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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
KENT ELECTRONICS CORPORATION
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, without par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
490553104
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(CUSIP Number)
David R. Birk
Senior Vice President, General Counsel and Secretary
Avnet, Inc.
2211 South 47th Street
Phoenix, Arizona 85034
(480) 643-2000
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
With a copy to:
James E. Abbott, Esq.
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
(212) 732-3200
March 21, 2001
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240.13d-7 for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
CUSIP No. 490553104
1 NAME OF REPORTING PERSON: Avnet, Inc.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY): 11-1890605
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS: WC, OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e): [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION: New York
NUMBER OF 7 SOLE VOTING POWER: 2,863,474 Shares*
SHARES
BENEFICIALLY 8 SHARED VOTING POWER: 592,224 Shares
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER: 2,863,474 Shares*
REPORTING
PERSON WITH 10 SHARED DISPOSITIVE POWER: -0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 3,455,698 Shares
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 10.97% (assuming
exercise of an option)
14 TYPE OF REPORTING PERSON: CO
________________________
* Issuable upon exercise of an option.
-2-
ITEM 1. Security and Issuer.
This Statement on Schedule 13D (this "Schedule 13D") relates to shares of
common stock, without par value ("Kent Common Stock"), of Kent Electronics
Corporation, a Texas corporation ("Kent" or the "Issuer"). The principal
executive offices of the Issuer are located at 1111 Gillingham Lane, Sugar Land,
Texas 77478.
ITEM 2. Identity and Background.
This Statement is being filed by Avnet, Inc., a New York corporation
("Avnet"). Avnet is one of the world's largest industrial distributors of
electronic components and computer products, with sales of $9.17 billion in its
fiscal year ended June 30, 2000. The principal executive offices of Avnet are
located at 2211 South 47th Street, Phoenix, Arizona 85034.
The name, business address, present principal occupation or employment, and
citizenship of each director and executive officer of Avnet is set forth in
Schedule I hereto and is incorporated herein by reference.
During the last five years, neither Avnet, nor, to the knowledge of Avnet,
any of the persons listed on Schedule I hereto, (1) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(2) has been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
ITEM 3. Source and Amount of Funds or Other Consideration.
As described in Item 4 hereof, Avnet has entered into a Stock Option
Agreement (as defined in Item 4 below) with Kent, in which Kent has granted
Avnet an option to acquire up to 2,863,474 shares of Kent Common Stock at a
price of $22.48 per share. Avnet shall pay the exercise price under the Stock
Option Agreement in cash or, in its sole discretion, with a combination of cash
and seven-year senior subordinated notes to be issued by Avnet to Kent. If Avnet
exercises the option, Avnet currently anticipates that funds for such exercise,
or for payment of the senior subordinated notes, would be provided from Avnet's
working capital.
No funds were used by Avnet in connection with entering into any of the
agreements referred to in Item 4.
-3-
ITEM 4. Purpose of Transaction.
On March 21, 2001, Avnet, Alpha Acquisition Corp., a wholly-owned
subsidiary of Avnet ("Merger Sub"), and Kent entered into an Agreement and Plan
of Merger (the "Merger Agreement") providing for, among other things, the merger
of Merger Sub with and into Kent (the "Merger"). Following the Merger, the
separate corporate existence of Merger Sub will cease, and Kent will continue as
the surviving corporation in the Merger (the "Surviving Corporation") and will
be a wholly-owned subsidiary of Avnet.
Pursuant to the terms of the Merger Agreement and subject to adjustments as
set forth therein, at the effective time of the Merger, each share of Kent
Common Stock issued and outstanding immediately prior to the effective time
(other than certain shares to be cancelled) will be converted into the right to
receive 0.87 of a fully paid and nonassessable share of Avnet common stock.
Consummation of the Merger is subject to certain conditions set forth in
the Merger Agreement, including (i) the approval of Avnet's and Kent's
shareholders in accordance with applicable Texas law and the policies of the New
York Stock Exchange, (ii) the approvals required by any governmental entities,
and (iii) the expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as
other customary conditions.
Pursuant to the Merger Agreement, (i) the articles of incorporation of Kent
in effect immediately prior to the effective time of the Merger will be the
articles of incorporation of the Surviving Corporation at and after the
effective time, until duly amended in accordance with their terms and the
applicable provisions of Texas law, (ii) the by-laws of Kent in effect
immediately prior to the effective time will be the by-laws of the Surviving
Corporation at and after the effective time, until duly amended in accordance
with their terms and the applicable provisions of Texas law, and (iii) the
directors of Merger Sub immediately prior to the effective time will be the
directors of the Surviving Corporation at and after the effective time, and the
individuals specified by Avnet in writing prior to the effective time will be
the officers of the Surviving Corporation at and after the effective time, in
each case 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 articles of incorporation and by-laws.
The Merger Agreement contains certain customary restrictions on the conduct
of the business of Kent pending the Merger, including certain customary
restrictions relating to the capital stock of Kent. Pursuant to the Merger
Agreement, Kent has agreed, among other things, that, after the date of the
Merger Agreement and prior to the effective time of the Merger, it will not
declare or pay any dividends on or make other distributions in respect of any of
its capital stock.
If the Merger is consummated, the Kent Common Stock will be delisted from
the New York Stock Exchange and its registration under Section 12(b) of the
Securities Exchange Act of 1934 will be terminated.
The Merger Agreement is attached as Exhibit 1 hereto and is incorporated
herein by reference in its entirety. The foregoing summary of the Merger
Agreement does not purport to be complete and is qualified in its entirety by
reference to such exhibit.
-4-
As provided in the Merger Agreement, Avnet and Kent entered into a Stock
Option Agreement dated as of March 21, 2001 (the "Stock Option Agreement"),
under which Kent granted Avnet an option (the "Kent Option") to purchase up to
2,863,474 shares of Kent Common Stock, equal to 10% of the issued and
outstanding shares of Kent Common Stock on March 21, 2001, at an exercise price
of $22.48 per share, subject to customary anti-dilution adjustments. The Kent
Option will only become exercisable if:
o any person unaffiliated with Avnet or Kent announces an intention to
acquire more than a majority of the outstanding shares of Kent common
stock, or
o Kent terminates the Merger Agreement for the purpose of entering into
an agreement with a person who has made a "superior proposal" to
acquire Kent, or
o Avnet terminates the Merger Agreement because
(a) Kent's board of directors has withdrawn, modified or changed its
approval or recommendation of the Merger Agreement or the Merger
in a manner adverse to Avnet, or has resolved to do so, or
(b) Kent's board of directors has approved or recommended a "superior
proposal," or
(c) Kent's board of directors has without Avnet's written consent
redeemed Kent's preferred share purchase rights attached to the
Kent Common Stock, or amended its shareholder rights agreement,
for any reason other than (1) to facilitate the transactions
contemplated by the Merger Agreement, or (2) following
termination of the Merger Agreement by Kent for the purpose of
entering into an agreement with a person that has made a
"superior proposal", or
o (a) Kent terminates the Merger Agreement because (1) the Merger is
not consummated by September 30, 2001, and Kent has not failed to
perform or observe in any material respect any of its covenants
and agreements in the Merger Agreement, or (2) the Kent
shareholders did not approve the Merger Agreement, or
(b) Avnet terminates the Merger Agreement when it is not in material
breach of any provision of the Merger Agreement in a manner that
has or is reasonably likely to have a material adverse effect on
Kent, because Kent has materially breached any provision of the
Merger Agreement in a manner that has or is reasonably likely to
have a material adverse effect on Avnet, or which may reasonably
be expected to prevent or materially delay the Merger,
and within one year following the termination of the Merger Agreement, Kent
enters into a written agreement with any person other than Avnet that has
made or in the future makes an "acquisition proposal" for Kent, and
consummates a transaction or series of transactions with that person in
which more than a majority of the Kent common stock or a majority of the
assets of Kent are transferred to that person or any of its affiliates.
-5-
Also in connection with the Merger Agreement, Avnet entered into Inducement
Agreements dated as of March 21, 2001 (the "Inducement Agreements"), with Morrie
K. Abramson, Larry D. Olson, Stephen J. Chapko, Richard J. Hightower and Mark A.
Zerbe, all of whom are directors or executive officers of Kent (collectively,
the "Stockholders"), under which each of the Stockholders granted Avnet an
irrevocable proxy to vote such Stockholder's shares of Kent Common Stock
(currently 592,224 shares in the aggregate) in favor of approval of the Merger
Agreement and against any other proposal for any recapitalization, merger, sale
of assets or other business combination between Kent and any other person or
entity other than Avnet or Merger Sub or the taking of any action which would
result in any of the conditions to Avnet's obligations under the Merger
Agreement not being fulfilled.
Each Stockholder also agreed in the Inducement Agreements that if (i) there
occurs any stock dividend, stock split, recapitalization, reclassification,
combination or exchange of shares of, on or affecting the Kent Common Stock, or
(ii) such Stockholder becomes the owner of, or otherwise obtains the right to
vote, any additional shares of Kent Common Stock, such new shares or other
securities will be subject to the terms of the Inducement Agreement. The
Inducement Agreement will terminate on the earlier to occur of (a) the effective
time of the Merger, or (b) termination of the Merger Agreement in accordance
with its terms.
The Stock Option Agreement is attached as Exhibit 2 to this Schedule 13D
and is incorporated by reference in its entirety in this Item 4. The foregoing
summary of the Stock Option Agreement does not purport to be complete and is
qualified in its entirety by reference to such exhibit. The Inducement
Agreements are attached as Exhibits 3 and 4 to this Schedule 13D and are
incorporated by reference in their entirety in this Item 4. The foregoing
summary of the Inducement Agreements does not purport to be complete and is
qualified in its entirety by reference to such exhibits.
Except as contemplated by the Merger Agreement, the Stock Option Agreement
and the Inducement Agreements or as otherwise set forth in this Item 4, neither
Avnet, nor, to the knowledge of Avnet, any of the persons listed in Schedule I
hereto, has any present plans or proposals which relate to or which would result
in any of the actions specified in subparagraphs (a) through (j) of Item 4 of
Schedule 13D.
-6-
ITEM 5. Interest in Securities of the Issuer.
Neither Avnet nor, to the knowledge of Avnet, any of the persons listed in
Schedule I hereto beneficially owns any shares of Kent Common Stock other than
as set forth below. Before the Kent Option becomes exercisable, Avnet expressly
disclaims beneficial ownership of the shares of Kent Common Stock which are
issuable upon exercise of the Kent Option. Neither the filing of this Schedule
13D nor any of its contents shall be deemed to constitute an admission that
Avnet is the beneficial owner, for purposes of Section 13(d) or 16 of the
Securities Exchange Act of 1934, as amended, or for any other purpose, of the
shares of Kent Common Stock subject to the Kent Option.
(a) Pursuant to the rules of the Securities and Exchange Commission, Avnet
may currently be deemed to be the beneficial owner of an aggregate of
3,455,698 shares of Kent Common Stock, or approximately 10.97% of the
shares of Kent Common Stock currently outstanding, including 2,863,474
shares issuable upon exercise in full of the Kent Option and 592,224
shares covered by the Inducement Agreements. In addition, Salvatore J.
Nuzzo a director of Avnet, beneficially owns 700 shares of Kent Common
Stock.
(b) Avnet would have sole voting and dispositive power with respect to any
shares of Kent Common Stock it acquires upon exercise of the Kent
Option. In addition, Avnet shares voting power with the Stockholders
with respect to the shares of Kent Common Stock covered by the
Inducement Agreements, to the limited extent provided in the
irrevocable proxies. Mr. Nuzzo has sole voting and dispositive power
with respect to his 700 shares of Kent Common Stock.
(c) Except as described in Item 4 above, no transactions in the Kent
Common Stock were effected by Avnet, or, to the knowledge of Avnet,
any of the persons listed on Schedule I hereto, during the 60-day
period preceding March 21, 2001 or thereafter through the date of this
Statement.
(d) Until the Kent Option is exercised, Avnet has no right to receive
dividends from, or the proceeds from the sale of, the shares of Kent
Common Stock issuable upon exercise of the Kent Option. If Avnet
exercises the Kent Option, Avnet would have the sole right to receive
dividends on the shares of Kent Common Stock acquired pursuant
thereto.
(e) Not applicable.
-7-
ITEM 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
Except as set forth in this Schedule 13D, to the knowledge of Avnet, there
are no other contracts, arrangements, understandings or relationships (legal or
otherwise) among the persons named in Item 2 or listed in Schedule I hereto, and
between such persons and any person with respect to any securities of Kent,
including but not limited to transfer or voting of any of the securities of
Kent, joint ventures, loan or option arrangements, puts or calls, guarantees or
profits, division of profits or loss, or the giving or withholding of proxies,
or a pledge or contingency the occurrence of which would give another person
voting power over the securities of Kent.
ITEM 7. Material to be Filed as Exhibits.
1. Agreement and Plan of Merger dated as of March 21, 2001, by and among
Avnet, Inc., Alpha Acquisition Corp. and Kent Electronics Corporation.
2. Stock Option Agreement dated as of March 21, 2001, by and between
Avnet, Inc. and Kent Electronics Corporation.
3. Inducement Agreement dated as of March 21, 2001, by and among Avnet,
Inc. and certain stockholders of Kent Electronics Corporation.
4. Inducement Agreement dated as of March 21, 2001, by and between Avnet,
Inc. and Morrie K. Abramson.
-8-
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, Avnet
certifies that the formation set forth in this statement is true, complete and
correct.
Dated: April 2, 2001
AVNET, INC.
By: /s/Raymond Sadowski
-------------------
Raymond Sadowski
Senior Vice President and
Chief Financial Officer
SCHEDULE I
The name and present principal occupation of each director and executive
officer of Avnet, Inc. are set forth below. Except as noted below, the business
address for each person listed below is c/o Avnet, Inc., 2211 South 47th Street,
Phoenix, Arizona 85034, and each such person is a United States citizen except
Mr. Houminer, who is a citizen of Israel.
Name and Address Present Principal Occupation
Roy Vallee* Chairman of the Board and Chief
Executive Officer of Avnet.
Eleanor Baum* Dean of the School of
The Cooper Union Engineering of The Cooper
51 Astor Place Union.
New York, NY 10003
J. Veronica Biggins* Senior Partner, Heidrick &
Heidrick & Struggles International Struggles, an executive search
303 Peachtree Street NE, Suite 3100 firm.
Atlanta, GA 30308
Lawrence W. Clarkson* Retired Senior Vice President
of The Boeing Company, a
manufacturer of aerospace,
aviation and defense products.
Ehud Houminer* Professor and Executive-in-
Columbia Business School Residence at Columbia Business
Columbia University School, Columbia University,
206 Eris Hall New York, NY and a principal of
3022 Broadway Lear, Yavitz and Associates.
New York, NY 10027
James A. Lawrence* Executive Vice President and
General Mills Incorporated Chief Financial Officer of
Number One General Mills Blvd. General Mills.
Minneapolis, MN 55426
________________________
* Director of Avnet
-10-
Name and Address Present Principal Occupation
Salvatore J. Nuzzo* Chairman and CEO of Datron
Datron Inc. Inc., a manufacturer of
1200 N. Glenrock Dr. aerospace and defense products.
Garland, TX 75040
Ray M. Robinson* President of AT&T Southern
1200 Peachtree Street N.E., Suite 12166 Region of the Consumer Long
Atlanta, GA 30309 Distance Division
Frederic Salerno* Vice Chairman and CFO of
Verizon Communications Verizon Communications,
1095 Avenue of the Americas formerly Bell Atlantic.
New York, NY 10036
Gary L. Tooker* Senior Advisor, Morgan Stanley
Dean Witter Private Equity.
David R. Birk Senior Vice President, General
Counsel and Secretary of Avnet.
Andrew S. Bryant Senior Vice President of Avnet.
Steven C. Church Senior Vice President of Avnet.
John F. Cole Controller of Avnet.
Anthony DeLuca Senior Vice President of Avnet.
Axel Hartstang Vice President of Avnet.
Brian Hilton Senior Vice President of Avnet.
Patrick Jewett Senior Vice President of Avnet.
Edward Kamins Senior Vice President of Avnet.
Raymond Sadowski Senior Vice President, Chief
Financial Officer and Assistant
Secretary of Avnet.
George Smith Vice President of Avnet.
________________________
* Director of Avnet
-11-
EXHIBIT 1
AGREEMENT
AND
PLAN OF MERGER
by and between
AVNET, INC.
and
ALPHA ACQUISITION CORP.
and
KENT ELECTRONICS CORPORATION
Dated as of March 21, 2001
Table of Contents
Agreement and Plan of Merger.................................................1
Recitals.....................................................................1
Article I The Merger.........................................................2
Section 1.01 The Merger...........................................2
Section 1.02 Closing..............................................2
Section 1.03 Effective Time.......................................2
Section 1.04 Articles of Incorporation............................2
Section 1.05 By-Laws..............................................2
Section 1.06 Officers and Directors...............................2
Section 1.07 Intentionally Omitted................................3
Section 1.08 Conversion of Shares.................................3
Section 1.09 Surrender of Shares; Transfer Books..................3
Section 1.10 Options and Warrants.................................6
Section 1.11 Affiliates...........................................6
Section 1.12 Closing Day Payments.................................7
Article II Representations And Warranties Of Company.........................7
Section 2.01 Organization; Subsidiaries...........................7
Section 2.02 Capitalization.......................................8
Section 2.03 Authority; Validity.................................10
Section 2.04 No Conflict.........................................10
Section 2.05 Consents............................................11
Section 2.06 Financial Statements; SEC Filings...................11
Section 2.07 Tax Matters.........................................13
Section 2.08 Absence of Certain Changes or Events................14
Section 2.09 Material Contracts; Customers and Suppliers.........14
Section 2.10 Title and Related Matters...........................15
Section 2.11 Employee Benefit Plans..............................16
Section 2.12 Employment Agreements...............................19
Section 2.13 Legal Proceedings...................................19
Section 2.14 Licenses; Compliance with Law; Accuracy of Certain
Information........................................19
Section 2.15 Accuracy of Proxy Statement/Prospectus..............20
Section 2.16 Insurance...........................................20
Section 2.17 Environmental Matters...............................20
Section 2.18 Intellectual Property...............................21
Section 2.19 Labor Matters.......................................22
Section 2.20 Related Party Transactions..........................23
Section 2.21 State Takeover Statutes.............................23
Section 2.22 Brokers; Advisors...................................23
Section 2.23 Pooling of Interest.................................23
Section 2.24 Full Disclosure.....................................23
i
Article III Representations And Warranties Of Parent And Buyer.............24
Section 3.01 Organization........................................24
Section 3.02 Capitalization......................................24
Section 3.03 Authority; Validity.................................25
Section 3.04 No Conflict.........................................25
Section 3.05 Consents............................................26
Section 3.06 Legal Proceedings...................................26
Section 3.07 Financial Statements, SEC Filings...................26
Section 3.08 No Material Adverse Effect..........................27
Section 3.09 Accuracy of Proxy Statement/Prospectus..............27
Section 3.10 Reorganization......................................27
Section 3.11 No Brokers or Finders...............................27
Section 3.12 Full Disclosure.....................................28
Section 3.13 Compliance with Law.................................28
Section 3.14 Taxes...............................................28
Section 3.15 Employee Benefits...................................28
Section 3.16 Environmental Matters...............................28
Article IV Covenants........................................................29
Section 4.01 Access and Information..............................29
Section 4.02 Governmental Filings................................30
Section 4.03 Consents and Approvals..............................30
Section 4.04 Meetings of Shareholders; Securities Filings........31
Section 4.05 Conduct of Company Business.........................32
Section 4.06 Conduct of Parent Business..........................33
Section 4.07 Publicity...........................................34
Section 4.08 Notification of Defaults and Adverse Events.........34
Section 4.09 Satisfy Conditions to Closing.......................34
Section 4.10 Anti-takeover Statutes..............................34
Section 4.11 Indemnification; Insurance..........................34
Section 4.12 Employee Benefits...................................36
Section 4.13 No Solicitation.....................................36
Section 4.14 Rights Agreement....................................37
Section 4.15 Option Vesting......................................37
Section 4.16 Special Earnings Announcement.......................38
Section 4.17 Reorganization......................................38
Article V Conditions........................................................38
Section 5.01 Conditions to Obligations of Company, Parent and
Buyer.............................................38
Section 5.02 Conditions to Obligations of Parent and Buyer.......39
Section 5.03 Conditions to Obligations of Company................39
Article VI Termination, Amendment and Waiver................................40
Section 6.01 Termination and Abandonment.........................40
Section 6.02 Effect of Termination and Termination Fee...........42
Section 6.03 Amendment...........................................43
ii
Section 6.04 Extension; Waiver...................................43
Article VII Miscellaneous...................................................43
Section 7.01 Termination of Representations and Warranties.......43
Section 7.02 Expenses............................................43
Section 7.03 Notices.............................................44
Section 7.04 Further Assurances..................................44
Section 7.05 Specific Performance................................45
Section 7.06 Assignability.......................................45
Section 7.07 Governing Law.......................................45
Section 7.08 Interpretation......................................45
Section 7.09 Counterparts........................................45
Section 7.10 Integration.........................................45
Section 7.11 Survival............................................45
Article VIII Definitions....................................................46
Section 8.01 Definitions.........................................46
iii
Annexes
-------
Annex A Inducement Agreement
Annex B Option Agreement
Annex C Affiliate Letter
Schedules
---------
Schedule 1.12 Closing Date Payments
Schedule 2.01(a) Organization; Subsidiaries
Schedule 2.01(b) Capitalization of Company and Company's Subsidiaries
Schedule 2.02 Options
Schedule 2.04 No Conflicts
Schedule 2.05 Company Required Consents
Schedule 2.06 Financial Statements
Schedule 2.08 Certain Events
Schedule 2.09 Material Contracts; 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 Operations
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 2.16 Company Insurance Policies
Schedule 2.17 Certain Environmental Matters
iv
Schedule 2.18 Intellectual Property
Schedule 2.20 Related Party Transactions
Schedule 2.22 Brokers; Advisors
Schedule 3.04 Parent Required Consents
Schedule 4.05 Conduct of Company Business
v
Agreement and Plan of Merger
THIS AGREEMENT and PLAN OF MERGER (this "Agreement") is entered into as of
March 21, 2001 by and between Avnet, Inc., a New York corporation ("Parent"),
Alpha Acquisition Corp., a Texas corporation and a wholly-owned subsidiary of
Parent ("Buyer"), and Kent Electronics Corporation, a Texas corporation
("Company").
Recitals
WHEREAS, the respective Boards of Directors of Parent, Buyer and Company
have each approved the acquisition of Company upon the terms and subject to the
conditions set forth herein;
WHEREAS, to induce Parent and Buyer to enter into this Agreement, (i)
certain beneficial and record holders of capital stock of Company are entering
into an Inducement Agreement (the "Inducement Agreement") with Parent, the form
of which is attached hereto as Annex A to this Agreement, pursuant to which,
among other things, such record holders have granted to Parent an irrevocable
proxy to vote their capital stock of Company in favor of the transactions
contemplated by this Agreement, (ii) Larry D. Olson and Mark A. Zerbe have each
executed and delivered an employment agreement with Parent, effective as of the
Effective Time, in form and substance acceptable to Parent, and (iii) Company is
entering into an Option Agreement (the "Option Agreement") granting Parent the
right to acquire up to 2,863,474 shares of common stock, without par value, of
Company ("Company Common Stock") upon the terms and conditions set forth
therein, in the form of Annex B to this Agreement;
WHEREAS, Parent, Buyer and Company intend the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code;
WHEREAS, Parent, Buyer and Company desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement and
prescribe various conditions to the Merger; and
WHEREAS, capitalized terms used herein but not otherwise defined where
referenced shall have the meanings ascribed to such terms in Article VIII
hereof.
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
Section 1.01 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined below), Buyer will be merged with
and into Company and the separate corporate existence of Buyer will thereupon
cease (the "Merger"). Company 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 Texas. The separate
corporate existence of Company with all its rights, privileges, immunities,
powers and franchises will continue unaffected by the Merger and Company will
succeed to all of the rights and properties of Buyer and will be subject to all
of the debts and liabilities of Buyer.
Section 1.02 Closing. The closing of the transactions contemplated hereby
(the "Closing") will take place (i) at the primary offices of Carter, Ledyard &
Milburn at 10:00 A.M., New York 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 the parties hereto may agree (the date of the Closing, the
"Closing Date").
Section 1.03 Effective Time. Subject to the provisions of this Agreement
and provided that this Agreement has not been terminated or abandoned pursuant
to Article VI, articles of merger (the "Articles of Merger") shall be duly
prepared, executed and acknowledged by Company and thereafter delivered to the
Secretary of State of Texas for filing in accordance with Section 5.04 of the
Texas Business Corporation Act (the "TBCA"), on or as soon as practicable after
the Closing Date. The Merger will become effective immediately upon the issuance
of a certificate of merger by the Secretary of State of Texas pursuant to
Section 5.05 of the TBCA (or, if the Articles of Merger provide for a subsequent
time for effectiveness, at the time thereafter so provided in the Articles of
Merger, as provided in Section 10.03 of the TBCA); 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."
Section 1.04 Articles of Incorporation. The Articles of Incorporation of
Company in effect immediately prior to the Effective Time will be the Articles
of Incorporation of the Surviving Corporation at and after the Effective Time
until duly amended in accordance with the terms thereof and the applicable
provisions of the TBCA.
Section 1.05 By-Laws. The By-Laws of Company in effect immediately prior to
the Effective Time will be the By-Laws of the Surviving Corporation at and after
the Effective Time until duly amended in accordance with the terms thereof and
the applicable provisions of the TBCA.
Section 1.06 Officers and Directors. The persons serving as directors of
Buyer immediately prior to the Effective Time shall continue as the directors of
the Surviving Corporation at and after the Effective Time, and the individuals
specified by Parent in
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writing prior to the Effective Time shall be the officers of the Surviving
Corporation at and after the Effective Time, in each case 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 Articles
of Incorporation and By-Laws.
Section 1.07 Intentionally Omitted.
Section 1.08 Conversion of Shares. Except as otherwise provided herein, at
the Effective Time:
(a) Each share of Company Common Stock ("Company Shares") issued and
outstanding immediately prior to the Effective Time (other than shares canceled
pursuant to this Section 1.08) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to receive
0.87 of a fully paid and nonassessable share ("Conversion Ratio") of Common
Stock of Parent, par value $1.00 per share ("Parent Stock"); provided, however,
that if between the date of this Agreement and the Effective Time the
outstanding shares of Company Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination,
or exchange of shares, the securities to be received by the shareholders of the
Company shall be appropriately and correspondingly adjusted to reflect such
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
(b) Each Company Common Share held immediately prior to the Effective Time
by Company, Parent or Buyer or any of their wholly-owned subsidiaries (other
than shares held in trust or otherwise in a representative capacity) (the
"Canceled Shares") shall be retired automatically, and no consideration shall be
payable with respect thereto.
(c) Each share of common stock of Buyer, par value $1.00 per share, issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into one share of common stock, without par value, of the Surviving Corporation.
Section 1.09 Surrender of Shares; Transfer Books.
(a) Exchange Agent. Before the mailing of the Proxy Statement/Prospectus,
Parent will appoint a bank or trust company to act as exchange agent (the
"Exchange Agent") for the payment of the Merger Consideration. Parent will
furnish the Exchange Agent forthwith upon the Effective Time with cash (to the
extent required by Section 1.09(e)) and certificates representing such number of
shares of Parent Stock as the Exchange Agent shall require in order to transmit
the Merger Consideration to shareholders surrendering certificates that
immediately prior to the Effective Time represented Company Shares in accordance
with paragraph (b) of this Section 1.09
(b) Exchange Procedures for Shares of Company Common Stock. As soon as
practicable after the Effective Time, Parent shall cause the Exchange Agent to
transmit to each holder of record of a certificate that immediately prior to the
Effective Time represented Company Shares (i) a letter of transmittal (which
shall specify that
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delivery shall be effected, and risk of loss and title to such certificates
shall pass, only upon proper delivery of the certificates to the Exchange Agent
and shall be in customary form) and (ii) instructions for use in effecting the
surrender of such certificates in exchange for the Merger Consideration. Each
holder of an outstanding certificate or certificates which immediately prior to
the Effective Time represented Company Shares shall, upon surrender to the
Exchange Agent of such certificate or certificates in accordance with such
letter of transmittal, duly executed, and acceptance thereof by the Exchange
Agent, be entitled to a certificate or certificates representing the number of
full shares of Parent Stock, if any, to be received by the holder thereof
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 Company Shares
which have been converted pursuant to this Agreement into the right to receive
the Merger Consideration, and if certificates immediately prior to the Effective
Time represented Company Shares are presented to the Surviving Corporation for
transfer, they will be canceled against delivery of certificates for Parent
Stock (and cash to the extent required by Section 1.09(e)). If any certificate
for such Parent Stock is to be issued in, or if cash is to be remitted to, a
name other than that in which the certificate that formerly represented Company
Shares 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 Parent Stock 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 1.09(b), each
certificate that formerly represented Company Shares 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 1.08 and Section
1.09(e). No interest will be paid or will accrue on any cash payable in lieu of
any fractional shares of Parent Stock.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered certificate that
formerly represented Company Shares with respect to the shares of Parent Stock
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 1.09(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 shares of
Parent Stock issued in connection herewith, without interest, (i) at the time of
such surrender the amount of any cash payable in lieu of a fractional share of
Parent Stock to which such holder is entitled pursuant to Section 1.09(e) and
the proportionate amount of dividends or other distributions with a record date
after the Effective Time theretofore
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paid with respect to such whole shares of Parent Stock, 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 shares of Parent Stock.
(d) No Further Ownership Rights in Company Common Stock. All Merger
Consideration paid upon the surrender for exchange of certificates that formerly
represented Company Shares in accordance with the terms of this Article I will
be deemed to have been issued and paid in full satisfaction of all rights
pertaining to the Company Shares represented by such certificates.
(e) No Fractional Shares; Exchange Agent.
(i) No Fractional Shares. No fractional shares of Parent Stock and no
certificates or scrip representing fractional shares of Parent Stock 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.
(ii) Cash Payment in Lieu of Fractional Shares. Each record holder of
Company Shares converted pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Parent Stock (after
taking into account all Company Shares held by such holder) will be
entitled to receive, in lieu thereof upon surrender of the certificates
that immediately prior to the Effective Time represented Company Shares, a
cash payment (without interest) in lieu of such fractional share in an
amount equal to the product of such fraction multiplied by $25.84.
(iii) Termination of Exchange Agent's Duties. Any holders of
certificates that immediately prior to the Effective Time represented
Company Shares who have not complied with this Article I within six months
after the Effective Time will thereafter look only to Parent for payment of
the Merger Consideration.
(iv) No Liability. None of Parent, Buyer, Company or the Exchange
Agent will be liable to any person in respect of any shares of Parent Stock
(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 that immediately prior to the Effective
Time represented Company Shares have not been surrendered before such date
on which any shares of Parent Stock, any cash in lieu of fractional shares
of Parent Stock, or any dividends or distributions with respect to shares
of Parent Stock in respect of such certificate would otherwise escheat to
or become the property of any governmental entity, any such shares, cash,
dividends or distributions in respect of such certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
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Section 1.10 Options and Warrants. (a) Prior to the Effective Time, the
Board of Directors of Company and the Board of Directors of Parent (or, if
appropriate, respective committees thereof) shall adopt appropriate resolutions
and take such action as may be required, under the Option Plans (as defined in
Section 2.02) such that, at the Effective Time,
(i) each Option Plan shall continue in existence and each Option (as
defined in Section 2.02) under each such Option Plan, whether or not then
exercisable, shall be assumed by Parent and converted into an option
("Assumed Option") to acquire on the same terms and conditions as were
applicable under the Option, shares of Parent Stock; provided, that (A)the
number of shares of Parent Stock subject to such Assumed Option under such
Option Plan shall be determined by multiplying the number of shares of
Company Common Stock subject to such Option by the Conversion Ratio (with
such share number rounded down to the nearest whole number), and (B) the
exercise price of each such Assumed Option shall be determined by dividing
the exercise price of the Option by the Conversion Ratio (with such
exercise price rounded up to the nearest penny); provided further, however,
that, in the case of any Option to which Code Section 421 applies by reason
of its qualification under any of Code Sections 422-424, the option
exercise price, the number of shares that may be acquired pursuant to such
option and the terms and conditions of exercise of such Option shall be
determined to comply with Code Section 425(a), and
(ii) each Warrant (as defined in Section 2.02), whether or not then
exercisable, will be converted into a right to acquire shares of Parent
Stock, subject to terms and conditions materially equivalent, in the
reasonable judgment of the Board of Directors of Parent, to the terms and
conditions set out in such Warrant; provided, that (iii) the number of
shares of Parent Stock subject to such right shall be determined by
multiplying the number of shares of Company Common Stock subject to such
Warrant by the Conversion Ratio (with such share number rounded down to the
nearest whole number); and (iv) the exercise price of such right shall be
determined by dividing the exercise price of such Warrant by the Conversion
Ratio.
(b) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Stock for delivery upon
exercise of the Assumed Options. As soon as practicable after the Effective
Time, Parent shall file a registration statement on Form S-8 (or any successor
or other appropriate forms) or a post-effective amendment to the Registration
Statement, with respect to the shares of Parent Stock subject to the Assumed
Options and shall use its best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses in connection therewith) for so long as
any Assumed Options remain outstanding
Section 1.11 Affiliates. Certificates representing Parent Stock issued to
any director or executive officer of Company or any other Person deemed by
Company to be an "affiliate," for purposes of Rule 145(c) under the Securities
Act of 1933, as amended (the "Securities Act"), of Company ("Company
Affiliates") will bear an appropriate restrictive legend. On or prior to the
Closing Date, Company will deliver to Parent a list
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certified by an appropriate executive officer of Company 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 to deliver promptly to Parent a letter substantially in the form
of Annex C to this Agreement.
Section 1.12 Closing Day Payments. On the Closing Date and without the
further consent of Parent or Buyer (provided, however, with respect to all
payments which are disclosed in the Disclosure Schedule as estimated payments,
only after reasonable consultation with Parent concerning the actual payment
amounts), Company shall be entitled to make any payment to employees, advisors
or other parties which are conditioned in whole or in part on the consummation
of the transactions contemplated hereby, to the extent and only to the extent
such persons and such payments are specifically disclosed in Section 1.12 of the
Disclosure Schedule.
Article II
Representations And Warranties Of Company
Company makes the representations and warranties set forth in this Article
II to Parent and Buyer. All representations and warranties of Company set forth
in this Article II are made subject to the exceptions which are noted in the
schedules delivered by Company to Parent and Buyer concurrently herewith and
identified by the parties as the "Disclosure Schedule". The Disclosure Schedule
has been delivered by Company to Parent and Buyer on the date hereof, and the
Disclosure Schedule has been reviewed and accepted by Parent and Buyer. Each
exception noted in the Disclosure Schedule is numbered to correspond to the
applicable Section of this Article II or other Article to which such exception
refers; provided, however, that all exceptions set forth in the Disclosure
Schedule shall be deemed to be disclosed not only in connection with the
representation and warranty specifically referenced on a specified section of
the Disclosure Schedule, but for all purposes relating to each of the other
representations and warranties of Company set forth in this Article II so long
as the relevance of such disclosure to such other representation or warranty is
reasonably apparent from the terms of such disclosure without investigation by
Parent or Buyer.
Section 2.01 Organization; Subsidiaries
(a) Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, and, except as disclosed in
Section 2.01of the Disclosure Schedule, each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and is in good standing as a foreign
corporation qualified to do business in each jurisdiction where the properties
owned, leased or operated, or the business conducted by it requires 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. Company and its Subsidiaries have the requisite power and authority to
own, lease and operate their respective properties and to carry on their
respective businesses as now being conducted.
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(b) Section 2.01 of the Disclosure Schedule 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. As used in this Agreement, the
term "Subsidiary" shall mean, with respect to any party, any corporation or
other organization, whether incorporated or unincorporated or domestic or
foreign to the United States of which (a) such party or any other Subsidiary of
such party is a general partner (excluding such partnerships where such party or
any Subsidiary of such party does not have a majority of the voting interest in
such partnership) or (b) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries. Section 2.01 of the Disclosure Schedule
correctly lists the current directors and officers of Company and of each of its
Subsidiaries. True, correct and complete copies of the respective charter
documents and by-laws of Company and each of its Subsidiaries as in effect on
the date hereof have been made available to Buyer.
(c) All outstanding securities or other ownership interests in each of the
Subsidiaries listed on Section 2.01 of the Disclosure Schedule, except as
disclosed on Section 2.01 of the Disclosure Schedule, are owned of record and
beneficially by Company or another of Company's wholly-owned Subsidiaries,
subject to no lien, claim, charge or encumbrance, and 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 those listed on Section 2.01 of the Disclosure
Schedule. There are no irrevocable proxies, voting agreements, or voting trusts
with respect to any of the securities or other ownership interests of the
Subsidiaries and no restrictions on Company to vote any of the stock or other
securities of any of the Subsidiaries.
Section 2.02 Capitalization.
(a) The authorized capital stock of Company consists of (i) 60,000,000
shares of Company Common Stock; and (ii) 2,000,000 shares of Preferred Stock,
par value $1.00 per share, which shares have been designated as Series A
Preferred Stock (the "Preferred Stock"). As of February 12, 2001 (a) 28,634,737
shares of Company Common Stock were issued and outstanding, (b) no shares of
Preferred Stock were issued and outstanding, and (c) as of December 30, 2000:
26,500 shares of Company Common Stock were reserved for issuance pursuant to
Company's Amended and Restated 1987 Stock Option Plan, as amended, under which
options to purchase 26,500 shares of Company Common Stock were outstanding;
53,250 shares of Company Common Stock were reserved for issuance pursuant to
Company's 1991 Non-Employee Director Stock Option Plan, as amended, under which
options to purchase 53,250 shares of Company Common Stock were outstanding;
200,000 shares of Company Common Stock were reserved for issuance pursuant to
Company's Amended and Restated 1996 Non-Employee Director Stock Option Plan,
under which options to purchase 147,500 shares
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of Company Common Stock were outstanding; 677,500 shares of Company Common Stock
were reserved for issuance pursuant to Company's Amended and Restated 1998 Stock
Option Plan, under which options to purchase 587,090 shares of Company Common
Stock were outstanding; 746,100 shares of Company Common Stock were reserved for
issuance pursuant to Company's 1999 Stock Option Plan, under which options to
purchase 334,200 shares of Company Common Stock were outstanding; 1,158,971
shares of Company Common Stock were reserved for issuance pursuant to Company's
1996 Employee Incentive Plan, under which options to purchase 1,093,524 shares
of Company Common Stock were outstanding; and 182,500 shares of Company Common
Stock were reserved for issuance pursuant to the stock option plans set forth
and described individually in Section 2.02 of the Disclosure Schedule
(collectively the foregoing plans are referred to as the "Option Plans", and
options issued thereunder are referred to as "Options"). All the outstanding
shares of Company's capital stock are, and all of Company Common Stock shares
that may be issued pursuant to the exercise of outstanding Options will be, when
issued in accordance with the terms thereof, duly authorized, validly issued,
fully paid and non-assessable and not subject to preemptive or other similar
rights. Section 2.02 of the Disclosure Schedule sets forth a complete and
correct list of the Options as of December 30, 2000, including for each the name
of the Option holder, the date of grant, the expiration date, the plan under
which the Option (or any portion thereof) was granted, and the number of shares
subject to such Option. Since December 30, 2000, Company has granted no Options
except Options granted in the ordinary course of business on terms and in
quantities consistent with past practice. As of the date hereof, there is
outstanding $207,000,000 in aggregate principal amount of Company's 4.5%
Convertible Subordinated Notes due 2004 (the "Convertible Notes") issued by
Company pursuant to the Indenture with Texas Commerce Bank National Association,
as Trustee, dated as of September 23, 1997. Except for the Convertible Notes and
except as contemplated by Company's Rights Agreement dated October 21, 1999
between Company and ChaseMellon Shareholder Services, L.L.C. Rights Agent, as
amended by an Amendment dated the date hereof (the "Rights Agreement"), there
are no bonds, debentures, notes or other instruments or evidences of
indebtedness having the right to vote (or convertible into, or exercisable or
exchangeable for, securities having the right to vote) on any matters on which
the shareholders of Company or any of its Subsidiaries may vote ("Voting Debt")
issued and outstanding. Except as disclosed in Section 2.02 of the Disclosure
Schedule, there are no existing options, warrants, calls, rights (including
preemptive rights), subscriptions or other rights, agreements, arrangements or
commitments of any character, obligating Company or any of its Subsidiaries to
issue, transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or Voting Debt of, or other equity interests in, Company or any of
its Subsidiaries or securities convertible into or exchangeable or exercisable
for such shares, Voting Debt, or equity interests, or obligating Company or any
of its Subsidiaries to grant, extend or enter into any such option, warrant,
call, right, subscription or other right, agreement, arrangement or commitment,
and (iii) there are no outstanding contractual or other obligations of Company
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of Company Common Stock, or the capital stock of any Subsidiary or affiliate of
Company or to provide funds to make any investment (in the form of a loan,
capital contribution or otherwise) in any Subsidiary or any other entity.
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Except for the Inducement Agreement, there are not as of the date hereof and
there will not be at any time on or prior to the Effective Time any stockholder
agreements, voting trusts or other agreements or understandings to which Company
or any of the Subsidiaries is a party or by which any of them is bound relating
to the voting of any shares of the capital stock of Company or any agreements,
arrangements, or other understandings to which Company or any of its
Subsidiaries is a party or by which it is bound that will limit in any way the
solicitation of proxies by or on behalf of Company from or the casting of votes
by, the shareholders of Company with respect to the Merger. There is no
liability for any dividends or other distributions declared or accumulated but
unpaid with respect to any capital stock of Company.
(b) All the outstanding shares of Company's capital stock are, and all
shares of Company Common Stock that may be issued pursuant to the exercise of
outstanding Options will be, when issued in accordance with the terms thereof,
duly authorized, validly issued, fully paid and non-assessable and not subject
to preemptive or other similar rights
Section 2.03 Authority; Validity. Company has full power and authority,
corporate or otherwise, 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 TBCA (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 Parent and Buyer), this Agreement will constitute the valid and
binding obligation of Company enforceable against Company in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or limiting creditors' rights
generally and equitable principles.
Section 2.04 No Conflict. Except as disclosed in Section 2.04 of the
Disclosure Schedule, and except for the HSR Act, none of Company nor any of its
Subsidiaries nor any of their respective assets is subject to or obligated under
any charter, bylaw, Contract, or other instrument or any permit, or subject to
any Law, 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
with) Company's execution, delivery and performance of this Agreement, the
Inducement Agreement and the Option Agreement, and the transactions contemplated
hereby and thereby, except where such event or occurrence (i) as of the date
hereof 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
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Business (collectively, "Company 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 disclosed in Section 2.04 of the Disclosure Schedule and
except for compliance with the HSR Act, Company's execution, delivery and
performance of 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 to
which Company or any of its Subsidiaries is subject except where such
encumbrance or change or acceleration would not, individually or in the
aggregate, reasonably be likely to have a Company Material Adverse Effect.
Section 2.05 Consents. Except as disclosed in Section 2.05 of the
Disclosure Schedule, and other than (i) the issuance of a certificate of Merger
by the Texas Secretary of State, as provided in Section 1.03, (ii) such consents
(including the Company Shareholders' Approval), orders, approvals,
authorizations, registrations, declarations and filings as may be required under
the TBCA, applicable state securities laws and the securities laws of any
foreign country, (iii) such actions of the Department of Justice and the Federal
Trade Commission as may be required under the HSR Act with respect to the Merger
and (iv) such other 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, or 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.
Section 2.06 Financial Statements; SEC Filings.
(a) Company has delivered or made available copies of the following
financial statements to Buyer: (i) the consolidated balance sheet of Company as
of April 1, 2000 and the consolidated statements of earnings, shareholders'
equity and cash flows for the fiscal years ended April 1, 2000 and April 3,
1999, in each case including the notes thereto and the related report of Grant
Thornton LLP, independent certified public accountants, and (ii) the unaudited
consolidated balance sheet of Company as of December 30, 2000, and the unaudited
consolidated statements of earnings and cash flows for the thirty-nine week
periods ended December 30, 2000 and January 1, 2000, in each case including any
notes thereto.
(b) All financial statements described in Section 2.06(a) are in accordance
with the books and records of Company and have been prepared in accordance with
GAAP consistently applied throughout the periods indicated (except as may be
indicated on the notes thereto, or in the case of the unaudited statements, as
permitted by Form 10-
-11-
Q). 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 reclassification or 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 1, 2000, Company did not have
any liabilities or obligations (absolute or contingent) of a nature required by
GAAP 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
(subject, in the case of the unaudited statements, to customary reclassification
or year-end adjustments).
(c) All trade accounts receivable appearing on Company's consolidated
balance sheets as of December 30, 2000 and as of April 1, 2000 arose from bona
fide, arms-length transactions for the sale of goods or performance of services,
and represent valid obligations arising from sales actually made 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. As of December 30, 2000, Company was in possession of
inventory having an aggregate value as reflected on such consolidated balance
sheet as of such date. All allowances and reserves reflected in such
consolidated balance sheet have been determined in accordance with GAAP. Since
April 1, 2000, 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
substantially in the same manner as theretofore recorded.
(d) Company has timely filed with the SEC all 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 of the SEC thereunder which were required to be
filed after January 1, 2000 (such forms, statements, reports and documents are
collectively referred to as the "Company SEC Filings"). Company "meets the
requirements for use of Form S-3" within the meaning of General Instruction
C.1.a. to Form S-4 under the Securities Act.
(e) 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.
(f) Except as disclosed in Section 2.06(f) of the Disclosure Schedule,
neither Company nor any of its Subsidiaries is obligated to make earnout
payments or other similar payments of cash or securities arising from completed
acquisitions of businesses by Company and its Subsidiaries to the former owners
of such businesses.
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Section 2.07 Tax Matters.
(a) Except as disclosed in Section 2.07 of the Disclosure Schedule, Company
and each of its Subsidiaries have filed all Tax Returns required to be filed by
them, except where failures to file such Tax Returns would not, individually or
in the aggregate, have a Company Material Adverse Effect, and all such Tax
Returns are complete and accurate in all material respects. Company and each of
its Subsidiaries have paid (or Company has paid on their behalf) all Taxes,
whether or not shown as due on such Tax Returns. The most recent financial
statements referred to in Section 2.06 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) No action, suit, investigation, audit, claim, assessment or adjustment
is pending or, to the Company's knowledge, proposed or threatened with respect
to a material amount of Taxes of Company or any of its Subsidiaries.
(c) There is no agreement or other document extending, or having the effect
of extending, the period of assessment or collection of any material amount of
Taxes and no power of attorney with respect to any Taxes has been executed or
filed with any taxing authority.
(d) Neither Company nor any of its Subsidiaries is a party to or is bound
by any Tax sharing agreement, Tax indemnity obligation or similar agreement,
arrangement or practice with respect to a material amount of Taxes (including
any advance pricing agreement, closing agreement or other agreement relating to
Taxes with any taxing authority), and none of Company or any Subsidiary has been
a member of any group of corporations filing federal, state, local or foreign
Tax Returns on a combined or consolidated basis other than each such group of
which it is currently a member.
(e) Neither Company nor any of its Subsidiaries shall be required to
include in a taxable period ending after the Effective Time a material amount of
taxable income attributable to income that accrued in a prior taxable period but
was not recognized in any prior taxable period as a result of the installment
method of accounting.
(f) All material amounts of Taxes which Company or any Subsidiary is
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid or accrued.
(g) Neither Company nor any of its Subsidiaries has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(2) of the Code) owned by Company or any of its
Subsidiaries.
(h) Except as disclosed in Section 2.07 of the Disclosure Schedule, neither
Company nor any of its Subsidiaries is a party to any agreement, contract or
arrangement (including this Agreement and any ancillary agreements) that could
result, separately or
-13-
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code or that would not be deductible pursuant to
the terms of Section 162(m) of the Code.
(i) Neither Company nor any of its Subsidiaries is a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
(j) Neither Company nor any of its Subsidiaries has agreed, or is otherwise
required, to make any adjustments pursuant to Code Section 481(a) or any similar
provision of state, local or foreign law, or has any application pending with
any taxing authority requesting permission for a change in accounting methods.
(k) Except as disclosed in Section 2.07 of the Disclosure Schedule, neither
the Company nor any of its Subsidiaries has requested or been granted an
extension of time for filing any Tax Return that has not yet been filed.
(l) To the Company's knowledge, Company and its Subsidiaries have not taken
any action which would prevent the Merger from constituting a reorganization
within the meaning of Section 368(a) of the Code.
Section 2.08 Absence of Certain Changes or Events. Except as disclosed in
Section 2.08 of the Disclosure Schedule (or disclosed in the Company SEC
Filings), since April 1, 2000, there has not been (a) any event which has
resulted in, 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 pursuant
to existing contractual obligations (to the extent such contracts and such
contractual obligations are specifically disclosed in Section 2.08 of the
Disclosure Schedule), 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; or (d) any labor dispute, other than routine
matters, none of which is material to Company's Business.
Section 2.09 Material Contracts; Customers and Suppliers. Section 2.09 of
the Disclosure Schedule 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 other than purchase orders received by the Company or its
Subsidiaries in the ordinary course of business requiring the performance of
services or delivery of goods by the Company or purchase orders entered into by
the Company or its Subsidiaries in the ordinary course of business for the
purchase of services or goods by the Company, (i) that would be required by Item
601(b)(4) or 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, unless terminable
by the Company on sixty (60) or fewer days notice at no cost to the Company,
-14-
(iii) that involves payments of $1,000,000 or more and contains any provision
prohibiting or limiting assignment thereof that would be applicable to the
transactions contemplated by this Agreement or allowing termination or the
change of any term or provision thereof, or the making of any payment by the
Company, in the event of any change in control or merger 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 April 1, 2000 or disclosed
in Company SEC Filings since April 1, 2000. Except as disclosed in Section 2.09
of the Disclosure Schedule, 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 under any such Material Contract 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. Section 2.09 of the Disclosure Schedule also lists the ten (10)
largest customers of each of the Company's Datacomm and Components divisions
during the period from April 1, 2000 through February 24, 2001 ("Principle
Customers"), and the ten (10) largest suppliers to the Company during the period
from April 1, 2000 through February 24, 2001 ("Principal Suppliers"). Except as
disclosed in Section 2.09 of the Disclosure Schedule, to the knowledge of
Company, no (i) Principal Customer, (ii) Principal Supplier, (iii) customer to
whom Company sold products in an amount in excess of $500,000 during the
calendar year ended December 31, 2000, or (iv) supplier for whom Company sold
products in an amount in excess of $1,000,000 during the calendar year ended
December 31, 2000 has advised Company that it intends to terminate its
relationship with Company as a result of the consummation of the transactions
contemplated by this Agreement. Except as set forth in Section 2.09 of the
Disclosure Schedule, neither Company nor any of its affiliates is a party to, or
in negotiations for the purpose of entering into, any agreement to acquire a
majority of the voting securities of, or substantially all of the assets of, any
Person or any business division of any Person.
Section 2.10 Title and Related Matters. Section 2.10 of the Disclosure Schedule
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 disclosed in Section 2.10
of the Disclosure Schedule, Company has good and indefeasible title to all of
its properties, interests in properties and assets, real and personal, reflected
in Company's December 30, 2000 consolidated balance sheet or acquired after
December 30, 2000 or necessary to conduct its business as now conducted (except
properties, interests on properties and assets sold or otherwise disposed of
since December 30, 2000 in the ordinary course of business), free and clear of
all mortgages, liens, pledges, charges or encumbrances of any kind or character,
except (a) liens for 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
-15-
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 December 30, 2000
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 December 30, 2000 consolidated
balance sheet to the extent GAAP requires the same to be reflected.
Section 2.11 Employee Benefit Plans.
(a) Section 2.11(a) of the Disclosure Schedule 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
Code (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 Code Section 6039D)
(together with Company ERISA Plans referred to herein as the "Company Benefit
Plans"). Except as disclosed in Section 2.11(a) of the Disclosure Schedule,
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 disclosed in Section 2.11(b) of the Disclosure Schedule, each
Company Benefit Plan is currently, and has been in the past, operated and
administered in all material respects in compliance with its (i) terms and (ii)
the requirements of all applicable Laws, including, without limitation, ERISA
and the Code, except where noncompliance would not have a Company Material
Adverse Effect. Each Company Benefit Plan which is, or was, intended to qualify
under Code 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 Parent, 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 Code Section 401(b) and the regulations thereunder. Except
as disclosed in Section 2.11(b) of the Disclosure Schedule, 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 adverse change has occurred with respect to the financial
materials covered thereby since the last Form 5500.
-16-
(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 previously 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 disclosed in Section 2.11(d) of the Disclosure Schedule, 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 Code 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 Code Section 401(a)(29). Neither Company
nor any of its Subsidiaries has any liability for contributions under ERISA
Section 302(c)(ii).
(e) Except as disclosed in Section 2.11(e) of the Disclosure Schedule, the
transactions contemplated by this Agreement do not (i) 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, (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, and except as
disclosed in Section 2.11(e) of the Disclosure Schedule the value of benefits
under any Company Benefit Plan will in no event be calculated on the basis of
any of the transactions contemplated by this Agreement.
(f) Neither Company nor any Company ERISA Affiliate, nor to Company's
knowledge any other "disqualified person" or "party in interest" (as defined in
Code 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 Code Section 4975(c)(1)) for which no
class, individual or statutory exemption exists under Code Section 4975(c)(2) or
(d), nor has the Company, any Company ERISA Affiliate, or to the knowledge of
Company, any other person who is a "fiduciary" (as defined in Section 3(21) of
ERISA) of any Company ERISA Plan
-17-
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 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 disclosed in Section 2.11(i) of the Disclosure Schedule, 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).
(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
Section 2.11(a) of the Disclosure Schedule): (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 made available to Parent true and complete copies of the
following with respect to each of the Company Benefit Plans: (i) each plan
document, insurance contract, service provider contract or arrangement, and
summary plan description or similar 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 for each Company
Benefit Plan required to make such filing; (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; and (vii) the most recent determination of the IRS
with respect to the qualified status of any Company Benefit Plan intended to be
qualified under Code Section 401(a).
-18-
(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.
Section 2.12 Employment Agreements. Except as disclosed in Section 2.12 of
the Disclosure Schedule, 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 officer or director or employee of Company
or any of its Subsidiaries. True and complete copies of the agreements disclosed
in Section 2.12 of the Disclosure Schedule have been furnished to Parent prior
to the date hereof. Neither Company nor any of its Subsidiaries is a party to
any collective bargaining agreement.
Section 2.13 Legal Proceedings. Except as disclosed in Section 2.13 of the
Disclosure Schedule, there is no action, suit or other proceeding pending or,
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries, or to which the Company or any of its Subsidiaries is a party,
except (i) workers' compensation claims which are fully insured, subject to
Company's retention of liability for the first $700,000 of such claims, and (ii)
receivables collections for less than $100,000 where Company is the plaintiff
and related countersuits. Except as disclosed in Section 2.13 of the Disclosure
Schedule, there is no pending or, to Company's knowledge, threatened judicial or
administrative proceeding or investigation affecting Company or any of its
Subsidiaries, or involving any of the properties or assets of the Company or any
of its Subsidiaries, at law or in equity or before any Governmental Entity or
any board of arbitration or similar entity that (i) involves a claimed amount
against the Company or any Subsidiary equal to or greater than $100,000, (ii)
would reasonably be expected to result in the payment by the Company or any
Subsidiary of damages or settlement in an amount equal to or greater than
$100,000, or (iii) 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.
Section 2.14 Licenses; Compliance with Law; Accuracy of Certain
Information. Except as disclosed in Section 2.14 of the Disclosure Schedule, all
licenses, franchises, permits and other governmental authorizations
(collectively, "Licenses") held by Company and its Subsidiaries that are used in
Company's Business are valid and sufficient for all business presently carried
on by Company, except where the failure to maintain such valid and sufficient
Licenses would not be reasonably likely to result in a Company Material Adverse
Effect. No suspension, cancellation or termination of any such Licenses is
threatened or imminent. No such License has been revoked, conditioned (except as
may be customary) or restricted and no action (equitable, legal or
administrative), arbitration or other process is pending, or to the Company's
knowledge, threatened in writing which in any way challenges the validity of, or
seeks to revoke, condition or restrict any such License. Except as disclosed in
Section 2.14 of the Disclosure Schedule, and except for matters addressed in
Section 2.07 (Tax Matters.), Section 2.11 (Employee Benefit Plans.), Section
2.17 (Environmental Matters), and Section 2.18 (Intellectual Property.), which
shall be governed exclusively by such Sections, Company's Business is being
conducted in compliance with all applicable Laws
-19-
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.
Section 2.15 Accuracy of Proxy Statement/Prospectus. On the date on which
Company mails to its shareholders the Proxy Statement/Prospectus, on the date
the Company Shareholders Meeting is held, and on the Effective Date, the Proxy
Statement/Prospectus will contain all material statements concerning Company
which are required to be set forth therein in accordance with the Securities
Act; and at such respective times, the Proxy Statement/Prospectus will not
include any untrue statement of a material fact with respect to the Company or
omit to state any material fact with respect to Company 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 Parent, Buyer or any of Parent's or
Buyer's Subsidiaries or advisors included or incorporated by reference in the
Proxy Statement/Prospectus.
Section 2.16 Insurance. 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 of similar size operating similar properties in the localities where
such properties are located under valid and enforceable policies issued by
insurers of recognized responsibility, except where failure to so insure would
not be reasonably likely to have a Company Material Adverse Effect.
Section 2.17 Environmental Matters. Except as would not reasonably be
likely to result in a Company Material Adverse Effect:
(a) Each of Company and its Subsidiaries is in compliance with all
applicable Environmental Laws Neither Company nor any Subsidiary has received
any notice of any investigation, claim or proceeding against Company which is
pending and unresolved relating to Hazardous Substances or any action pursuant
to or violation or alleged violation under any Environmental Law, and Company is
not aware of any fact or circumstance that could reasonably be expected to
involve the Company or any Subsidiary in any environmental litigation,
proceeding, investigation or claim or impose any environmental liability upon
Company or any Subsidiary.
(b) To the knowledge of Company, there are no Hazardous Substances in,
under or about the soil, sediment, surface water or groundwater on, under or
around any properties at any time owned, leased or occupied by Company or any
Subsidiary for which Company would incur obligations of remediation under
applicable Environmental Laws. Neither Company nor any Subsidiary has disposed
of any Hazardous Substances on or about such properties except in compliance
with applicable Environmental Laws or in a manner that would not cause Company
or any Subsidiary to incur obligations of remediation under applicable
Environmental Laws. There is no present release or threatened release of any
Hazardous Substances in, on, under or around such properties for which Company
would incur obligations of remediation under applicable
-20-
Environmental Laws. To the knowledge of Company, neither the Company nor any
Subsidiary has disposed of any materials at any site being investigated or
remediated for contamination or possible contamination of the environment for
which Company would have liability.
(c) Except as set forth in Section 2.17 of the Disclosure Schedule, the
Company has provided no indemnities of any kind to any third party with respect
to environmental matters concerning the Company, its Subsidiaries, or the assets
of either under which Company or a Subsidiary has received notice of actual and
unresolved liability.
Section 2.18 Intellectual Property.
(a) The Company and each of its Subsidiaries owns, or is licensed or
otherwise possesses legally sufficient rights to use, all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
technology, know-how, computer software programs or applications (in both source
code and object code form) and tangible or intangible proprietary information or
material that are used or proposed to be used in the business of the Company or
such Subsidiary, as currently conducted in any respect (the "Company
Intellectual Property"). Except as disclosed in Section 2.18 of the Disclosure
Schedule, Company has no knowledge of any infringement by any other Person of
any of the Company Intellectual Property owned by or exclusively licensed to
Company (any such licensed Company Intellectual Property being referred to
herein as "Third Party Intellectual Property"), and Company has not entered into
any agreement to indemnify any other Person against any charge of infringement
of any of the Company Intellectual Property Except as disclosed in Section 2.18
of the Disclosure Schedule, to the knowledge of Company, neither Company nor any
of its Subsidiaries has violated or infringed any intellectual property right of
any other Person, and neither Company nor any of its Subsidiaries has received
any written communication (including, without limitation, claims or demands)
alleging that it violates or infringes the intellectual property rights of any
other Person. Except as disclosed in Section 2.18 of the Disclosure Schedule,
neither Company nor any of its Subsidiaries has received any written claim or
demand of any Person pertaining to, or any proceeding which is pending or, to
the knowledge of Company, threatened, that challenges the rights of Company or
any of its Subsidiaries in respect of any Company Intellectual Property, or that
claims that any default exists under any Company Intellectual Property. None of
the Company Intellectual Property is subject to any outstanding order, ruling,
decree, judgment or stipulation by or with any court, tribunal, arbitrator, or
other Governmental Entity.
-21-
(b) Neither the Company nor any of its Subsidiaries is, nor will it be as a
result of the execution and delivery of this Agreement or the performance of its
obligations hereunder, in violation of any license, sublicense or agreement
concerning Company Intellectual Property. Except as set forth in Section 2.18 of
the Disclosure Schedule, no claims with respect to the Company Intellectual
Property, any trade secret material to the Company or Third Party Intellectual
Property to the extent arising out of any use, reproduction or distribution of
such Third Party Intellectual Property by or through the Company or any of its
Subsidiaries, are currently pending or, to the knowledge of the Company, are
threatened by any person, (i) to the effect that the manufacture, sale,
licensing or use of any product as now used, sold or licensed or proposed for
use, sale or license by the Company or any of its Subsidiaries infringes on any
patent, trademark, trade name, service mark, copyright, or trade secret; (ii)
against the use by the Company or its Subsidiaries of any patent, trademarks,
trade names, copyrights, trade secrets, technology, know-how or computer
software programs and applications used in the business of the Company or any of
its Subsidiaries as currently conducted or as proposed to be conducted; (iii)
challenging the ownership, validity or effectiveness of any of the Company
Intellectual Property or other trade secret material to the Company and its
Subsidiaries, or (iv) challenging the Company's or any of its Subsidiaries'
license or legally enforceable right to use of the Third Party Intellectual
Property.
(c) Except as disclosed in Section 2.18 of the Disclosure Schedule, neither
the execution and delivery of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated by this Agreement will result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default), or impair the Company's or any of its
Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any license agreement, contract or other arrangement of any
nature relating to Company Intellectual Property Rights or Third Party
Intellectual Property Rights.
Section 2.19 Labor Matters. There are no controversies pending or, to the
knowledge of the Company, threatened, between the Company or any of its
Subsidiaries and any group of their respective employees. Neither the Company
nor any of its Subsidiaries is a party to any collective bargaining agreement or
other labor union contract applicable to persons employed by the Company or its
Subsidiaries nor does the Company know of any activities or proceedings of any
labor union to organize any such employees; and neither the Company or any of
its Subsidiaries has breached or otherwise failed to comply with any provision
of any such agreement or contract and there are no grievances outstanding
against any such parties under any such agreement or contract. There are no
unfair labor practice complaints pending against the Company or any of its
Subsidiaries before the National Labor Relations Board or any current union
representation questions involving employees of the Company or any of its
Subsidiaries. The Company has no knowledge of any strikes, slowdowns, work
stoppages, lockouts, or threats thereof, by or with respect to any employees of
the Company or any of its Subsidiaries. The Company has no knowledge of any
strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any employees of the
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Company or any of its Subsidiaries. No consent of any union which is a party to
any collective bargaining agreement with the Company or any of its Subsidiaries
is required to consummate the transactions contemplated by this Agreement.
Section 2.20 Related Party Transactions. Except as set forth in the
Company's SEC Filings or Section 2.20 of the Disclosure Schedule, no director,
officer, or "affiliate" (as such term is defined in Rule 12b-2 under the
Exchange Act) of the Company (a) has outstanding any indebtedness or other
similar obligations of the Company or any of its Subsidiaries, other than
ordinary course of business travel advances or (b) other than employment related
benefits agreements contemplated by or disclosed in this Agreement, is a party
to any legally binding contract, commitment or obligation to, from or with the
Company or any of its Subsidiaries.
Section 2.21 State Takeover Statutes. The action of the Board of Directors
of the Company in approving the Merger, this Agreement, and the transactions
contemplated hereby is sufficient to render inapplicable to the Merger and this
Agreement the provisions of Part Thirteen of the TBCA.
Section 2.22 Brokers; Advisors. No broker, investment banker, financial
advisor or other person, other than Credit Suisse First Boston Corporation, the
fees and expenses of which will be paid by the Company (and are reflected in
agreements between Credit Suisse First Boston Corporation and the Company,
complete copies of which have been furnished to Parent), is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. A true and complete estimate
of the fees and costs of all financial and accounting advisors and legal counsel
retained by Company in connection with the negotiation and consummation of the
Merger is set forth in Section 2.22 of the Disclosure Schedule. Company will
obtain the agreement of Credit Suisse First Boston Corporation to provide the
section of the Proxy Statement/Prospectus that describes the procedures it
followed in arriving at its fairness opinion.
Section 2.23 Pooling of Interest. Neither Company nor any of its
Subsidiaries has taken or agreed or intends to take any action, nor does the
Company have any knowledge of any fact or circumstance with respect to Company
or its Subsidiaries, which would prevent the Merger from being treated for
financial accounting purposes as a "pooling of interests" in accordance with
GAAP or the rules, regulations and interpretations of the SEC.
Section 2.24 Full Disclosure. No representation or warranty by the Company
herein (including the Schedules and Annexes hereto) or in any certificate
furnished by or on behalf of the Company to Parent in connection herewith, taken
together with all the other information provided to Parent or its counsel in
connection with the transactions contemplated hereby and all the information
included in the Company SEC Filings, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading.
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Article III
Representations And Warranties
Of Parent And Buyer
Parent and Buyer hereby represent and warrant to Company as follows:
Section 3.01 Organization. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York, and has
the requisite power and authority to carry on its business as it is now being
conducted. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas.
Section 3.02 Capitalization. (a) The authorized capital stock of Parent
consists of (i) 300,000,000 shares of Parent Stock, of which 92,261,655 shares
were issued and outstanding as of December 29, 2000, and (ii) 3,000,000 shares
of Parent's Preferred Stock, par value $1.00 per share, of which no shares of
Preferred Stock are issued and outstanding. Except as disclosed in the Parent
SEC Filings, there are no (i) bonds, debentures, notes or other instruments or
evidences of indebtedness having the right to vote (or convertible into, or
exercisable or exchangeable for, securities having the right to vote) on any
matters on which the shareholders of Parent or any of its Subsidiaries may vote
("Parent Voting Debt") issued and outstanding, (ii) existing options (other than
director and employee stock options which, as of December 29, 2000 represent an
aggregate of 8,377,954 shares of Parent Stock), warrants, calls, rights
(including preemptive rights), subscriptions or other rights, agreements,
arrangements or commitments of any character, obligating Parent to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or Parent Voting Debt of, or other equity interests in, Parent or
securities convertible into or exchangeable or exercisable for such shares,
Parent Voting Debt, or equity interests, or obligating Parent to grant, extend
or enter into any such option, warrant, call, right, subscription or other
right, agreement, arrangement or commitment, or (iii) outstanding contractual or
other obligations of Parent to repurchase, redeem or otherwise acquire any
shares of Parent Stock or to provide funds to make any investment (in the form
of a loan, capital contribution or otherwise) in any other entity. There are not
as of the date hereof and there will not be at the Effective Time any
stockholder agreements, voting trusts or other agreements or understandings to
which Parent or any of its Subsidiaries is a party or by which any of them is
bound relating to the voting of any shares of the capital stock of Parent or any
agreements, arrangements, or other understandings to which Parent or any of its
Subsidiaries is a party or by which any of them is bound that will limit in any
way the solicitation of proxies by or on behalf of Parent from or the casting of
votes by, the shareholders of Parent with respect to the Merger. There is no
liability for any dividends or other distributions declared or accumulated but
unpaid with respect to any capital stock of Parent.
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(b) The authorized capital stock of Buyer consists of 10,000 shares of
common stock, par value $1.00 per share, of which 1,000 shares are issued and
outstanding on the date hereof and will be issued and outstanding as of the
Closing Date. All of the shares of capital stock of Buyer are owned beneficially
and of record by Parent.
(c) The shares of Parent Stock to be issued as part of the Merger
Consideration have been authorized and when issued and delivered in accordance
with the terms of this Agreement, including Company Shareholder Approval and
Parent Shareholder Approval, will be validly issued, fully paid and
nonassessable, and the issuance thereof is not subject to any preemptive or
similar right.
Section 3.03 Authority; Validity. Parent and Buyer have full power and
authority, corporate or otherwise, to execute and deliver this Agreement and,
subject to the approval of this Agreement by the shareholders of Parent ("Parent
Shareholders' Approval"), to carry out their respective 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 the Board of Directors of Parent and Buyer. Parent's Board
of Directors has directed that this Agreement and the transactions contemplated
hereby be submitted to Parent's shareholders for consideration at a meeting of
such shareholders and, except for the Parent Shareholders' Approval, no other
corporate proceedings on the part of Parent or 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 constitute the valid and binding
obligation of Parent and Buyer enforceable against Parent and Buyer in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or limiting
creditors' rights generally and equitable principles.
Section 3.04 No Conflict. Neither Parent, Buyer nor any of their respective
assets is subject to or obligated under any charter, bylaw, Contract, or other
instrument or any permit, or subject to any Law 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 with) Parent's or Buyer's execution,
delivery and performance of this Agreement and the transactions contemplated
hereby except where such event or occurrence (i) as of the date hereof is not
reasonably likely to result in losses, liabilities, costs or expenses, damage,
decline in value to the business, condition or properties of Parent's Business
(collectively, "Parent Losses") that, individually or in the aggregate, would
reasonably be likely to have a Parent 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 Parent Material Adverse Effect.
Neither Parent's nor Buyer's execution, delivery and performance of this
Agreement and the transactions contemplated hereby will result in the creation
of any lien, pledge, security interest or other encumbrance on the assets of
Parent or Buyer 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 Parent or any change
in the rights or obligations of
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Parent under any Law, permit or license to which Parent is subject, except where
such encumbrance, change or acceleration would not, individually or in the
aggregate, reasonably be likely to have a Parent Material Adverse Effect.
Section 3.05 Consents. Except as disclosed in Section 3.05 of the
Disclosure Schedule, and other than (i) the issuance of a certificate of merger
by the Texas Secretary of State, as provided in Section 1.03, (ii) such consents
(including the Parent Shareholders' Approval), orders, approvals,
authorizations, registrations, declarations and filings as may be required under
the TBCA, applicable state securities laws and the securities laws of any
foreign country, (iii) the order of the SEC declaring the Registration Statement
effective, (iv) the listing on the NYSE of Parent Stock issuable in the Merger
or upon exercise of the Options, (v) such actions of the Department of Justice
and the Federal Trade Commission as may be required under the HSR Act with
respect to the Merger, and (vi) such other 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 Parent Material Adverse Effect, and that would not 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 Parent and Buyer to permit the Merger and the other
transactions contemplated hereby.
Section 3.06 Legal Proceedings. Except as otherwise disclosed by Parent to
Company there is no pending or, to Parent's knowledge, threatened judicial or
administrative proceeding or investigation affecting Parent that if resolved
adversely to Parent would reasonably be likely to result in a Parent Material
Adverse Effect or could reasonably be expected to impair its ability to
consummate the Merger.
Section 3.07 Financial Statements, SEC Filings.
(a) Parent has delivered or made available copies of the following
financial statements to Company: (i) the consolidated balance sheet of Parent at
June 30, 2000 and the consolidated statements of income, shareholders' equity
and cash flows for the years ended June 30, 2000 and July 2, 1999, in each case
including the notes thereto and the related report of Arthur Andersen LLP,
independent certified public accountants, and (ii) the unaudited consolidated
balance sheet of Parent at December 29, 2000 and the unaudited consolidated
statements of income and cash flows for the six-month periods ended December 29,
2000 and December 31, 1999, in each case including any notes thereto.
(b) All financial statements delivered pursuant to Section 3.07(a) hereof
are in accordance with the books and records of Parent and have been prepared in
accordance with GAAP 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 Parent as of the dates
thereof (subject, in the case of the unaudited statements,
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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 December 29, 2000, Parent did not have any liabilities or
obligations (absolute or contingent) of a nature required by GAAP 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 Parent for the
periods indicated.
(c) Parent has filed with the SEC all 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 of the SEC thereunder (such forms, statements, reports and
documents are collectively referred to as the "Parent SEC Filings") required to
be filed after January 1, 2000.
(d) As of their respective dates, (i) each of Parent's past Parent SEC
Filings was, and each of its future Parent SEC Filings will be, prepared in
compliance in all respects with the applicable requirements of the Securities
Act and the Exchange Act; and (ii) none of its past Parent SEC Filings did, and
none of its future Parent 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.
Section 3.08 No Material Adverse Effect. Since June 30, 2000 there has not
been any event which has had or is likely to have a Parent Material Adverse
Effect.
Section 3.09 Accuracy of Proxy Statement/Prospectus. On the date on which
Parent mails to its shareholders the Proxy Statement/Prospectus, on the date the
Parent Shareholders Meeting is held, and on the Effective Date, the Proxy
Statement/Prospectus will contain all statements concerning Parent and Buyer
which are required to be set forth therein in accordance with the Securities Act
and the Exchange Act; and at such respective times, the Proxy
Statement/Prospectus 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,
Parent and Buyer make no representation or warranty with respect to any
information concerning Company or any of Company's Subsidiaries or advisors
included or incorporated by reference in the Proxy Statement/Prospectus. Section
3.10 Reorganization. Neither Parent nor Buyer has taken or agreed or
intends to take any action, nor does Parent have any knowledge of any fact or
circumstance, which would prevent the Merger from constituting a reorganization
within the meaning of Section 368(a) of the Code.
Section 3.11 No Brokers or Finders. Neither Parent, Buyer nor any of their
respective 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
Parent has retained
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Merrill Lynch, Pierce Fenner, & Smith Incorporated as its financial advisor,
whose fees and expenses will be paid by Parent.
Section 3.12 Full Disclosure. No representation or warranty by Parent or
Buyer herein (including the Schedules and Annexes hereto) or in any certificate
furnished by or on behalf of Parent or Buyer to Company in connection herewith,
taken together with all the other information provided to Company or its counsel
in connection with the transactions contemplated hereby and all the information
included in the Parent SEC Filings, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading.
Section 3.13 Compliance with Law. All Licenses held by Parent and its
Subsidiaries that are material in connection with Parent's Business are valid
and sufficient for all business presently carried on by Parent and its
Subsidiaries, except where the failure to maintain such valid and sufficient
license would not be reasonably likely to result in a Parent Material Adverse
Effect. No suspension, cancellation or termination of any such Licenses is
threatened or imminent. Parent'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 Parent Material Adverse Effect.
Section 3.14 Taxes. Parent and each of its Subsidiaries have filed all Tax
Returns required to be filed by them, or requests for extensions to file such
Tax Returns have been timely filed and granted and have not expired, except
where failures to file such Tax Returns or request such extensions would not,
individually or in the aggregate, reasonably be likely to have a Parent Material
Adverse Effect, and all such Tax Returns are complete and accurate in all
material respects. Parent and each of its Subsidiaries have paid (or Parent has
paid on their behalf) all Taxes, whether or not shown as due on such Tax
Returns. The most recent financial statements referred to in Section 3.06
reflect an adequate reserve for all Taxes payable by Parent 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 Parent
or any of its Subsidiaries subsequent to such date other than in the ordinary
course of its business.
Section 3.15 Employee Benefits. Each Parent Benefit Plan is currently, and
has been in the past, operated and administered in all respects in compliance
with its terms and with the requirements of all applicable Laws, including,
without limitation, ERISA and the Code, except where non-compliance would not be
reasonably likely to have a Parent Material Adverse Effect."
Section 3.16 Environmental Matters. Except as would not reasonably be
likely to result in a Parent Material Adverse Effect, (i) Parent and each of its
Subsidiaries have conducted their respective businesses in accordance with all
applicable Environmental Laws, and (ii) Parent has not received any written
notice of any investigation, claim or proceeding against Parent or any of its
Subsidiaries relating to Hazardous Substances.
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Article IV
Covenants
Section 4.01 Access and Information.
(a) Subject to applicable laws and regulations, upon reasonable notice
during the period from the date hereof through the Effective Time, each of
Company, Parent and Buyer shall, and shall cause their Representatives to, and
Company shall cause its Subsidiaries to, afford the Representatives of the other
party reasonable access during normal business hours to all of the other party's
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 Company shall cause
its Subsidiaries to) furnish promptly to the other party all information
concerning such party as such other party or such other party's Representatives
may reasonably request.
(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, Parent, 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 Parent, 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 Parent, Buyer or Company,
as the case may be, from other sources not known by Parent, Buyer or Company,
respectively, to be bound by a confidentiality obligation, (iii) is
independently acquired by Parent, Buyer or Company, as the case may be, as a
result of work carried out by any Representative of Parent, 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 Parent 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
Time 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 parties prompt notice
thereof, (ii) keep the other parties informed as to the status thereof and (iii)
permit the other parties 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.
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(d) Notwithstanding anything to the contrary herein, neither Parent, Buyer
nor Company nor any of their respective Subsidiaries shall be required to
provide access to or to disclose information where such access or disclosure
would violate or prejudice the rights of its customers, jeopardize the
attorney-client privilege of the entity in possession or control of such
information or contravene any law, rule, regulation, order, judgment, decree or
binding agreement entered into prior to the date of this Agreement. The parties
will make appropriate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply.
Section 4.02 Governmental Filings. Subject to the terms and conditions
herein provided, the parties hereto 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 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, and (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.
Section 4.03 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) Each party hereto 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 Proxy Statement/Prospectus and the
Registration Statement or any other statement, filing, notice or application
made by or on behalf of Parent, Buyer or Company to any Governmental Entity in
connection with the Merger and the other transactions contemplated hereby.
(c) Each party hereto shall promptly furnish each other with copies of all
written communications received by such party 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.
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Section 4.04 Meetings of Shareholders; Securities Filings.
(a) Meetings of Shareholders. Each of Company and Parent shall take all
action necessary in accordance with applicable Laws, its charter documents and
the policies of the NYSE 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 Parent respectively with
their respective fiduciary duties as advised by counsel (the "Company
Shareholders Meeting" and "Parent Shareholders Meeting", respectively). Each of
Company and Parent shall, through its Board of Directors recommend to their
respective shareholders approval of such matters and shall use its best efforts
to obtain such approval by its shareholders unless, (i) in the case of Company,
Company's Board of Directors determines in good faith, after receipt of written
advice from Locke Liddell & Sapp LLP, counsel to Company, that such action
creates a reasonable likelihood of constituting a breach of the fiduciary duties
of Company's Board of Directors to Company's shareholders under applicable law,
and (ii) in the case of Parent, Parent's Board of Directors determines in good
faith, after receipt of written advice from Carter, Ledyard & Milburn, counsel
to Parent, that such action creates a reasonable likelihood of constituting a
breach of the fiduciary duties of Parent's Board of Directors to Parent's
shareholders under applicable law. Company and Parent agree to postpone, delay
or adjourn 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/Prospectus and Registration Statement. As
promptly as reasonably practicable, Company, Parent and Buyer shall prepare and
Parent shall 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 Parent Stock to be issued in the Merger (the "Registration Statement")
for use in connection with their respective shareholder meetings. Part I of the
Registration Statement will be a joint proxy statement/prospectus for
distribution to the shareholders of Company and Parent in connection with their
respective shareholder meetings (the "Proxy Statement/Prospectus") The Proxy
Statement/Prospectus and Registration Statement shall not be filed, and no
amendment or supplement to the Proxy Statement/Prospectus and Registration
Statement shall be made by either Company or Parent, without prior consultation
with the other party and its counsel. Company and Parent shall cooperate and use
all reasonable efforts to have the Registration Statement declared effective by
the SEC as promptly as reasonably practicable. Parent 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. Parent 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 Parent Stock pursuant to
the Merger.
(c) Indemnification. Each of Company and Parent (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
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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, at the time of its effectiveness, includes an untrue statement of a
material fact concerning such Indemnifying Party or omits to state a material
fact concerning such Indemnifying Party required to be stated therein or
necessary in order to make the statements therein not misleading. These
indemnity obligations will remain in force after any termination of this
Agreement.
(d) Listing Application; Blue Sky. Parent shall use its reasonable efforts
to cause the Parent Stock distributed in connection with the Merger and upon
exercise of Options to be authorized for listing on the NYSE. Parent shall make
all necessary blue sky law filings in connection with the Merger and exercise of
Options.
Section 4.05 Conduct of Company Business. Company covenants and agrees that
after the date hereof and prior to the Effective Time (unless Parent 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 will use its reasonable efforts to (i) preserve its
existing business organization, insurance coverage, rights, licenses or permits,
advantageous business relationships, agreements and credit facilities; (ii)
retain and keep available the services of its present officers, employees and
agents; (iii) preserve the goodwill of its customers, suppliers and others
having business relations with it; and (iv) timely pay all Taxes when due in
accordance with past practices or accrue and provide for on the books and
records of the Company in accordance with GAAP. Subject to compliance with
applicable Laws and existing contractual obligations (to the extent such
contracts and such obligations are specifically disclosed in Section 4.05 of the
Disclosure Schedule), Company and its Subsidiaries will not: (A) enter into any
transaction or commitment, or dispose of or acquire any properties or assets,
except purchases and sales of inventory in the ordinary course of business
consistent with past practices; (B) 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 (D) take any action that would be reasonably likely to jeopardize
the continuance of any material supplier or customer relationship, except for
efforts to collect accounts receivable or efforts to resolve good faith disputes
regarding accounts payable, in each case, in a manner consistent with past
practice (E) make any 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) 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 $250,000 in any
specific case in the aggregate, excluding transactions in the ordinary course of
business or as contemplated by Company's AFE log (as exists on the date hereof)
and other authorized capital expenditures, to the extent disclosed in writing to
Parent and Buyer prior to the date of this Agreement; (H) make any Tax election
or make any change in any method or period of accounting or any change in any
accounting policy, practice or procedure; or (I) take, or fail to take, any
action that would prevent, or would be reasonably likely to
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prevent, the Merger from qualifying for "pooling of interests" accounting
treatment under the requirements of Opinion No. 16 (Business Combinations) of
the Accounting Principles Board of the American Institute of Certified Public
Accountants, the Financial Accounting Standards Board, and the rules and
regulations of the SEC. Notwithstanding the foregoing, Company may, without
Parent's consent, negotiate and settle its current dispute with Thayer-Blum
Funding II, LLC ("TBFLLC") relating to the Stock Purchase Agreement dated as of
October 10, 2000 between Company and TBFLLC concerning the sale by Company of
the common stock of K*Tec Electronics Corporation, to the extent that the
settlement thereof does not require payment of any amount by Company to TBFLLC.
(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 or by-laws.
(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 Section 2.02 of the
Disclosure Schedule. Company will not grant any Options.
Section 4.06 Conduct of Parent Business. Parent covenants and agrees that
after the date hereof and prior to the Effective Time (unless Company shall have
agreed in writing):
(a) Ordinary Course. Parent will, and will cause its Subsidiaries to,
operate Parent's Business only in the ordinary course of business consistent
with past practices and will use its reasonable efforts to (i) preserve its
existing business organization, insurance coverage, rights, licenses or permits,
advantageous business relationships, 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.
(b) Charter Documents. Parent will not amend its Articles of Incorporation
or By-Laws.
(c) Dividends. Parent will not declare or pay any dividend or make any
other distribution in respect of its capital stock, other than its regular
quarterly cash dividend consistent with past practice.
(d) Stock. Parent will not split, combine or reclassify any shares of its
capital stock, or redeem or acquire (or agree to do so) any of its equity
securities, options, warrants, or convertible instruments, except pursuant to
existing contractual obligations or benefit plans.
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Section 4.07 Publicity. Company and Parent must mutually agree upon the
initial press releases announcing the Merger which shall satisfy the
requirements of Rule 425 under the Securities Act and Rule 14a-12 under the
Exchange Act. Thereafter, Company and Parent 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 Parent, except to the extent that the
disclosing party is advised by its counsel that such action is required by
applicable Laws, and then, if practicable, only after consultation with the
other party.
Section 4.08 Notification of Defaults and Adverse Events. Company and
Parent 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 Parent
Material Adverse Effect, respectively, or (ii) any suit, action or proceeding is
instituted or, to the knowledge of Company or Parent, threatened against or
affecting Company or Parent or any of their respective Subsidiaries which, if
adversely determined, would be reasonably likely to result in a Company Material
Adverse Effect or a Parent Material Adverse Effect. Each of Company and Parent
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.
Section 4.09 Satisfy Conditions to Closing. Parent and Company shall each
use its reasonable best efforts to cause all conditions to Closing to be
satisfied.
Section 4.10 Anti-takeover Statutes. If any anti-takeover or similar
statute is applicable to the transactions contemplated hereby, including but not
limited to Part Thirteen of the TBCA, Parent and 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
anti-takeover or similar statute on the transactions contemplated hereby.
Section 4.11 Indemnification; Insurance.
(a) Indemnification. At all times after the Effective Time, Parent and
Surviving Corporation 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 Parent
and Surviving Corporation (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
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permitted under the TBCA or Company's Articles of Incorporation or By-Laws in
effect as of the date of this Agreement (to the extent consistent with
applicable law), including, without limitation, provisions relating to advances
of expenses incurred in the defense of any action or suit, provided that any
determination required to be made with respect to whether an Indemnified Party's
conduct complies with the standards set forth under Texas law and the Company's
Articles of Incorporation and By-laws shall be made by independent counsel
appointed by the Surviving Corporation's Board of Directors that shall be
acceptable to the Indemnified Party. In addition, Parent and Surviving
Corporation shall pay or reimburse, to the maximum extent permissible under the
TBCA, expenses incurred by an Indemnified Party in advance of the final
disposition of any such action or proceeding after Parent and Surviving
Corporation receive a written affirmation by the Indemnified Party of his good
faith belief that he has met the standard of conduct necessary for
indemnification under the TBCA and a written undertaking by or on behalf of such
Indemnified Party to repay the amount paid or reimbursed if it is ultimately
determined that indemnification of the Indemnified Party is prohibited by
Article 2.02-1E of the TBCA. Without limiting the foregoing, in the event any
claim, action, suit, proceeding or investigation is brought against any
Indemnified Party, Parent shall be entitled to assume the defense of any such
action or proceeding. Upon assumption by Parent of the defense of any such
action or proceeding, the Indemnified Party shall have the right to participate
in such action or proceeding and to retain its own counsel, but Parent and
Surviving Corporation shall not be liable for any legal fees or expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof unless (i) Parent and Surviving Corporation have agreed to pay such fees
and expenses, (ii) the Indemnified Party shall have been advised by counsel
reasonably acceptable to Parent and Surviving Corporation that representation of
the Indemnified Party by counsel provided by Parent is not possible due to
conflicts of interest between Parent, Buyer or the Surviving Corporation and the
Indemnified Party, or (iii) Parent and Surviving Corporation shall have failed
in a timely manner to assume the defense of the matter Parent shall not be
liable for any settlement of any claim effected without its written consent.
Parent and Surviving Corporation shall not, 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 4.11(a), upon learning of any such claim, action, suit,
proceeding or investigation, shall notify Parent and Surviving Corporation (but
the failure so to notify Parent and Surviving Corporation shall not relieve it
from any liability which it may have under this Section 4.11(a) except to the
extent such failure materially prejudices Parent and Surviving Corporation). In
addition to the foregoing, and without limiting in any manner the foregoing,
after the Effective Time Parent and Surviving Corporation shall assume the
obligations of Company under the indemnification agreements set forth in Section
4.04(c), but only to the extent Company would be permitted under the TBCA to
perform its obligations under such indemnification agreements.
(b) Insurance. For a period of six (6) years after the Effective Date,
Parent shall cause (or shall cause the Surviving Corporation) to be maintained
officers' and directors' liability insurance covering Company's existing
officers and directors who are
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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.
Section 4.12 Employee Benefits. (a) At the Effective Time, the Surviving
Corporation shall offer all persons who are at the Effective Time employees of
Company and its Subsidiaries benefits under Parent Benefit Plans which, in the
aggregate, are no less favorable to such employees than those that Parent
currently provides to its own employees. Each Parent Benefit Plan 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.
(b) Parent hereby agrees that as of the Closing Date Company may pay to
Company employees party to the agreements set forth in Section 4.12 of the
Disclosure Schedule the payments and other benefits provided thereby regardless
of such employee's employment status with Company on or after the date thereof,
to the extent and only to the extent specifically disclosed in Section 4.12 of
the Disclosure Schedule.
Section 4.13 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 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, Company may
(a) comply with Rule 14e-2 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 any of its
Subsidiaries or 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 if, and only to the extent that:
(A) (1) the third party has first made a bona fide 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
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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
Acquisition Proposal being referred to 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, 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 Parent 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, or
(ii) accept a Superior Proposal from a third party, provided that the
conditions set forth in clauses Section 4.13(b)(i)(A) and Section
4.13(b)(i)(B) above have been satisfied and Company complies with and
terminates this Agreement pursuant to Section 6.01(h).
Company shall immediately cease and terminate any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any persons
or entities conducted heretofore by Company or any of its Subsidiaries of
Representatives with respect to the foregoing. The Company shall notify Parent
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 Parent
informed of the status and details of any such inquiry, offer, or proposal
except to the extent doing so would constitute a breach of the fiduciary duties
of the Board of Directors.
Section 4.14 Rights Agreement. Company shall take all necessary action
(including, if required, redeeming all of the outstanding stock purchase rights
or amending or terminating the Rights Agreement) so that the entering into of
this Agreement and the consummation of the Merger and the other transactions
contemplated hereby do not and will not result in a "Distribution Date" under
the Rights Agreement.
Section 4.15 Option Vesting. Except as contractually obligated prior to the
date hereof, Company shall not take any action at any time prior to the Closing
which may serve to accelerate the vesting of any Option granted by Company.
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Section 4.16 Special Earnings Announcement. Parent shall use its reasonable best
efforts to publish or cause to be published no later than 15 days after the end
of the first month after the Effective Time (which month may be the month in
which the Effective Time occurs) in which there are at least 30 days of
post-Merger combined operations, combined sales and net income figures
contemplated by and in accordance with the terms of SEC Accounting Release No.
135.
Section 4.17 Reorganization. Neither Parent, Buyer nor Company shall take,
or fail to take, any action that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
Article V
Conditions
Section 5.01 Conditions to Obligations of Company, Parent and Buyer. The
respective obligations of the parties to effect the Merger are subject to the
fulfillment at or prior to the Effective Time of the following conditions unless
waived in writing by all parties:
(a) Approval. The shareholders of Company and Parent shall have approved
this Agreement and the Merger in accordance with applicable Laws and the
policies of the NYSE.
(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, except where failure to obtain
such approval would not be reasonably likely to have a Parent Material Adverse
Effect or a Company Material Adverse Effect. 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. Since the date of this Agreement,
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
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.
(e) Tax Opinions. Parent shall have received a written opinion dated the
Effective Date from its counsel, Carter, Ledyard & Milburn, and Company shall
have received a written opinion dated the Effective Date from its counsel, Locke
Liddell & Sapp LLP, each to the effect that the Merger will be treated for
federal income tax purposes as a tax-free reorganization within the meaning of
Code Section 368(a), that each of Parent, Buyer and Company will be a party to
that reorganization within the
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meaning of Code Section 368(b) and that neither Parent, Buyer nor Company will
recognize any gain on the Merger; provided, however, that if counsel to either
party does not render such opinion, this condition shall be deemed satisfied
with respect to such party if counsel to the other party renders such opinion to
such party. In rendering such opinions, counsel may rely upon reasonably
requested representation letters of Parent, Buyer and Company.
Section 5.02 Conditions to Obligations of Parent and Buyer. The obligations
of Parent and Buyer to effect the Merger are subject to the fulfillment at or
prior to the Effective Time of the following conditions except to the extent
waived in writing by Parent and Buyer:
(a) Approval. All corporate actions necessary to authorize the execution,
delivery and performance of this Agreement and the Merger shall have been duly
and validly taken by Company, except to the extent that the failure to take such
corporate actions would not have a Company Material Adverse Effect or make
execution, delivery or performance of this Agreement and the Merger
unenforceable or invalid.
(b) Representations and Compliance. The representations and warranties of
Company in this Agreement shall be true and correct in all material respects
(other than representations and warranties that are already so qualified, which
in each such case shall be true and correct as written) as of the date of this
Agreement and on the Closing Date with the same effect as though made on and as
of such date, except (i) that representations and warranties which specifically
relate to a particular date or period shall be true and correct as of such date
or for such period, and (ii) where failure to be so true and correct would not
(in the aggregate for all representations and warranties of Company) have a
Company Material Adverse Effect (other than representations and warranties that
are already so qualified, which in each such case shall be true and correct as
written), and except for any changes contemplated by this Agreement; Company
shall have complied in all material respects (other than covenants that are
already so qualified, which in each such case shall be complied with as written)
with all covenants requiring compliance by it prior to the Closing Date, except
where failure to comply did not, individually or in the aggregate, result in a
Company Material Adverse Effect or prevent the consummation of the transactions
contemplated by this Agreement; and Buyer shall have received an officer's
certificate signed by the Chief Executive Officer of Company certifying as to
each of the foregoing.
(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.
Section 5.03 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:
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(a) Approval. All corporate actions necessary to authorize the execution,
delivery and performance of this Agreement and the Merger shall have been duly
and validly taken by Parent and Buyer, except to the extent that the failure to
take such corporate actions would not have a Parent Material Adverse Effect or
make execution, delivery or performance of this Agreement and the Merger
unenforceable or invalid.
(b) Representations and Compliance. The representations and warranties of
Parent and Buyer in this Agreement shall be true and correct in all material
respects (other than representations and warranties that are already so
qualified, which in each such case shall be true and correct as written) as of
the date of this Agreement and on the Closing Date with the same effect as
though made on and as of such date, except (i) that representations and
warranties which specifically relate to a particular date or period shall be
true and correct as of such date or for such period, and (ii) where failure to
be so true and correct would not (in the aggregate for all representations and
warranties of Parent and Buyer) have a Parent Material Adverse Effect (other
than representations and warranties that are already so qualified, which in each
such case shall be true and correct as written), and except for any changes
contemplated by this Agreement; Parent and Buyer shall have complied in all
material respects (other than covenants that are already so qualified, which in
each such case shall be complied with as written) with all covenants requiring
compliance by it prior to the Closing Date, except where failure to comply did
not, individually or in the aggregate, result in a Parent Material Adverse
Effect or prevent the consummation of the transactions contemplated by this
Agreement; and Company shall have received an officer's certificate signed by
the Chief Executive Officer of Parent certifying as to each of the foregoing.
(c) Listing. The Parent Stock distributable in the Merger or in connection
with the exercise of Options shall have been approved 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 Parent
Material Adverse Effect.
Article VI
Termination, Amendment and Waiver
Section 6.01 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 or Parent:
(a) by mutual consent of Parent and Company;
(b) by either Parent 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;
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(c) by either Parent or Company if the Merger shall not have been
consummated on or before September 30, 2001 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 either Company or Parent if the requisite vote of the shareholders
of Company required for the consummation of the Merger shall not have been
obtained at the Company Shareholders Meeting held pursuant to Section 4.04(a);
(e) by either Parent or Company if the requisite vote of the shareholders
of Parent required for the consummation of the Merger shall not have been
obtained at the Parent Shareholders Meeting held pursuant to Section 4.04(a);
(f) by Parent, upon written notice to Company, if (i) Company's Board of
Directors shall withdraw, modify or change its approval or recommendation of
this Agreement or the Merger in a manner adverse to Parent or shall have
resolved to do so, (ii) Company shall have materially breached its obligations
under this Agreement by reason of a failure to call the Company Shareholders
Meeting in accordance with Section 4.04(a) or a failure to prepare and mail to
its shareholders the Joint Proxy Statement/Prospectus in accordance with Section
4.04, (iii) Company's Board of Directors shall have approved or recommended any
Superior Proposal, or (iv) Company's Board of Directors shall redeem or amend
the Rights Agreement without Parent's written consent for any reason other than
(A) pursuant to Section 4.14 hereof or (B) following termination of this
Agreement pursuant to Section 6.01(h) below;
(g) by Company, upon written notice to Parent, if Parent's Board of
Directors shall withdraw, modify or change its approval or recommendation of
this Agreement or the Merger in a manner adverse to Company or shall have
resolved to do so, or (ii) Parent shall have materially breached its obligations
under this Agreement by reason of a failure to call the Parent Shareholders
Meeting in accordance with Section 4.04(a) or a failure to prepare and mail to
its shareholders the Joint Proxy Statement/Prospectus in accordance with Section
4.04;
(h) by Company, prior to the consummation of the transactions contemplated
hereby, for the purpose of entering into an agreement with a Person that has
made a Superior Proposal; or
(i) by either Parent or Company (so long as the terminating party has not
materially breached any representation, warranty, covenant or other agreement
contained herein in a manner that has or would reasonably likely have a Material
Adverse Effect with respect to such terminating party) if there shall have been
a material breach of any of the representations, warranties, covenants or
agreements or obligations set forth in this Agreement on the part of the other
party which has or would reasonably likely have a Parent Material Adverse Effect
(if the terminating party is Company) or a Company Material Adverse Effect (if
the terminating party is Parent), or which would reasonably be expected to
prevent (or materially delay) the consummation of the Merger, which shall
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not have been cured within ten (10) 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.
Section 6.02 Effect of Termination and Termination Fee. (a) Except as
provided in this Section 6.02 and Section 7.02, Section 4.01(b), and Section
4.04(c) hereof, 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.
(b) Company shall pay Parent, by wire transfer of immediately available
funds, the sum (to be referred to as the "Company Termination Fee") of:
(i) $30,000,000, less any amount paid pursuant to subsection (ii)
below or Section 6.02(d) below; if this Agreement is terminated: (A) by
Parent pursuant to Section 6.01(f), or (B) by Company pursuant to Section
6.01(h) and, within one year of the termination date, Company consummates a
transaction or series of transactions with the Person submitting such
Superior Proposal (or any Affiliate of such Person) whereby more than 50%
of the Company Stock or a majority of the assets of Company are transferred
to such party (or any Affiliate of such party); or (C) if, within one year
following termination of this Agreement by Company pursuant to Section
6.01(c) or Section 6.01(d), or by Parent pursuant to Section 6.01(i), any
Person shall successfully acquire more than 50% of the Company Stock, or
Company shall enter into a written agreement with any Person (other than
Parent) that has made or in the future makes an Acquisition Proposal and
consummates a transaction or series of transactions with such Person (or
any Affiliate of such Person) whereby more than 50% of the Company Stock or
a majority of the assets of Company are transferred to such party (or any
Affiliate of such party);
(ii) $1,000,000 if either party shall terminate this Agreement
pursuant to Section 6.01(d);
Company shall pay the Company Termination Fee on the business day
immediately following the event causing such Company Termination Fee to be
payable. If Company fails to pay all amounts due to Parent on the dates
specified, then Company shall pay all costs and expenses (including legal fees
and expenses) incurred by Parent in connection with any action or proceeding
(including the filing of any lawsuit) taken by it to collect such unpaid
amounts, together with interest on such unpaid amounts at the prime lending rate
prevailing at such time, as published in the Wall Street Journal, from the date
such amounts were required to be paid until the date actually received by
Parent.
(c) Parent shall pay Company, by wire transfer of immediately available
funds, the sum (such sum to be referred to as the "Parent Termination Fee") of:
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(i) $30,000,000 if Company shall terminate this Agreement pursuant to
Section 6.01(g), less any amount paid pursuant to subsection (ii) below or
Section 6.02(d) below;
(ii) $1,000,000 if either party shall terminate this Agreement
pursuant to Section 6.01(e).
Parent shall pay such Parent Termination Fee on the business day
immediately following the event causing such Parent Termination Fee to be
payable. If Parent fails to pay all amounts due to Company on the dates
specified, then Parent shall pay all costs and expenses (including legal fees
and expenses) incurred by Company in connection with any action or proceeding
(including the filing of any lawsuit) taken by it to collect such unpaid
amounts, together with interest on such unpaid amounts at the prime lending rate
prevailing at such time, as published in the Wall Street Journal, from the date
such amounts were required to be paid until the date actually received by
Company.
(d) In the event of the termination of this Agreement by either Parent or
Company as provided in Section 6.01(i), the aggrieved party may exercise any and
all rights or remedies available at law or in equity for Parent Losses or
Company Losses, as applicable, and damages (including, without limitation,
expenses incurred in connection with this Agreement and the transactions
contemplated hereby).
Section 6.03 Amendment. This Agreement may be amended by the parties hereto
at any time before or after approval hereof by the shareholders of Company and
Parent, but, after any such approval, no amendment shall be made which would
under the TBCA require the approval of the shareholders of Company or Parent,
respectively, without such 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.
Section 6.04 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
Section 7.01 Termination of Representations and Warranties. The
representations and warranties of each party will terminate at the Effective
Time.
Section 7.02 Expenses. Subject to Section 6.02(d), each party will pay its
own expenses relating to this Agreement and the transactions contemplated
hereby.
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Section 7.03 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 telecopied to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or Buyer:
Avnet, Inc.
2211 South 47th Street
Phoenix, Arizona 85034
Attention: David R. Birk, Esq.
Telecopy: 480-643-7929
with a copy to:
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
Attention: James E. Abbott, Esq.
Telecopy: 212-732-3232
(b) if to Company:
Kent Electronics Corporation
7433 Harwin Drive
Houston, Texas 77036
Attention: Larry D. Olson
Telecopy: 713-978-5800
with a copy to:
Locke Liddell & Sapp LLP
3400 Chase Tower
600 Travis
Houston, Texas 77002-3095
Attention: Gene G. Lewis, Esq.
Telecopy: 713-223-3717
Section 7.04 Further Assurances. Parent, 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.
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Section 7.05 Specific Performance.
(a) If (i) all of the conditions to Closing set forth in Section 5.01 and
Section 5.02 shall have been satisfied (or if permitted, waived in writing) and
(ii) Parent or Buyer shall have breached or violated its obligations under
Article I of this Agreement (a "Parent Article I Breach"), the parties hereto
acknowledge and agree that money damages or other remedy at law would not be
sufficient or adequate remedy for any Parent Article I Breach and that in
addition to all other remedies available to Company, Company shall be entitled
to the fullest extent permitted by law to an injunction restraining such Parent
Article I Breach and to any other legal or equitable relief, including, without
limitation, specific performance, without bond or other security being required.
(b) If (i) all of the conditions to Closing set forth in Section 5.01 and
Section 5.03 shall have been satisfied (or if permitted, waived in writing) and
(ii) Company shall have breached or violated its obligations under Article I of
this Agreement (a "Company Article I Breach"), the parties hereto acknowledge
and agree that money damages or other remedy at law would not be sufficient or
adequate remedy for any Company Article I Breach and that in addition to all
other remedies available to Parent and Buyer, Parent and Buyer shall be entitled
to the fullest extent permitted by law to an injunction restraining such Company
Article I Breach and to any other legal or equitable relief, including, without
limitation, specific performance, without bond or other security being required.
Section 7.06 Assignability. Neither this Agreement nor any rights or
obligations under it are assignable.
Section 7.07 Governing Law. This Agreement will be governed by the laws of
the State of Texas without regard to conflict of law principles.
Section 7.08 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.
Section 7.09 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.
Section 7.10 Integration. This Agreement and the Schedules hereto
constitute the entire agreement and supersede all prior agreements and
understandings (excluding the Confidentiality Agreement which shall remain in
full force and effect without any amendment or modification thereto), both
written and oral, among the parties with respect to the subject matter hereof.
Section 7.11 Survival. The provisions of Section 6.02, and Articles VII and
VIII hereof shall survive termination of this Agreement.
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Article VIII
Definitions
Section 8.01 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 GAAP; (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.
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 or series 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 or series 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.
"Articles of Merger" has the meaning set forth in Section 1.03.
"Buyer" has the meaning set forth in the first paragraph hereof.
"Canceled Shares" has the meaning set forth in Section 1.08(b).
"Closing" has the meaning set forth in Section 1.02.
"Closing Date" has the meaning set forth in Section 1.02.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Company" has the meaning set forth in the first paragraph hereof.
"Company Affiliates" has the meaning set forth in Section 1.11.
"Company Benefit Plans" has the meaning set forth in Section 2.11(a).
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"Company's Business" means the business of Company and its Subsidiaries,
taken as a whole.
"Company Common Stock" has the meaning set forth in the second Recital
hereto.
"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 Losses" has the meaning set forth in Section 2.04.
"Company Material Adverse Effect" means any change or effect that is
materially adverse to the business, financial condition, results of operations,
or properties of Company and its Subsidiaries, taken as a whole, provided,
however, that none of the following shall be deemed (either individually or in
the aggregate) to constitute, and none of the following shall be taken into
account in determining whether there has been or will be, a Company Material
Adverse Effect:
(a) any matter disclosed in the Disclosure Schedule to this Agreement with
sufficient specificity to indicate the nature, size and scope of such change or
effect;
(b) any failure by Company to meet internal projections or forecasts or
published revenue or earnings predictions; or
(c) any adverse change or effect (including any litigation, loss of
employees, cancellation of or delay in customer orders, reduction in revenues or
income or disruption of business relationships) arising from or attributable to
(i) the announcement or pendency of the transactions contemplated by this
Agreement, to the extent such adverse change or effect is proven to be
attributable primarily to such announcement or the pendency of such
transactions, (ii) conditions generally affecting the industry sectors in which
Company or any of its Subsidiaries participates, the U.S. economy as a whole or
any foreign economy in any location where Company or any of its Subsidiaries has
material operations or sales, (iii) legal, accounting or investment banking fees
or expenses incurred in connection with the transactions contemplated by this
Agreement, as set forth in Section 2.22 of the Disclosure Schedule, (iv)
compliance with the terms of, or the taking of any action required by, this
Agreement, (v) the payment of any amounts due to, or the provision of any other
benefits to, any officers or employees under employment contracts,
non-competition agreements, employee benefit plans, severance arrangements or
other arrangements in existence as of the date of this Agreement, to the extent
disclosed specifically in the Disclosure Schedules hereto, (vi) the taking of
any action approved or consented to in writing by Parent or Buyer, (vii) any
change in accounting requirements or principles or any change in applicable Laws
or the interpretations thereof, or (viii) any required repurchase of Company's
Convertible Notes.
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"Company SEC Filings" has the meaning set forth in Section 2.06(d).
"Company Shareholders' Approval" has the meaning set forth in Section 2.03.
"Company Shareholders Meeting" has the meaning set forth in Section
4.04(a).
"Company Shares" has the meaning set forth in Section 1.08.
"Company Termination Fee" has the meaning set forth in Section 6.02(b)
"Confidentiality Agreement" means the confidentiality agreement dated as of
March 1, 2001 by and between Company and Parent.
"Contract" means any agreement, arrangement, bond, commitment, franchise,
indemnity, indenture, instrument, lease, license or understanding, whether or
not in writing.
"Conversion Ratio" has the meaning set forth in Section 1.08(a).
"Effective Date" has the meaning set forth in Section 1.03.
"Effective Time" has the meaning set forth in Section 1.03.
"Environmental Laws" means, local, state and federal statutes, orders,
rules, ordinances, regulations, codes and other requirements of any Governmental
Entity and all applicable judicial or administrative interpretations thereof
relating to pollution or protection of human health or the environment,
including, without limitation, laws relating to exposures, emissions,
discharges, releases or threatened releases of Hazardous Substances (as
hereinafter defined) into or on land, ambient air, surface water, groundwater,
personal property or structures (including the protection, cleanup, removal,
remediation or damage thereof), or otherwise related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
generation, discharge or handling of Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" has the meaning set forth in Section 1.09(a).
"GAAP" means United States generally accepted accounting principles.
"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.
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"Hazardous Substances" means substances that are defined or listed in, or
otherwise classified pursuant to, any applicable Laws, including, without
limitation, CERCLA and RCRA, 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,
without limitation, ignitability, 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 or polychlorinated biphenyls.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Indemnified Parties" has the meaning set forth in Section 4.11(a).
"Indemnifying Party" has the meaning set forth in Section 4.04(c).
"Inducement Agreement" has the meaning set forth in the recitals.
"IRS" means the Internal Revenue Service.
"Knowledge" or "knowledge" or "known" - Parent and Company shall be deemed
to have "knowledge" of or to have "known" a particular fact or other matter if
either the Chief Executive Officer, the Chief Financial Officer or, in the case
of Company, Messrs. Abramson, Hightower or Zerbe, or, in the case of Parent,
Messrs. Birk, Church or DeLuca has actual knowledge of such fact or other matter
after due inquiry, or would have had such knowledge if he or she had made due
inquiry.
"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.
"Material Contract" has the meaning set forth in Section 2.09.
"Merger" has the meaning set forth in Section 1.01.
"Merger Consideration" means the Parent Stock into which Company Shares are
converted pursuant to the Merger, and cash payable in lieu of fractional shares
of Parent Stock, if any, pursuant to Section 1.09(e).
"NYSE" means the New York Stock Exchange.
"Option Plans" has the meaning set forth in Section 2.02.
"Options" has the meaning set forth in Section 2.02.
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"Parent Benefit Plans" means collectively, all employee benefit plans,
programs and commitments that Parent 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 Code Section 6039D).
"Parent's Business" means the business of Parent and its Subsidiaries,
taken as a whole.
"Parent Losses" has the meaning set forth in Section 3.04.
"Parent Material Adverse Effect" means any change or effect that is
materially adverse to the business, financial condition or results of operations
of Parent and its Subsidiaries taken as a whole; provided, however, that none of
the following shall be deemed (either individually or in the aggregate) to
constitute, and none of the following shall be taken into account in determining
whether there has been or will be, a Parent Material Adverse Effect:
(a) any matter disclosed in the Disclosure Schedule to this Agreement with
sufficient specificity to indicate the nature, size and scope of such change or
effect;
(b) any failure by Parent to meet internal projections or forecasts or
published revenue or earnings predictions; or
(c) any adverse change or effect (including any litigation, loss of
employees, cancellation of or delay in customer orders, reduction in revenues or
income or disruption of business relationships) arising from or attributable to
(i) the announcement or pendency of the transactions contemplated by this
Agreement, to the extent such adverse change or effect is proven to be
attributable primarily to such announcement or the pendency of such
transactions, (ii) conditions generally affecting the industry sectors in which
Parent or any of its Subsidiaries participates, the U.S. economy as a whole or
any foreign economy in any location where Parent or any of its Subsidiaries has
material operations or sales (iii) legal, accounting, or investment banking fees
or expenses incurred in connection with the transactions contemplated by this
Agreement, (iv) compliance with the terms of, or the taking of any action
required by, this Agreement, (v) any change in accounting requirements or
principles or any change in applicable Laws or the interpretations thereof, (vi)
the taking of any action approved or consented to in writing by Company.
"Parent SEC Filings" has the meaning set forth in Section 3.07(c).
"Parent Shareholders' Approval" has the meaning set forth in Section 3.03.
"Parent Shareholders Meeting" has the meaning set forth in Section 4.04.
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"Parent Stock" has the meaning set forth in Section 1.08(a).
"Parent Termination Fee" has the meaning set forth in Section 6.02(c).
"Person" means any individual, partnership, joint venture, corporation,
bank, trust, unincorporated organization, Governmental Entity or other entity.
"Proxy Statement/Prospectus" has the meaning set forth in Section 4.04(b)
"Qualified Plan" has the meaning set forth in Section 2.11(b).
"Registration Statement" has the meaning set forth in Section 4.04(b).
"Representatives" means a Person's or any of its Subsidiaries' officers,
directors, employees, consultants, investment bankers, accountants, attorneys
and other advisors, representatives and agents.
"Rights Agreement" has the meaning set forth in Section 2.02(a).
"Securities Act" means the Securities Act of 1933, as amended.
"SEC" means the Securities and Exchange Commission.
"Superior Proposal" has the meaning set forth in Section 4.13.
"Surviving Corporation" has the meaning set forth in Section 1.01.
"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.
"Tax Return" means a declaration, statement, report, return, claim for
refund, 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, and including any schedule or attachment thereto, and any
amendment thereof.
"Termination Fee" shall mean either a Parent Termination Fee or a Company
Termination Fee.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
AVNET, INC.
By: /s/Raymond Sadowski
-------------------
Name: Raymond Sadowski
Title: Chief Financial Officer and
Senior Vice President
ALPHA ACQUISITION CORP.
By: /s/Raymond Sadowski
-------------------
Name: Raymond Sadowski
Title: President
KENT ELECTRONICS CORPORATION
By: /s/Larry D. Olson
------------------
Name: Larry D. Olson
Title: President and Chief Executive Officer
EXHIBIT 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 21, 2001 (this "Agreement"),
between Avnet, Inc., a New York corporation ("Parent"), Alpha Acquisition Corp.,
a Texas corporation and wholly owned subsidiary of Parent ("Acquisition") and
Kent Electronics Corporation, a Texas corporation (the "Company").
WHEREAS, Parent, Acquisition, and Company propose to enter into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"; terms not defined herein shall have the meanings set forth in the
Merger Agreement), which provides, among other things, that Acquisition will
merge with and into Company pursuant to the terms of the merger provided for in
the Merger Agreement (the "Merger"); and
WHEREAS, as a condition to the willingness of Parent and Acquisition to
enter into the Merger Agreement, Parent and Acquisition have required that
Company agree, and in order to induce Parent and Acquisition to enter into the
Merger Agreement Company has agreed, to grant Parent an option to purchase
2,863,474 shares of common stock, without par value, of Company ("Company Common
Stock"), in accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein and in the Merger Agreement, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
THE STOCK OPTION
Section 1.01 Grant of Stock Option. Company hereby grants to Parent an
irrevocable option (the "Stock Option") to purchase up to 2,863,474 shares of
Company Common Stock (the "Option Shares") at a purchase price of $22.48 per
Option Share (the "Purchase Price").
Section 1.02 Exercise of Stock Option. (a) Subject to the conditions set
forth in Section 1.03, the Stock Option may be exercised by Parent, in whole or
in part, at any time or from time to time after the occurrence of an Exercise
Event (as defined below) and prior to the Termination Date (as defined below).
(b) An "Exercise Event" shall occur for purposes of this Agreement upon the
occurrence of any of the following events or circumstances:
(i) from the date hereof through the date on which the Merger
Agreement is terminated for any reason by any party thereto, any Person
unaffiliated with Parent or Company publicly announces an intention to
acquire more than a majority of the outstanding Company Common Stock;
(ii) termination of the Merger Agreement by Company pursuant to
Section 6.01(h) thereof or by Parent pursuant to Section 6.01(f) thereof;
or
(iii) within one year following termination of the Merger Agreement by
Company pursuant to Section 6.01(c) or Section 6.01(d) thereof, or by
Parent pursuant to Section 6.01(i) thereof, any Person (other than Parent
or any Affiliate of Parent) shall successfully acquire more than 50% of the
Company Stock, or Company shall enter into a written agreement with any
Person (other than Parent) that has made or in the future makes an
Acquisition Proposal and consummates a transaction or series of
transactions with such Person (or any Affiliate of such Person) whereby
more than a majority of the Company Stock or a majority of the assets of
Company are transferred to such Person (or Affiliate thereof).
(c) The "Termination Date" shall occur for purposes of this Agreement upon
the first to occur of any of the following:
(i) the Effective Time;
(ii) the termination of the Merger Agreement in accordance with its
terms, so long as, in the case of this clause (ii), an Exercise Event has
not occurred and could not occur in the future; or
(iii) the date which is 180 days after the occurrence of an Exercise
Event; or
(iv) the date on which Parent's Total Recovery equals $40,000,000.
(d) In the event Parent wishes to exercise the Stock Option, Parent shall
send a written notice (an "Exercise Notice") to Company specifying the total
number of Option Shares Parent wishes to purchase, the denominations of the
certificate or certificates evidencing such Option Shares which Parent wishes to
receive, a date for the closing of such purchase (a "Closing Date"), which shall
be at least five business days (as defined in the Merger Agreement) after
delivery of such notice, and a place for the Closing and, if Parent intends to
pay the Purchase Price for such Option Shares with a Note (as defined below)
pursuant to clause (b) of the second sentence of Section 1.04, the names of at
least three investment banks of recognized national standing, none of which have
a material relationship with Parent, acceptable to Parent for the purpose of
determining the interest rate of such Note pursuant to Section 1.04 if Parent
and Company are unable to agree on such interest rate. In the event that the
interest rate is not
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determined on or prior to the date specified for the Closing, the Closing shall
occur on the first business day following determination of the interest rate.
(e) Upon receipt of an Exercise Notice, Company shall be obligated to
deliver to Parent a certificate or certificates evidencing the number of Option
Shares specified therein, in accordance with the terms of this Agreement, on the
later of (i) the date specified in such Exercise Notice and (ii) the first
business day on which the conditions specified in Section 1.03 shall be
satisfied.
Section 1.03 Conditions to Delivery of Option Shares. The obligation of
Company to deliver Option Shares upon any exercise of the Stock Option is
subject to the following conditions:
(a) Such delivery would not in any material respect violate, or otherwise
cause the material violation of, Sections 312.00 through 312.07 of the New York
Stock Exchange Listed Company Manual or any material applicable law, including,
without limitation, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"); and
(b) There shall be no preliminary or permanent injunction or other order by
any court of competent jurisdiction preventing or prohibiting such exercise of
the Stock Option or the delivery of the Option Shares in respect of such
exercise.
Section 1.04 Closings. At each Closing, Company will deliver to Parent a
certificate or certificates evidencing the number of Option Shares specified in
the applicable Exercise Notice (in the denominations specified therein), and
Parent will purchase each such Option Share from Company at the Purchase Price.
All payments made by Parent to Company pursuant to this Section 1.04 shall be
made, at the option of Parent, either (a) by wire transfer of immediately
available funds in the amount of the aggregate Purchase Price for the Option
Shares, or (b) by delivery to Company of (x) a certified or bank check or checks
payable to or on the order of Company in an amount not less than the aggregate
par value of the Option Shares to be purchased at the applicable Closing and (y)
a senior subordinated note of Parent, issued under substantially the same form
of indenture as the form filed as an exhibit to Parent's Current Report on Form
8-K bearing cover date of October 12, 2000, in a principal amount equal to the
aggregate Purchase Price less the amount paid by check or wire transfer pursuant
to clause (a) of this Section 1.04, with a maturity of seven years from the date
of issuance and covenants substantially the same as those of Parent's currently
outstanding publicly held 8.20% Notes due 2003 and bearing an interest rate
agreed to by Parent and Company as an interest rate intended to cause the Note
to trade, at the time of issuance, at a price equal to its principal amount (a
"Note": all such Notes being, collectively, the "Notes"). If Parent and Company
are unable to agree on such an interest rate within two business days after
delivery of the Exercise Notice, Company shall, not later than the close of
business on the third business day after delivery of the Exercise Notice, select
one investment bank from the list of investment banks included in such Exercise
Notice, which investment bank shall, not later than the opening of business on
the fifth business day after delivery of such Exercise Notice, determine the
interest rate
-3-
for the Note which such investment bank believes, in its sole judgment, would
cause the Note to trade, at the time of issuance, at a price equal to its
principal amount. The determination by such investment bank shall be final,
binding and conclusive on Parent and Company. The fees and expenses of such
investment bank shall be borne equally by Parent and Company.
Section 1.05 Adjustments Upon Share Issuances, Changes in Capitalization,
etc. (a) In the event of any change in Company Common Stock or in the number of
outstanding shares of Company Common Stock by reason of a stock dividend,
split-up, recapitalization, combination, exchange of shares or similar
transaction or any other change in the corporate or capital structure of Company
(including, without limitation, the declaration or payment of an extraordinary
dividend of cash, securities or other property), the type and number of shares
or securities to be issued by Company upon exercise of the Stock Option shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction, so that Parent shall receive upon exercise of the
Stock Option the number and class of shares or other securities or property that
Parent would have received in respect of Company Common Stock if the Stock
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable and elected to the fullest extent it would have been
permitted to elect, to receive such securities, cash or other property.
(b) In the event that Company shall enter into an agreement (i) to
consolidate with or merge into any person, other than Parent or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Parent or one of
its subsidiaries, to merge into Company and Company shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Company Common Stock shall be changed into or exchanged for stock or
other securities of Company or any other person or cash or any other property or
the outstanding shares of Company Common Stock shall after such merger represent
less than 66% of the outstanding shares and share equivalents of the surviving
corporation or (iii) to sell or otherwise transfer all or substantially all of
its assets to any person, other than Parent or one of its subsidiaries, then,
and in each such case, proper provision shall be made in the agreements
governing such transaction so that Parent shall receive upon exercise of the
Stock Option the number and class of shares or other securities or property that
Parent would have received in respect of Company Common Stock if the Stock
Option had been exercised immediately prior to such transaction, or the record
date therefor, as applicable and elected to the fullest extent it would have
been permitted to elect, to receive such securities, cash or other property.
(c) The provisions of this Agreement, including, without limitation,
Section 1.01, Section 1.02, Section 1.04, Section 3.02 and Section 3.03, shall
apply with appropriate adjustments to any securities for which the Stock Option
becomes exercisable pursuant to this Section 1.05.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Parent and Acquisition as
follows:
Section 2.01 Authority Relative to this Agreement. Company has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Company and the
consummation by Company of the transactions contemplated hereby have been duly
and validly authorized by the Board of Directors of Company, and no other
corporate proceedings on the part of Company are necessary to authorize this
Agreement or to consummate such transactions. This Agreement has been duly and
validly executed and delivered by Company and, assuming the due authorization,
execution and delivery by Parent and Acquisition, constitutes a legal, valid and
binding obligation of Company, enforceable against Company in accordance with
its terms. The grant of the Stock Option hereunder is exempt from Section 16(b)
under the Securities Exchange Act of 1934 by virtue of Rule 16b-3(d) thereunder.
Section 2.02 Authority to Issue Shares. Company has taken all necessary
corporate action to authorize and reserve and permit it to issue, and at all
times from the date hereof through the Termination Date shall have reserved, all
the Option Shares issuable pursuant to this Agreement, and Company will take all
necessary corporate action to authorize and reserve and permit it to issue all
additional shares of Company Common Stock or other securities which may be
issued pursuant to Section 1.05, all of which, upon their issuance and delivery
in accordance with the terms of this Agreement, shall be duly authorized,
validly issued, fully paid and nonassessable, shall be delivered free and clear
of all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on Parent's voting rights, charges and other
encumbrances of any nature whatsoever (other than this Agreement) and shall not
be subject to any preemptive rights.
Section 2.03 Consents; No Conflict. The execution and delivery of this
Agreement by Company do not, and the performance of this Agreement by Company
will not, (i) require any consent, approval, authorization or permit of, or
filing with or notification to (other than pursuant to the HSR Act or foreign
competition, antitrust or investment law, if applicable) any governmental or
regulatory authority, domestic or foreign, (ii) conflict with or violate the
Articles of Incorporation or by-laws or equivalent organizational documents of
Company or any of its Subsidiaries, (iii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to Company or any of its
Subsidiaries or by which any property or asset of Company or any of its
Subsidiaries is bound or affected, or (iv) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance of any nature whatsoever on any property or asset of Company or any
of its Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other
-5-
instrument or obligation to which Company or any of its Subsidiaries is a party
or by which Company or any of its Subsidiaries or any property or asset of
Company or any of its Subsidiaries is bound or affected, except, in the case of
clauses (i), (iii) and (iv), for any such conflicts, violations, breaches,
defaults or other occurrences which would not in any material respect prevent or
delay the exercise by Parent of the Stock Option or any other right of Parent
under this Agreement.
ARTICLE III
COVENANTS OF COMPANY
Section 3.01 Listing; Other Action. (a) Company shall, at its expense, use
reasonable best efforts to cause the Option Shares to be approved for listing on
the New York Stock Exchange, upon official notice of issuance, as promptly as
practicable following the date of this Agreement, and will provide prompt notice
to the New York Stock Exchange of the issuance of each Option Share, unless the
delivery of the Option Shares can be satisfied with shares of Company Common
Stock held in treasury by Company.
(b) Company shall use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereunder,
including, without limitation, using its reasonable best efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities. Without limiting the generality of the
foregoing, Company shall when required in order to effect the transactions
contemplated hereunder make all filings and submissions under the HSR as
promptly as practicable.
(c) Company shall not take any action in order to intentionally cause the
exercise of the Stock Option to violate Section 312.00 through 312.07of the New
York Stock Exchange Listed Company Manual.
Section 3.02 Registration. (a) Upon the request of Parent at any time and
from time to time within two years of the last Closing, Company agrees (i) to
effect, as promptly as practicable, but in each instance no more than 60 days
after its receipt of such a request, up to two registrations under the
Securities Act covering any part or all (as may be requested by Parent) of the
Option Shares or other securities that have been acquired by or are issuable to
Parent upon exercise of the Stock Option (provided that the anticipated
aggregate sales price of such securities is at least $5,000,000), and to use its
best efforts to qualify such Option Shares or other securities under any
applicable state securities laws and (ii) to include, at Parent's request, any
part or all of the Option Shares or such other securities in any registration
statement filed by Company under the Securities Act in which such inclusion is
permitted under applicable rules and regulations, and to use its best efforts to
keep each such registration described in clauses (i) and (ii) effective for a
period of not less than twelve months. If the managing underwriter of a proposed
underwritten offering of securities by Company described in clause (ii) shall
advise Company in writing that, in the reasonable opinion of the managing
underwriter, the distribution of the Option Shares requested by Parent to be
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included in a registration statement concurrently with securities being
registered for sale by Company would adversely affect the distribution of such
securities by Company, then Company shall either (i) include such Option Shares
in the registration statement, but Parent shall agree to delay the offering and
sale for such period of time as the managing underwriter may reasonably request
(provided that Parent may at any time withdraw its request to include Option
Shares in such offering) or (ii) include such portion of the Option Shares in
the registration statement as the managing underwriter advises may be so
included for sale simultaneously with sales by Company, provided, that at
Company's discretion, Company may reduce the number of Option Shares to be
included in such offering only to the extent that such Option Shares will not
constitute more than 25% of the Shares of Company Common Stock to be included in
such offering. The registrations effected under this Section 3.02 shall be
effected at Company's expense except for any underwriting discounts and
commissions allocable to the Option Shares and the fees and disbursements of
Parent's counsel. Company shall indemnify and hold harmless Parent, its
affiliates and controlling persons and their respective officers, directors,
agents and representatives from and against any and all losses, claims, damages,
liabilities and expenses (including, without limitation, all out-of-pocket
expenses, investigation expenses, expenses incurred with respect to any judgment
and fees and disbursements of counsel and accountants) arising out of or based
upon any statements contained in, or omissions or alleged omissions from, each
registration statement (and related prospectus) filed pursuant to this Section
3.02 provided, however, that Company shall not be liable in any such case to
Parent or any affiliate or controlling person of Parent or any of their
respective officers, directors, agents or representatives to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or omission or
alleged omission made in such registration statement or prospectus in reliance
upon, and in conformity with, written information furnished to Company
specifically for use in the preparation thereof by Parent, such affiliate,
controlling person, officer, director, agent or representative, as the case may
be.
(b) For a period not exceeding an aggregate of 60 trading days in any 12
month period, Company may suspend the ability of Parent to make dispositions
under a registration statement or prospectus by providing Parent with written
notification (a "Blocking Notice") if Company's Board of Directors determines in
its good faith judgment that Company's obligation to ensure that such
registration statement and prospectus contain current and complete information
would require Company to make a public disclosure regarding a material
non-public transaction, provided, that Company shall not be entitled to deliver
a Blocking Notice within 10 trading days of the expiration of any Blocking
Notice previously delivered. Each Blocking Notice shall contain a general
statement of the reasons for such postponement and an approximation of the
anticipated delay. Parent agrees that, upon receipt of a Blocking Notice from
Company, Parent shall not dispose of, sell or offer for sale the Option Shares
pursuant to the registration statement until Parent receives (i) copies of the
supplemented or amended prospectus, or until counsel for Company shall have
determined that such disclosure is not required due to subsequent events, (ii)
notice in writing from Company that the use of the prospectus may be resumed and
(iii) copies of any additional or supplemental filings that are incorporated by
reference in the prospectus.
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(c) Whenever Parent shall have requested that any Option Shares be
registered pursuant to this Section 3.02, the Company will use its commercially
reasonable efforts to effect the registration and the sale of such Option Shares
in accordance with this Section 3.02 and, to that end, will as expeditiously as
reasonably practicable (i) prepare and file with the Securities and Exchange
Commission a registration statement with respect to the Option Shares (and
required amendments and supplements to such registration statement), (ii) enter
into customary agreements in connection therewith (including underwriting
agreements in customary form), (iii) obtain a cold comfort letter from the
Company's independent public accountants in customary form and covering
customary matters, (iv) provide a customary legal opinion of the Company's
outside counsel, and (v) take all such other actions reasonably necessary to
perform its obligations under this Section 3.02.
Section 3.03 Repurchase of Option. For a period of 30 days after the
earlier of the consummation of, or the execution of an agreement providing for,
a Superior Proposal involving Company (a "Put Event"), but in no event later
than 180 days following an Exercise Event, Parent shall have the right, upon
five business days' prior written notice to Company (or any successor in
interest to Company by merger, sale of all or substantially all of the assets,
or otherwise) (the "Put Notice"), to cause Company (or any such successor in
interest) to have a closing and to pay at such closing (and Company and such
successor, jointly and severally, shall be obligated to pay) to Parent in
consideration for the cancellation of the Stock Option, an aggregate
cancellation price (the "Cancellation Price") equal to the product of (x) the
number of Option Shares as to which the Stock Option remains exercisable
multiplied by (y) the excess of (i) the average per share closing price of a
share of Company Common Stock as quoted on the New York Stock Exchange (or if
not then quoted thereon, on such other exchange or quotation system on which
Company Common Stock is quoted) for the period of five trading days ending on
the trading day immediately prior to the occurrence of the Put Event over (ii)
the Purchase Price.
(b) At any closing contemplated by the Put Notice, Company shall pay to
Parent the Cancellation Price for the number of Option Shares as to which the
Stock Option is to be canceled either by (i) delivering to Parent a certified or
bank check payable to or on the order of Parent in an amount equal to the
Cancellation Price (ii) wire transfer of immediately available funds, or (iii)
(A) canceling an aggregate amount, up to the amount of the Purchase Price
(including, without limitation, accrued and unpaid interest), then owing to
Company under the Note or Notes delivered by Parent to Company in connection
with the exercise by Parent of the Stock Option and (B) delivering to Parent a
certified or bank check payable to or on the order of Parent in an amount equal
to the excess, if any, of the Cancellation Price over the amount of indebtedness
canceled under clause (A) (including, without limitation, accrued and unpaid
interest) evidenced by such Note or Notes.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Company as follows:
Section 4.01 Authority Relative to this Agreement. Parent has all necessary
power and authority to execute, and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Parent and the consummation by
Parent of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Parent, and no other corporate
proceedings on the part of Parent are necessary to authorize this Agreement or
to consummate such transactions. This Agreement has been duly and validly
executed and delivered by Parent and, assuming the due authorization, execution
and delivery by Company, constitutes a legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms.
Section 4.02 Consents; No Conflict. The execution and delivery of this
Agreement by Parent does not, the performance of this Agreement by Parent will
not, and the issuance of the Note by Parent will not at the time of issuance,
(i) require any consent, approval, authorization or permit of, or filing with or
notification to (other than pursuant to the HSR Act or foreign competition,
antitrust or investment law, if applicable) any governmental or regulatory
authority, domestic or foreign, (ii) conflict with or violate the certificate of
incorporation or by-laws of Parent, (iii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to Parent or by which any
property or asset of Parent is bound or affected, or (iv) result in any breach
of or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance of any nature whatsoever on any property or asset of Parent
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent is
a party or by which Parent or any property or asset of Parent is bound or
affected, except, in the case of clauses (i), (iii) and (iv), for any such
conflicts, violations, breaches, defaults or other occurrences which would not
in any material respect prevent or delay the exercise by Company of any right of
Company under this Agreement and would not have a Parent Material Adverse
Effect.
ARTICLE V
COVENANTS OF PARENT
Parent hereby covenants and agrees as follows:
Section 5.01 Distribution. Parent shall acquire the Option Shares for
investment purposes only and not with a view to any distribution thereof in
violation of the Securities Act, and shall not sell any Option Shares purchased
pursuant to this Agreement except in compliance with the Securities Act.
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Section 5.02 Notes and Registration. (a) Any Note delivered pursuant to
Section 1.04 shall be duly and validly authorized, executed and delivered by
Parent shall constitute a legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms.
(b) Upon the request of Company at any time and from time to time within
three years of the first Closing, Parent agrees (i) to effect, as promptly as
practicable, up to two registrations under the Securities Act covering any part
or all (as may be requested by Company) of the Notes, and to use its best
efforts to qualify such Notes under any applicable state securities laws and
(ii) to cause to be included any part or all of the Notes in any registration
statement for debt securities filed by Parent under the Securities Act in which
such inclusion is permitted under applicable rules and regulations, and to use
its best efforts to cause to keep each such registration described in clauses
(i) and (ii) effective for a period of not less than six months. Parent shall
give Company at least 15 days' advance written notice of Parent's anticipated
filing of a registration statement described in clause (ii) of the preceding
sentence. If the managing underwriter of a proposed offering of securities by
Parent shall advise Parent in writing that, in the reasonable opinion of the
managing underwriter, the distribution of the Notes requested by Company to be
included in a registration statement concurrently with securities being
registered for sale by Parent would adversely affect the distribution of such
securities by Parent, then Parent shall either (i) include such Notes in the
registration statement, but Company shall agree to delay the offering and sale
for such period of time as the managing underwriter may reasonably request
(provided that Company may at any time withdraw its request to include Notes in
such offering) or (ii) include such portion of the Notes in the registration
statement as the managing underwriter advises may be so included for sale
simultaneously with sales by Parent. The registrations effected under this
paragraph (c) shall be effected at Parent's expense except for underwriting
commissions allocable to the Notes and the fees and disbursements of Company's
counsel. Parent shall indemnify and hold harmless Company, its affiliates and
controlling persons and their respective officers, directors, agents and
representatives from and against any and all losses, claims, damages,
liabilities and expenses (including, without limitation, all out-of-pocket
expenses, investigation expenses, expenses incurred with respect to any judgment
and fees and disbursements of counsel and accountants) arising out of or based
upon any statements contained in, or omissions or alleged omissions from, each
registration statement (and related prospectus) filed pursuant to this paragraph
(c); provided, however, that Parent shall not be liable in any such case to
Company or any affiliate or controlling person of Company or any of their
respective officers, directors, agents or representatives to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or omission or
alleged omission made in such registration statement or prospectus in reliance
upon, and in conformity with, written information furnished to Parent with
respect to it specifically for use in the preparation thereof by Company, such
affiliate, controlling person, officer, director, agent or representative, as
the case may be.
(c) Whenever Company shall have requested that any Notes be registered
pursuant to this Section 5.02 Parent will use its commercially reasonable
efforts to effect the registration and the sale of such Notes in accordance with
this Section 5.02 and, to
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that end, will as expeditiously as reasonably practicable (i) prepare and file
with the Securities and Exchange Commission a registration statement with
respect to the Notes (and required amendments and supplements to such
registration statement), (ii) enter into customary agreements in connection
therewith (including underwriting agreements in customary form), (iii) obtain a
cold comfort letter from Parent's independent public accountants in customary
form and covering customary matters, (iv) provide a customary legal opinion of
the Parent's outside counsel, and (v) take all such other actions reasonably
necessary to perform its obligations under this Section 5.02
ARTICLE VI
PARENT RECOVERY
Section 6.01 Limitation of Parent Recovery. (a) Notwithstanding any other
provision herein or in the Merger Agreement, in no event shall Parent's Total
Recovery (as defined below) exceed $40 million (the "Maximum Recovery"), and, if
it otherwise would exceed such amount, Parent, at its sole discretion, shall
either (i) reduce the number of shares subject to the Stock Option, (ii) deliver
to Company for cancellation shares of Company Common Stock (or other securities
into which such Option Shares are converted or exchanged), (iii) pay cash to
Company, (iv) reduce the amount of the Cancellation Price or (v) any combination
of the foregoing, so that Parent's actually realized Total Recovery shall not
exceed the Maximum Recovery after taking into account the foregoing actions.
Notwithstanding any other provision of this Agreement, the Stock Option may not
be exercised for a number of shares as would, as of the date of exercise, result
in a Notional Total Recovery (as defined below) of more than the Maximum
Recovery and, if exercise of the Stock Option would otherwise result in the
Notional Total Recovery exceeding such amount, Parent, in its discretion, may
take any of the actions specified in this Section 6.01(a) so that the Notional
Total Recovery shall not exceed the Maximum Recovery; provided, that nothing in
this sentence shall restrict any subsequent exercise of the Stock Option which
at such time complies with this sentence.
(b) For purposes of this Agreement, "Total Recovery" shall mean: (i) the
aggregate amount (before taxes) of (A) the excess of (x) the net cash amounts or
fair market value of any property received by Parent pursuant to a sale of
Option Shares (or securities into which such shares are converted or exchanged),
other than to a wholly-owned subsidiary of Parent, after payment of applicable
brokerage or sales commissions and discounts, over (y) Parent's aggregate
Purchase Price for such Option Shares (or other securities), plus (B) all
amounts received by Parent upon the repurchase of the Stock Option by Company
pursuant to Section 3.03 hereof, plus (C) all amounts theretofore received by
Parent pursuant to Section 6.02 of the Merger Agreement, minus (ii) (A) all
amounts of cash previously paid to Company pursuant to Section 6.01(a), plus (B)
the value of the Option Shares (or other securities) previously delivered to
Company for cancellation pursuant to Section 6.01(a), which value shall be
deemed to be the aggregate Purchase Price paid for such Option Shares (or other
securities). For purposes of this Agreement, "Notional Total Recovery" with
respect to any number of shares as to which Parent may propose to exercise the
Stock Option shall be the Total Recovery, determined as of the date of such
proposed exercise assuming that the Stock Option were
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exercised on such date for such number of shares, and assuming that such shares,
together with all other Option Shares held by Parent and its affiliates as of
such date, were sold for cash at the closing market price for the Company Common
Stock as of the close of business on the preceding trading day (less customary
brokerage discounts and commissions). For purposes of this Section 6.01,
transactions by a subsidiary transferee of Parent in respect of the Stock Option
or Option Shares transferred to it shall be treated as if made by Parent.
(c) Notwithstanding any other provision of this Agreement, nothing in this
Agreement shall affect the ability of Parent to receive, nor relieve Company's
obligation to pay, any payment provided for in Section 6.02 of the Merger
Agreement; provided, that if and to the extent the Total Recovery received by
Parent would exceed the Maximum Recovery following receipt of such payment,
Parent shall be obligated to comply with the terms of Section 6.01(a) on the
date on which Parent has realized cash and/or property representing Total
Recovery in excess of Maximum Recovery.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses. Except as otherwise provided herein or in the Merger
Agreement, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
Section 7.02 Further Assurances. Company and Acquisition will execute and
deliver all such further documents and instruments and take all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 7.03 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 7.04 Entire Agreement. This Agreement, the Merger Agreement
(together with the Exhibits, the Company Disclosure Schedule, the Parent
Disclosure Schedule and the other executed documents delivered pursuant thereto)
and the Confidentiality Agreement constitute the entire agreement between the
parties with respect to the matters provided for herein, and supersedes all
prior agreements and understandings, both written and oral, between the parties,
or any of them, with respect to the subject matter hereof.
Section 7.05 Assignment. This Agreement shall not be assigned by operation
of law or otherwise, except that Parent may assign all or any of its rights and
obligations hereunder to any wholly-owned subsidiary of Parent, provided that no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
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Section 7.06 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their successors and
permitted assigns. Nothing in this Agreement, express or implied, is intended to
or shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
Section 7.07 Amendment; Waiver. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto. Either Company or Parent
may (i) extend the time for the performance of any obligation or other act of
the other, (ii) waive any inaccuracy in the representations and warranties of
the other contained herein or in any document delivered by the other pursuant
hereto and (iii) waive compliance with any agreement or condition contained
herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
Section 7.08 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to, the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
Section 7.09 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed on transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at their
addresses as specified in the Merger Agreement or sent by electronic
transmission to the respective parties at their telecopier numbers as specified
in the Merger Agreement.
Section 7.10 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas regardless of the
laws that might otherwise govern under applicable principles of conflicts of
law.
Section 7.11 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in anyway the meaning or
interpretation of this Agreement.
Section 7.12 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different, parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, Parent, Acquisition and Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
AVNET, INC.
By: /s/Raymond Sadowski
-------------------
Name: Raymond Sadowski
Title: Chief Financial Officer and
Senior Vice President
ALPHA ACQUISITION CORP.
By: /s/Raymond Sadowski
-------------------
Name: Raymond Sadowski
Title: President
KENT ELECTRONICS CORPORATION
By: /s/Larry D. Olson
-----------------
Name: Larry D. Olson
Title: President and Chief Executive Officer
EXHIBIT 3
INDUCEMENT AGREEMENT
This Inducement Agreement (the "Agreement"), dated as of March 21, 2001, by
and among Avnet, Inc., a New York corporation ("Parent"), and the stockholders
listed on the signature page hereof (each such stockholder being referred to
herein as a "Stockholder" and, collectively with each other Stockholder, the
"Stockholders").
W I T N E S S E T H
WHEREAS, each Stockholder, as of the date hereof, has sole or shared voting
power with respect to the number of shares of common stock, without par value
(the "Company Common Stock") of Kent Electronics Corporation, a Texas
corporation ("Company") set forth on Schedule A attached hereto (together with
any shares of Common Stock acquired by a Stockholder after the date hereof, the
"Company Shares");
WHEREAS, in reliance upon the execution and delivery of this Agreement,
Parent and Alpha Acquisition Corp., a Texas corporation and wholly-owned
subsidiary of Parent ("Acquisition"), will enter into an Agreement and Plan of
Merger dated as of the date hereof (the "Merger Agreement") with Company,
pursuant to which, among other things, Acquisition will be merged with and into
Company (the "Merger"), and Company will become a wholly-owned subsidiary of
Parent, on the terms and subject to the conditions contained in the Merger
Agreement; and
WHEREAS, in order to induce Acquisition and Parent to enter into the Merger
Agreement and to incur the obligations set forth therein, each Stockholder is
granting an irrevocable proxy to Parent to vote his Company Shares in favor of
the Merger and is making certain agreements with respect to his Company Shares.
NOW THEREFORE, for and in consideration of the foregoing and the mutual
promises contained herein, and upon and subject to the terms and conditions set
forth below, the parties hereto agree as follows:
Section 1. Grant of Irrevocable Proxy. Each Stockholder hereby irrevocably
appoints and constitutes Parent or any designee of Parent, with full power of
substitution, the lawful agent, attorney and proxy of the Stockholder (each an
"Irrevocable Proxy") during the term of this Agreement to vote in its sole
discretion all of the shares of Company Common Stock of which such Stockholder
is or becomes the beneficial owner with voting power for the following purposes:
(i) to call one or more meetings of the stockholders of Company in accordance
with the by-laws of Company and applicable law for the purpose of considering a
proposal to approve the Merger Agreement and the transactions contemplated
thereby; (ii) to vote for approval of the Merger Agreement at any stockholders'
meetings of Company held to consider the Merger Agreement (whether annual or
special and whether or not an adjourned meeting); (iii) to vote against any
other proposal for any recapitalization, merger, sale of assets or other
business combination between
Company and any other person or entity other than Parent or Acquisition, or the
taking of any action which would result in any of the conditions to the
obligations of Parent, Acquisition or Company under the Merger Agreement not
being fulfilled; and (iv) to vote as otherwise necessary or appropriate to
enable Acquisition to consummate the transactions contemplated by the Merger
Agreement and, in connection with such purposes, to otherwise act with respect
to the Company Shares which the Stockholder is entitled to vote. THIS
IRREVOCABLE PROXY HAS BEEN GIVEN IN CONSIDERATION OF THE UNDERTAKINGS OF PARENT
AND ACQUISITION IN THE MERGER AGREEMENT AND SHALL BE IRREVOCABLE AND COUPLED
WITH AN INTEREST UNTIL THE IRREVOCABLE PROXY TERMINATION DATE AS DEFINED IN
SECTION 2 HEREOF. This Agreement shall revoke all other proxies granted by the
Stockholders with respect to their Company Shares.
Section 2. Irrevocable Proxy Termination Date. This Irrevocable Proxy shall
expire on the earlier to occur of the Effective Time (as defined in the Merger
Agreement) of the Merger or the termination of the Merger Agreement in
accordance with its terms (in either case, the "Irrevocable Proxy Termination
Date").
Section 3. Covenants of the Stockholders. Each Stockholder covenants and
agrees for the benefit of Parent that, until the Irrevocable Proxy Termination
Date, he will not:
(a) other than as expressly contemplated by this Agreement, grant any
powers of attorney or proxies or consents in respect of any shares of Company
Common Stock, deposit any of such shares into a voting trust, enter into a
voting agreement with respect to any of such shares or otherwise restrict or
take any action adversely affecting the ability of such Stockholder freely to
exercise all voting rights with respect thereto; or
(b) except as expressly permitted by the Merger Agreement, directly or
indirectly through his agents and representatives, initiate, solicit or
encourage, any inquiries or the making or implementation of any Acquisition
Proposal (as defined in the Merger Agreement), or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implementation Acquisition Proposal;
and, except as expressly permitted by the Merger Agreement, such Stockholder
shall (i) immediately cease and cause to be terminated any existing activities,
including discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing and will take the necessary steps to inform his
or her agents and representatives of the obligations undertaken in this Section
3(b), and (ii) notify Parent promptly if any such inquiries or proposals are
received by him, any such information is requested from him, or any such
negotiations or discussions are sought to be initiated or continued with him.
Section 4. Covenants of Parent. Parent covenants and agrees for the benefit
of the Stockholders that (a) immediately upon execution of this Agreement,
Parent shall enter into the Merger Agreement, and (b) until the Irrevocable
Proxy Termination Date, it shall use all reasonable efforts to take, or cause to
be taken, all action, and do, or cause to be done, all things necessary or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement and the Merger Agreement, consistent with the
terms and conditions of each such
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agreement; provided, however, that nothing in this Section 4 or any other
provision of this Agreement is intended, nor shall it be construed, to limit or
in any way restrict Parent's right or ability to exercise any of its rights
under the Merger Agreement.
Section 5. Representations and Warranties of the Stockholders. Each
Stockholder represents and warrants to Parent that:
(a) the execution, delivery and performance by such Stockholder of this
Agreement will not conflict with, require a consent, waiver or approval under,
or result in a breach or default under, any of the terms of any contract,
commitment or other obligation (written or oral) to which such Stockholder is
bound;
(b) such Stockholder has full right, power and authority to enter into and
execute this Agreement and to perform his obligations hereunder;
(c) this Agreement has been duly executed and delivered by such Stockholder
and constitutes a legal, valid and binding obligation of such Stockholder
enforceable against him in accordance with its terms;
(d) as of the date hereof, such Stockholder is the beneficial owner with
the right to vote the number of Company Shares set forth on Schedule A attached
hereto and made a part hereof, and such Shares represent all shares of Company
Common Stock of or with respect to which such Stockholder is the beneficial
owner with the right to vote at the date hereof;
(e) except for the Company Shares listed on Schedule A hereto, such
Stockholder does not have any right to acquire, nor is her or she the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of, with the right to vote, any other shares
of any class of capital stock of Company or any securities convertible into or
exchangeable or exercisable for any shares of any class of capital stock of
Company (other than shares issuable upon exercise of employee stock options
granted by Company and previously disclosed to Parent); and
(f) such Stockholder's Company Shares are duly authorized, validly issued,
fully paid and non-assessable shares of Company Common Stock, and such
Stockholder owns all of his Company Shares free and clear of all liens, claims,
pledges, charges, proxies, restrictions, encumbrances, proxies and voting
agreements or any nature whatsoever (each, an "Encumbrance") other than as
provided by this Agreement, and good and valid title to his Company Shares, free
and clear of any Encumbrance (other than Encumbrances that will not prohibit
such Stockholder from complying with the terms of this Agreement).
The representations and warranties contained herein shall be made as of the
date hereof and as of the Effective Time of the Merger, provided that nothing
herein shall prevent any Stockholder from selling, transferring or otherwise
disposing of any of his Company Shares set forth on Schedule A.
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Section 6. Representations and Warranties of Parent. Parent represents and
warrants to the Stockholders that:
(a) It has all requisite power and authority to enter into and perform all
of its obligations under this Agreement; and
(b) The execution, delivery and performance of this Agreement by it, and
all transactions contemplated hereby, have been duly authorized by all necessary
corporate action on its part, and this Agreement constitutes the legal, valid
and binding contract of Parent enforceable against it in accordance with its
terms.
The representations and warranties contained herein shall be made as of the
date hereof and as of the Effective Time of the Merger.
Section 7. Adjustments; Additional Shares. In the event (a) of any stock
dividend, stock split, merger (other than the Merger), recapitalization,
reclassification, combination, exchange of shares or the like of the capital
stock of Company on, of or affecting the Company Common Stock or (b) that any
Stockholder shall become the owner of, or otherwise obtain the right to vote
with respect to, any additional shares of Company Common Stock or other
securities entitling the holder thereof to vote or give consent with respect to
the matters set forth in Section 1 hereof, then the terms of this Agreement with
respect to the Irrevocable Proxy shall apply to the shares of capital stock or
other instruments or documents that the Stockholders own or have the right to
vote immediately following the effectiveness or the events described in clause
(a) or any Stockholder becoming the owner of or obtaining the right to vote with
respect to any Common Stock or other securities as described in clause (b), as
though, in either case, they were Company Shares hereunder.
Section 8. Specific Performance. The parties hereto agree that the Company
Shares are unique and that money damages are an inadequate remedy for breach of
this Agreement because of the difficulty of ascertaining the amount of damage
that will be suffered by Parent in the event that this Agreement is breached.
Therefore, each of the Stockholders agrees that in addition to and not in lieu
of any other remedies available to Parent at law or in equity, Parent may obtain
specific performance of this Agreement.
Section 9. Assignment. Parent's rights and obligations under this Agreement
may not be assigned without the consent of each affected Stockholder, except
that Parent may assign the same to any direct or indirect wholly-owned
subsidiary of Parent upon delivery of written notice of such assignment to the
Stockholders.
Section 10. Amendments. Amendment or waiver of any provision of this
Agreement or consent to departure therefrom shall not be effective unless in
writing and signed by Parent and all affected Stockholders, in the case of an
amendment, or by the party which is the beneficiary of any such provision, in
the case of a waiver or a consent to depart therefrom.
-4-
Section 11. Notices. Any notices or other communications hereunder shall be
in writing and shall be deemed to have bee duly given (and shall be deemed to
have been duly received if so given) if personally delivered or sent by
telecopier or three business days after being sent by registered or certified
mail, postage paid, addressed to the respective parties as follows:
(a) If to Parent:
Avnet, Inc.
2211 South 47th Street
Phoenix, Arizona 85034
Attention: David R. Birk, Esq.
Telecopier No.:480-643-7929
with a copy to:
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
Attention: James E. Abbott, Esq.
Telecopier No.: 212-732-3232
(b) If to a Stockholder:
To the address listed on the signature page hereof
with a copy to:
Locke Liddell & Sapp LLP
3400 Chase Tower
600 Travis
Houston, Texas 77002-3095
Attention: Gene G. Lewis, Esq.
Telecopy: 713-223-3717
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
Section 12. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of
Texas, without regard to the conflict of laws principles thereof.
Section 13. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors, personal
representatives, executors, heirs and permitted assigns.
-5-
Section 14. Headings. The Section headings herein are for convenience of
reference only and shall not affect the construction hereof.
Section 15. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Agreement.
-6-
IN WITNESS WHEREOF, Parent and each of the Stockholders have duly executed
this Agreement as of the date and year first above written.
AVNET, INC.
By: /s/Raymond Sadowski
------------------------------
Name: Raymond Sadowski
Title: Chief Financial Officer and
Senior Vice President
/s/Larry D. Olson
----------------------------------
Name: Larry D. Olson
Address: 6402 Taimer Ct
-------------------------
Sugar Land TX 77479
-------------------------
/s/Stephen J. Chapko
----------------------------------
Name: Stephen J. Chapko
Address: 3406 Williams Glen Drive
-------------------------
Sugar Land, Tx. 77479
-------------------------
/s/Richard J. Hightower
----------------------------------
Name: Richard J. Hightower
Address: 12 Turtle Creek Manor
-------------------------
Sugar Land TX 77479
--------------------------
/s/Mark A. Zerbe
----------------------------------
Name: Mark A. Zerbe
Address: 6 St. George Ct
-------------------------
Sugar Land TX 77479
-------------------------
Schedule A
Shares
------
Name of Stockholder Number of Shares
- ------------------- ----------------
Larry D. Olson 103,800
Stephen J. Chapko 35,000
Richard J. Hightower 9,500
Mark A. Zerbe 19,800
EXHIBIT 4
INDUCEMENT AGREEMENT
This Inducement Agreement (the "Agreement"), dated as of March 21, 2001, by
and between Avnet, Inc., a New York corporation ("Parent"), and Morrie Abramson
("Stockholder").
W I T N E S S E T H
WHEREAS, Stockholder, as of the date hereof, has sole or shared voting
power with respect to the number of shares of common stock, without par value
(the "Company Common Stock") of Kent Electronics Corporation, a Texas
corporation ("Company") set forth on Schedule A attached hereto (together with
any shares of Common Stock acquired by Stockholder after the date hereof, the
"Company Shares");
WHEREAS, in reliance upon the execution and delivery of this Agreement,
Parent and Alpha Acquisition Corp., a Texas corporation and wholly-owned
subsidiary of Parent ("Acquisition"), will enter into an Agreement and Plan of
Merger dated as of the date hereof (the "Merger Agreement") with Company,
pursuant to which, among other things, Acquisition will be merged with and into
Company (the "Merger"), and Company will become a wholly-owned subsidiary of
Parent, on the terms and subject to the conditions contained in the Merger
Agreement; and
WHEREAS, in order to induce Acquisition and Parent to enter into the Merger
Agreement and to incur the obligations set forth therein, Stockholder is
granting an irrevocable proxy to Parent to vote his Company Shares in favor of
the Merger and is making certain agreements with respect to his Company Shares.
NOW THEREFORE, for and in consideration of the foregoing and the mutual
promises contained herein, and upon and subject to the terms and conditions set
forth below, the parties hereto agree as follows:
Section 1. Grant of Irrevocable Proxy. Stockholder hereby irrevocably
appoints and constitutes Parent or any designee of Parent, with full power of
substitution, the lawful agent, attorney and proxy of Stockholder (each an
"Irrevocable Proxy") during the term of this Agreement to vote in its sole
discretion all of the shares of Company Common Stock of which Stockholder is or
becomes the beneficial owner with voting power for the following purposes: (i)
to call one or more meetings of the stockholders of Company in accordance with
the by-laws of Company and applicable law for the purpose of considering a
proposal to approve the Merger Agreement and the transactions contemplated
thereby; (ii) to vote for approval of the Merger Agreement at any stockholders'
meetings of Company held to consider the Merger Agreement (whether annual or
special and whether or not an adjourned meeting); (iii) to vote against any
other proposal for any recapitalization, merger, sale of assets or other
business combination between Company and any other person or entity other than
Parent or Acquisition, or the taking of any action which would result in any of
the conditions to the obligations of Parent, Acquisition or Company under the
Merger Agreement not being fulfilled; and (iv) to vote as otherwise necessary or
appropriate to enable Acquisition to consummate the transactions contemplated by
the Merger Agreement and, in connection with such purposes, to otherwise act
with respect to the Company Shares which Stockholder is entitled to vote. THIS
IRREVOCABLE PROXY HAS BEEN GIVEN IN CONSIDERATION OF THE UNDERTAKINGS OF PARENT
AND ACQUISITION IN THE MERGER AGREEMENT AND SHALL BE IRREVOCABLE AND COUPLED
WITH AN INTEREST UNTIL THE IRREVOCABLE PROXY TERMINATION DATE AS DEFINED IN
SECTION 2 HEREOF. This Agreement shall revoke all other proxies granted by
Stockholder with respect to his Company Shares.
Section 2. Irrevocable Proxy Termination Date. This Irrevocable Proxy shall
expire on the earlier to occur of the Effective Time (as defined in the Merger
Agreement) of the Merger or the termination of the Merger Agreement in
accordance with its terms (in either case, the "Irrevocable Proxy Termination
Date").
Section 3. Covenants of the Stockholder. Stockholder covenants and agrees
for the benefit of Parent that, until the Irrevocable Proxy Termination Date, he
will not:
(a) other than as expressly contemplated by this Agreement, grant any
powers of attorney or proxies or consents in respect of any shares of Company
Common Stock, deposit any of such shares into a voting trust, enter into a
voting agreement with respect to any of such shares or otherwise restrict or
take any action adversely affecting the ability of Stockholder freely to
exercise all voting rights with respect thereto; or
(b) except as expressly permitted by the Merger Agreement, directly or
indirectly through his agents and representatives, initiate, solicit or
encourage, any inquiries or the making or implementation of any Acquisition
Proposal (as defined in the Merger Agreement), or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implementation Acquisition Proposal;
and, except as expressly permitted by the Merger Agreement, Stockholder shall
(i) immediately cease and cause to be terminated any existing activities,
including discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing and will take the necessary steps to inform his
or her agents and representatives of the obligations undertaken in this Section
3(b), and (ii) notify Parent promptly if any such inquiries or proposals are
received by him, any such information is requested from him, or any such
negotiations or discussions are sought to be initiated or continued with him.
Section 4. Covenants of Parent. Parent covenants and agrees for the benefit
of Stockholder that (a) immediately upon execution of this Agreement, Parent
shall enter into the Merger Agreement, and (b) until the Irrevocable Proxy
Termination Date, it shall use all reasonable efforts to take, or cause to be
taken, all action, and do, or cause to be done, all things necessary or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement and the Merger Agreement, consistent with the
terms and conditions of each such agreement; provided, however, that nothing in
this Section 4 or any other provision of this
-2-
Agreement is intended, nor shall it be construed, to limit or in any way
restrict Parent's right or ability to exercise any of its rights under the
Merger Agreement.
Section 5. Representations and Warranties of Stockholder. Stockholder
represents and warrants to Parent that:
(a) the execution, delivery and performance by Stockholder of this
Agreement will not conflict with, require a consent, waiver or approval under,
or result in a breach or default under, any of the terms of any contract,
commitment or other obligation (written or oral) to which Stockholder is bound;
(b) Stockholder has full right, power and authority to enter into and
execute this Agreement and to perform his obligations hereunder;
(c) this Agreement has been duly executed and delivered by Stockholder and
constitutes a legal, valid and binding obligation of Stockholder enforceable
against him in accordance with its terms;
(d) as of the date hereof, Stockholder is the beneficial owner with the
right to vote the number of Company Shares set forth on Schedule A attached
hereto and made a part hereof, and such Shares represent all shares of Company
Common Stock of or with respect to which Stockholder is the beneficial owner
with the right to vote at the date hereof;
(e) except for the Company Shares listed on Schedule A hereto, Stockholder
does not have any right to acquire, nor is her or she the "beneficial owner" (as
such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) of, with the right to vote, any other shares of any class of capital
stock of Company or any securities convertible into or exchangeable or
exercisable for any shares of any class of capital stock of Company (other than
shares issuable upon exercise of employee stock options granted by Company and
previously disclosed to Parent); and
(f) Stockholder's Company Shares are duly authorized, validly issued, fully
paid and non-assessable shares of Company Common Stock, and Stockholder owns all
of his Company Shares free and clear of all liens, claims, pledges, charges,
proxies, restrictions, encumbrances, proxies and voting agreements or any nature
whatsoever (each, an "Encumbrance") other than as provided by this Agreement,
and good and valid title to his Company Shares, free and clear of any
Encumbrance (other than Encumbrances that will not prohibit Stockholder from
complying with the terms of this Agreement).
The representations and warranties contained herein shall be made as of the
date hereof and as of the Effective Time of the Merger, provided that nothing
herein shall prevent Stockholder from selling, transferring or otherwise
disposing of any of his Company Shares set forth on Schedule A.
-3-
Section 6. Representations and Warranties of Parent. Parent represents and
warrants to Stockholder that:
(a) It has all requisite power and authority to enter into and perform all
of its obligations under this Agreement; and
(b) The execution, delivery and performance of this Agreement by it, and
all transactions contemplated hereby, have been duly authorized by all necessary
corporate action on its part, and this Agreement constitutes the legal, valid
and binding contract of Parent enforceable against it in accordance with its
terms.
The representations and warranties contained herein shall be made as of the
date hereof and as of the Effective Time of the Merger.
Section 7. Adjustments; Additional Shares. In the event (a) of any stock
dividend, stock split, merger (other than the Merger), recapitalization,
reclassification, combination, exchange of shares or the like of the capital
stock of Company on, of or affecting the Company Common Stock or (b) that
Stockholder shall become the owner of, or otherwise obtain the right to vote
with respect to, any additional shares of Company Common Stock or other
securities entitling the holder thereof to vote or give consent with respect to
the matters set forth in Section 1 hereof, then the terms of this Agreement with
respect to the Irrevocable Proxy shall apply to the shares of capital stock or
other instruments or documents that Stockholder owns or has the right to vote
immediately following the effectiveness or the events described in clause (a) or
Stockholder becoming the owner of or obtaining the right to vote with respect to
any Common Stock or other securities as described in clause (b), as though, in
either case, they were Company Shares hereunder.
Section 8. Specific Performance. The parties hereto agree that the Company
Shares are unique and that money damages are an inadequate remedy for breach of
this Agreement because of the difficulty of ascertaining the amount of damage
that will be suffered by Parent in the event that this Agreement is breached.
Therefore, Stockholder agrees that in addition to and not in lieu of any other
remedies available to Parent at law or in equity, Parent may obtain specific
performance of this Agreement.
Section 9. Assignment. Parent's rights and obligations under this Agreement
may not be assigned without the consent of Stockholder, except that Parent may
assign the same to any direct or indirect wholly-owned subsidiary of Parent upon
delivery of written notice of such assignment to Stockholder.
Section 10. Amendments. Amendment or waiver of any provision of this
Agreement or consent to departure therefrom shall not be effective unless in
writing and signed by Parent and Stockholder, in the case of an amendment, or by
the party which is the beneficiary of any such provision, in the case of a
waiver or a consent to depart therefrom.
-4-
Section 11. Notices. Any notices or other communications hereunder shall be
in writing and shall be deemed to have bee duly given (and shall be deemed to
have been duly received if so given) if personally delivered or sent by
telecopier or three business days after being sent by registered or certified
mail, postage paid, addressed to the respective parties as follows:
(a) If to Parent:
Avnet, Inc.
2211 South 47th Street
Phoenix, Arizona 85034
Attention: David R. Birk, Esq.
Telecopier No.:480-643-7929
with a copy to:
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
Attention: James E. Abbott, Esq.
Telecopier No.: 212-732-3232
(b) If to Stockholder:
To the address listed on the signature page hereof
with a copy to:
Locke Liddell & Sapp LLP
3400 Chase Tower
600 Travis
Houston, Texas 77002-3095
Attention: Gene G. Lewis, Esq.
Telecopy: 713-223-3717
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
Section 12. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of
Texas, without regard to the conflict of laws principles thereof.
Section 13. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors, personal
representatives, executors, heirs and permitted assigns.
-5-
Section 14. Headings. The Section headings herein are for convenience of
reference only and shall not affect the construction hereof.
Section 15. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Agreement.
[Signature Page Follows]
-6-
IN WITNESS WHEREOF, Parent and Stockholders have duly executed this
Agreement as of the date and year first above written.
AVNET, INC.
By: /s/Raymond Sadowski
------------------------------
Name: Raymond Sadowski
Title: Chief Financial Officer and
Senior Vice President
/s/Morrie Abramson
----------------------------------
Name: Morrie Abramson
Address: 7433 Harwin Drive
-------------------------
Houston, Texas 77306
-------------------------
Schedule A
Number of Shares
----------------
424,124