
breached, terminated, forfeited or violated by or in conflict (or upon the
failure to give notice or the lapse of time, or both, would result in a default,
breach, termination, forfeiture or conflict) with its executing and carrying out
this Agreement and the transactions contemplated hereby except where (i) as of
the date hereof such event or occurrence is not reasonably likely to result in
Losses that, individually or in the aggregate, would reasonably be likely to
have a Buyer Material Adverse Effect; or (ii) between the date hereof and the
Closing Date would not, individually or in the aggregate, reasonably be likely
to have a Buyer Material Adverse Effect.
3.4 Consents. Except as contemplated by this Agreement or set forth on
SCHEDULE 3.3, no consent of any Person not a party to this Agreement, nor
consent of or filing with (including any waiting period) any Governmental
Entity, is required to be obtained on the part of Buyer to permit the Merger.
3.5 Legal Proceedings. There is no pending or, to Buyer's knowledge,
threatened judicial or administrative proceeding or investigation affecting
Buyer that if resolved adversely to either of them would reasonably be likely to
result in a Buyer Material Adverse Effect or could reasonably be expected to
impair their ability to consummate the Merger.
3.6 Financial Statements, SEC Filings.
(a) Buyer has delivered copies of the following financial statements to
Company: (i) the consolidated balance sheet of Buyer at June 26, 1998 and the
consolidated statements of income, shareholders' equity and changes in financial
position for the years
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ended June 27, 1997 and June 26, 1998, in each case including the notes thereto
and the related report of Arthur Andersen LLP, independent certified public
accountants, and (ii) the unaudited consolidated statements of financial
position of Buyer and its subsidiaries at April 2, 1999 and the unaudited
consolidated statements of shareholders' equity and changes in financial
position for the nine-month period ended April 2, 1999, and the unaudited
consolidated statements of income for the nine-month period ended April 2, 1999,
in each case including any notes thereto.
(b) All financial statements delivered pursuant to SECTION 3.6(a) hereof
are in accordance with the books and records of Buyer and have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods indicated (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). All consolidated balance sheets included on such financial
statements present fairly in all material respects the consolidated financial
position of Buyer as of the dates thereof (subject, in the case of the unaudited
statements, to customary reclassification year-end adjustments). Except as and
to the extent reflected or reserved against in such consolidated balance sheets
(including the notes thereto) as of April 2, 1999, Buyer did not have any
liabilities or obligations (absolute or contingent) of a nature required by
generally accepted accounting principles to be reflected in a consolidated
balance sheet as of such date. All consolidated statements of income included on
such financial statements present fairly in all material respects the
consolidated results of operations of Buyer for the periods indicated.
(c) Since January 1, 1998, Buyer has filed with the SEC all material forms,
statements, reports and documents (including all exhibits, amendments and
supplements thereto) required to be filed by it under the Securities Act, the
Exchange Act and the respective rules and regulations thereunder (such forms,
statements, reports and documents are collectively referred to as the "BUYER SEC
FILINGS"). Buyer has delivered or made available to Company accurate and
complete copies of all of the Buyer SEC Filings.
(d) As of their respective dates, (i) each of Buyer's past Buyer SEC
Filings was, and each of its future Buyer SEC Filings will be, prepared in
compliance in all material respects with the applicable requirements of the
Securities Act and the Exchange Act; and (ii) none of its past Buyer SEC Filings
did, and none of its future Buyer SEC Filings will, contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.7 Buyer's Financing. Buyer has or will have at the Closing financing in
amounts sufficient to pay the cash portion of the Merger Consideration pursuant
to this Agreement and consummate the transactions contemplated hereby and has
provided to Company evidence of the same.
3.8 Tax Returns. Buyer and each of its subsidiaries has filed all Tax
Returns required to be filed by it, or requests for extensions to file such Tax
Returns have been timely filed and granted and have not expired, except where
such filings or failures to request extensions would not, individually or in the
aggregate, reasonably be likely to have a Buyer Material Adverse Effect, and all
such Tax Returns are complete and accurate in all material respects. Buyer and
each of its subsidiaries has paid (or Buyer has paid on its behalf) all Taxes
sown as due on such Tax Returns. The most recent financial statements referred
to in SECTION 3.6 reflect and adequate reserve for all Taxes payable by Buyer
and its subsidiaries for all taxable periods and portions thereof accrued
through the date of
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such financial statements and no liabilities for Taxes have been incurred by
Buyer or any of its subsidiaries subsequent to such date other than in the
ordinary course of its business.
3.9 No Material Adverse Effect. Since April 2, 1999, there has not been
any event which has had or is likely to have a Buyer Material Adverse Effect.
3.10 Employee Benefit Plans. Buyer will provide to Company upon request
true and complete copies of the following with respect to each of the Buyer
Benefit Plans: (i) each plan document and summary plan description if any; (ii)
each trust agreement, insurance policy or other instrument relating to the
funding thereof; (iii) the most recent Annual Report (Form 5500 series) and
associated schedules filed with the IRS or the United States Department of
Labor; (iv) the most recent audited financial statement report, if any; (v) the
most recent actuarial report if any; and (vi) a description of each unwritten
Buyer Benefit Plan and the individuals covered thereby.
3.11 Compliance with Law. All licenses, franchises, permits and other
governmental authorizations held by Buyer that are material in connection with
Buyer's Business are valid and sufficient for all business presently carried on
by Buyer except where the failure to maintain such a valid and sufficient permit
would not reasonably be likely to result in a Buyer Material Adverse Effect. No
suspension, cancellation or termination of any such material, licenses,
franchises, permits and other governmental authorizations is threatened or
imminent. Buyer's Business is not being conducted in violation of any Law,
except for violations which either individually or in the aggregate are not
reasonably likely to result in a Buyer Material Adverse Effect.
3.12 Accuracy of Proxy Statement and Other Information. On the date on
which Buyer mails to its shareholders the Joint Proxy Statement, on the date its
shareholders meeting is held, and on the Effective Date, the Joint Proxy
Statement will contain all material statements concerning Buyer which are
required to be set forth therein in accordance with the Exchange Act; and at
such respective times, the Joint Proxy Statement will not include 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.
Notwithstanding the foregoing, Buyer makes no representation or warranty with
respect to any information concerning Company or any of its subsidiaries or
advisors included or incorporated by reference in the Joint Proxy Statement.
3.13 Environmental Matters. Except as set forth in Buyer's SEC Filings,
or as would not have a Buyer Material Adverse Effect, Buyer and each of its
subsidiaries have conducted their respective businesses in accordance with all
applicable Environmental Regulations. Except as set forth in Buyer's SEC Filings
or as would not have a Buyer Material Adverse Effect, Buyer has not received any
notice of any investigation, claim or proceeding against Buyer or any of its
subsidiaries relating to Hazardous Substances.
3.14 No Brokers or Finders. Neither Buyer nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory, brokerage or finder's fees or commissions
in connection with the transactions contemplated herein, except that Buyer has
retained Merrill Lynch & Co. as its financial advisor, whose fees and expenses
will be paid by Buyer.
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ARTICLE IV
COVENANTS
4.1 Access and Information.
(a) Subject to applicable laws and regulations, upon reasonable notice
during the period from the date hereof through the Effective Time, Company will
give to Buyer and Buyer's Representatives full access during normal business
hours to all of its and its subsidiaries' properties, books, records, documents
(including, without limitation, Tax Returns for all periods open under the
applicable statute of limitations), personnel, auditors and counsel, and each
party shall (and shall cause its subsidiaries to) furnish promptly to the other
party all information concerning such party and its subsidiaries as such other
party or such other party's Representatives may reasonably request. Subject to
applicable laws and regulations, upon reasonable notice during the period from
the date hereof through the Effective Time, Buyer will provide to Company and
Company's Representatives such information as Company may reasonably request to
determine the accuracy of Buyer's representations and warranties in this
Agreement and compliance by Buyer with its covenants in this Agreement.
(b) All non-public information disclosed by any party (or its
Representatives) whether before or after the date hereof, in connection with the
transactions contemplated by, or the discussions and negotiations preceding,
this Agreement to any other party (or its Representatives) shall be kept
confidential by such other party and its Representatives and shall not be used
by any such Persons other than as contemplated by this Agreement. Subject to the
requirements of applicable Law, Buyer and Company will keep confidential, and
each will cause their respective Representatives to keep confidential, all such
non-public information and documents unless such information (i) was already
known to Buyer or Company, as the case may be, as long as such information was
not obtained in violation of a confidentiality obligation (ii) becomes available
to Buyer or Company, as the case may be, from other sources not known by Buyer
or Company, respectively, to be bound by a confidentiality obligation, (iii) is
independently acquired by Buyer or Company, as the case may be, as a result of
work carried out by any Representative of Buyer or Company, respectively, to
whom no disclosure of such information has been made, (iv) is disclosed with the
prior written approval of Company or Buyer, as the case may be, or (v) is or
becomes readily ascertainable from publicly available information. Upon any
termination of this Agreement, each party hereto will collect and deliver to the
other, or certify as to the destruction of, all documents obtained by it or any
of its Representatives then in their possession and any copies thereof.
(c) Subject to applicable Law, if between the date hereof and the Effective
Date any Governmental Entity shall commence any examination, review,
investigation, action, suit or proceeding against any party hereto with respect
to the Merger, such party shall (i) give the other party prompt notice thereof,
(ii) keep the other party informed as to the status thereof and (iii) permit the
other party to observe and be present at each meeting, conference or other
proceeding and have access to and be consulted in connection with any document
filed or provided to such Governmental Entity in connection with such
examination, review, investigation, action, suit or proceeding.
4.2 Governmental Filings. Subject to the terms and conditions herein
provided, Company and Buyer shall: (a) promptly make their respective filings
and thereafter make any other required submissions under the HSR Act with
respect to the Merger; (b) use all reasonable efforts to cooperate with one
another in (i) determining which filings are
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required to be made prior to the Effective Time with, and which consents,
approvals, permits or authorizations are required to be obtained prior to the
Effective Time from, any Governmental Entity in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby (ii) timely making all such filings and timely seeking all
such consents, approvals, permits or authorizations; and (c) using all
reasonable efforts to take, or cause to be taken, all other action and doing, or
cause to be done, all other things necessary, proper or appropriate to
consummate and make effective the transactions contemplated by this Agreement.
4.3 Consents and Approvals.
(a) Company shall use its commercially reasonable efforts to obtain any and
all consents from other parties to all Material Contracts, if necessary or
appropriate to allow the consummation of the Merger. Each party hereto shall use
its commercially reasonable efforts to obtain any and all permits or approvals
of any Governmental Entity required by such party for the lawful consummation of
the Merger.
(b) Buyer and Company shall, upon request, furnish each other with all
information concerning themselves, their respective subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary
or advisable in connection with the Joint Proxy Statement or any other
statement, filing, notice or application made by or on behalf of Buyer or
Company to any Governmental Entity in connection with the Merger and the other
transactions contemplated hereby.
(c) Buyer and Company shall promptly furnish each other with copies of all
written communications received by Buyer or Company, as the case may be, or any
of their respective subsidiaries from, or delivered by any of the foregoing to,
any Governmental Entity in respect of the transactions contemplated hereby.
4.4 Meetings of Shareholders; Registration Statement; Listing Application.
(a) Meetings of Shareholders. Each of Company and Buyer shall take all
action necessary in accordance with applicable Law and its charter documents to
duly call, give notice of, convene and hold a meeting of its shareholders as
promptly as practicable to consider and vote upon this Agreement, the Merger and
all matters related thereto, in each case, subject to compliance by the
directors of Company and Buyer respectively with their respective fiduciary
duties as advised by counsel. Each of Company and Buyer shall, through their
respective Boards of Directors recommend to their respective shareholders
approval of such matters (unless, (1) in the case of Company, Company's
directors shall be advised in writing by O'Melveny & Myers LLP, counsel to
Company, that such action is inconsistent with the proper exercise by such
directors of their fiduciary duties on account of an unsolicited Acquisition
Proposal and (2) in the case of Buyer, Buyer's directors shall be advised in
writing by Sullivan & Cromwell, counsel to Buyer, that such action is
inconsistent with the proper exercise by such directors of their fiduciary
duties), and each of Company and Buyer shall use its best efforts to obtain such
approval by its shareholders. Company and Buyer agree to postpone or delay their
respective meetings, or to convene a second meeting, in the event insufficient
voting shares are present to conduct the meeting.
(b) Joint Proxy Statement; Registration Statement. As promptly as
reasonably practicable, Company and Buyer shall prepare and file with the SEC a
joint proxy statement (the "JOINT PROXY STATEMENT") for use in connection with
their respective shareholder meetings, and Buyer shall prepare and, after SEC
approval of the Joint Proxy
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Statement, file with the SEC a registration statement on Form S-4 under the
Securities Act and the rules and regulations promulgated thereunder with respect
to the Buyer Stock to be issued in the Merger (the "REGISTRATION STATEMENT"),
which shall include as a part thereof the Joint Proxy Statement. The Joint Proxy
Statement shall not be filed, and no amendment or supplement to the Joint Proxy
Statement shall be made by either Company or Buyer, without prior consultation
with the other party and its counsel. Company and Buyer shall cooperate and use
all reasonable efforts to have the Registration Statement declared effective by
the SEC. Buyer will, as promptly as practicable, provide any written comments
received from the SEC with respect to the Registration Statement and advise
Company of any verbal comments received from the SEC with respect thereto. Buyer
shall also take any action (other than qualifying to do business in any
jurisdiction in which it is now not so qualified) required to be taken under the
securities or "blue sky" laws of the various States in connection with the
issuance of the Buyer Stock pursuant to the Merger.
(c) Indemnification. Each of Company and Buyer (each an "INDEMNIFYING
PARTY") agrees to indemnify and hold harmless the other, each person who
controls the other within the meaning of the Securities Act, and each director
and officer of the other, against any losses, claims, damages, liabilities or
expenses (including reasonable counsel fees and costs of investigation and
defense) that are based on the ground or alleged ground that the Registration
Statement includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. This indemnification obligation extends,
however, only insofar as any such statement or omission was made in reliance
upon, and in conformity with, any written information furnished by the
Indemnifying Party for use in the preparation of such materials. These indemnity
obligations will remain in force after the Effective Date.
(d) Listing Application. Buyer shall use its best efforts to cause the
Buyer Stock distributed in connection with the Merger to be authorized for
listing on the NYSE and shall make all necessary blue sky law filings in
connection therewith.
4.5 Conduct of Company Business. Company covenants and agrees that after
the date hereof and prior to the Effective Time (unless Buyer shall have agreed
in writing):
(a) Ordinary Course. Company will, and will cause its subsidiaries
to, operate Company's Business only in the ordinary course of business
consistent with past practices and use its commercially reasonable efforts
to (i) preserve its existing business organization, insurance coverage,
material rights, material licenses or permits, advantageous business
relationships, material agreements and credit facilities; (ii) retain and
keep available the services of its present officers, employees and agents;
and (iii) preserve the goodwill of its customers, suppliers and others
having business relations with it. Company and its subsidiaries will not:
(A) enter into any material transaction or commitment, or dispose of or
acquire any material properties or assets, except purchases and sales of
inventory in the ordinary course of business consistent with past
practices; (B) except as set forth on SCHEDULE 4.5, implement any new
employee benefit plan, or employment, compensatory or severance agreement;
(C) amend any existing employee benefit plan or employment agreement except
as required by Law or by this Agreement; or except as set forth on SCHEDULE
4.5, (D) take any action that would jeopardize the continuance of its
material supplier or customer relationships; (E) make any material change
in the nature of their businesses and operations; (F) enter into any
transaction or agreement with any officer, director or affiliate of Company
or any of its subsidiaries; (G) except for
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borrowings and repayments permitted under the Loan Agreement or the Swap
Agreements, incur or agree to incur any obligation or liability (absolute
or contingent) that individually calls for payment by Company or any of its
subsidiaries of more than $100,000 in any specific case or $300,000 in the
aggregate, excluding transactions in the ordinary course of business; or
(H) make any Tax election or make any change in any method or period of
accounting or any material change in any accounting policy, practice or
procedure.
(b) Charter Documents. Company will not amend its Articles of
Incorporation or By-Laws and will not permit any of its subsidiaries to
amend their charter documents.
(c) Dividends. Company will not declare or pay any dividend or make
any other distribution in respect of its capital stock.
(d) Stock. Company will not split, combine or reclassify any shares
of its capital stock, or issue, redeem or acquire (or agree to do so) any
of its equity securities, options, warrants, or convertible instruments,
except (i) pursuant to existing obligations under Company Benefit Plans or
(ii) pursuant to the existing commitments or conversion rights listed on
SCHEDULE 2.2(a) or (iii) for a redemption of the rights outstanding
pursuant to the Rights Plan. Company will not grant any Company Options.
4.6 SEI Shareholders Agreement. Upon execution of this Agreement, Company
will promptly notify Sonepar Electronique International ("SEI") that Company
will waive its right of first refusal to purchase the shares of Eurotronics B.V.
to be sold to Buyer under a separate agreement between Buyer and SEI (the "SEI
SALE") and the related provisions concerning exclusivity and non-competition
subject to the following conditions: such waiver shall only be effective if (i)
the closing of the SEI Sale occurs after the Closing or (ii) Company accepts a
Superior Proposal from a third party pursuant to SECTION 4.15 and terminates
this Agreement pursuant to SECTION 6.1(h). The waiver will be in the form of
Schedule 6.1(h) hereto.
4.7 Repayment of Debt. In the event that Company and Buyer are unable to
obtain the consent of the lenders under the Loan Agreement to the transactions
contemplated by this Agreement, Buyer shall cause the repayment at the Closing
of the outstanding indebtedness under the Loan Agreement.
4.8 Publicity. Company and Buyer must mutually agree upon the initial
press releases. Thereafter, Company and Buyer shall coordinate all publicity
relating to the transactions contemplated by this Agreement and no party shall
issue any press release, publicity statement or other public notice relating to
this Agreement, or the transactions contemplated by this Agreement, without
prior consultation with both Company and Buyer, except to the extent that the
disclosing party is advised by its counsel that such action is required by
applicable Law, and then, if practicable, only after consultation with the other
party.
4.9 Notification of Defaults and Adverse Events. Company and Buyer will
promptly notify each other if, subsequent to the date of this Agreement and
prior to the Effective Date: (i) an event occurs that may be reasonably likely
to result in a Company Material Adverse Effect or a Buyer Material Adverse
Effect, respectively, or (ii) any suit, action or proceeding is instituted or,
to the knowledge of Company, threatened against or affecting Company or Buyer or
any of their respective subsidiaries which, if adversely determined,
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would be reasonably likely to result in a Company Material Adverse Effect or a
Buyer Material Adverse Effect. Each of Company and Buyer will promptly notify
the other if it determines it is or will be unable to comply with any of its
obligations under this Agreement or fulfill any conditions under its control.
4.10 Satisfy Conditions to Closing. Buyer and Company shall each use its
commercially reasonable efforts to cause all conditions to Closing to be
satisfied.
4.11 Termination Fee. If this Agreement is terminated (a) by Buyer
pursuant to SECTION 6.1(d) (unless the failure to obtain the required
shareholder vote is for a reason other than the shareholders' awareness of
another Acquisition Proposal), or SECTION 6.1(i) hereof, or (b) by Company
pursuant to SECTION 6.1(d) (unless the failure to obtain the required
shareholder vote is for a reason other than the shareholders' awareness of
another Acquisition Proposal) or SECTION 6.1(h), then Company shall pay to
Buyer, upon demand, a fee, to be paid in cash, of $30,000,000 (the "TERMINATION
FEE"). The Termination Fee will be Buyer's sole and exclusive remedy against
Company for a termination pursuant to such Sections and Buyer shall not pursue
in any manner, directly or indirectly, any claim or cause of action based upon
tortious or other interference with rights under this Agreement against any
Person submitting an Acquisition Proposal.
4.12 Anti-takeover Statutes. If any anti-takeover or similar statute is
applicable to the transactions contemplated hereby, Company will grant such
approvals and take such actions as are necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate the effects of such takeover
statute on the transactions contemplated hereby.
4.13 Indemnification; Insurance.
(a) Indemnification. After the Effective time, Buyer shall indemnify,
defend and hold harmless, each present and former director and officer of
Company and each such person's personal representative, estate, testator or
intestate successors (the "INDEMNIFIED PARTIES") against any and all losses,
claims, damages, liabilities, costs, expenses, judgments and amounts paid in
settlement with the approval of Buyer (which approval shall not be unreasonably
withheld) in connection with any actual or threatened claim, action, suit,
proceeding or investigation arising out of or pertaining to any action or
omission occurring prior to the Effective Time (including without limitation,
any which arise out of or relate to the transactions contemplated by this
Agreement), whether asserted or claimed prior to, or on or after, the Effective
Time, to the full extent Company would be permitted under California Law to
indemnify such Indemnified Parties as Company's own directors and officers;
provided, however, that Buyer will not be liable in any such case to the extent
that any such loss, claim, damage, liability, cost, expense, judgment or amount
paid in settlement arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission from any document sent
to shareholders of Company or filed with the SEC in reliance upon and in
conformity with written information furnished by Company expressly for use
therein. In addition, Buyer shall pay expenses incurred by an Indemnified Party
in advance of the final disposition of any such action or proceeding upon
receipt of an undertaking by or on behalf of such Indemnified Party to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified. Without limiting the foregoing, in the event any claim, action,
suit, proceeding or investigation is brought against any Indemnified Party, the
Surviving Corporation shall be entitled to assume the defense of any such action
or proceeding. Upon assumption by the Surviving Corporation of the defense of
any such action or proceeding, the Indemnified
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Party shall have the right to participate in such action or proceeding and to
retain its own counsel, but neither the Surviving Corporation nor Buyer shall be
liable for any legal fees or expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof unless (i) the Surviving
Corporation has agreed to pay such fees and expenses, (ii) the Indemnified Party
shall have been advised by counsel that representation of the Indemnified Party
by counsel provided by Buyer is not possible due to conflicts of interest
between Buyer, the Surviving Corporation and the Indemnified Party, or (iii) the
Surviving Corporation shall have failed in a timely manner to assume the defense
of the matter. Neither Buyer nor the Surviving Corporation shall be liable for
any settlement of any claim effected without its written consent, which consent
shall not be unreasonably withheld. Neither Buyer nor the Surviving Corporation
shall, except with the written consent of the Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term the release by the claimant or plaintiff of such Indemnified
Party from all further liability in respect of such claim. Any Indemnified Party
wishing to claim indemnification under this SECTION 4.13(a), upon learning of
any such claim, action, suit, proceeding or investigation, shall notify the
Surviving Corporation (but the failure so to notify the Surviving Corporation
shall not relieve it from any liability which it may have under this SECTION
4.13(a) except to the extent such failure materially prejudices Buyer or the
Surviving Corporation). In addition to the foregoing, and without limiting in
any manner the foregoing, after the Effective Time Buyer shall assume the
obligations of Company and the Surviving Corporation under the indemnification
agreements set forth in SECTION 4.13(a), but only to the extent Company would be
permitted under California Law to perform its obligations under such
indemnification agreements.
(b) Insurance. For a period of six years after the Effective Date, Buyer
shall cause to be maintained officers' and directors' liability insurance
covering Company's existing officers and directors who are currently covered in
such capacities by Company's existing officers' and directors' liability
insurance policies on terms substantially no less advantageous to such officers
and directors than such existing insurance.
4.14 Employee Benefits. At the Effective Time, Buyer shall offer all
persons who were theretofore employees of Company and its subsidiaries benefits
under Buyer Benefit Plans which, in the aggregate, are no less favorable to such
employees than those that Buyer currently provides to its own employees. Each
Buyer Benefit Plan (i) shall give credit for purposes of eligibility to
participate and vesting to employees of Company and its subsidiaries for service
prior to the Effective Time with Company and its subsidiaries (and their
predecessors, to the extent credit for service with such predecessors was given
by Company) to the same extent that such service was recognized under a
comparable Company Benefit Plan and (ii) shall, if applicable, waive any
pre-existing condition or limitation applicable to the addition of such
employees to any Buyer Benefit Plan to the same extent that such condition or
limitation would be waived under a comparable Company Benefit Plan.
4.15 No Solicitation. From and after the date hereof, Company shall not,
and shall not authorize or permit any of its subsidiaries or Representatives to,
directly or indirectly, solicit or initiate (including by way of furnishing
information) or take any other action to facilitate knowingly any inquiries or
the making of any proposal which constitutes or may reasonably be expected to
lead to an Acquisition Proposal (as defined herein) from any person or entity,
or engage in any discussion or negotiations relating thereto or accept any
Acquisition Proposal; provided, however, that notwithstanding any other
provision hereof,
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Company may (a) comply with Rule 14e-2 promulgated under the Exchange Act with
regard to a tender or exchange offer; and (b) at any time prior to the Closing,
(i) engage in discussions or negotiations with a third party who (without any
solicitation, initiation, encouragement, discussion or negotiation, directly or
indirectly, by or with Company or its Representatives after the date hereof)
seeks to initiate such discussions or negotiations, and may furnish such third
party nonpublic information concerning Company and its business, properties and
assets for a period not to exceed ninety-six hours if, and only to the extent
that, (A) (1) the third party has first made an Acquisition Proposal that the
Board of Directors of Company believes in good faith (after consultation with
its financial advisor) is reasonably capable of being completed, taking into
account all relevant, legal, financial, regulatory and other aspects of the
Acquisition Proposal and the source of its financing, and believes in good faith
(after consultation with its financial advisor and after considering all of the
terms, conditions, representations, warranties and covenants which are included
in such Acquisition Proposal) that such Acquisition Proposal would, if
consummated, result in a transaction more favorable to the shareholders of
Company, from a financial point of view, than the transactions contemplated by
this Agreement and believes in good faith (after consultation with its financial
advisor) that the person making such Acquisition Proposal has, or is reasonably
likely to have or obtain, any necessary funds or customary commitments to
provide any funds necessary to consummate such Acquisition Proposal (any such
more favorable Acquisition Proposal being referred in this Agreement as a
"SUPERIOR PROPOSAL") and (2) Company's Board of Directors shall conclude in good
faith, after considering applicable provisions of state law, on the basis of
written advice from O'Melveny & Myers LLP, counsel to Company, that such action
may be necessary for the Board of Directors to act in a manner consistent with
its fiduciary duties under applicable law, and (B) forty-eight hours prior to
furnishing such information to or entering into discussions or negotiations with
such person or entity, Company (1) provides prompt notice to Buyer to the effect
that it is furnishing information to or entering into discussions or
negotiations with such person or entity and (2) receives from such person or
entity an executed confidentiality agreement in reasonably customary form on
terms not materially more favorable to such person or entity than the terms
contained in the Confidentiality Agreement dated May 18, 1999, and/or (ii)
accept a Superior Proposal from a third party, provided that the conditions set
forth in clauses (i)(A) and (i)(B) above have been satisfied and Company
complies with and terminates this Agreement pursuant to SECTION 6.1(h). Company
shall immediately cease and terminate any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any persons or entities
conducted heretofore by the party or its Representatives with respect to the
foregoing. The Company shall notify Buyer orally and in writing of any such
inquiries, offers or proposals (including the terms and conditions of any such
proposal and the identity of the person making it) within twenty-four hours of
the receipt thereof, and shall keep Buyer informed of the status and details of
any such inquiry, offer, or proposal.
ARTICLE V
CONDITIONS
5.1 Conditions to Obligations of Company and Buyer. The respective
obligations of the parties to effect the Merger are subject to the fulfillment
at or prior to the Effective Date of the following conditions unless waived in
writing by all parties:
(a) Approval. All corporate actions necessary to authorize the
execution, delivery and performance of this Agreement and the Merger shall
have been duly and
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validly taken by the other parties. The shareholders of Company and Buyer
shall have approved the Merger in accordance with applicable Law.
(b) Approval from Government Entities. All approvals required by any
Governmental Entity and all other actions required to effect the Merger and
related transactions shall have been obtained. The waiting period under the
HSR Act shall have expired, or early termination of the waiting period
under the HSR Act shall have been granted.
(c) Absence of Governmental Litigation. No Governmental Entity shall
have instituted a proceeding seeking injunctive or other relief in
connection with the Merger and related transactions. There shall not be any
judgment, decree, injunction, ruling or order of any Governmental Entity
that prohibits, restricts, or delays consummation of the Merger.
(d) Effectiveness of Registration Statement. The Registration
Statement covering the Buyer Stock shall have been declared effective under
the Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall have been issued with respect thereto.
5.2 Conditions to Obligations of Buyer. The obligations of Buyer to
effect the Merger are subject to the fulfillment at or prior to the Effective
Date of the following conditions except to the extent waived in writing by
Buyer:
(a) Representations and Compliance. The representations and
warranties of Company in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and on the Effective
Date with the same effect as though made on and as of such date, except for
any changes contemplated by this Agreement; Company shall have complied in
all material respects with all covenants requiring compliance by it prior
to the Effective Date; and Buyer shall have received an officer's
certificate signed by the Chief Executive Officer of Company certifying as
to each of the foregoing.
(b) Tax Opinion. Buyer shall have received an opinion from Sullivan &
Cromwell, counsel to Buyer, based upon reasonably requested representation
letters and dated the Effective Date, that the Merger will constitute a
reorganization for United States federal income tax purposes within the
meaning of IRC Section 368(a), that each of Buyer and Company will be a
party to that reorganization within the meaning of IRC Section 368(b) and
that neither Buyer nor Company will recognize any gain on the Merger.
(c) No Material Adverse Effect. From the date hereof, there shall not
have occurred any event which has resulted or is likely to result in a
Company Material Adverse Effect.
(d) Material Contracts. All consents from other parties to the
Material Contracts listed on SCHEDULE 5.2(d), if necessary or appropriate
to allow the consummation of the Merger and the continuation of Company's
Business in the ordinary course after consummation of the Merger, shall
have been received.
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5.3 Conditions to Obligations of Company. The obligations of Company to
effect the Merger are subject to the fulfillment at or prior to the Effective
Date of the following conditions unless waived in writing by Company:
(a) Representations and Compliance. The representations and
warranties of Buyer in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and on the Effective
Date with the same effect as though made on and as of such date, except for
any changes contemplated by this Agreement; Buyer shall have complied in
all material respects with all covenants requiring compliance by it prior
to the Effective Date; and Company shall have received an officer's
certificate signed by the Chief Executive Officer of Buyer certifying as to
each of the foregoing.
(b) Tax Opinion. Company shall have received an opinion from
O'Melveny & Myers LLP, counsel to Company, based upon reasonably requested
representation letters and dated the Effective Date, that the Merger will
constitute a reorganization for United States federal income tax purposes
within the meaning of IRC Section 368(a) that each of Buyer and Company
will be a party to that reorganization within the meaning of IRC Section
368(b) and that Company's shareholders will not recognize any gain or loss
as a result of the Merger except to the extent that cash is received as
part of the Merger Consideration or in lieu of fractional share interests.
(c) Listing. The Buyer Stock distributed in connection with the
Merger shall have been accepted upon notice of issuance for listing on the
NYSE.
(d) No Material Adverse Effect From the date hereof, there shall not
have occurred any event which has resulted or is likely to result in a
Buyer Material Adverse Effect.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.1 Termination and Abandonment. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval by the shareholders of Company:
(a) by mutual consent of Buyer and Company;
(b) by either Buyer or Company upon written notice to the other party
if any Governmental Entity of competent jurisdiction shall have issued a
final nonappealable order denying, enjoining or otherwise prohibiting the
consummation of any of the transactions contemplated by this Agreement;
(c) by either Buyer or Company if the Merger shall not have been
consummated on or before December 31, 1999, unless the failure of the
Merger to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe in any material
respect the covenants and agreements of such party set forth herein;
(d) by Company or Buyer if any approval of the shareholders of Company
required for the consummation of the Merger shall not have been obtained by
reason
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of the failure to obtain the required vote of shareholders of Company at
the Company Shareholders Meeting or at any adjournment or postponement
thereof;
(e) by Company or Buyer if any approval of the shareholders of Buyer
required for the consummation of the Merger shall not have been obtained by
the reason of the failure to obtain the required vote of shareholders of
Buyer at a duly held meeting of shareholders of Buyer or at any adjournment
or postponement thereof.
(f) by either Buyer or Company (so long as the terminating party is
not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material
breach of any of the representations or warranties set forth in this
Agreement on the part of the other party;
(g) by either Buyer or Company (so long as the terminating party is
not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material
breach of any of the covenants or agreements or conditions or obligations
set forth in this Agreement on the part of the other party, which breach
shall not have been cured within ten days following receipt by the
breaching party of written notice of such breach from the other party
hereto or which breach, by its nature, cannot be cured prior to the
Effective Time;
(h) by Company if, prior to the consummation of the transactions
contemplated hereby, a Person shall have made a Superior Proposal that the
Board of Directors of Company determines is more favorable to Company's
shareholders than the Merger and if Company's Board of Directors shall have
been advised in writing by O'Melveny & Myers LLP that the failure to
terminate this Agreement and accept such Superior Proposal could be
inconsistent with the proper exercise of such fiduciary duties under
applicable Law as set forth in paragraph (i)(A)(2) of SECTION 4.15; and
(i) by Buyer prior to the consummation of the transactions
contemplated hereby if the Board of Directors of Company shall have
withdrawn its approval or modified its approval or recommendation of this
Agreement or shall have recommended another offer for the purchase of
Company Common Stock.
(j) by Company or Buyer if the Closing Price is less than $38.25 and
Buyer does not agree before the Closing either (i) to increase the Exchange
Ratio so that it is equal to $35.10 divided by the Closing Price or (ii) to
make a cash payment for each Non-Cash Election Share equal to $35.10 less
the product of 0.91765 and the Closing Price.
6.2 Effect of Termination. Except as provided in SECTION 4.11 and SECTION
7.2 hereof with respect to expenses and fees (including the Termination Fee),
and except as provided in SECTION 4.1(b) hereof with respect to information
obtained in connection with the transactions contemplated hereby, and except as
provided in SECTION 4.4(c), in the event of the termination of this Agreement
and the abandonment of the Merger, this Agreement shall thereafter become null
and void and have no effect, and no party hereto shall have any liability to any
other party hereto or its shareholders or directors or officers in respect
thereof, and each party shall be responsible for its own expenses, except that
nothing herein shall relieve any party for liability for any willful breach
hereof.
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6.3 Amendment. This Agreement may be amended by the parties hereto at any
time before or after approval hereof by the shareholders of Company and Buyer,
but, after any such approval, no amendment shall be made which would have a
material adverse effect on the shareholders of Company or Buyer, respectively,
without the further approval of such shareholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
6.4 Extension; Waiver. At any time prior to the Effective Date, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE VII
MISCELLANEOUS
7.1 Termination of Representations and Warranties. The representations
and warranties of each party will terminate on the Effective Date.
7.2 Expenses. Subject to SECTION 4.11, each party will pay its own
expenses relating to this Agreement and the transactions contemplated hereby.
7.3 Remedies. If, in accordance with the terms of the parenthetical
contained in the second sentence of SECTION 4.4(a), Company's Board of Directors
fails to recommend this Agreement (and the transactions contemplated hereby,
including the Merger) to Company's shareholders, or modifies or withdraws its
recommendation thereof to Company's shareholders, Buyer's sole remedy in
connection therewith shall be Company's payment of the Termination Fee to Buyer
pursuant to SECTION 4.11.
7.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered in person, sent by registered or
certified mail (return receipt requested), or telexed or telecopied to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
if to Buyer:
Avnet, Inc.
2211 South 47th Street
Phoenix, Arizona 85034
Attention: David R. Birk, Esq.
Telecopy: (602) 643-7929
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Richard R. Howe
Telecopy: (212) 558-3612
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if to Company:
Marshall Industries
9320 Telstar Avenue
El Monte, California 91731-2895
Attention: Henry Chin
Telecopy: (626) 307-6232
with a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Attention: Frederick B. McLane
Telecopy: (213) 430-6407
7.5 Further Assurances. Buyer and Company each agree to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be reasonably necessary or desirable in order to
expeditiously consummate or implement the transactions contemplated by this
Agreement.
7.6 Assignability. Neither this Agreement nor any rights or obligations
under it are assignable.
7.7 Governing Law. This Agreement will be governed by the laws of the
State of California without regard to conflict of law principles.
7.8 Interpretation. Headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.10 Integration. This Agreement and the Schedules hereto constitute the
entire agreement and supersede all prior agreements and understandings
(including the Confidentiality Agreements), both written and oral, among the
parties with respect to the subject matter hereof.
ARTICLE VIII
DEFINITIONS
8.1 Definitions. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires: (a) the terms
defined in this ARTICLE VIII have the meaning assigned to them in this ARTICLE
VIII and include the plural as well as the singular; (b) all accounting terms
not otherwise defined herein have the meanings assigned under generally accepted
accounting principles; (c) all references in this Agreement to designated
"Articles," "Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of the body of this Agreement; (d) pronouns of
either gender or neuter shall include, as appropriate, the other pronoun forms;
and (e) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as whole and not to any particular Article,
Section nor other subdivision.
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As used in this Agreement and the Schedules delivered pursuant to this
Agreement, the following definitions shall apply.
"Acquisition Proposal" means any proposal or offer from any Person relating
to any direct or indirect acquisition or purchase of all or a substantial part
of the assets of the Company or any of its subsidiaries or of over 15% of any
class of equity securities of the Company or any of its subsidiaries, any tender
offer or exchange offer that if consummated would result in any Person
beneficially owning 15% or more of any class of equity securities of Company or
any of its subsidiaries, any merger, consolidation, business combination, sale
of all or substantially all of the assets, recapitalization, liquidation,
dissolution or similar transaction involving Company or any of its subsidiaries,
other than the transactions contemplated by this Agreement.
"Buyer" has the meaning set forth in the first paragraph hereof.
"Buyer Benefit Plans" means collectively, all employee benefit plans,
programs and commitments that Buyer makes generally available to its employees
and their beneficiaries, providing benefits in the nature of pension,
retirement, severance, stock purchase, health, medical, life, disability, sick
leave, vacation, or other welfare or fringe benefits, including, without
limitation, all employee benefit plans (as defined in Section 3(3) of ERISA) and
fringe benefit plans (as defined in IRC Section 6039D).
"Buyer Material Adverse Effect" means a material adverse effect on the
business, financial condition, results of operation, business prospects or
properties of Buyer and its subsidiaries, taken as a whole. For purposes of this
Agreement, a Buyer Material Adverse Effect does not include a material adverse
effect on the business, financial condition, results of operation or properties
of Buyer as a result of (i) the transactions contemplated hereby or the public
announcement hereof, or (ii) changes in the conditions or prospects of Buyer and
its subsidiaries, taken as a whole, which are consistent with general economic
conditions or general changes affecting the electronic components or computer
products, distribution industries or electronics manufacturing industry, or
(iii) any matter disclosed in the Buyer SEC Filings (as defined in SECTION 3.6)
or in the Schedules to this Agreement.
"Buyer Shareholders' Approval" has the meaning set forth in SECTION 3.2.
"Buyer Stock" has the meaning set forth in SECTION 1.7(a).
"Buyer's Business" means the business of Buyer and its subsidiaries, taken
as a whole.
"CA Code" has the meaning set forth in SECTION 1.3.
"Canceled Shares" has the meaning set forth in SECTION 1.7(d).
"Cash Election Price" has the meaning set forth in SECTION 1.7(b).
"Cash Proration Factor" has the meaning set forth in SECTION 1.9(c)(2)(i).
"Certificates of Merger" has the meaning set forth in SECTION 1.3.
"Closing" has the meaning set forth in SECTION 1.2.
"Company" has the meaning set forth in the first paragraph hereof.
"Company Affiliates" has the meaning set forth in SECTION 1.13.
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<PAGE> 123
"Company Benefit Plans" has the meaning set forth in SECTION 2.11(a).
"Company Common Stock" has the meaning set forth in SECTION 1.7.
"Company ERISA Affiliate" has the meaning set forth in SECTION 2.11(a).
"Company ERISA Plans" has the meaning set forth in SECTION 2.11(a).
"Company Material Adverse Effect" means a material adverse effect on the
business, financial condition, results of operation, business prospects or
properties of Company and its subsidiaries, taken as a whole. For purposes of
this Agreement, a Company Material Adverse Effect does not include a material
adverse effect on the business, financial condition, results of operation or
properties of Company as a result of (i) the transactions contemplated hereby or
the public announcement hereof, or (ii) changes in the conditions or prospects
of Company and its subsidiaries, taken as a whole, which are consistent with
general economic conditions or general changes affecting the electronic
components, computer products or production supplies distribution industries or
electronics manufacturing industry, or (iii) any matter disclosed in Company SEC
Filings (as defined in SECTION 2.6) made before the execution of this Agreement
or in the Schedules to this Agreement.
"Company Options" means any issued and outstanding option granted by
Company to purchase shares of Company Common Stock pursuant to Company's 1984
Stock Option Plan, 1992 Stock Option Plan and 1997 Stock Option Plan, and any
individual issued and outstanding option grant made prior to the date hereof.
"Company SEC Filings" has the meaning set forth in SECTION 2.6(b).
"Company Shareholders' Approval" has the meaning set forth in SECTION 2.3.
"Company's Business" means the business of Company and its subsidiaries,
taken as a whole.
"Confidentiality Agreements" means the confidentiality agreements dated as
of May 18, 1999 and June 24, 1999 by and between Company and Buyer.
"Contract" means any agreement, arrangement, bond, commitment, franchise,
indemnity, indenture, instrument, lease, license or understanding, whether or
not in writing.
"Dissenting Shares" has the meaning set forth in SECTION 1.11(a).
"DLJ" has the meaning set forth in SECTION 2.19.
"Effective Date" has the meaning set forth in SECTION 1.3.
"Effective Time" has the meaning set forth in SECTION 1.3.
"Electing Shares" has the meaning set forth in SECTION 1.7(a).
"Election Date" has the meaning set forth in SECTION 1.8(c).
"Environmental Regulations" means, collectively, all Laws, regulations,
orders and other requirements of any Governmental Entity relating to the
protection of human health or the environment or to Hazardous Substances and the
use, storage, treatment, disposal, transport, generation, release of, and
exposure of others to, Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974.
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<PAGE> 124
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" has the meaning set forth in SECTION 1.8(b).
"Exchange Ratio" is that ratio calculated pursuant to the terms set forth
in SECTION 1.7(c).
"Form of Election" has the meaning set forth in SECTION 1.8(c).
"Governmental Entity" means any governmental agency, district, bureau,
board, commission, court, department, official political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
"Hazardous Substances" means (but shall not be limited to) substances that
are defined or listed in, or otherwise classified pursuant to, any applicable
Laws as "hazardous substances," "hazardous materials," "hazardous wastes" or
"toxic substances," or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitibility,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive toxicity
or "EP toxicity," and petroleum and drilling fluids, produced waters and other
wastes associated with the exploration, development, or production of crude oil,
natural gas or geothermal energy, and lead, asbestos, PCBs or other substances
regulated under Environmental Regulations.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Indemnified Parties" has the meaning set forth in SECTION 4.13(a).
"Indemnifying Party" has the meaning set forth in SECTION 4.4(c).
"Intangible Property" means any trade secret, secret process or other
confidential information or know-how and any and all Marks.
"IRC" means the Internal Revenue Code of 1986, as amended.
"IRS" means the Internal Revenue Service.
"Joint Proxy Statement" has the meaning set forth in SECTION 4.4(b).
"Laws" means any constitutional provision, statute, ordinance, or other
law, code, common law, rule, regulation or interpretation of any Governmental
Entity and any decree, injunction, judgment, award, order, ruling, assessment or
writ.
"Loan Agreement" means that certain Credit Agreement dated as of January
16, 1998 by and among Company and, subject to and in accordance with Addendum A
thereto, Sterling Electronics Corporation and First Union National Bank, as
Administrative Agent, together with Addendum A thereto, as amended.
"Losses" has the meaning set forth in SECTION 2.4.
"Marks" means any brand name, copyright, patent, service mark, trademark,
trade name, and all registrations or applications for registration of any of the
foregoing.
"Merger" has the meaning set forth in SECTION 1.1.
"Merger Consideration" has the meaning set forth in SECTION 1.7.
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<PAGE> 125
"Non-Cash Election Shares" has the meaning set forth in SECTION 1.7(a).
"Non-Cash Election Number" has the meaning set forth in SECTION 1.9(a).
"Non-Cash Proration Factor" has the meaning set forth in SECTION 1.9(b)(1).
"NYBCL" has the meaning set forth in SECTION 1.3.
"NYSE" means the New York Stock Exchange.
"Person" means any individual, partnership, joint venture, corporation,
bank, trust, unincorporated organization or other entity.
"Qualified Plan" has the meaning set forth in SECTION 2.11(b).
"Registration Statement" has the meaning set forth in SECTION 4.4(b).
"Representatives" means a Person's officers, directors, employees,
consultants, investment bankers, accountants, attorneys and other advisors,
representatives and agents.
"Rights Plan" means that Rights Agreement between Company and First Union
National Bank, dated as of February 8, 1999
"Securities Act" means the Securities Act of 1933, as amended.
"SEC" means the Securities and Exchange Commission.
"SEI" has the meaning set forth in SECTION 4.6.
"SEI Option" means that certain Nonqualified Stock Option Grant by and
between Company and SEI Investments, BV and dated as of September 15, 1997.
"SEI Sale" has the meaning set forth in SECTION 4.6.
"Superior Proposal" has the meaning set forth in SECTION 4.15.
"Surviving Corporation" has the meaning set forth in SECTION 1.1.
"Swap Agreements" means: (a) the ISDA Master Agreement, dated as of January
16, 1998 between Marshall Industries and First National Bank of Chicago, as
amended; and (b) the ISDA Master Agreement dated as of January 16, 1998 between
Marshall Industries and NationsBank of Texas, N.A., as amended.
"Tax" or "Taxes" means any foreign, federal, state, county or local income,
sales, use, excise, franchise, ad valorem, real and personal property, transfer,
gross receipt, stamp, premium, profits, customs, duties, windfall profits,
capital stock, production, business and occupation, disability, employment,
payroll, severance or withholding taxes, fees, assessments or charges of any
kind whatever imposed by any Governmental Entity, and interest and penalties
(civil or criminal), additions to tax, payments in lieu of taxes or additional
amounts related thereto or to the nonpayment thereof, and any loss in connection
with the determination, settlement or litigation of any Tax liability.
"Tax Return" means a declaration, statement report, return or other
document or information required to be filed or supplied with respect to Taxes,
including, where permitted or required, combined or consolidated returns for any
group of entities that includes Company or any of its subsidiaries.
"Termination Fee" has the meaning set forth in SECTION 4.11.
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<PAGE> 126
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
AVNET, INC
By:
-----------------------------------
Roy Valle
Chairman and Chief Executive
Officer
MARSHALL INDUSTRIES
By:
-----------------------------------
Robert Rodin
President and Chief Executive
Officer
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<PAGE> 127
ANNEX A
FORM OF RULE 145 LETTER FROM
AFFILIATES OF COMPANY
Avnet, Inc.
2211 South 47th Street
Phoenix, Arizona 85034
Ladies and Gentlemen:
I have been advised that I may be deemed an "affiliate," as defined in Rule
145 under the Securities Act of 1993 (the "ACT"), of Marshall Industries
("COMPANY") at the time of the merger ("MERGER") of Company into Avnet, Inc.
("BUYER"). In the Merger, I will acquire shares ("SHARES") of the common stock
of Buyer in exchange for my shares of Company common stock.
I represent and agree as follows:
1. I have carefully read this letter and, to the extent I felt
necessary, I have discussed it with counsel.
2. I will not make any sale or other disposition of the Shares in
violation of the Act or related rules and regulations. In this connection,
I understand that the issuance of the Shares to me has been or will be
registered under the Act, but that such registration would not cover
resales by affiliates. Accordingly, the Shares must be held by me
indefinitely unless (a) the Shares have been registered under the Act for
sale by me, (b) a sale of the Shares is made in conformity with the volume
and other applicable limitations of paragraph (d) of Rule 145, or (c)
another exemption from registration is available.
3. I understand that Buyer is under no obligation to register the sale
or other disposition of the Shares by me or on my behalf or to take any
other action to qualify for an exemption from registration.
4. I also understand that stop transfer instructions will be given to
Buyer's transfer agent with respect to the Shares and that there will be
placed on the certificates for the Shares a legend stating in substance:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED IN
A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, APPLIES AND MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY
IN COMPLIANCE WITH THE REQUIREMENTS OF RULE 145 OR PURSUANT TO A
REGISTRATION STATEMENT.
5. I know of no plan (written or oral) pursuant of which holders of
shares of the outstanding Company Common Stock intend to sell or otherwise
dispose of more than 50%, in the aggregate, of their interest in such
shares, either by a sale or other disposition of Company common capital
stock before the Merger, by a sale or other disposition of Shares to be
received by them as a result of the Merger.
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<PAGE> 128
6. I do not intend to take a position on any federal or state income
tax return that is inconsistent with the treatment of the Merger as a
tax-free reorganization for federal or state income tax purposes.
Very truly yours,
--------------------------------------
Signature
--------------------------------------
Type or Print Name
Date
----------------------------------------
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<PAGE> 129
APPENDIX B
[DONALDSON, LUFKIN & JENRETTE LOGO]
June 25, 1999
Board of Directors
Marshall Industries
9320 Telstar Avenue
El Monte, CA 91731-2895
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of common stock, par value $1.00 per share ("Company Common
Stock"), of Marshall Industries (the "Company") of the Merger Consideration (as
defined herein) to be received by such shareholders pursuant to the terms of the
Agreement and Plan of Merger, dated as of June 25, 1999 (the "Agreement"), by
and between Avnet Inc. ("Buyer") and the Company, pursuant to which the Company
will be merged (the "Merger") with and into Buyer.
Pursuant to the Agreement, each outstanding share of Company Common Stock
(other than shares of Company Common Stock held at the effective time of the
Merger by the Company or Buyer or their wholly owned subsidiaries) will be
converted into the right to receive, and become exchangeable for, at the
election of the holder thereof (i) the number of shares of common stock, par
value $1.00 per share of Buyer ("Buyer Common Stock") equal to the Exchange
Ratio (the "Stock Consideration") or (ii) $39.00 in cash (the "Cash
Consideration", and together with the Stock Consideration, the "Merger
Consideration"); provided that such election shall be subject to proration as
set forth in the Agreement. The "Exchange Ratio" shall mean (i) 0.81569 if the
Closing Price (as defined in the Agreement) is not less than $43.03125 or
greater then $52.59375, (ii) the quotient of $42.90 divided by the Closing Price
if the Closing Price is not less than $52.59375 or greater than $57.375, (iii)
0.74772 if the Closing Price is greater than $57.375, (iv) the quotient of
$35.10 divided by the Closing Price if the Closing Price is greater than $38.25
but less than $43.03125 and (v) 0.91765 if the Closing Price is less than
$38.25.
In arriving at our opinion, we have reviewed the Agreement. We also have
reviewed financial and other information that was publicly available or
furnished to us by the Company and Buyer including information provided during
discussions with their respective managements. Included in the information
provided during discussions with the respective managements were certain
financial projections of the Company for the period beginning June 1, 1998 and
ending May 31, 2000 prepared by the management of the Company and certain
financial projections of Buyer for the period beginning July 1, 1999 and ending
June 30, 2000 prepared by the management of Buyer. In addition, we have compared
certain financial and securities data of the Company and Buyer with various
other companies whose securities are traded in public markets, reviewed the
historical stock prices and trading volumes of the Company Common Stock and
Buyer Common Stock, reviewed prices and premiums paid in certain other business
combinations and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion.
<PAGE> 130
In rendering our opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all of the financial
and other information that was available to us from public sources, that was
provided to us by the Company and Buyer or their respective representatives, or
that was otherwise reviewed by us. In particular, we have relied upon the
estimates of the management of the Company of the operating synergies achievable
as a result of the Merger and upon our discussions of such synergies with the
management of Buyer. With respect to the financial projections supplied to us,
we have assumed that they have been reasonably prepared on the basis reflecting
the best currently available estimates and judgments of the management of the
Company and Buyer as to the future operating and financial performance of the
Company and Buyer, respectively. We have not assumed any responsibility for
making an independent evaluation of any assets or liabilities or for making any
independent verification of any of the information reviewed by us. We have
relied as to certain legal matters on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which the Buyer Common Stock will actually trade at any time. Our
opinion does not address the relative merits of the Merger and the other
business strategies being considered by the Company's Board of Directors, nor
does it address the Board's decision to proceed with the Merger. Our opinion
does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for the Company in the past and has been compensated
for such services, including acting as financial advisor in the Company's
acquisition of Sterling Electronics on January 16, 1998 and the adoption of a
shareholder rights plan on February 9, 1999.
Based upon and subject to the foregoing and such other factors as we deem
relevant, we are of the opinion that the Merger Consideration to be received by
the shareholders of the Company pursuant to the Agreement is fair to such
shareholders from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-----------------------------------
Jeffrey A. Raich
Senior Vice President
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<PAGE> 131
APPENDIX C
Investment Banking
Corporate and Institutional
Client Group
World Financial Center
North Tower
New York, New York
10281-1330
[Merrill Lynch Logo] 212 449 1000 Main
June 25, 1999
Board of Directors
Avnet, Inc.
2211 South 47th Street
Phoenix, Arizona 85034
Members of the Board of Directors:
Marshall Industries ("Marshall") and Avnet, Inc. ("Avnet"), propose to
enter into the Agreement and Plan of Merger, dated as of June 25, 1999 (the
"Agreement") pursuant to which, as more fully described in the Agreement,
Marshall will be merged with and into Avnet in a transaction (the "Merger") in
which each outstanding share of Marshall's common stock, par value $1.00 per
share (the "Marshall Shares"), will be converted into the right to receive, at
the election of the holder thereof and subject to certain limitations and
proration procedures specified in the Agreement (as to which we express no
opinion), (i) that number of shares of the common stock of Avnet, par value
$1.00 per share (the "Avnet Shares") equal to the Exchange Ratio (defined below)
or (ii) $39.00 in cash (collectively, the "Merger Consideration"). The exchange
ratio (the "Exchange Ratio") shall be calculated as follows: if the average of
the closing trade prices of Avnet shares for the twenty consecutive trading days
ending on the fifth trading day before the date of the Marshall shareholder
meeting and reported on the New York Stock Exchange Composite Tape (the "Closing
Price") is (i) not less than $43.03125 nor greater than $52.59375, then the
Exchange Ratio shall equal 0.81569; (ii) not less than $52.59375 nor greater
than $57.375, then the Exchange Ratio shall equal $42.90 divided by the Closing
Price; (iii) greater than $57.375, then the Exchange Ratio shall equal 0.74772;
(iv) greater than $38.25 but less than $43.03125, then the Exchange Ratio shall
equal $35.10 divided by the Closing Price; and (v) less than $38.25, then the
Exchange Ratio shall equal 0.91765.
You have asked us whether, in our opinion, the Merger Consideration to be
paid by Avnet in the Merger is fair from a financial point of view to Avnet.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to Marshall and Avnet that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and
prospects of Marshall and Avnet, as well as the amount and timing of
the cost savings and related expenses and synergies expected to result
from the Merger (the "Expected Synergies") furnished to us by Marshall
and Avnet, respectively;
<PAGE> 132
(3) Conducted discussions with members of senior management of Marshall
and Avnet concerning the matters described in clauses 1 and 2 above,
as well as their respective businesses and prospects before and after
giving effect to the Merger and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for Marshall Shares
and Avnet Shares and compared them with those of certain publicly
traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of Marshall and Avnet and compared
them with those of certain publicly traded companies that we deemed to
be relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions that we deemed to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of Marshall and Avnet and their financial and legal
advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed the Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of Marshall or Avnet or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of Marshall or Avnet. With
respect to the financial forecast information and the Expected Synergies
furnished to or discussed with us by Marshall or Avnet, we have assumed that
they have been reasonably prepared and reflect the best currently available
estimates and judgment of Marshall's or Avnet's management as to the expected
future financial performance of Marshall or Avnet, as the case may be, and the
Expected Synergies. We have further assumed that the Merger will qualify as a
tax-free reorganization for U.S. federal income tax purposes. We have also
assumed that the final form of the Agreement will be substantially similar to
the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of the date hereof.
We are acting as financial advisor to Avnet in connection with the Merger
and will receive a fee from Avnet for our services, a significant portion of
which is contingent upon the consummation of the Merger. In addition, Avnet has
agreed to indemnify us for certain liabilities arising out of our engagement. We
have, in the past, provided financial advisory and financing services to Avnet
and/or its affiliates and may continue to do so and have received, and may
receive, fees for the rendering of such services. In addition, in the ordinary
course of our business, we may actively trade Marshall Shares and other
securities of Marshall, as well as Avnet Shares and other securities of Avnet,
for our own account
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and for the accounts of customers and, accordingly, may at any time hold a long
or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of Avnet.
Our opinion does not address the merits of the underlying decision by Avnet to
engage in the Merger and does not constitute a recommendation to any shareholder
as to any matter related thereto.
We are not expressing any opinion herein as to the prices at which Avnet
Shares will trade following the announcement or consummation of the Merger.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Merger Consideration is fair from a financial point
of view to Avnet.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
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<PAGE> 134
APPENDIX D
CHAPTER 13 OF THE CALIFORNIA GENERAL CORPORATION LAW
SECTION 1300. REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES; CORPORATE
PURCHASE AT FAIR MARKET VALUE; DEFINITIONS.
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) or (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of
Section 25100 or (B) listed on the list of OTC margin stocks issued by the
Board of Governors of the Federal Reserve System, and the notice of meeting
of shareholders to act upon the reorganization summarizes this section and
Sections 1301, 1302, 1303 and 1304; provided, however, that this provision
does not apply to any shares with respect to which there exists any
restriction on transfer imposed by the corporation or by any law or
regulation; and provided, further, that this provision does not apply to
any class of shares described in subparagraph (A) or (B) if demands for
payment are filed with respect to 5% or more of the outstanding shares of
that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case
where the approval required by Section 1201 is sought by written consent
rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
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SECTION 1301. NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS; DEMAND
FOR PURCHASE; TIME; CONTENTS.
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the price stated any dissenting shares as defined in subdivision (b) of Section
1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
SECTION 1302. SUBMISSION OF SHARE CERTIFICATES FOR ENDORSEMENT; UNCERTIFICATED
SECURITIES.
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall
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bear a like statement, together with the name of the original dissenting holder
of the shares.
SECTION 1303. PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING FAIR
MARKET VALUE; FILING; TIME OF PAYMENT.
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
SECTION 1304. ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR
FAIR MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATION; DETERMINATION OF ISSUES;
APPOINTMENT OF APPRAISERS.
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If
the status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
SECTION 1305. REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT;
JUDGMENT; PAYMENT; APPEAL; COSTS.
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the report shall be submitted to the court and considered on such evidence as
the court considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed
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by the court or the report is not confirmed by the court, the court shall
determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301, 1302 if the value awarded by the court for the shares is more than 125% of
the price offered by the corporation under subdivision (a) of Section 1301).
SECTION 1306. PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS; INTEREST.
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
SECTION 1307. DIVIDENDS ON DISSENTING SHARES.
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
SECTION 1308. RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION; WITHDRAWAL OF
DEMAND FOR PAYMENT.
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation
consents thereto.
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<PAGE> 138
SECTION 1309. TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS.
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter
all necessary expenses incurred in such proceedings and reasonable
attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for
conversion into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of
the shares, and neither files a complaint or intervenes in a pending action
as provided in Section 1304, within six months after the date on which
notice of the approval by the outstanding shares or notice pursuant to
subdivision (i) of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
SECTION 1310. SUSPENSION OF RIGHT TO COMPENSATION OR VALUATION PROCEEDINGS;
LITIGATION OF SHAREHOLDERS' APPROVAL.
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
SECTION 1311. EXEMPT SHARES.
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
SECTION 1312. RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR RESCIND
MERGER OR REORGANIZATION; RESTRAINING ORDER OR INJUNCTION; CONDITIONS.
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
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<PAGE> 139
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholders' shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 54 of the Registrant's By-laws provides as follows:
A. The Corporation shall indemnify, and advance the expenses of, any
director, officer or employee to the full extent permitted by the New York
Business Corporation Law as the same now exists or may hereafter be
amended.
B. The indemnification and advancement of expenses granted pursuant to
this Section 54 shall not be exclusive or limiting of any other rights to
which any person seeking indemnification or advancement of expenses may be
entitled when authorized by (i) a resolution of shareholders, (ii) a
resolution of directors or (iii) an agreement providing for such
indemnification; provided that no indemnification may be made to or on
behalf of any such person if a judgment or other final adjudication adverse
to such person establishes that his 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 personally gained in fact a
financial profit or other advantage to which he was not legally entitled.
C. No amendment, modification or rescission of these By-laws shall be
effective to limit any person's right to indemnification with respect to
any alleged cause of action that accrues or other incident or matter that
occurs prior to the date on which such modification, amendment or
rescission is adopted.
Section 721 of the New York Business Corporation Law (the "BCL") provides
that no indemnification may be made to or on behalf of any director or officer
of the Registrant if "a judgment or other final adjudication adverse to the
director or officer establishes that his 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 personally gained in fact a financial
profit or other advantage to which he was not legally entitled." Section 54B of
the Registrant's By-laws includes the foregoing statutory language.
The rights granted under Section 54 of the By-laws are in addition to, and
are not exclusive of, any other rights to indemnification and expenses to which
any director or officer may otherwise be entitled. Under the BCL, a New York
corporation may indemnify any director or officer who is made or threatened to
be made a party to an action by or in the right of such corporation against
"amounts paid in settlement and reasonable expenses, including attorneys' fees,"
actually and necessarily incurred by him in connection with the defense or
settlement of such action, or in connection with an appeal therein, if such
director or officer acted, in good faith, for a purpose which he reasonably
believed to be in the best interests of the corporation, except that no
indemnification shall be made in respect of (1) a threatened action which is
settled or otherwise disposed of, or (2) any claim, issue or matter as to which
such director or officer shall have been adjudged liable to the corporation,
unless and only to the extent that a court determines that the director or
officer is fairly and reasonably entitled to indemnity (BCL Section 722(c)). A
corporation may also indemnify directors and officers who are parties to other
actions or proceedings (including actions or proceedings by or in the right of
any other corporation or other enterprise which the director or officer served
at the request of the corporation)
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against "judgments, fines, amounts paid in settlement and reasonable expenses,
including attorneys' fees," actually or necessarily incurred as a result of such
actions or proceedings, or any appeal therein, provided the director or officer
acted in good faith, for a purpose which he reasonably believed to be in the
best interests of the corporation (or in the case of service to another
corporation or other enterprise at the request of such corporation, not opposed
to the best interests of such corporation) and, in criminal cases, result of
such actions or proceedings, or any appeal therein, provided the director or
officer acted in good faith, for a purposes which he reasonably believed to be
in the best interests of the corporation (or in the case of service to another
corporation or other enterprise at the request of such corporation, not opposed
to the best interests of such corporation) and, in criminal cases, that he also
had no reasonable cause to believe that his conduct with unlawful (BCL Section
722(a)). Any indemnification under Section 722 may be made only if authorized in
the specific case by disinterested directors, or by the board of directors upon
the opinion in writing of independent legal counsel that indemnification is
proper, or by shareholders (BCL Section 723(b)), but even without such
authorization, a court may order indemnification in certain circumstances (BCL
Section 724). Further, any director or officer who is "successful, on the merits
or otherwise," in the defense of an action or proceeding is entitled to
indemnification as a matter of right (BCL Section 723(a)).
A New York corporation may generally purchase insurance, consistent with
the limitation of New York insurance law and regulatory supervision, to
indemnify the corporation for any obligation which it incurs as a result of the
indemnification of directors and officers under the provisions of the BCL, so
long as no final adjudication has established that the directors' or officers'
acts of active and deliberate dishonesty were material to the cause of action so
adjudicated or that the directors or officers personally gained in fact a
financial profit or other advance (BCL Section 726).
The Registrant's directors and officers are currently covered as insureds
under directors' and officers' liability insurance. Such insurance, subject to
annual renewal and certain rights of the insurer to terminate, provides an
aggregate maximum of $50,000,000 of coverage for directors and officers of the
Registrant and its subsidiaries against claims made during the policy period
relating to certain civil liabilities, including liabilities under the
Securities Act of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION AND METHOD OF FILING
- -------- --------------------------------
<C> <S>
2.1 Amended and Restated Agreement and Plan of Merger, dated as
of June 25, 1999, between Avnet and Marshall (incorporated
by reference to Appendix A to this Registration Statement on
Form S-4)
4.1 Form of Certificate representing shares of Avnet common
stock (incorporated by reference to Exhibit 4 to Avnet's
Registration Statement on Form S-2 (Registration No.
33-80932))
5.1 Opinion of Sullivan & Cromwell
8.1 Tax Opinion of Sullivan & Cromwell
8.2 Tax Opinion of O'Melveny & Myers LLP
</TABLE>
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<PAGE> 142
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION AND METHOD OF FILING
- -------- --------------------------------
<C> <S>
21.1 Subsidiaries
23.1 Consent of Arthur Andersen LLP
23.3 Consent of Sullivan & Cromwell (included in opinions filed
as Exhibit 5.1 and Exhibit 8.1 hereto)
23.4 Consent of O'Melveny & Myers LLP (included in opinion filed
as Exhibit 8.2 hereto)
24.1 Powers of Attorney
99.1 Form of Proxy Card of Marshall Industries
99.2 Form of Proxy Card of Avnet, Inc.
99.3 Consent of Donaldson, Lufkin & Jenrette Securities
Corporation
99.4 Consent of Merrill Lynch, Pierce, Fenner & Smith
99.5 Non-Cash Election Form
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) 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 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.
(b) 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.
(c) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (b) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act 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.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
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<PAGE> 143
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.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 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.
(f) 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> 144
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Phoenix, state of
Arizona, on September 7, 1999.
AVNET, INC.
By: /s/ ROY VALLEE
------------------------------------
Name: Roy Vallee
Title: Chairman of the Board,
Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
/s/ ROY VALLEE Chairman of the Board, Chief September 7, 1999
- ------------------------------------------------ Executive Officer and
Roy Vallee Director (principal
executive officer)
/s/ RAYMOND SADOWSKI Senior Vice President, Chief September 7, 1999
- ------------------------------------------------ Financial Officer and
Raymond Sadowski Assistant Secretary
(principal financial
officer)
/s/ JOHN F. COLE Controller (principal September 7, 1999
- ------------------------------------------------ accounting officer)
John F. Cole
* Director September 7, 1999
- ------------------------------------------------
Eleanor Baum
* Director September 7, 1999
- ------------------------------------------------
J. Veronica Biggins
* Director September 7, 1999
- ------------------------------------------------
Joseph F. Caligiuri
* Director September 7, 1999
- ------------------------------------------------
Lawrence W. Clarkson
* Director September 7, 1999
- ------------------------------------------------
Ehud Houminer
</TABLE>
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<PAGE> 145
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
* Director September 7, 1999
- ------------------------------------------------
James A. Lawrence
* Director September 7, 1999
- ------------------------------------------------
Salvatore J. Nuzzo
* Director September 7, 1999
- ------------------------------------------------
Frederic Salerno
* Director September 7, 1999
- ------------------------------------------------
Frederick S. Wood
*By: /s/ RAYMOND SADOWSKI
- ------------------------------------------------
Raymond Sadowski
Attorney-in-Fact
</TABLE>
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<PAGE> 146
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION AND METHOD OF FILING
- -------- --------------------------------
<C> <S>
2.1 Amended and Restated Agreement and Plan of Merger, dated as
of June 25, 1999, between Avnet and Marshall (incorporated
by reference to Appendix A to this Registration Statement on
Form S-4)
4.1 Form of Certificate representing shares of Avnet common
stock (incorporated by reference to Exhibit 4 to Avnet's
Registration Statement on Form S-2 (Registration No.
33-80932))
5.1 Opinion of Sullivan & Cromwell
8.1 Tax Opinion of Sullivan & Cromwell
8.2 Tax Opinion of O'Melveny & Myers LLP
21.1 Subsidiaries
23.1 Consent of Arthur Andersen LLP
23.3 Consent of Sullivan & Cromwell (included in opinions filed
as Exhibit 5.1 and Exhibit 8.1 hereto)
23.4 Consent of O'Melveny & Myers LLP (included in opinion filed
as Exhibit 8.2 hereto)
24.1 Powers of Attorney
99.1 Form of Proxy Card of Marshall Industries
99.2 Form of Proxy Card of Avnet, Inc.
99.3 Consent of Donaldson, Lufkin & Jenrette Securities
Corporation
99.4 Consent of Merrill Lynch, Pierce, Fenner & Smith
99.5 Non-Cash Election Form
</TABLE>
<PAGE> 1
EXHIBIT 5.1
September 7, 1999
Avnet, Inc.,
2211 South 47th Street,
Phoenix, Arizona 85034.
Dear Sirs:
We have acted as counsel to Avnet, Inc., a New York corporation (the
"Company"), in connection with the registration under the Securities Act of 1933
(the "Act") of 7,624,003 shares (the "Shares") of Common Stock, par value $1.00
per share, of the Company to be issued in connection with the merger (the
"Merger") of Marshall Industries, a California corporation ("Marshall"), into
the Company pursuant to the Amended and Restated Agreement and Plan of Merger,
dated as of June 25, 1999, between the Company and Marshall (the "Merger
Agreement"). For the purposes of this opinion, as your counsel we have examined
such corporate records, certificates and other documents and such questions of
law as we have considered necessary or appropriate for the purposes of this
opinion. Upon the basis of such examination, we advise you that, in our opinion:
(1) When the registration statement relating to the Shares (the
"Registration Statement") has become effective under the Act and the Merger
<PAGE> 2
Avnet, Inc. 2
Agreement has become effective in accordance with its terms, the Shares
will be validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the State of New York, and we are expressing no opinion
as to the effect of the laws of any other jurisdiction.
In rendering this opinion, we have relied as to certain matters upon
information obtained from public officials, officers of the Company and other
sources believed by us to be responsible.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Validity of
Shares" in the Prospectus. 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 Act.
Very truly yours,
/s/ Sullivan & Cromwell
-----------------------
SULLIVAN & CROMWELL
<PAGE> 1
EXHIBIT 8.1
September 7, 1999
Avnet, Inc.,
2211 South 47th Street,
Phoenix, Arizona 85034.
Ladies and Gentlemen:
We have acted as counsel to Avnet, Inc., a New York corporation ("Avnet"),
in connection with the planned merger (the "Merger") of Marshall Industries, a
California corporation ("Marshall"), with and into Avnet, pursuant to the
Amended and Restated Agreement and Plan of Merger, dated as of June 25, 1999
(the "Merger Agreement"), by and between Avnet and Marshall. Capitalized terms
used but not defined herein shall have the meanings specified in the Merger
Agreement.
We have assumed with your consent that the representations contained in
the letters of representation from Avnet and Marshall to us dated September 7,
1999 were true and correct when made and will be true and correct at the
Effective Time.
On the basis of the foregoing, and our consideration of such other
matters of fact and law as we have deemed necessary or appropriate, it is our
opinion, under presently applicable federal income tax law, that (i)
<PAGE> 2
Avnet, Inc. -2-
the Merger will be treated as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code") (ii) each
of Avnet and Marshall will be a party to that reorganization within the meaning
of Section 368(b) of the Code and (iii) neither Avnet nor Marshall will
recognize any gain as a result of the Merger. We express no opinion, however,
regarding the recognition of gain by Marshall (for example, by reason of holding
assets which are accounted for on a mark-to-market method for federal income tax
purposes) as a result of the closing of its taxable year in connection with the
Merger.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement filed in connection with the Merger and to the references
to this opinion in the Registration Statement. 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 of 1933.
Very truly yours,
/s/ Sullivan & Cromwell
-----------------------
SULLIVAN & CROMWELL
<PAGE> 1
EXHIBIT 8.2
September 8, 1999
Marshall Industries
9320 Telstar Avenue
El Monte, CA 91731
RE: PROPOSED MERGER OF MARSHALL INDUSTRIES WITH AND INTO AVNET,
INC.
Dear Sir or Madam:
You have requested our opinion concerning certain of the Federal income
tax consequences of the proposed statutory merger (the "Merger") of Marshall
Industries, a California corporation ("Marshall"), with and into Avnet, Inc., a
New York corporation ("Avnet").
In connection with this opinion, we have examined such documents and
matters of law and fact as we have considered appropriate, including the Amended
and Restated Agreement and Plan of Merger dated as of June 25, 1999, (the
"Merger Agreement"), and the Joint Proxy Statement/Prospectus filed on September
8, 1999 with the Securities and Exchange Commission (the "Proxy Statement"), and
with your consent have relied (without any independent investigation on our
part) on the representations contained in the letters of representation of
Marshall and Avnet each dated September 7, 1999 and delivered to us in
connection with the Merger (the "Representations").
Our opinion set forth below assumes that (1) the statements and facts
concerning the Merger in the Merger Agreement and the Proxy Statement are
accurate, (2) the Merger is consummated in the manner contemplated by, and in
accordance with the terms set forth in, the Merger Agreement and (3) the
Representations will be true and correct at the effective time of the Merger.
Based upon the aforementioned facts and representations, our review and
analysis of the documents described above and the current state of the law, it
is our opinion that for federal income tax purposes:
<PAGE> 2
Marshall Industries, September 8, 1999 - Page 2
1. The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Marshall and Avnet will each be a party to the reorganization within
the meaning of Section 368(b) of the Code.
3. The Marshall stockholders will not recognize gain or loss for Federal
income tax purposes upon receipt of Avnet common stock in the Merger,
except to the extent that they receive cash in lieu of fractional
shares.
This opinion is furnished by us as counsel for Marshall pursuant to
Section 5.3(b) of the Merger Agreement, and is intended solely for the benefit
of Marshall and its shareholders. We express no opinion concerning any tax
consequences of the Merger other than those specifically set forth herein.
This opinion is based on current authorities and upon facts and
assumptions as of this date. It is subject to change in the event of change in
the applicable law or a change in the interpretation of such law by the courts
or by the Internal Revenue Service. There can be no assurance that legislative
or administrative changes or court decisions will not be forthcoming that would
significantly modify this opinion. Any such changes may or may not be
retroactive with respect to transactions prior to the date of such changes. This
opinion has no binding effect or official status, and accordingly no assurance
can be given that the position set forth herein will be sustained by a court, if
contested. No ruling will be obtained from the Internal Revenue Service with
respect to the Merger.
We hereby consent to the filing of this opinion as an exhibit to the
Proxy Statement and to the references to this opinion in the Proxy Statement. 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 of 1933.
Respectfully submitted,
/s/ O'Melveny & Myers LLP
<PAGE> 1
EXHIBIT 21.1
AVNET, INC. AND SUBSIDIARIES
SUBSIDIARIES OF AVNET, INC.
<TABLE>
<CAPTION>
JURISDICTION
NAME OF INCORPORATION
- ---- ----------------
<S> <C>
Allied Electronics, Inc. Delaware
Avnet Bytech Ltd. England
Avnet CiNERGi Pte Ltd. Singapore
Avnet Computer Technologies, Inc. Delaware
Avnet Computer Technologies Leasing, Inc. Delaware
Avnet de Mexico, S.A. de C.V. Mexico
Avnet de Puerto Rico, Inc. Puerto Rico
Avnet Direct, Inc. Delaware
Avnet do Brasil Ltda. Brazil
Avnet EMG GmbH does business as Avnet E2000 Germany
Avnet EMG Ltd. does business as: England
Avnet Access
Avnet Time
Avnet EMG S.r.l. does business as: Italy
Avnet Adelsy
Avnet DeMico
Avnet Europe NV/SA Belgium
Avnet France, S.A. which includes three subsidiaries France
Avnet Gallium Israel
Avnet GTDG Singapore Pte Limited Singapore
Avnet Holding Corporation II Delaware
Avnet Holding Germany GmbH Germany
Avnet Holdings Limited England
Avnet, Inc. Delaware
Avnet International (Canada) Ltd. Ontario
Avnet Kopp (Pty.) Limited which includes two subsidiaries South Africa
Avnet Lyco Limited which includes one subsidiary Ireland
Avnet Marketing Services California
Avnet Max Limited India
Avnet -- Mercuries Technology Co., Ltd. Taiwan
Avnet Nortec AB which includes seven subsidiaries Sweden
Avnet Pacific (NZ) Limited New Zealand
Avnet Setron Elektronik Vertrieb GmbH which includes
two subsidiaries and affiliates Germany
Avnet WKK -- Hong Kong Limited Hong Kong
BFI Optilas International SA which includes
eleven subsidiaries France
Channel Master Satellite Systems, Inc. New York
Disti Export Trading Corp. Barbados
Optilas International SA which includes five subsidiaries France
Optional Systems Resource, Inc. Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of our report dated
July 29, 1998, included in Avnet, Inc.'s Annual Report on Form 10-K for the
year ended June 26, 1998, and our report dated August 25, 1999, included in
Marshall Industries Annual Report on Form 10-K for the year ended May 31, 1999,
and to all references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Phoenix, Arizona
September 7, 1999.
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
The undersigned director of Avnet Inc. does hereby constitute and appoint
David R. Birk and Raymond Sadowski, and each of them, her true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for her and in her name, place and stead, in any and all
capacities, to sign the Registration Statement on Form S-4 relating to the
merger of Marshall Industries with and into Avnet, Inc., and any amendments
thereto (including post-effective amendments), and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission. The undersigned further grants unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done
in connection with said filing, as fully to all intents and purposes as she
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents, or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 2nd day of September, 1999.
/s/ Eleanor Baum
------------------------------------
Eleanor Baum, Director
<PAGE> 2
POWER OF ATTORNEY
The undersigned director of Avnet Inc. does hereby constitute and appoint
David R. Birk and Raymond Sadowski, and each of them, her true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for her and in her name, place and stead, in any and all
capacities, to sign the Registration Statement on Form S-4 relating to the
merger of Marshall Industries with and into Avnet, Inc., and any amendments
thereto (including post-effective amendments), and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission. The undersigned further grants unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
connection with said filing, as fully to all intents and purposes as she might
or could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 3rd day of September, 1999.
/s/ J. Veronica Biggins
----------------------------------------
J. Veronica Biggins, Director
<PAGE> 3
POWER OF ATTORNEY
The undersigned director of Avnet Inc. does hereby constitute and appoint
David R. Birk and Raymond Sadowski, and each of them, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement on Form S-4 relating to the
merger of Marshall Industries with and into Avnet, Inc., and any amendments
thereto (including post-effective amendments), and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission. The undersigned further grants unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
connection with said filing, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his/her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 2nd day of September, 1999.
/s/ Joseph F. Caligiuri
----------------------------------------
Joseph F. Caligiuri, Director
<PAGE> 4
POWER OF ATTORNEY
The undersigned director of Avnet Inc. does hereby constitute and appoint
David R. Birk and Raymond Sadowski, and each of them, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement on Form S-4 relating to the
merger of Marshall Industries with and into Avnet, Inc., and any amendments
thereto (including post-effective amendments), and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission. The undersigned further grants unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
connection with said filing, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 3rd day of September, 1999.
/s/ Lawrence W. Clarkson
---------------------------------------
Lawrence W. Clarkson, Director
<PAGE> 5
POWER OF ATTORNEY
The undersigned director Avnet, Inc. does hereby constitute and appoint
David R. Birk and Raymond Sadowski, and each of them, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement on Form S-4 relating to the
merger of Marshall Industries with and into Avnet, Inc., and any amendments
thereto (including post-effective amendments), and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission. The undersigned further grants unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
connection with said filing, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his/her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 3rd day of September, 1999.
/s/ Ehud Houminer
------------------------------
Ehud Houminer, Director
<PAGE> 6
POWER OF ATTORNEY
The undersigned director of Avnet Inc. does hereby constitute and appoint
David R. Birk and Raymond Sadowski, and each of them, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement on Form S-4 relating to the
merger of Marshall Industries with and into Avnet, Inc., and any amendments
thereto (including post-effective amendments), and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission. The undersigned further grants unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
connection with said filing, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 3rd day of September, 1999.
/s/ James A. Lawrence
-------------------------------
James A. Lawrence, Director
<PAGE> 7
POWER OF ATTORNEY
The undersigned director of Avent Inc. does hereby constitute and appoint
David R. Birk and Raymond Sadowski, and each of them, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement on Form S-4 relating to the
merger of Marshall Industries with and into Avent, Inc., and any amendments
thereto (including post-effective amendments), and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission. The undersigned further grants unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
connection with said filing, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his/her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 3rd day of September, 1999.
/s/ Salvatore J. Nuzzo
---------------------------------
Salvatore J. Nuzzo, Director
<PAGE> 8
Power of Attorney
The undersigned director of Avnet Inc. does hereby constitute and appoint
David R. Birk and Raymond Sadowski, and each of them, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement on Form S-4 relating to the
merger of Marshall Industries with and into Avnet, Inc., and any amendments
thereto (including post-effective amendments), and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission. The undersigned further grants unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
connection with said filing, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his/her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 2nd day of September, 1999.
/s/ FREDERIC SALERNO
------------------------------------
Frederic Salerno, Director
<PAGE> 9
POWER OF ATTORNEY
The undersigned director of Avnet Inc. does hereby constitute and appoint
David R. Birk and Raymond Sadowski, and each of them, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement on Form S-4 relating to the
merger of Marshall Industries with and into Avnet, Inc., and any amendments
thereto (including post-effective amendments), and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission. The undersigned further grants unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done
in connection with said filing, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents, or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 3rd day of September, 1999.
/s/ Frederick S. Wood
------------------------------------
Frederick S. Wood, Director
<PAGE> 1
EXHIBIT 99.1
MARSHALL INDUSTRIES/PROXY 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I hereby appoint Gordon S. Marshall and Henry W. Chin, and each of them
or either of them with full power to act without the other and with full power
of substitution, my true and lawful attorneys and proxies, to vote all the
shares of stock of Marshall Industries held of record by me on September 7, 1999
and to act for me and in my name, place and stead at the special meeting of
Marshall shareholders to be held on October 19, 1999 or any adjournment thereof,
for the purpose of considering and voting upon the following:
1. Proposal to approve the Amended and Restated Agreement and
Plan of Merger dated as of June 25, 1999 between Avnet, Inc.
and Marshall Industries.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, the proxies are authorized to vote upon
any other business that may properly come before the special
meeting or any adjournments, postponements, continuations or
reschedulings of the special meeting.
(Please sign and date the reverse side)
<PAGE> 2
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1.
Please sign exactly as name appears below.
This Proxy should be dated, signed by the
shareholder as name appears hereof, and
returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity
should so indicate.
[Name and Address here]
___________________________________________
Signature
___________________________________________
Signature if held jointly
DATED: _____________________________, 1999
<PAGE> 3
INSTRUCTIONS FOR RECORD HOLDERS FOR TELEPHONE VOTING
Marshall encourages you to take advantage of a new and convenient way
by which you can submit your proxy. If you are a record holder, you can submit
your proxy by telephone. This eliminates the need to return the proxy card.
To submit your proxy by telephone you must use the control number
printed in the box above, just below the perforation. The series of numbers that
appear in the box above must be used to access the system.
To submit your proxy over the telephone on a touch-tone telephone call
1-877-393-4961 24 hours a day, 7 days a week.
Your telephone proxy authorizes the named proxies in the same manner as
if you marked, signed, dated and returned the proxy card.
IF YOU CHOOSE TO VOTE YOUR SHARES BY TELEPHONE, THERE IS NO NEED TO
MAIL BACK YOUR PROXY CARD.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
IF YOU SUBMIT YOUR PROXY BY TELEPHONE THERE IS NO NEED FOR YOU TO
MAIL BACK YOUR PROXY
THANK YOU FOR VOTING!
INSTRUCTIONS FOR BENEFICIAL HOLDERS FOR VOTING
Beneficial holders who hold their shares through a broker, nominee,
fiduciary or other custodian may be able to vote by telephone or through the
Internet. Beneficial holders should follow the instructions they receive from
the record holder of their shares with respect to voting.
<PAGE> 1
EXHIBIT 99.2
AVNET, INC.
Special Meeting of Shareholders
Tuesday, October 19, 1999
YOUR VOTING CARD IS ATTACHED BELOW.
You may vote by e-mail, by telephone or by conventional mail.
Please read the other side of this card carefully for instructions.
How ever you decide to vote, your representation
at the Special Meeting of Shareholders is important to Avnet.
- --------------------------------------------------------------------------------
AVNET, INC. -- PROXY FOR SPECIAL MEETING OF
SHAREHOLDERS ON OCTOBER 19, 1999
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder of AVNET, INC. (the "Company") hereby
constitutes and appoints Roy Vallee and Raymond Sadowski, or either of them, as
proxy of the undersigned, with full power of substitution and revocation, to
vote all shares of Common Stock of the Company standing in his or her name on
the books of the Company at the Special Meeting of Shareholders to be held at
10:00 a.m. in the Bisbee Room at the Pointe Hilton at South Mountain Resort
Hotel, Phoenix, Arizona 85044, on October 19, 1999, or at any adjournment
thereof, with all the powers which the undersigned would possess if personally
present, as designated on the reverse side.
The undersigned hereby instructs the said proxies (i) to vote in
accordance with the instructions indicated on the reverse side, BUT, IF NO
INSTRUCTION IS GIVEN ON THE REVERSE SIDE, TO VOTE "FOR" THE APPROVAL OF THE
AGREEMENT AND PLAN OF MERGER, and (ii) to vote in their discretion with respect
to such other matters (including matters incident to the conduct of the meeting)
as may properly come before the meeting.
The undersigned hereby acknowledges receipt of the Notice of Meeting
and Proxy Statement dated September 8, 1999 relating to the Special Meeting of
Shareholders to be held October 19, 1999.
(CONTINUED TO BE SIGNED ON REVERSE SIDE)
<PAGE> 2
AVNET, INC.
To Vote by E-mail:
- - Visit our electronic voting website on the Internet:
http://proxy.shareholder.com/avt
- - Enter your "control number" in the on-screen box, then click on
"Submit." Your control number is printed below.
- - Follow the on-screen instructions.
- - When you finish, review your vote. If the on-screen confirmation is
correct, click again on "Submit" to register your vote.
To Vote by Telephone:
- - Call our toll-free number from any Touch-Tone telephone in the United
States or Canada: 1-800-650-4886.
- - When prompted, enter your "control number," followed by the # sign.
Your control number is printed below.
- - Follow the recorded instructions.
- - When you finish, you will hear a recorded recap. If it is correct,
press "2" to register your vote.
To Vote by Mail:
- - Mark, sign and date the voting card which is attached below.
- - Return it in the postage-paid envelope we have provided. Make sure the
pre-printed address shows through the envelope window.
- -------------------------------------------------------------------------------
(a) To adopt the Amended and Restated Agreement and Plan of Merger dated as
of June 25, 1999 between the Company and Marshall Industries pursuant
to which Marshall Industries will be merged into the Company, which
will be the surviving corporation.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(b) Transaction of such other business as may properly come before the
meeting or any adjournment(s), postponement(s), continuation(s) or
rescheduling(s) thereof.
Signature should correspond with the stenciled name appearing hereon. When
signing in a fiduciary or representative capacity, give full title as such. When
more than one owner, each should sign.
Dated: _______________________ , 1999
_______________________ (L.S.)
_______________________ (L.S.)
Please Sign, Date and Return the Proxy Card Promptly Using the
Enclosed Envelope.
Votes MUST be indicated by (x) in Black or Blue ink.
<PAGE> 3
IF YOU CHOOSE TO VOTE YOUR SHARES THROUGH THE INTERNET OR BY TELEPHONE,
THERE IS NO NEED TO MAIL BACK YOUR PROXY CARD.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
IF YOU SUBMIT YOUR PROXY BY TELEPHONE OR THROUGH THE
INTERNET THERE IS NO NEED FOR YOU
TO MAIL BACK YOUR PROXY.
THANK YOU FOR VOTING!
<PAGE> 1
EXHIBIT 99.3
CONSENT OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
We hereby consent to (i) the inclusion of our opinion letter,
dated June 25, 1999, to the Board of Directors of Marshall Industries (the
"Company") as Appendix B to the Joint Proxy Statement/Prospectus of the Marshall
Industries and Avnet, Inc. which forms a part of this Registration Statement on
Form S-4, relating to the proposed merger of the Company with and into Avnet,
Inc., and (ii) all references in such Joint Proxy Statement/Prospectus to such
opinion under the captions "Summary" and "The Merger-Opinion of Marshall's
Financial Advisor". In giving such consent, we do not admit that we come within
the category of persons whose consent is required under Section 7 of, and we do
not thereby admit that we are "experts" with respect to any part of such
Registration Statement for purposes of, the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Jeffrey Raich
--------------------------------
Jeffrey Raich
Senior Vice President
Los Angeles, California
September 7, 1999
<PAGE> 1
EXHIBIT 99.4
[LETTERHEAD OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED]
We hereby consent to the inclusion of our opinion letter dated June 25,
1999 to the Board of Directors of Avnet, Inc. ("Avnet") as Appendix C to the
Joint Proxy Statement/Prospectus relating to the proposed merger of Avnet and
Marshall Industries and to the references thereto in such Joint Proxy
Statement/Prospectus under the captions "SUMMARY --- Opinions of Financial
Advisers," "THE MERGER --- Background of the Merger," "---- Avnet's Reasons for
the Merger; Recommendations of the Avnet Board of Directors" and "--- Opinion of
Avnet's Financial Adviser." In giving this consent, we do not admit that we come
within the category of persons whose consent is required under, and we do not
admit that we are "experts" for purposes of, the Securities Act of 1933 and the
rules and regulations promulgated thereunder.
New York, New York
September 7, 1999
By: /s/ Merrill Lynch, Pierce, Fenner & Smith Incorporated
-------------------------------------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
<PAGE> 1
Exhibit 99.5
NON-CASH ELECTION FORM
To accompany certificates representing shares of common stock ("Marshall Common
Stock"), $1.00 par value per share, of
MARSHALL INDUSTRIES
when submitted pursuant to an election ("Non-Cash Election") to receive
shares of common stock, par value $1.00 per share ("Non-Cash Election Shares"),
of AVNET, INC., a New York corporation ("Avnet"), in connection with the
proposed merger (the "Merger") of Marshall with and into Avnet.
DELIVER BY HAND, MAIL OR OVERNIGHT DELIVERY TO:
THE BANK OF NEW YORK
AS EXCHANGE AGENT FOR THE MERGER
AT
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Courier:
The Bank of New York The Bank of New York
Tender & Exchange Department Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
</TABLE>
IF YOU HAVE QUESTIONS OR WANT ADDITIONAL COPIES OF THIS NON-CASH ELECTION FORM,
PLEASE CONTACT CORPORATE INVESTOR COMMUNICATIONS, INC., WHICH IS ACTING AS
MARSHALL'S INFORMATION AGENT FOR THE MERGER, AT THE ADDRESS OR PHONE NUMBER
LISTED BELOW.
The Marshall Information Agent for the Merger is:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 Commerce Road
Carlstadt, New Jersey 07072-2586
(877) 393-4961 (toll free)
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
BOX I: ELECTION AND DESCRIPTION OF SHARES OF MARSHALL COMMON STOCK ENCLOSED
(Attach additional sheets if necessary)
(See Instructions.)
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF
NUMBER OF SHARES FOR
NAME AND ADDRESS OF REGISTERED HOLDER(S) SHARES WHICH A NON-
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEARS CERTIFICATE REPRESENTED BY CASH ELECTION IS
ON CERTIFICATE(S))* NUMBER EACH CERTIFICATE MADE
- ------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
TOTAL NUMBER
OF SHARES
- ------------------------------------------------------------------------------------------------------------------------
[ ] Check here if this election represents a revocation of an earlier election.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Only certificates registered in a single form may be deposited with this
Non-Cash Election Form. If certificates are registered in different forms (e.g.,
John R. Doe and J.R. Doe), it will be necessary to fill in, sign and submit as
many separate Forms of Non-Cash Election as there are different registrations of
certificates. Unless otherwise indicated, it will be assumed that all shares
listed in Box I are to be treated as having made a Non-Cash Election.
DELIVERY OF THIS NON-CASH ELECTION FORM TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE FOR THE EXCHANGE AGENT DOES NOT CONSTITUTE A VALID DELIVERY. PLEASE READ
1
<PAGE> 2
THE ACCOMPANYING INSTRUCTIONS CAREFULLY. COMPLETE THE SUBSTITUTE FORM W-9
INCLUDED WITH THIS NON-CASH ELECTION FORM AND SIGN IN BOX IV OF THIS NON-CASH
ELECTION FORM.
[ ] Check here if you cannot locate certificates. Upon receipt of this Non-Cash
Election Form, the Exchange Agent will contact you directly with replacement
instructions. You cannot submit an effective Non-Cash Election Form without
attaching your stock certificate(s) to this Non-Cash Election Form.
Therefore, if you wish to make an effective Non-Cash Election, it is
critical that you act immediately to obtain replacement stock certificates.
HOLDERS OF MARSHALL COMMON STOCK WHO DO NOT WISH TO MAKE A NON-CASH
ELECTION (THAT IS, THEY WANT TO RECEIVE ONLY CASH IN THE MERGER) (ANY SUCH
HOLDER, A "NON-ELECTING HOLDER") SHOULD NOT SUBMIT THIS NON-CASH ELECTION FORM.
EACH SHARE OF MARSHALL COMMON STOCK OWNED BY ANY SUCH NON-ELECTING HOLDER WILL
AUTOMATICALLY, SUBJECT TO PRORATION AS DESCRIBED IN THE PROXY STATEMENT (AS
DEFINED BELOW), BE CONVERTED INTO THE RIGHT TO RECEIVE AN AMOUNT EQUAL TO $39.00
IN CASH FROM AVNET FOLLOWING THE MERGER.
TO BE EFFECTIVE, THIS NON-CASH ELECTION FORM, TOGETHER WITH YOUR STOCK
CERTIFICATES (OR GUARANTEE OF DELIVERY OF SUCH STOCK CERTIFICATE(S)) MUST BE
RECEIVED BY THE EXCHANGE AGENT BEFORE THE ELECTION DEADLINE SPECIFIED IN THE
INSTRUCTIONS.
In connection with the Merger, the undersigned hereby submits the
certificate(s) for shares of Marshall Common Stock listed in BOX I and elects,
subject to proration and other conditions as set forth below, to have all or a
portion of the shares of Marshall Common Stock represented by such certificates
converted into the right to receive Non-Cash Election Shares following the
Merger.
By delivering certificates for shares of Marshall Common Stock, the
registered holder of such certificates releases Marshall, Avnet and their
respective affiliates, directors, officers, employees, partners, agents,
advisors and representatives, and their respective successors and assigns, from
any and all claims arising from or in connection with the purchase or ownership
of such Marshall Common Stock or the exchange of such Marshall Common Stock
pursuant to the Merger Agreement.
It is understood that this Non-Cash Election Form and the following
election are subject to (i) the terms, conditions and limitations set forth in
the Joint Proxy Statement/Prospectus dated September 8, 1999, relating to the
Merger (including all annexes thereto, and as it may be amended or supplemented
from time to time, the "Proxy Statement"), receipt of which is acknowledged by
the undersigned, (ii) the terms of the Amended and Restated Agreement and Plan
of Merger, dated as of June 25, 1999 (as the same may be amended or supplemented
from time to time, the "Merger Agreement"), a conformed copy of which appears as
Appendix A to the Proxy Statement, and (iii) the accompanying Instructions.
Capitalized terms not otherwise defined in this Non-Cash Election Form shall
have the meanings given to such terms in the Merger Agreement.
The undersigned understands that a Non-Cash Election is subject to certain
terms, conditions and limitations that have been set forth in the Merger
Agreement including, but not limited to, the fact that only 8,308,182 shares of
Marshall Common Stock will be converted into the right to receive Non-Cash
Election Shares in the Merger and the remaining outstanding shares of Marshall
Common Stock will be converted into the right to receive cash in the Merger. THE
UNDERSIGNED ACKNOWLEDGES THAT THE MERGER AGREEMENT PROVIDES FOR PRORATION, WITH
THE RESULT THAT THE UNDERSIGNED MAY RECEIVE A MIX OF CASH AND NON-CASH ELECTION
SHARES THAT DIFFERS FROM THE NON-CASH ELECTION MADE HEREBY.
The undersigned authorizes and instructs you, as Exchange Agent, to deliver
such certificate(s) of Marshall Common Stock to Marshall and to receive on
behalf of the undersigned, in exchange for the shares of Marshall Common Stock
represented thereby, any certificate for Non-Cash Election Shares or check for
cash issuable in the Merger pursuant to the Merger Agreement. If certificates of
Marshall Common Stock are not delivered herewith, there is furnished below a
guarantee of delivery of such certificates representing shares of Marshall
2
<PAGE> 3
Common Stock from a member of a national securities exchange, a member of the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company having an office in the United States.
The undersigned hereby represents and warrants that the undersigned is, as
of the date hereof, and will be as of the Closing Date, the registered holder of
the shares of Marshall Common Stock represented by the certificate(s) for
Marshall Common Stock surrendered herewith, with good title to such shares of
Marshall Common Stock and full power and authority (i) to sell, assign and
transfer such shares, free and clear of all liens, claims and encumbrances, and
not subject to any adverse claims and (ii) to make the Non-Cash Election
indicated herein. All authority conferred or agreed to be conferred in this
Non-Cash Election Form shall be binding upon the successors, assigns, heirs,
executors, administrators and legal representatives of the undersigned and shall
not be affected by, and shall survive, the death or incapacity of the
undersigned.
Unless otherwise indicated under Special Payment Instructions below, please
issue any certificate(s) for Non-Cash Election Shares and/or any check(s)
issuable in exchange for the shares of Marshall Common Stock represented by the
certificate(s) submitted hereby in the name of the registered holder(s) of such
Marshall Common Stock. Similarly, unless otherwise indicated under Special
Delivery Instructions, please mail any certificate for shares of Avnet Common
Stock and/or any check for cash issuable in exchange for the shares of Marshall
Common Stock represented by the certificates submitted hereby to the registered
holder(s) of the Marshall Common Stock at the address or addresses shown above.
BOX II
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------
SPECIAL ISSUANCE AND PAYMENT
INSTRUCTIONS
(SEE INSTRUCTIONS)
To be completed ONLY if the certificate(s) for Non-Cash
Election Shares are to be registered in the name of, or
the check(s) are to be made payable to, someone other
than the registered holder(s) of shares of Marshall
Common Stock.
Issue the certificate(s) and/or the check to:
Name -------------------------------------------------
(Please Print)
Address -----------------------------------------------
--------------------------------------------------------
(Include Zip Code)
--------------------------------------------------------
Tax Identification or Social Security No.)
--------------------------------------------------------
* Please note that the person named in this Special
Issuance and Payment Instructions must be the person
who completes the Substitute Form W-9.
- ----------------------------------------------------------------
</TABLE>
BOX III
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS)
To be completed ONLY if the certificate(s) for Non-Cash
Election Shares are to be registered in the name of, or
the check(s) are to be made payable to, the registered
holder(s) of shares of Marshall Common Stock, but are to
be sent to someone other than the registered holder(s)
or to an address other than the address of the
registered holder(s) set forth above.
Deliver the certificate(s) and/or the check to:
Name -------------------------------------------------
(Please Print)
Address -----------------------------------------------
--------------------------------------------------------
(Include Zip Code)
- ----------------------------------------------------------------
</TABLE>
3
<PAGE> 4
BOX IV: PLEASE SIGN HERE
(SEE INSTRUCTIONS)
The undersigned represents and warrants that the undersigned has full power
and authority to transfer the shares of Marshall Common Stock surrendered hereby
and that the transferee will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim when the shares are accepted for exchange by the Exchange
Agent. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent to be necessary and desirable to complete
the transfer of the shares of Marshall Common Stock surrendered hereby.
<TABLE>
<S> <C>
- -------------------------------------------------------- Name: -------------------------------------------------
Signature of Owner (Please Print)
Dated: ------------------------------------------------- Telephone Number
(including area code): --------------------------------
Tax Identification or
Social Security Number: ------------------------------
- -------------------------------------------------------- Name: -------------------------------------------------
Signature of Owner (Please Print)
Dated: ------------------------------------------------- Telephone Number
(including area code): --------------------------------
Tax Identification or
Social Security Number: ------------------------------
- -------------------------------------------------------- Name: -------------------------------------------------
Signature of Owner (Please Print)
Dated: ------------------------------------------------- Telephone Number
(including area code): --------------------------------
Tax Identification or
Social Security Number: ------------------------------
</TABLE>
Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or any other person acting in a
fiduciary or representative capacity, please set forth the following information
and see Instructions.
Name(s):
- --------------------------------------------------------------------------------
Capacity (full title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
Telephone Number (including area code):
- --------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS)
The undersigned hereby guarantees the signature(s) which appear(s) on this
Non-Cash Election Form.
Name Of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
Authorized Signature:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
Telephone Number (Including Area Code):
- ------------------------------------------------------------------------
4
<PAGE> 5
BOX V: GUARANTEE OF DELIVERY
(TO BE USED ONLY IF CERTIFICATES ARE NOT SURRENDERED HEREWITH)
(SEE INSTRUCTIONS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------
The undersigned is: (1) a member of a national securities exchange; (2) a member of the National Association of Securities
Dealers, Inc.; or (3) a commercial bank or trust company having an office in the United States; and guarantees to deliver
to the Exchange Agent the certificates for shares of Marshall Common Stock to which this Non-Cash Election Form relates,
duly endorsed in blank or otherwise in form acceptable for transfer on the books of Marshall, no later than 5:00 P.M. New
York City time on the third New York Stock Exchange trading day after the date of execution of this guarantee of delivery.
- -----------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------
(Address)
- ----------------------------------------------------------- --------------------------------------------------------
Firm -- (Please Print) --------------------------------------------------------
- ----------------------------------------------------------- --------------------------------------------------------
(Authorized Signature) (Telephone Number -- including area code)
- ----------------------------------------------------------- --------------------------------------------------------
(Date) (Contact Name)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 6
INSTRUCTIONS FOR NON-CASH ELECTION FORM
A. SPECIAL CONDITIONS.
1. Decision to Elect Non-Cash Shares. If you wish to receive only cash in
connection with the Merger, you should not submit this Non-Cash Election Form.
Instead, you will received a Letter of Transmittal after the Merger for your
shares of Marshall Common Stock to be surrendered to the Exchange Agent in
exchange for the merger consideration.
2. Time in Which to Elect. To be effective, a Non-Cash Election pursuant
to the terms and conditions set forth herein on this Non-Cash Election Form or a
facsimile hereof, accompanied by the above-described certificates representing
shares of Marshall Common Stock or a proper guarantee of delivery thereof, must
be received by the Exchange Agent, at the address set forth above, no later than
5:00 P.M., New York City time, on October 18, 1999 (the "Election Deadline").
Holders of Marshall Common Stock whose stock certificates are not immediately
available may also make an effective Non-Cash Election by completing this
Non-Cash Election Form or a facsimile hereof and having the Guarantee of
Delivery box (BOX V) properly completed and duly executed (subject to the
condition that the certificates for which delivery is thereby guaranteed are in
fact delivered to the Exchange Agent, duly endorsed in blank or otherwise in
form acceptable for transfer on the books of Marshall, no later than 5:00 P.M.,
New York City time, on the third New York Stock Exchange trading day after the
date of execution of such guarantee of delivery). Each share of Marshall Common
Stock with respect to which the Exchange Agent shall have not received an
effective Non-Cash Election prior to the Election Deadline, or with respect to
which the proration procedures set forth in the Proxy Statement pertain,
outstanding at the Effective Time of the Merger will be converted into the right
to receive an amount equal to $39.00 in cash from Avnet following the Merger.
See Instruction C.
3. Revocation of Non-Cash Election. Any Non-Cash Election may be revoked
by giving written notice to the Exchange Agent prior to the Election Deadline.
Such notice must specify the person in whose name the shares of Marshall Common
Stock to be withdrawn had been deposited, the number of shares to be withdrawn,
the name of the registered holder thereof, and the serial numbers shown on the
certificate(s) representing the shares to be withdrawn. If a Non-Cash Election
is revoked, and the certificate(s) for shares withdrawn, the Marshall Common
Stock certificate(s) submitted therewith will be promptly returned by the
Exchange Agent to the person who submitted such certificate(s).
4. Termination of Right to Elect. If for any reason the Merger is not
consummated or is abandoned, all Forms of Non-Cash Election will be void and of
no effect. Certificate(s) for Marshall Common Stock previously received by the
Exchange Agent will be returned promptly by the Exchange Agent to the person who
submitted such stock certificate(s).
B. ELECTION AND PRORATION PROCEDURES.
A description of the election and proration procedures is set forth in the
Proxy Statement under "The Merger -- Terms of the Merger." A full statement of
the election and proration procedures is contained in the Merger Agreement and
all Non-Cash Elections are subject to compliance with such procedures. IN
CONNECTION WITH MAKING ANY NON-CASH ELECTION, A HOLDER OF MARSHALL COMMON STOCK
SHOULD READ CAREFULLY, AMONG OTHER MATTERS, THE AFORESAID DESCRIPTION AND
STATEMENT AND THE INFORMATION CONTAINED IN THE PROXY STATEMENT UNDER "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES."
BECAUSE OF THE LIMITATIONS ON THE AGGREGATE AMOUNT OF CASH CONSIDERATION
AND STOCK CONSIDERATION TO BE ISSUED BY AVNET IN THE MERGER, YOU MAY NOT RECEIVE
THE FORM OF CONSIDERATION THAT YOU ELECT. IF THE ELECTIONS RESULT IN THE
OVERSUBSCRIPTION OF EITHER CASH CONSIDERATION OR STOCK CONSIDERATION, THE
PRORATION PROCEDURES FOR ALLOCATING CASH AND SHARES OF AVNET COMMON STOCK SET
FORTH IN ARTICLE I OF THE MERGER AGREEMENT AND DESCRIBED
6
<PAGE> 7
IN THE PROXY STATEMENT UNDER THE HEADING "THE MERGER -- TERMS OF THE MERGER"
WILL BE FOLLOWED BY THE EXCHANGE AGENT. SUCH HOLDERS WILL NOT BE ABLE TO CHANGE
THE NUMBER OF NON-CASH ELECTION SHARES OR THE AMOUNT OF CASH ALLOCATED TO THEM
PURSUANT TO SUCH PROCEDURES. ALL DECISIONS BY THE EXCHANGE AGENT WITH RESPECT TO
THIS ALLOCATION PROCESS WILL BE FINAL AND BINDING.
C. RECEIPT OF NON-CASH ELECTION SHARES OR CHECKS.
As soon as practicable after the Effective Time of the Merger, the Exchange
Agent will mail certificate(s) for Non-Cash Election Shares and/or cash payments
by check to the holders of Marshall Common Stock with respect to each share of
Marshall Common Stock which is included in any effective Non-Cash Election.
Holders of Marshall Common Stock who declined to make a Non-Cash Election, or
failed to make an effective Non-Cash Election, with respect to any or all of
their shares will receive, for each such share, the right to receive an amount
equal to $39.00 in cash, subject to proration, as soon as practicable after the
certificate(s) representing such share or shares have been submitted for
cancellation. In no event shall the holder of any surrendered certificate for
Shares of Common Stock be entitled to receive any interest or any cash to be
received in the Merger.
No fractional Non-Cash Election Shares will be issued in connection with
the Merger. In lieu thereof, each fractional share shall be exchanged for an
amount in cash (without interest) equal to the product of such fraction
multiplied by the average of the closing trade prices of Avnet's Common Stock
for the twenty consecutive trading days ending on the fifth trading day before
the date of the meeting of Marshall's shareholders to vote with respect to the
Merger, as set forth in Section 1.10(e)(2) of the Merger Agreement.
D. GENERAL.
1. Execution and Delivery. This Non-Cash Election Form or a facsimile
hereof must be properly filled in, dated and signed in BOX IV, and must be
delivered (together with stock certificate(s) representing the shares of
Marshall Common Stock as to which the Non-Cash Election is made or with a duly
signed guarantee of delivery of such certificate(s)) to the Exchange Agent at
the address set forth above for the Exchange Agent.
THE METHOD OF DELIVERY OF CERTIFICATE(S) AND ALL OTHER REQUIRED DOCUMENTS
IS AT THE OPTION AND RISK OF THE SHAREHOLDER, BUT IF SENT BY MAIL, IT IS
RECOMMENDED THAT THEY BE SENT BY REGISTERED MAIL WITH RETURN RECEIPT REQUESTED.
2. Inadequate Space. If there is insufficient space on this Non-Cash
Election Form to list all your stock certificates being submitted to the
Exchange Agent, please attach a separate list.
3. Guarantee of Signatures. Signatures on all Forms of Non-Cash Election
must be guaranteed by a financial institution that is a member of a Securities
Transfer Association approved medallion program such as STAMP, SEMP or MSP (an
"Eligible Institution"), except in cases where securities are surrendered (i) by
a registered holder of the securities who has not completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Form of Election or (ii) for the account of an Eligible
Institution. See Instruction D.5.
4. Tender by Registered Holder. Only the registered holder of the shares
of Marshall Common Stock described in Box I may make the Non-Cash Election and
deliver those shares. Any beneficial owner that is not the registered holder of
those shares and that wishes to make the Non-Cash Election and deliver those
shares should arrange with the registered holder to execute and deliver this
Non-Cash Election Form on behalf of that owner or that owner must, prior to
completing and executing this Non-Cash Election Form and delivering those
shares, either make appropriate arrangements to register ownership of the shares
in that beneficial owner's name or obtain a properly completed stock power from
the registered owner.
7
<PAGE> 8
5. Book-entry Delivery. The Exchange Agent will make a request to
establish an account with respect to the shares of Marshall Common Stock to be
tendered in connection with the merger at Depositary Trust Company ("DTC")
within two business days after the date of the mailing of this Non-Cash Election
Form to the Marshall shareholders. Any financial institution that is a
participant in DTC's system may make a book-entry transfer of shares of Marshall
Common Stock by causing DTC to transfer those shares into the Exchange Agent's
account at DTC in accordance with DTC's procedures for transfer. Although you
may effect the delivery of shares of Marshall Common Stock through book-entry
transfer at DTC before the Election Deadline, you must deliver a completed and
signed Non-Cash Election Form with any required signature guarantees to the
Exchange Agent at one of the addresses listed above before the Election
Deadline. In addition, for such Non-Cash Election Form to be effective,
confirmation of book-entry transfer of such shares of Marshall Common Stock into
the Exchange Agent's account at DTC must be received by the Exchange Agent no
later than the Election Deadline. You should not send this Election Form or any
of the other required documents included with this Non-Cash Election Form to DTC
because a delivery to DTC of the documents will not constitute a delivery to the
Exchange Agent.
6. Signatures. The signature (or signatures, in the case of certificates
owned by two or more joint holders) on this Form of Election should correspond
exactly with the name(s) as written on the face of the certificate(s) submitted,
unless shares of Marshall Common Stock described on this Non-Cash Election Form
have been assigned by the registered holder(s), in which event this Non-Cash
Election Form should be signed in exactly the same form as the name(s) of the
last transferee(s) indicated on the transfers attached to or endorsed on the
certificates.
If this Non-Cash Election Form is signed by a person or persons other than
the registered owner(s) of the certificates listed, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered owner(s) appear on the certificates.
If this Non-Cash Election Form or any stock certificate(s) or stock
power(s) are signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or any other person acting in a
fiduciary or representative capacity, the person signing must give such person's
full title in such capacity, and appropriate evidence of authority to act in
such capacity must be forwarded with this Non-Cash Election Form.
7. Lost, Stolen or Destroyed Certificates. If your stock certificate(s)
has been either lost or destroyed, please check the box on the front of the
Non-Cash Election Form and the appropriate forms for replacement will be sent to
you. You will then be instructed as to the steps you must take in order to
receive a stock certificate(s) representing Non-Cash Election Shares and/or any
checks in accordance with the Merger Agreement.
8. Stock Transfer Taxes. If payment for securities is to be made to any
person other than the registered holder, or if surrendered certificates are
registered in the name of any person other than the person(s) signing the
Non-Cash Election Form, the amount of any stock transfer taxes (whether imposed
on the registered holder or such person) payable as a result of the transfer to
such person will be deducted from the payment for such securities if
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
not submitted.
9. New Certificates and/or Checks in Same Name. If any stock
certificate(s) representing Non-Cash Election Shares or any check(s) in respect
of Non-Cash Election Shares are to be registered in, or made payable to the
order of, exactly the same name(s) that appears on the certificate(s)
representing shares of Marshall Common Stock submitted with the Non-Cash
Election Form, no endorsement of certificate(s) or separate stock power(s) are
required.
10. New Certificates and Checks in Different Name. If any stock
certificate(s) representing Non-Cash Election Shares or any check(s) in respect
of Non-Cash Election Shares are to be registered in, or made payable to the
order of, other than exactly the same name(s) that appear on the certificate(s)
representing shares of Marshall Common Stock submitted with the Non-Cash
Election Form, such exchange shall not be made by the Exchange Agent unless the
certificates submitted are endorsed, BOX II is completed, and the
8
<PAGE> 9
signature is guaranteed in BOX IV by a member of a national securities exchange,
a member of the National Association of Securities Dealers, Inc. or a commercial
bank (not a savings bank or a savings & loan association) or trust company in
the United States which is a member in good standing of the Exchange Agent's
Medallion Program.
11. Special Delivery Instructions. If the checks are to be payable to the
order of, or the certificates for Non-Cash Election Shares are to be registered
in, the name of the registered holder(s) of shares of Marshall Common Stock, but
are to be sent to someone other than the registered holder(s) or to an address
other than the address of the registered holder(s), it will be necessary to
indicate such person or address in BOX III.
12. Miscellaneous. A single check and/or a single stock certificate
representing Non-Cash Election Shares will be issued in exchange for shares of
Marshall Common Stock submitted herewith.
13. Backup Federal Income Tax Withholding and Substitute Form W-9. Under
the "backup withholding" provisions of Federal income tax law, the Exchange
Agent may be required to withhold 31% of the amount of any payment made to
holders of Marshall Common Stock pursuant to the Merger. To prevent backup
withholding, each holder should complete and sign the Substitute Form W-9
included in the Non-Cash Election Form and either: (a) provide the correct
taxpayer identification number ("TIN") and certify, under penalties of perjury,
that the TIN provided is correct (or that such holder is awaiting a TIN), and
that (i) the holder has not been notified by the Internal Revenue Service
("IRS") that the holder is subject to backup withholding as a result of failure
to report all interest or dividends, or (ii) the IRS has notified the holder
that the holder is no longer subject to backup withholding; or (b) provide an
adequate basis for exemption. If the box in Part 2 of the Substitute Form W-9 is
checked, the Exchange Agent shall retain 31% of payments made to a holder during
the sixty (60) day period following the date of the Substitute Form W-9. If the
holder furnishes the Exchange Agent with his or her TIN within sixty (60) days
of the date of the Substitute Form W-9, the Exchange Agent shall remit such
amounts retained during the sixty (60) day period to the holder and no further
amounts shall be retained or withheld from payments made to the holder
thereafter. If, however, the holder has not provided the Exchange Agent with his
or her TIN within such sixty (60) day period, the Exchange Agent shall remit
such previously retained amounts to the IRS as backup withholding and shall
withhold 31% of all payments to the holder thereafter until the holder furnishes
a TIN to the Exchange Agent. In general, if a holder is an individual, the TIN
is the Social Security number of such individual. If the certificates for
Marshall Common Stock are registered in more than one name or are not in the
name of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 ("Guidelines") for
additional guidance on which number to report. If the Exchange Agent is not
provided with the correct TIN or an adequate basis for exemption, the holder may
be subject to a $50 penalty imposed by the IRS and backup withholding at a rate
of 31%. Certain holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order to satisfy the Exchange Agent that a foreign individual
qualifies as an exempt recipient, such holder must submit a statement
(generally, IRS Form W-8), signed under penalties of perjury, attesting to that
individual's exempt status. A form for such statements can be obtained from the
Exchange Agent.
For further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a TIN if you do not
have one and how to complete the Substitute Form W-9 if Marshall Common Stock is
held in more than one name), consult the enclosed Guidelines.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Marshall Common Stock to be deemed invalidly delivered, but may require the
Exchange Agent to withhold 31% of the amount of any payments made pursuant to
the Merger. Backup withholding is not an additional Federal income tax. Rather,
the Federal income tax liability of a person subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
14. Additional Copies. Additional copies of this Non-Cash Election Form
may be obtained from The Bank of New York at the address listed above.
9
<PAGE> 10
All questions with respect to this Non-Cash Election Form, the Non-Cash
Elections (including, without limitation, questions relating to the timeliness
or effectiveness of revocation of any Non-Cash Election and computations as to
proration), and the validity, form and eligibility of any surrender of
certificates will be determined by the Exchange Agent and such determination
shall be final and binding. Marshall and Avnet reserve the right to waive any
irregularities or defects in the surrender of any certificates. A surrender will
not be deemed to have been made until all irregularities have been cured or
waived.
10
<PAGE> 11
- --------------------------------------------------------------------------------
SUBSTITUTE FORM W-9 REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION
(PLEASE REFER TO ACCOMPANYING GUIDELINES)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PART 1 -- PLEASE ENTER YOUR
SOCIAL SECURITY NUMBER OR
EMPLOYER IDENTIFICATION NUMBER
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PART 2 -- CERTIFICATION PART 3 -- CERTIFICATION FOR
FOREIGN RECORD HOLDERS
Please check the box at the right if you have applied for,
and are awaiting receipt of, your Taxpayer Identification Under penalties of perjury, I certify that
Number. [ ] I am not a United States citizen or
resident (or I am signing for a foreign
UNDER PENALTIES OF PERJURY, I CERTIFY THAT: corporation, partnership, estate or
trust).
(1) The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to SIGNATURE: -------------------------
be issued to me) and
DATE: ---------------------------------
(2) I am not subject to backup withholding either because I
have not been notified by the Internal Revenue Service ------------------------------------------
('IRS') that I am subject to backup withholding as a
result of failure to report all interest or dividends,
or the IRS has notified me that I am no longer subject
to backup withholding.
Certificate Instructions -- You may cross out item (2)
in Part 2 above if you have been notified by the IRS
that you are subject to backup withholding because of
underreporting interest or dividends on your tax
return. However, if after being notified by the IRS
that you were subject to backup withholding you
received another notification from the IRS stating that
you are no longer subject to backup withholding, do not
cross out item (2).
</TABLE>
SIGNATURE:
- ---------------------------------------------------------- Date:
-------------------------------------
- --------------------------------------------------------------------------------
IF YOU CHECKED THE BOX IN PART 2 OF THE SUBSTITUTE FORM W-9, YOU MUST SIGN AND
DATE THE FOLLOWING CERTIFICATION:
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification Number
has not been issued to me, and that I mailed or delivered an application to
receive a Taxpayer Identification Number to the appropriate IRS Center or
Social Security Administration Office (or I intend to mail or deliver an
application in the near future). I understand that if I do not provide a
Taxpayer Identification Number to the payer, 31% of all payments made to me
pursuant to this Merger shall be retained until I provide a Taxpayer
Identification Number to the payer and that, if I do not provide my Taxpayer
Identification Number within 60 days, such retained amounts shall be remitted
to the IRS as backup withholding and 31% of all reportable payments made to me
thereafter will be withheld and remitted to the IRS until I provide a Taxpayer
Identification Number.
SIGNATURE:
------------------------------------------------------------ Date:
----------------------------------------
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU.
- --------------------------------------------------------------------------------
11
<PAGE> 12
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE
SOCIAL SECURITY
NUMBER OF--
- ------------------------------------------------------------
1. An individual The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if
the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent
minor, or incompetent person person(3)
7. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under State law
8. Sole proprietorship account The owner(4)
- ------------------------------------------------------------
- ------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER
IDENTIFICATION
NUMBER OF--
- ------------------------------------------------------------
9. A valid trust, estate, or pension Legal entity (Do
trust not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school district,
or prison) that receives
agricultural program payments
- ------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a Social Security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your Social Security number or
Employer Identification Number (if you have one).
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
12
<PAGE> 13
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number (for business and all other
entities), at the local office to the Social Security Administration or the
Internal Revenue Service (the "IRS") and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation
- A financial institution.
- An organization exempt from tax under section 501(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), or an individual retirement plan, or
a custodial account under section 403(b)(7) of the Code, if the account
satisfies the requirements of section 401(f)(2) of the Code.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a) of the Code.
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1) of the Code.
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
- A middleman known in the investment community as a nominee or who is listed
in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441 of
the Code.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
- Section 401(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852 of the Code).
- Payments described in section 6049(b)(5) of the Code to nonresident aliens.
- Payments on tax-free covenant bonds under Section 1451 of the Code.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt Payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A of the Code and the Treasury regulations promulgated thereunder.
PRIVACY ACT NOTICE. Section 6109 of the Code requires most recipients of
dividend, interest, or other payments to give taxpayer identification numbers to
payers who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your taxpayer identification number to payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to a reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT
YOUR TAX CONSULTANT OR THE IRS
