AGREEMENT AND PLAN OF MERGER
dated as of
January 23, 1996
among
Premier Industrial Corporation,
Farnell Electronics PLC
and
FAC Delaware Corp.
TABLE OF CONTENTS
Page
ARTICLE 1
THE MERGER
SECTION 1.1. THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. CANCELLATION OF TREASURY STOCK AND FARNELL OWNED STOCK. . . . 2
SECTION 1.3. CAPITAL STOCK OF MERGER SUBSIDIARY. . . . . . . . . . . . . . 2
SECTION 1.4. CONVERSION OF COMPANY COMMON STOCK. . . . . . . . . . . . . . 2
SECTION 1.5. SHARES OF DISSENTING SHAREHOLDERS.. . . . . . . . . . . . . . 4
SECTION 1.6. EXCHANGE OF CERTIFICATES. . . . . . . . . . . . . . . . . . . 5
SECTION 1.7. STOCK TRANSFER BOOKS. . . . . . . . . . . . . . . . . . . . . 9
SECTION 1.8. STOCK OPTIONS.. . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.1. CERTIFICATE OF INCORPORATION; NAME OF SURVIVING CORPORATION.. 10
SECTION 2.2. BYLAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.3. DIRECTORS AND OFFICERS. . . . . . . . . . . . . . . . . . . . 10
SECTION 2.4. PRINCIPAL OFFICE. . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.5. CONSENT TO SERVICE OF PROCESS.. . . . . . . . . . . . . . . . 11
SECTION 2.6. QUALIFICATION AS A FOREIGN CORPORATION. . . . . . . . . . . . 11
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
SECTION 3.1. CORPORATE EXISTENCE AND POWER.. . . . . . . . . . . . . . . . 11
SECTION 3.2. CORPORATE AUTHORIZATION.. . . . . . . . . . . . . . . . . . . 12
SECTION 3.3. GOVERNMENTAL AUTHORIZATION. . . . . . . . . . . . . . . . . . 12
SECTION 3.4. NON-CONTRAVENTION.. . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.5. CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.6. SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.7. SEC FILINGS.. . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.8. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.9. DISCLOSURE DOCUMENTS. . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.10. ABSENCE OF CERTAIN CHANGES. . . . . . . . . . . . . . . . . . 17
SECTION 3.11. NO UNDISCLOSED MATERIAL LIABILITIES.. . . . . . . . . . . . . 18
SECTION 3.12. LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.13. TAXES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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SECTION 3.14. ERISA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.15. COMPLIANCE WITH LAWS AND ORDERS.. . . . . . . . . . . . . . . 22
SECTION 3.16. FINDERS' FEES.. . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.17. ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.18. TRADEMARKS. . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.19. PRINCIPAL STOCKHOLDERS OF THE COMPANY.. . . . . . . . . . . . 23
SECTION 3.20. VOTE REQUIRED . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.21. INAPPLICABILITY OF CERTAIN OHIO LAWS. . . . . . . . . . . . . 24
SECTION 3.22. OPINION OF FINANCIAL ADVISOR. . . . . . . . . . . . . . . . . 24
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF FARNELL AND MERGER SUBSIDIARY
SECTION 4.1. CORPORATE EXISTENCE AND POWER.. . . . . . . . . . . . . . . . 24
SECTION 4.2. CORPORATE AUTHORIZATION.. . . . . . . . . . . . . . . . . . . 25
SECTION 4.3. GOVERNMENTAL AUTHORIZATION. . . . . . . . . . . . . . . . . . 25
SECTION 4.4. NON-CONTRAVENTION.. . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.5. CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.6. SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.7. PRIOR UK DISCLOSURES. . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.8. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.9. DISCLOSURE DOCUMENTS. . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.10. ABSENCE OF CERTAIN CHANGES. . . . . . . . . . . . . . . . . . 29
SECTION 4.11. NO UNDISCLOSED MATERIAL LIABILITIES . . . . . . . . . . . . . 30
SECTION 4.12. LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.13. COMPLIANCE WITH LAWS AND ORDERS . . . . . . . . . . . . . . . 31
SECTION 4.14. MERGER SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.15. FINANCING.. . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.16. FINDERS' FEES.. . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 5
COVENANTS OF THE COMPANY
SECTION 5.1. CONDUCT OF THE COMPANY. . . . . . . . . . . . . . . . . . . . 32
SECTION 5.2. SHAREHOLDER MEETING; PROXY MATERIAL.. . . . . . . . . . . . . 34
SECTION 5.3. ACCESS TO INFORMATION.. . . . . . . . . . . . . . . . . . . . 34
SECTION 5.4. NO SOLICITATION.. . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.5. NOTICES OF CERTAIN EVENTS.. . . . . . . . . . . . . . . . . . 36
SECTION 5.6. TAX CERTIFICATION . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.7. AFFILIATES AND CERTAIN OTHER SHAREHOLDERS . . . . . . . . . . 37
SECTION 5.8. LETTERS OF COMPANY'S ACCOUNTANTS. . . . . . . . . . . . . . . 37
ARTICLE 6
COVENANTS OF FARNELL
SECTION 6.1. CONDUCT OF FARNELL. . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.2. ACCESS TO INFORMATION.. . . . . . . . . . . . . . . . . . . . 38
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SECTION 6.3. NOTICES OF CERTAIN EVENTS.. . . . . . . . . . . . . . . . . . 39
SECTION 6.4. NO SOLICITATION . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.5. OBLIGATIONS OF MERGER SUBSIDIARY. . . . . . . . . . . . . . . 40
SECTION 6.6. INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.7. SHAREHOLDER'S MEETING.. . . . . . . . . . . . . . . . . . . . 41
SECTION 6.8. REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . . . 42
SECTION 6.9. STOCK EXCHANGE LISTING. . . . . . . . . . . . . . . . . . . . 42
SECTION 6.10. LETTER OF FARNELL'S ACCOUNTANTS . . . . . . . . . . . . . . . 42
SECTION 6.11. COMPANY EMPLOYEES AND EMPLOYEE . . . . . . . . . . . . . . . 43
SECTION 6.12. U.S. HEADQUARTERS . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.13. NAME. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.14. CERTAIN TAX MATTERS . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 7
COVENANTS OF FARNELL
AND THE COMPANY
SECTION 7.1. CERTAIN ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.2. CERTAIN FILINGS.. . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.3. PUBLIC ANNOUNCEMENTS. . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.4. FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.5. TAX TREATMENT . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.1. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY.. . . . . . . . . 46
SECTION 8.2. CONDITIONS TO THE OBLIGATIONS OF FARNELL AND MERGER
SUBSIDIARY.. . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.3. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. . . . . . . . . 49
ARTICLE 9
TERMINATION
SECTION 9.1. TERMINATION.. . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 9.2. EFFECT OF TERMINATION.. . . . . . . . . . . . . . . . . . . . 51
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10.2. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. . . . 53
SECTION 10.3. AMENDMENTS; NO WAIVERS. . . . . . . . . . . . . . . . . . . . 53
SECTION 10.4. FEES AND EXPENSES.. . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.5. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . 56
SECTION 10.6. JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . . 56
iii
SECTION 10.7. GOVERNING LAW.. . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.8. COUNTERPARTS; EFFECTIVENESS.. . . . . . . . . . . . . . . . . 56
SECTION 10.9. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.10. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.11. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.12. CERTAIN INTERPRETIVE MATTERS. . . . . . . . . . . . . . . . . 57
Exhibit 1.4 Form of Amendments to Farnell's Memorandum and Articles
of Association
Exhibit 2.1 Certificate of Incorporation of Merger Subsidiary
Exhibit 2.2 By-laws of Merger Subsidiary
Exhibit 3.20(1) Voting Agreement
Exhibit 3.20(2) Shareholders Agreement
Exhibit 5.7(a) Form of Affiliate Letter
Exhibit 5.7(b) Form of Tax Letter for non-Founder 5% Shareholders
Exhibit 5.7(c) Form of Tax Letter for Founder Shareholders
Exhibit 5.7(d) Form of Tax Letter for Officers and Directors
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of January 23, 1996 among
Premier Industrial Corporation, an Ohio corporation (the "COMPANY"), Farnell
Electronics PLC, a public limited company formed under the laws of England
("FARNELL"), and FAC Delaware Corp., a Delaware corporation and a wholly-owned
subsidiary of Farnell ("MERGER SUBSIDIARY").
The parties hereto agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1. THE MERGER. (a) At the Effective Time, the Company
shall be merged (the "MERGER") with and into Merger Subsidiary in accordance
with Section 252 of General Corporation Law of the State of Delaware (the
"DELAWARE LAW") and Section 1701.79 of the Ohio General Corporation Law
("OGCL"), whereupon the separate existence of the Company shall cease, and the
Merger Subsidiary shall be the surviving corporation (the "SURVIVING
CORPORATION").
(b) As soon as practicable after satisfaction of all conditions to
the Merger or, to the extent permitted hereunder, waiver of all conditions to
the Merger, the Company will execute and deliver to Merger Subsidiary a
certificate of merger complying with the OGCL (the "OHIO CERTIFICATE OF MERGER")
and Merger Subsidiary will execute a certificate of merger complying with
Delaware Law (the "DELAWARE CERTIFICATE OF MERGER"). Upon receipt by Merger
Subsidiary of notice that Merger Subsidiary has been capitalized with the
proceeds of the financing referred to in Section 4.15 and the Rights Offering
Shares (as defined in Section 4.15) have been admitted to the Official List of
the London Stock Exchange Limited (the "LSE") and that trading therein has
commenced, Merger Subsidiary will immediately file the Ohio Certificate of
Merger with the Secretary of State of the State of Ohio and file the Delaware
Certificate of Merger with the Secretary of State of the State of Delaware and,
together with the Company, make all other filings or recordings required by
Delaware Law or the OGCL in connection with the Merger. The Merger shall become
effective immediately upon the later of the filing of the Ohio Certificate of
Merger and the filing of the Delaware Certificate of Merger (the "EFFECTIVE
TIME").
(c) The Merger shall have the effects specified under Delaware Law
and the OGCL. Without limiting the
generality of the foregoing, from and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, immunities, powers,
franchises and authority and be subject to all of the restrictions, disabilities
and duties of the Company and Merger Subsidiary, all as provided under Delaware
Law and the OGCL.
SECTION 1.2. CANCELLATION OF TREASURY STOCK AND FARNELL OWNED STOCK.
At the Effective Time, each share of common stock, without par value, of the
Company then issued (each, a "SHARE", and collectively, the "SHARES") held by
the Company as treasury stock or owned by Farnell or any subsidiary of Farnell
immediately prior to the Effective Time shall be canceled, and no payment shall
be made with respect thereto.
SECTION 1.3. CAPITAL STOCK OF MERGER SUBSIDIARY. Each share of
common stock of Merger Subsidiary outstanding immediately prior to the Effective
Time shall remain outstanding and shall, subject to Section 1.6(l) below, be
unchanged after the Merger, all of which shares shall be issued to Farnell and
shall thereafter constitute the only outstanding shares of capital stock of the
Surviving Corporation.
SECTION 1.4. CONVERSION OF COMPANY COMMON STOCK. (a) At the
Effective Time, except as otherwise provided in this Section 1.4 and subject to
Sections 1.5 and 1.6(f), each Share issued and outstanding immediately prior to
the Effective Time (other than Shares to be canceled in accordance with Section
1.2) shall (subject to adjustment in accordance with Section 1.4(b)) be
converted into the right to receive:
(A) 0.84401 Ordinary Shares (the "ORDINARY SHARES") of 5p. each of Farnell
(evidenced by American Depositary Receipts (the "ORDINARY SHARE ADRS"),
each Ordinary Share ADR representing two Ordinary Shares (the "ORDINARY
SHARE CONSIDERATION");
(B) 0.34000 $1.35 Cumulative Convertible Redeemable Preference Shares of
L1 each having the terms set forth in Exhibit 1.4 (the "PREFERENCE SHARES"
and, together with the Ordinary Shares, the "FARNELL SHARES") of Farnell
(evidenced by American Depositary Receipts ("PREFERENCE SHARE ADRS" and,
together with the Ordinary Share ADRs, the "FARNELL ADRS"), each Preference
Share ADR representing one Preference Share (the "PREFERENCE SHARE
CONSIDERATION" and, together with the Ordinary Share Consideration, the
"STOCK CONSIDERATION"); and
(C) cash in an amount equal to $17.00, without interest, from Merger
Subsidiary (the "CASH CONSIDERATION" and,
2
together with the Stock Consideration, the "MERGER CONSIDERATION").
Notwithstanding the foregoing, Founder Shareholders and other persons who are
affiliates ("RULE 145 AFFILIATES") of the Company within the meaning of Rule 145
under the Securities Act of 1933, as amended (THE "SECURITIES ACT") will receive
separate classes of Restricted American Depositary Receipts evidencing the
Ordinary Shares ("RESTRICTED ORDINARY ADRS") and Preference Shares ("RESTRICTED
PREFERENCE ADRS" and together with the Restricted Ordinary ADRs, the "RESTRICTED
ADRS"), respectively, to be issued to such persons pursuant to the preceding
sentence.
At the Effective Time, all such Shares shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of such Shares shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration and any dividends or other
distributions to which such holder is entitled pursuant to Section 1.6(d) and
any cash to be paid in lieu of fractional Restricted ADRs or fractional Farnell
ADRs to which such holder is entitled pursuant to Section 1.6(f), upon surrender
of a Certificate (as defined in Section 1.6(b)). For purposes of this
Agreement, "FOUNDER SHAREHOLDERS" means the holders of Shares listed on Schedule
1.4(a) hereto, and "FOUNDER SHARES" means the number of outstanding Shares held
by the Founder Shareholders immediately prior to the Effective Time.
(b) ADJUSTMENTS TO PRESERVE TAX TREATMENT. If either (i) the tax
opinion of Farnell's tax counsel referred to in Section 8.2(e) cannot be
rendered (as reasonably determined by such counsel) or (ii) the tax opinion of
the Company's tax counsel referred to in Section 8.3(c) cannot be rendered (as
reasonably determined by such counsel), in either case as a result of the Merger
potentially failing to satisfy continuity of interest requirements under
applicable federal income tax principles relating to reorganizations under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "CODE"),
then, the amount of Cash Consideration per Share payable with respect to non-
Dissenting Shares shall be reduced (the "CASH REDUCTION AMOUNT") to the minimum
extent necessary, and the number of shares constituting the Preference Share
Consideration per Share payable with respect to non-Dissenting Shares shall be
increased by an amount equal to the Cash Reduction Amount divided by the fair
market value of a Preference Share at the Effective Time, to enable the relevant
tax opinion or opinions, as the case may be, to be rendered (such reduction and
increase to be finally calculated and made as soon as practicable after the 10th
day following the Company
3
Shareholder Meeting); PROVIDED, HOWEVER, that (x) in no event shall there be an
adjustment under this Section 1.4(b) to the extent that such adjustment would
result in the aggregate fair market value of the Stock Consideration at the
Effective Time payable with respect to non-Dissenting Shares constituting more
than 45% of the aggregate fair market value of the consideration payable to all
holders of Shares at the Effective Time, including holders of Dissenting Shares
and (y) Farnell will not be required to issue a number of Preference Shares
which would cause the aggregate liquidation preference of all Preference Shares
issued in connection with the Merger to exceed $800 million. The parties will
seek to agree as to whether any adjustment is necessary under this Section
1.4(b) and, if any such adjustment is to be made, the terms thereof. If the
parties fail to reach an agreement, they shall select a qualified independent
investment banking firm (mutually acceptable to the parties) to determine the
fair market value of the Preference Shares, which determination shall be final
and binding on both parties and shall be used to determine any adjustment under
this Section 1.4(b). If an adjustment is required under this Section 1.4(b),
then as soon as practicable after the 10th day following the Company Shareholder
Meeting, the adjustment of the Cash Consideration and Preference Share
Consideration shall be determined, and Farnell shall issue a press release
announcing in reasonable detail the results of such determination.
SECTION 1.5. SHARES OF DISSENTING SHAREHOLDERS. Notwithstanding
anything in this Agreement to the contrary, any Shares that are issued and
outstanding immediately prior to the Effective Time and that are held by a
shareholder who shall not have voted such Shares in favor of the adoption of the
Merger and who shall have timely delivered a written demand for the payment of
the fair cash value of such Shares in the manner provided in Section 1701.85 of
the OGCL (the "DISSENTING SHARES") shall not be converted into the right to
receive the Merger Consideration but shall become the right to receive payment
of the fair cash value of such Shares in accordance with the provisions of
Section 1701.85 of the OGCL; PROVIDED, HOWEVER, that (i) if any holder of
Dissenting Shares shall subsequently withdraw such holder's demand for payment
of the fair cash value of such Shares (with the consent of the Surviving
Corporation by action of its directors), (ii) if any holder of Dissenting Shares
fails to comply with such Section 1701.85 (unless the Surviving Corporation by
action of its directors waives such failure), (iii) if Farnell abandons or is
finally enjoined or prevented from carrying out, or the holders of Shares
rescind their adoption of, the Merger or (iv) if the Surviving Corporation and
any holder of Dissenting Shares will not have come to an agreement as to the
fair cash value
4
of such holder's Dissenting Shares, and neither such holder of Dissenting Shares
nor the Surviving Corporation has filed or joined in a petition demanding a
determination of the value of all Dissenting Shares within the period provided
in Section 1701.85 of the OGCL, the right and obligation of such holder or
holders (as the case may be) to receive such fair cash value shall terminate,
and, subject to applicable law, such Dissenting Shares shall thereupon be deemed
to have been converted into and to have become, as of the Effective Time, the
right to receive, without any interest thereon, the components of the Merger
Consideration in such form and amounts as determined by Farnell in its sole
discretion. Holders of Shares who have perfected statutory rights with respect
to Dissenting Shares as aforesaid shall not be paid as provided in this
Agreement, and shall have only have such rights as are provided by Section
1701.85 of the OGCL with respect to such Shares. The Company shall give Farnell
(i) prompt notice of any notice or demands for payment for Dissenting Shares
pursuant to Section 1701.85 of the OGCL received by the Company and (ii) the
opportunity to participate in and direct all negotiations and proceedings with
respect to any such demands or notices. The Company shall not, without the
prior written consent of Farnell, make any payment with respect to, or settle,
offer to settle or otherwise negotiate, any such demands.
SECTION 1.6. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. At the
Effective Time, Merger Subsidiary and the Surviving Corporation shall deposit
the Cash Consideration and Farnell or Merger Subsidiary shall make available, as
needed (or cause each Person acting as a depositary under each deposit agreement
relating to Ordinary Share ADRs, Preference Share ADRs, Restricted Ordinary ADRs
and Restricted Preference ADRs to make available) the Stock Consideration and
any dividends or other distributions to which such holder is entitled pursuant
to Section 1.6(d) and, from and after the Effective Time, as needed, the
Surviving Corporation shall deposit cash for payment in lieu of fractional
Restricted ADRs or fractional Farnell ADRs with National City Bank acting as
exchange agent or such other bank or trust company as Farnell and the Company
may agree (the "EXCHANGE AGENT"), for the benefit of the holders of Shares
(other than Dissenting Shares), for exchange in accordance with this Article I
through the Exchange Agent; PROVIDED that the Surviving Corporation shall direct
the investment of any cash held by the Exchange Agent and shall be paid any
investment return on a daily basis.
(b) EXCHANGE PROCEDURES. As promptly as practicable after the
Effective Time, Farnell shall cause the Exchange Agent to mail to each holder of
a certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares (other than Dissenting
5
Shares) (the "CERTIFICATES") (i) a letter of transmittal (which shall be in
customary form and shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates evidencing
Restricted ADRs, Farnell ADRs and cash.
(c) EXCHANGE OF CERTIFICATES. Upon surrender to the Exchange Agent
of a Certificate for cancellation, together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, and
such other customary documents as may be reasonably required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor an Ordinary Share ADR representing that number of whole
Ordinary Shares, if any, which such holder has the right to receive pursuant to
this Article 1, a Preference Share ADR representing that number of whole
Preference Shares, if any, which such holder has the right to receive pursuant
to this Article 1 (PROVIDED that if such Person is a Founder Shareholder or a
Rule 145 Affiliate, such Person shall receive certificates evidencing Restricted
ADRs in lieu of the Farnell ADRs), and a check in the amount equal to the cash
which such holder has the right to receive pursuant to this Article 1 (including
any cash in lieu of any fractional Restricted ADRs or fractional Farnell ADRs to
which such holder is entitled pursuant to Section 1.6(f) and any dividends or
other distributions to which such holder is entitled pursuant to Section 1.6(d))
and the Certificate so surrendered shall forthwith be canceled. In the event of
a transfer of ownership of Shares which is not registered in the transfer
records of the Company, the applicable Merger Consideration, cash in lieu of any
fractional Restricted ADRs or fractional Farnell ADRs to which such holder is
entitled pursuant to Section 1.6(f) and any dividends or other distributions to
which such holder is entitled pursuant to Section 1.6(d) may be issued to a
transferee only if the Certificate representing such Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 1.6, each Certificate
shall be deemed at all times after the Effective Time to represent only the
right to receive upon such surrender the applicable Merger Consideration with
respect to the Shares formerly represented thereby, cash in lieu of any
fractional Restricted ADRs or fractional Farnell ADRs to which such holder is
entitled pursuant to Section 1.6(f) and any dividends or other distributions to
which such holder is entitled pursuant to Section 1.6(d).
6
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions declared or made after the Effective Time with respect to
Farnell Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to Farnell Shares
represented thereby, and no cash payment in lieu of any fractional Restricted
ADRs or fractional Farnell ADRs shall be paid to any such holder pursuant to
Section 1.6(f), until the holder of such Certificate shall surrender such
Certificate. Farnell Shares issued in the Merger will not rank for the final
dividend (the "1996 Dividend") of Farnell to be declared in respect of the year
ending January 28, 1996 and holders of Farnell Shares (or Restricted ADRs or
Farnell ADRs representing such Farnell Shares) shall not be entitled to such
dividend. Subject to the effect of escheat, tax or other applicable laws,
following surrender of any such Certificate, there shall be paid to the holder
of the certificates representing whole Restricted ADRs and whole Farnell ADRs
issued in exchange therefor, without interest, (i) promptly, the amount of any
cash payable with respect to a fractional Restricted ADR or fractional Farnell
ADR to which such holder is entitled pursuant to Section 1.6(f) and the amount
of dividends or other distributions with a record date after the Effective Time
and theretofore paid (other than the 1996 Dividend) with respect to such whole
Restricted ADRs and whole Farnell ADRs, and (ii) at the appropriate payment
date, the amount of dividends (other than the 1996 Dividend) or other
distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole Restricted ADRs and whole Farnell ADRs.
(e) NO FURTHER RIGHTS IN SHARES. All Restricted ADRs or Farnell ADRs
issued or cash paid upon conversion of the Shares in accordance with the terms
hereof (including any cash paid pursuant to Section 1.6(d) or (f)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
Shares.
(f) NO FRACTIONAL RESTRICTED ADRS OR FARNELL ADRS. No certificates
or scrip representing fractional Restricted ADRs or fractional Farnell ADRs
shall be issued upon the surrender for exchange of Certificates, and such
fractional Restricted ADRs or fractional Farnell ADR interests will not entitle
the owner thereof to vote or to any other rights of a shareholder or ADR holder
of Farnell. Each holder of a fractional Restricted ADR interest or fractional
Farnell ADR interest shall be paid an amount in cash equal to the product
obtained by multiplying (i) such fractional interest to which such holder (after
taking into account all fractional share interests then held by such holder)
would otherwise be entitled by (ii)(x) in the case of fractional
7
Restricted Ordinary ADRs or fractional Ordinary Share ADRs $20.142 or (y) in the
case of fractional Restricted Preference ADRs or fractional Preference Share
ADRs $25.00. As promptly as practicable after the determination of the amount
of cash, if any, to be paid to holders of fractional interests, the Exchange
Agent shall so notify the Surviving Corporation, and the Surviving Corporation
shall deposit such amount with the Exchange Agent and shall cause the Exchange
Agent to forward payments to such holders of fractional interests subject to and
in accordance with the terms of Sections 1.6(b), (c) and (d).
(g) RETURN OF UNCLAIMED MERGER CONSIDERATION. Any portion of the
Merger Consideration together with any dividends or other distributions payable
pursuant to Section 1.6(d) and cash for payment in lieu of fractional Restricted
ADRs or fractional Farnell ADRs deposited with the Exchange Agent that remains
unclaimed by the holders of Shares one year after the Effective Time shall be
returned to the Surviving Corporation, upon demand, and any such holder who has
not exchanged his Shares for the Merger Consideration in accordance with this
Section prior to that time shall thereafter look only to the Surviving
Corporation for payment of the Cash Consideration and to Farnell for payment of
the Stock Consideration. Any amounts remaining unclaimed by holders of Shares
five years after the Effective Time (or such earlier date immediately prior to
such time as such amounts would otherwise escheat to or become property of any
governmental entity) shall, to the extent permitted by applicable law, become
the property of the Surviving Corporation free and clear of any claims or
interest of any Person previously entitled thereto.
(h) MERGER CONSIDERATION FOR DISSENTING SHARES. Any portion of the
Merger Consideration together with any dividends or other distributions payable
pursuant to Section 1.6(d) and cash for payment in lieu of fractional Restricted
ADRs or fractional Farnell ADRs deposited with the Exchange Agent to pay for
Dissenting Shares for which the right to receive a payment pursuant to Section
1701.85 of the OGCL shall have been perfected shall be returned to the Surviving
Corporation, upon demand.
(i) NO LIABILITY. None of the Exchange Agent, Farnell nor the
Surviving Corporation shall be liable to any holder of Shares for any Restricted
ADRs, Farnell ADRs (or dividends or distributions with respect thereto), or cash
delivered to a public official pursuant to any abandoned property, escheat or
similar law.
(j) WITHHOLDING RIGHTS. The Surviving Corporation shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement
8
to any holder of Shares such amounts as it is required to deduct and withhold
with respect to the making of such payment under the Code or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
the Surviving Corporation, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made by the Surviving
Corporation.
(k) LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond or other form of
security, in such reasonable amount or form as the Surviving Corporation may
reasonably direct, as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the applicable Merger Consideration,
any cash in lieu of fractional Restricted ADRs or fractional Farnell ADRs to
which the holder thereof is entitled pursuant to Section 1.6(f) and any
dividends or other distributions to which the holder thereof is entitled
pursuant to this Agreement.
(l) ALLOTMENT OF FARNELL SHARES. In consideration of and in exchange
for the issuance to Farnell by the Surviving Corporation of such number of
shares of common stock of the Surviving Corporation as Farnell shall specify and
in consideration of the cancellation of the Shares, Farnell shall allot Farnell
Shares represented by share certificates, Restricted ADRs or Farnell ADRs to be
issued in the Merger to the Exchange Agent on behalf of the Persons entitled
thereto for the purpose of giving effect to the conversion and exchange referred
to in this Article 1.
SECTION 1.7. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Shares. From and after the Effective Time, the
holders of Certificates representing Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided herein or by law. On or after the Effective Time,
any Certificates presented to the Exchange Agent or Farnell for any reason shall
be canceled and exchanged for the consideration provided for in, and in
accordance with the procedures set forth in, this Article 1.
SECTION 1.8. STOCK OPTIONS. (a) Immediately prior to the Effective
Time, each outstanding director or employee stock option to purchase Shares
granted under any director or
9
employee stock option or compensation plan or arrangement of the Company whether
or not then vested or exercisable, shall be canceled and converted into the
right to receive from the Company an amount determined by multiplying (i) the
excess, if any, of $34.00 per Share over the applicable exercise price of such
option by (ii) the number of Shares such holder could have purchased (assuming
full vesting of all options) had such holder exercised such option in full
immediately prior to the Effective Time, less any withholding required by
applicable law; PROVIDED, HOWEVER, that such payment shall not be made to a
holder of options unless such payment shall be in full satisfaction of all
rights of such holder under such options.
(b) Prior to the Effective Time, the Company shall (i) use its
reasonable best efforts to obtain any consents from holders of options to
purchase Shares granted under the Company's stock option or compensation plans
or arrangements and (ii) make any amendments to the terms of such stock option
or compensation plans or arrangements that, in the case of either clauses (i) or
(ii), are necessary to give effect to the transactions contemplated by Section
1.8(a). Notwithstanding any other provision of this Section, payment may be
withheld in respect of any employee or director stock option until necessary
consents are obtained.
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.1. CERTIFICATE OF INCORPORATION; NAME OF SURVIVING
CORPORATION. The certificate of incorporation of Merger Subsidiary in effect at
the Effective Time attached hereto as Exhibit 2.1 shall be the certificate of
incorporation of the Surviving Corporation until amended in accordance with
applicable law, except that the name of the Surviving Corporation shall be
changed to "Premier Farnell Corp."
SECTION 2.2. BYLAWS. The bylaws of Merger Subsidiary attached
hereto as Exhibit 2.2 in effect at the Effective Time shall be the bylaws of the
Surviving Corporation until amended in accordance with applicable law.
SECTION 2.3. DIRECTORS AND OFFICERS. From and after the Effective
Time, until successors are duly elected or appointed and qualified in accordance
with applicable law, (a) the directors of Merger Subsidiary at the Effective
Time shall be the directors of the Surviving Corporation, and (b) the officers
of the Company at the Effective Time shall be the officers of the Surviving
Corporation.
10
SECTION 2.4. PRINCIPAL OFFICE. The principal office of the
Surviving Corporation in Delaware, the State in which the Surviving Corporation
exists, is: c/o The Corporation Trust Company, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000.
SECTION 2.5. CONSENT TO SERVICE OF PROCESS. The Surviving
Corporation consents to be sued and served with process in the State of Ohio,
and irrevocably appoints the Secretary of State of the State of Ohio as its
agent to accept service of process in any proceeding in such State to enforce
against the Surviving Corporation any obligation of any constituent corporation
in the Merger or to enforce the rights of a dissenting shareholder of the
Company.
SECTION 2.6. QUALIFICATION AS A FOREIGN CORPORATION. It is desired
that the Surviving Corporation transact business in the State of Ohio as a
foreign corporation from and after the Effective Time. The statutory agent of
the Surviving Corporation within the State of Ohio from and after the Effective
Time shall be CT Corporation System, 000 Xxxx Xxxxxx, Xxxxxxxxxx, Xxxx, 00000,
and any process, notice or demand may be served upon such statutory agent or the
Secretary of State of the State of Ohio.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Farnell that:
SECTION 3.1. CORPORATE EXISTENCE AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Ohio, and has all corporate power and authority required to
own, operate and lease its properties and to carry on its business as now
conducted. The Company is duly qualified to do business as a foreign
corporation and (with respect to jurisdictions which recognize the concept of
"good standing"), is in good standing in each jurisdiction where the character
of the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a Company
Material Adverse Effect. The Company has heretofore delivered to Farnell true
and complete copies of the Company's amended articles of incorporation and
regulations as currently in effect. As used herein, "COMPANY MATERIAL ADVERSE
EFFECT" means a material adverse effect on the financial condition, business,
assets or
11
results of operations of the Company and its Subsidiaries (as defined in Section
3.6) taken as a whole.
SECTION 3.2. CORPORATE AUTHORIZATION. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby are within the Company's corporate
powers and, except for the adoption of this Agreement by a majority vote of the
Company's stockholders, have been duly authorized by all necessary corporate
action. This Agreement constitutes a valid and binding agreement of the
Company.
SECTION 3.3. GOVERNMENTAL AUTHORIZATION. The execution, delivery
and performance by the Company of this Agreement and the consummation of the
Merger by the Company will not require the Company to obtain any consent,
approval or authorization, or to make any filing with or give any notification
to, any governmental or regulatory body, agency, official or authority other
than (a) the filing of Delaware Certificate of Merger and the Ohio Certificate
of Merger in accordance with Delaware Law and the OGCL, respectively; (b)
compliance with any applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 0000 (xxx "XXX XXX"); (c) compliance with any applicable
requirements of the Securities Exchange Act of 1934, as amended (including the
rules and regulations promulgated thereunder, the "EXCHANGE ACT") (including the
filing of the Proxy Statement referred to in Section 5.2), state securities or
blue sky laws and the rules and regulations of the New York Exchange ("NYSE");
(d) compliance with any applicable requirements of the United Kingdom's Fair
Trading Xxx 0000; (e) compliance with any applicable requirements of the German
Act Against Restraints of Competition (Gesetz gegen Wettbewerbsbeschrdnkungen -
GWB) (the "GERMAN COMPETITION LAW"); and (f) where the failure to obtain such
consents, approvals, authorization or permits, or to make such filings or
notifications, would not, either individually or in the aggregate, prevent the
Company from performing its obligations under this Agreement or consummating the
Merger and would not have a Company Material Adverse Effect.
SECTION 3.4. NON-CONTRAVENTION. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby do not and will not (a) (subject to the
shareholders approval referred to in Section 3.2) contravene or conflict with
the amended articles of incorporation or regulations of the Company, (b)
assuming compliance with the matters referred to in Section 3.3, contravene or
conflict with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree in effect
12
as of the date of this Agreement and binding upon or applicable to the Company
or any of its Subsidiaries, (c) constitute a breach of, or default under or give
rise to a right of termination, cancellation or acceleration of any right or
obligation of the Company or any of its Subsidiaries or to a loss of any benefit
to which the Company or any of its Subsidiaries is entitled under any provision
of any agreement, contract or other instrument binding upon the Company or any
of its Subsidiaries or any license, franchise, permit or other similar
authorization held by the Company or any of its Subsidiaries, or (d) result in
the creation or imposition of any Lien on any asset of the Company or any of its
Subsidiaries (other than Liens created in connection with the financing referred
to in Section 4.15 obtained by Farnell and the Merger Subsidiary in connection
with the Merger or otherwise created by Farnell and the Merger Subsidiary in
connection with the Merger), except for such conflicts or violations described
in clause (b) or breaches, defaults, rights of termination, cancellation or
acceleration, loss of any benefits, or Liens described in clause (c) or (d) that
would not, individually or in the aggregate, have a Company Material Adverse
Effect. For purposes of this Agreement, "LIEN" means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind in respect of such asset.
SECTION 3.5. CAPITALIZATION. The authorized capital stock of the
Company consists of (i) 100,000,000 Shares and (ii) 1,500,000 shares of serial
preferred stock, without par value ("PREFERRED STOCK"). As of January 18, 1996,
there were issued or granted (i) no shares of Preferred Stock, (ii) 87,076,326
Shares, 4,872,628 of which were held in the treasury of the Company, and (iii)
employee and director stock options to purchase an aggregate of 1,310,016 Shares
(of which options to purchase an aggregate of 15,817 Shares were exercisable).
All outstanding shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. Except as set forth in
this Section 3.5 and except for changes since January 18, 1996 resulting from
the exercise of employee or director stock options outstanding on such date,
there are outstanding (a) no shares of capital stock or other voting securities
of the Company, (b) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
and (c) no options or other rights to acquire from the Company, and no
obligation of the Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company (the items in clauses (a), (b) and (c) being referred
to collectively as the "COMPANY SECURITIES"). There are no outstanding
obligations of the Company or any
13
of its Subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities. There are no restrictions upon the voting or transfer of any Shares
pursuant to the amended articles of incorporation or regulations as in full
force and effect on the date of this Agreement.
SECTION 3.6. SUBSIDIARIES. (a) Each Subsidiary of the Company is a
corporation duly organized, validly existing and (with respect to jurisdiction
which recognize the concept of "good standing") in good standing under the laws
of its jurisdiction of incorporation, has all corporate power and authority
required to own, operate and lease its properties and to carry on its business
as now conducted and is duly qualified to do business as a foreign corporation
and (with respect to jurisdictions which recognize the concept of "good
standing") is in good standing in each jurisdiction where the character of the
property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where failure to be so
qualified would not, individually or in the aggregate, have a Company Material
Adverse Effect. For purposes of this Agreement, a "SUBSIDIARY" of any Person
means any corporation or other entity (including a partnership, limited
partnership, limited liability company or joint venture) of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are
directly or indirectly owned by such Person.
(b) Except for directors' qualifying shares and other similar
holdings, all of the outstanding capital stock of, or other ownership
interests in, each Subsidiary of the Company, is owned by the Company,
directly or indirectly, free and clear of any Lien (other than Liens imposed
by foreign law which are not material (and of which the Company is not
aware)) and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). There are no outstanding (i) securities
of the Company or any of its Subsidiaries convertible into or exchangeable
for shares of capital stock or other voting securities or ownership interests
in any Subsidiary or (ii) options or other rights to acquire from the Company
or any of its Subsidiaries, or other obligations of the Company or any of its
Subsidiaries to issue, any capital stock, voting securities or other
ownership interests in, or any securities convertible into or exchangeable
for any capital stock, voting securities or ownership interests in, any of
its Subsidiaries (the items in clauses (i) and (ii) being referred to
collectively as the "SUBSIDIARY SECURITIES"). There are no outstanding
obligations of the Company or any of its Subsidiaries to
14
repurchase, redeem or otherwise acquire any outstanding Subsidiary Securities.
SECTION 3.7. SEC FILINGS. (a) The Company has delivered to Farnell
(i) its annual reports on Form 10-K for its fiscal years ended May 31, 1993,
1994 and 1995, (ii) its quarterly reports on Form 10-Q for its fiscal quarters
ended August 31, 1995, and November 30, 1995, (iii) its proxy or information
statements relating to meetings of, or actions taken without a meeting by, the
stockholders of the Company held since June 1, 1993, and (iv) all of its other
reports, statements, schedules and registration statements filed with the
Securities and Exchange Commission (the "SEC") since June 1, 1993 (collectively,
the "SEC REPORTS").
(b) As of its filing date, each SEC Report filed pursuant to the
Exchange Act (i) did not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading and (ii) complied as to form in all material respects with the
requirements of the Exchange Act.
(c) The Company is eligible to use Securities Act Form S-3 for the
filing of a Registration Statement under the Securities Act.
(d) All reports, statements or schedules filed by the Company with
the SEC under the Exchange Act (other than the Proxy Statement) after the date
hereof (i) will not, as of its filing date, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading and (ii) will comply as to form in all material respects
with the requirements of the Exchange Act.
SECTION 3.8. FINANCIAL STATEMENTS. Each of the consolidated balance
sheets of the Company included in or incorporated by reference in the annual
reports on Form 10-K and the quarterly reports on Form 10-Q included in the SEC
Reports (including the related notes and schedules), as amended or supplemented
by any subsequent SEC Reports filed with the SEC prior to the date hereof,
presents fairly (or in the case of any Form 10-K or Form 10-Q filed after the
date hereof will present fairly), in all
15
material respects, the consolidated financial position of the Company and its
subsidiaries as of its date, and each of the consolidated statements of
earnings, shareholders' equity and cash flows of the Company included in or
incorporated by reference into such SEC Reports (including any related notes and
schedules) presents fairly (or in the case of any Form 10-K or Form 10-Q filed
after the date hereof, will present fairly), in all material respects, the
results of operations, shareholders' equity and cash flows of the Company as of
or for the periods set forth therein (subject to normal year-end adjustments in
the case of any unaudited interim financial statements), in each case in
conformity with U.S. generally accepted accounting principles applied on a
consistent basis, except as may be indicated in the notes thereto. For purposes
of this Agreement, "BALANCE SHEET" means the consolidated balance sheet of the
Company and its Subsidiaries as of May 31, 1995 incorporated by reference into
the Company's annual report on Form 10-K for the fiscal year ended May 31, 1995
(the "COMPANY 10-K") and "BALANCE SHEET DATE" means May 31, 1995.
SECTION 3.9. DISCLOSURE DOCUMENTS. (a) None of the information to
be provided by the Company for inclusion or incorporation by reference in the
Registration Statement (as defined in Section 6.8) or the Proxy Statement (or
any amendment or supplement thereto) will, (i) on the date the Proxy Statement
(or such amendment or supplement) is first mailed to the shareholders of the
Company, (ii) at the time the Registration Statement (or such amendment or
supplement) becomes effective or (iii) at the time of the Company Shareholder
Meeting (as amended or supplemented prior to such time, if applicable), contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(b) None of the information to be provided by the Company for
inclusion or incorporation by reference in the UK Disclosure Document (as
defined in Section 6.7), (or any amendment or supplement thereto) will, (i) on
the date the UK Disclosure Document (or such amendment or supplement) is first
mailed to the shareholders of Farnell, (ii) on the last day for acceptance and
payment under the Rights Offering (as amended or supplemented prior to such
time, if applicable) or (iii) at the time of the Company Shareholder Meeting (as
amended or supplemented prior to such time, if applicable), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
(c) The representations and warranties contained in this Section 3.9
will not apply to statements or omissions included in the Registration
Statement, Proxy Statement or UK Disclosure Document based upon information
furnished to the Company by Farnell for use therein.
16
SECTION 3.10. ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
SEC Reports filed with the SEC prior to the date of this Agreement or as
contemplated by this Agreement, from the Balance Sheet Date to the date of this
Agreement, the Company and its Subsidiaries have conducted their business in the
ordinary course consistent with past practice and there has not been:
(a) any event, occurrence or development of a state of circumstances
or facts which, individually or in the aggregate, has had or is reasonably
likely to have a Company Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the
Company (other than quarterly cash dividends on the Shares not in excess of
$0.125 per Share per quarter and having customary record and payment
dates), or any repurchase, redemption or other acquisition by the Company
or any of its Subsidiaries of any outstanding shares of capital stock or
other securities of, or other ownership interests in, the Company or any of
its Subsidiaries (other than shares acquired by the Company in whole or
partial satisfaction of the exercise price of any employee or director
stock options);
(c) any amendment of any material term of any outstanding security of
the Company or any of its Subsidiaries;
(d) except as set forth in the disclosure letter dated the date of
this Agreement (the "DISCLOSURE LETTER"), any making of any loan, advance
or capital contributions to or investment in any Person other than employee
relocation loans or advances or loans, advances or capital contributions to
or investments in wholly-owned Subsidiaries or other foreign Subsidiaries
of the Company which are wholly owned but for nominee shareholders required
by foreign law, in each case, made in the ordinary course of business
consistent with past practices; or
(e) (i) any grant of any severance or termination pay to any
director, officer or employee of the Company or any of its Subsidiaries,
(ii) any employment, deferred compensation or other similar agreement (or
any amendment to any such existing agreement) entered into with any
director, officer or employee of the Company or any of its Subsidiaries,
(iii) any increase in benefits payable under any existing severance or
termination pay policy or employment agreement or (iv) any increase in any
compensation, bonus or other benefits payable to
17
directors, officers or employees of the Company or any of its
Subsidiaries, in the case of (i) through (iv) other than in the ordinary
course of business consistent with past practice.
SECTION 3.11. NO UNDISCLOSED MATERIAL LIABILITIES. There are no
liabilities of the Company or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
other than:
(a) liabilities disclosed or provided for in the consolidated balance
sheet of the Company and its subsidiaries at November 30, 1995 (the
"INTERIM BALANCE SHEET DATE");
(b) liabilities incurred in the ordinary course of business
consistent with past practice since the Interim Balance Sheet Date, which
individually or in the aggregate, do not have, and are not reasonably
likely to have, a Company Material Adverse Effect;
(c) other liabilities the presence of which, individually or in the
aggregate, do not have, and are not reasonably likely to have, a Company
Material Adverse Effect; and
(d) liabilities incurred in connection with this Agreement and the
Merger.
SECTION 3.12. LITIGATION. Except as set forth in the Company 10-K
and the Company's quarterly report on Form 10-Q for the quarterly period ended
November 30, 1995, as of the date of this Agreement, there is no action, suit,
claim, investigation or proceeding pending against, or to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
or any of their respective assets, properties or business before any court or
arbitrator or any governmental body, agency or official which, individually or
in the aggregate, is reasonably likely to have a Company Material Adverse
Effect.
SECTION 3.13. TAXES. The Company and its Subsidiaries have
prepared in good faith and timely filed, or caused to be timely filed, all
federal, state, local and foreign income, franchise, sales and other tax returns
or reports required to be filed by them on or before the date hereof, or
requests for extensions to file such returns or reports have been timely filed
and granted and have not expired, and all tax returns and reports are complete
and accurate in all respects, except to the extent that such failures to file or
be complete and accurate, as applicable, individually or in the aggregate with
any other failure or
18
misrepresentation under this Section 3.13, would not result in a Company
Material Adverse Effect. The Company and each Subsidiary of the Company have
paid, or have made adequate provision or set up an adequate accrual or reserve
for the payment of, all taxes, interest, additions to tax and penalties owing by
the Company or any of its Subsidiaries, except for inadequately reserved taxes,
interest, additions or penalties that would not, individually or in the
aggregate with any other failure or misrepresentation under this Section 3.13,
result in a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is a party to any action or proceeding, nor, to the knowledge of
the Company, is any such action or proceeding threatened, by any taxing
authority for the assessment or collection of any taxes, and no deficiency
notices or reports have been received by the Company or any of its Subsidiaries
in respect of any deficiencies for any tax, assessment or government charges,
except for any such actions, proceedings or deficiencies which are not,
individually or in the aggregate with any other failure or misrepresentation
under this Section 3.13, reasonably likely to result in a Company Material
Adverse Effect. Except as previously disclosed to Farnell in writing, as of the
date of this Agreement the Company and its Subsidiaries have not executed an
extension or waiver of any statute of limitations on the assessment or
collection of any tax due, which extension or waiver is still in effect. The
Company and each Subsidiary of the Company have paid, or have made adequate
provision or set up an adequate accrual or reserve for the payment of, all
taxes, interest, additions to tax and penalties due with respect to completed
and settled examinations or concluded litigation relating to the Company and its
Subsidiaries, except for inadequately reserved taxes, interest, additions or
penalties that would not, individually or in the aggregate with any other
failure or misrepresentation under this Section 3.13, result in a Company
Material Adverse Effect. The federal income tax returns of the Company and each
of its Subsidiaries consolidated in such returns have been examined by and
settled with the United States Internal Revenue Service for all years through
1991. As used in this Agreement, "TAXES" shall include all federal, state,
local and foreign income, property, sales, excise and other taxes, tariffs or
governmental charges of any nature whatsoever. Neither the Company's shares of
capital stock nor the shares of capital stock of any Subsidiary of the Company
are "UNITED STATES REAL PROPERTY INTERESTS" within the meaning of Section 897 of
the Code.
SECTION 3.14. ERISA. (a) The Company shall make available to
Farnell as soon as practicable after the date hereof (i) a list identifying each
"EMPLOYEE BENEFIT PLAN", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), which (A) is subject to any
19
provision of ERISA and (B) is maintained, administered or contributed to by the
Company or any affiliate (as defined below) and covers any employee or former
employee of the Company or any affiliate or under which the Company or any
affiliate has any liability, and (ii) copies of such plans (and, if applicable,
related trust agreements) and all amendments thereto, together with the three
most recent annual reports (Form 5500 including, if applicable, Schedule B
thereto) prepared in connection with any such plan. The Company has previously
furnished to Farnell the most recent actuarial valuation report prepared in
connection with any such plan. Such plans are referred to collectively herein
as the "EMPLOYEE PLANS". For purposes of this Section, "AFFILIATE" of any
Person means any other Person which, together with such Person, would be treated
as a single employer under Section 414 of the Code. The only Employee Plans
which individually or collectively would constitute an "EMPLOYEE PENSION BENEFIT
PLAN" as defined in Section 3(2) of ERISA (the "PENSION PLANS") are identified
as such in the list referred to above.
(b) Except as disclosed in the SEC Reports (and actuarial statements
and reports furnished to Farnell or its representative prior to the date of this
Agreement) or as set forth in the Disclosure Letter (i) all Employee Plans are
in compliance in all material respects with all applicable requirements of law,
including ERISA and the Code, (ii) neither the Company nor any affiliate has any
liabilities or obligations with respect to any such Employee Plans, whether
accrued, contingent or otherwise, nor to the knowledge of the Company, are any
liabilities or obligations reasonably likely to be incurred other than those
which, individually or in the aggregate, are not reasonably likely to have a
Company Material Adverse Effect, and (iii) neither the Company nor any affiliate
is a party to any contract under which, after giving effect to the Merger,
Farnell or the Surviving Corporation would be obligated to make any "parachute"
payment within the meaning of Section 280G of the Code that would not be
deductible pursuant to the terms of Sections 162(a)(1) or 280G of the Code.
Except as described in the Disclosure Letter, the execution of, and performance
of the transactions contemplated by, this Agreement will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any benefit plan, program, policy or agreement or any trust, loan or
funding arrangement that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits, obligation to fund benefits with respect to
any employee or subject the Company or any affiliate to any liability under
Title I of ERISA or Section 4975 of the Code. The Company knows of no
"reportable event", within the meaning of Section 4043 of
20
ERISA, and no event described in Section 4041, 4042, 4062 or 4063 of ERISA has
occurred in connection with any Employee Plan other than a "reportable event"
that is not reasonably likely to have a Company Material Adverse Effect.
(c) Except as otherwise identified in the Disclosure Letter, no
Employee Plan constitutes a "MULTIEMPLOYER PLAN", as defined in Section 3(37) of
ERISA (a "MULTIEMPLOYER PLAN"), and no Employee Plan is maintained in connection
with any trust described in Section 501(c)(9) of the Code. The only Employee
Plans that are subject to Title IV of ERISA (the "RETIREMENT PLANS") are
identified in the Disclosure Letter. Except as set forth in the Disclosure
Letter, if a "COMPLETE WITHDRAWAL" by the Company and all of its affiliates were
to occur as of the Effective Time with respect to all Employee Plans which are
Multiemployer Plans, neither the Company nor any affiliate would incur any
material withdrawal liability under Title IV of ERISA.
(d) The excess of the present value of the projected liability in
respect of post-retirement health and medical benefits for retired employees of
the Company and its affiliates, determined using assumptions reasonable in the
aggregate, over the fair market value of any fund, reserve or other assets
segregated for the purpose of satisfying such liability (including for such
purposes any fund established pursuant to Section 401(h) of the Code) does not
in the aggregate exceed $10,000,000.
(e) The Company shall make available to Farnell as soon as
practicable after the date of this Agreement a list of (i) each employment
contract or arrangement and each severance or other similar contract,
arrangement or policy, in each case providing for current or future payments of
at least $100,000 per recipient per year, or $1,000,000 in the aggregate per
recipient, (ii) each plan or arrangement (written or oral) providing for
insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits or
vacation benefits, (iii) each plan or arrangement providing for retirement
benefits or for deferred compensation, profit-sharing or bonuses of at least
$100,000 per recipient on an annual basis, and (iv) stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (A) is not an Employee Plan, (B) is
entered into, maintained or contributed to, as the case may be, by the Company
or any of its affiliates and (C) covers any employee or former employee of the
Company or any of its affiliates and provides for continuing Company or
affiliate obligations from and after the date of this Agreement. Such
contracts, plans and arrangements as are described above,
21
copies or descriptions of all of which have been or will be furnished to
Farnell, are referred to collectively herein as the "BENEFIT ARRANGEMENTS".
Each Benefit Arrangement has been maintained in compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to such Benefit Arrangement, other than where
any noncompliance, individually or in the aggregate, would not have a Company
Material Adverse Effect.
SECTION 3.15. COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed
in the SEC Reports, neither the Company nor any of its Subsidiaries is in
violation of, or has violated, any applicable provisions of any law, statute,
ordinance, regulation, judgment, order, decree, license or permit of any
governmental entity except for violations which individually, or in the
aggregate, have not had, and in the future are not reasonably likely to have, a
Company Material Adverse Effect. The Company and its Subsidiaries have all
material governmental licenses, authorizations, consents, approvals and permits
required to own, operate and lease their properties and carry on their business
as now conducted.
SECTION 3.16. FINDERS' FEES. Except for Lazard Freres & Co. LLC and
Lazard Brothers & Co., Limited, a copy of whose engagement agreement has been
provided to Farnell, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of the
Company or any of its Subsidiaries who might be entitled to any fee or
commission from Farnell or any of its affiliates upon consummation of the
transactions contemplated by this Agreement.
SECTION 3.17. ENVIRONMENTAL MATTERS. (a) Except as disclosed in
writing to Farnell prior to the date of this Agreement:
(i) no notice of violation or noncompliance or order has been issued
by, no complaint has been filed with, no penalty has been assessed by, and
no investigation or proceeding is pending or, to the knowledge of the
Company threatened before, any court or governmental body, agency or
official against, the Company or any Subsidiary with respect to any alleged
violation of any Environmental Law the outcome of which is reasonably
likely to have a Company Material Adverse Effect; and
(ii) as of the date of this Agreement, neither the Company nor any of
its Subsidiaries owns or leases any real property in New Jersey or
Connecticut.
22
(b) Except for such noncompliance or liabilities that, individually
or in the aggregate, are not reasonably likely to have a Company Material
Adverse Effect, the Company and each of its Subsidiaries has complied with
Environmental Laws, and there are no liabilities of the Company or any
Subsidiary under any Environmental Laws.
(c) "ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, rules, permits,
licenses, agreements and governmental restrictions, relating to human health,
the environment or to emissions, discharges or releases of pollutants,
contaminants or other hazardous substances or wastes into the environment,
including without limitation ambient air, surface water, ground water or land,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants
or other hazardous substances or wastes or the clean-up or other remediation
thereof.
SECTION 3.18. TRADEMARKS. The Company has provided Farnell with a
list of all registered trademarks and service marks owned by or registered in
the name of the Company or any of its Subsidiaries (collectively, the
"TRADEMARKS"). The Company and its Subsidiaries own or possess adequate
licenses or other rights to use all Trademarks necessary to permit the Company
and its Subsidiaries to conduct their business as now conducted. No claim has
been received as of the date of this Agreement which is pending or, to the
knowledge of the Company, threatened to the effect that any of the Trademarks
was or is invalid or unenforceable.
SECTION 3.19. PRINCIPAL STOCKHOLDERS OF THE COMPANY. Except as
disclosed in the SEC Reports filed with the SEC prior to the date of this
Agreement or as set forth on the Disclosure Letter, to the knowledge of the
Company, as of the date of this Agreement, no person beneficially owns five
percent or more of the Shares.
SECTION 3.20. VOTE REQUIRED. The adoption of this Agreement and the
authorization of the Merger by the affirmative vote of the holders of Shares
entitling such holders to exercise at least a majority of the voting power of
the Shares (the "COMPANY SHAREHOLDERS' APPROVAL") is the only vote of the
holders of any class or series of the capital stock of the Company required to
approve this Agreement, the Merger and the other transactions contemplated
hereby. No vote of shareholders of the Company is required to approve the
execution, delivery or performance of the Voting Agreement dated as of the date
hereof among Farnell and the other parties thereto (the "VOTING AGREEMENT")
attached as Exhibit 3.20(1) or the
23
Shareholders Agreement dated as of the date hereof among Farnell and the other
parties thereto (the "SHAREHOLDERS AGREEMENT") attached as Exhibit 3.20(2).
SECTION 3.21. INAPPLICABILITY OF CERTAIN OHIO LAWS. None of (i) the
provisions of Section 1701.831 of the OGCL or (ii) the provisions of Chapter
1704 of the Ohio Revised Code in any way restricts or prohibits the consummation
of the transactions contemplated by this Agreement, including the Merger, the
Voting Agreement or the Shareholders Agreement.
SECTION 3.22. OPINION OF FINANCIAL ADVISOR. The Company has received
the opinion of Lazard Freres & Co. LLC, dated January 22, 1996, to the effect
that, as of January 22, 1996, the consideration to be received by the holders of
the Shares in the Merger is fair to such holders from a financial point of view.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF FARNELL AND MERGER SUBSIDIARY
Each of Farnell and Merger Subsidiary represents and warrants to the
Company that:
SECTION 4.1. CORPORATE EXISTENCE AND POWER. Farnell is duly
incorporated and validly existing under English law, and has all corporate power
and authority required to own, operate and lease its properties and carry on its
business as now conducted. Merger Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware,
and has all corporate power and authority required to own, operate and lease its
properties and to carry on its business as now conducted. Each of Farnell and
Merger Subsidiary is duly qualified to do business as a foreign corporation and
(with respect to jurisdictions which recognize the concept of "good standing")
is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, have a Farnell Material Adverse
Effect. As used herein, "FARNELL MATERIAL ADVERSE EFFECT" means a material
adverse effect on the financial condition, business, assets or results of
operations of Farnell and its Subsidiaries taken as a whole. Farnell has
heretofore delivered to the Company true and complete copies of Farnell's
memorandum and articles of association and the Merger Subsidiary's certificate
of
24
incorporation and bylaws, in each case, as currently in effect.
SECTION 4.2. CORPORATE AUTHORIZATION. The execution, delivery and
performance by each of Farnell and Merger Subsidiary of this Agreement and by
Farnell of the Voting Agreement and the Shareholders Agreement and the
consummation by each of Farnell and Merger Subsidiary of the transactions
contemplated hereby and thereby are within each of their corporate powers. This
Agreement and the consummation by each of Farnell and Merger Subsidiary of the
transactions contemplated hereby have been duly and validly authorized by the
respective Boards of Directors of Farnell and Merger Subsidiary and by Farnell
as the sole stockholder of Merger Subsidiary, and no other corporate proceedings
on the part of Farnell or Merger Subsidiary are required to authorize this
Agreement, the allotment and issuance of the Stock Consideration, the amendments
to the articles of association of Farnell set forth in Exhibit 1.4 hereto or the
Merger or the consummation of the other transactions contemplated hereby, other
than the approval and adoption of this Agreement and the transactions
contemplated hereby by the shareholders of Farnell, by special resolution and
approval by the Board of Directors of Farnell for the allotment and allocation
of the Convertible Stock Units (as defined in Section 4.15), the Rights Offering
Shares (as defined in Section 4.15) and Farnell Shares. This Agreement
constitutes a valid and binding agreement of each of Farnell and Merger
Subsidiary.
SECTION 4.3. GOVERNMENTAL AUTHORIZATION. The execution, delivery
and performance by each of Farnell and Merger Subsidiary of this Agreement and
the consummation of the Merger by each of Farnell and Merger Subsidiary will not
require Farnell or the Merger Subsidiary to obtain any consent, approval or
authorization, or to make any filing with or notification to, any governmental
or regulatory body, agency, official or authority other than (a) the filing of
the Delaware Certificate of Merger and the Ohio Certificate of Merger in
accordance with Delaware Law and the OGCL, respectively; (b) compliance with any
applicable requirements of the HSR Act; (c) compliance with any applicable
requirements of the Exchange Act; (d) compliance with any applicable
requirements of the Securities Act (including the filing of the Registration
Statement), any applicable requirements of any state securities or blue sky laws
and the rules and regulations of the NYSE; (e) compliance with any applicable
requirements of the London Stock Exchange ("LSE") or the UK Financial Services
Xxx 0000 (including the filing of the UK Disclosure Document); (f) compliance
with any applicable requirements of the United Kingdom's Fair Trading Xxx 0000;
(g) compliance with any applicable requirements of the
25
German Competition Law; and (h) where the failure to obtain such consents,
approvals or authorizations, or to make such filings or notifications, would
not, either individually or in the aggregate, prevent Farnell from performing
its obligations under this Agreement or consummating the Merger and would not
have a Farnell Material Adverse Effect.
SECTION 4.4. NON-CONTRAVENTION. The execution, delivery and
performance by each of Farnell and the Merger Subsidiary of this Agreement and
the consummation by each of Farnell and the Merger Subsidiary of the
transactions contemplated hereby do not and will not (a) contravene or conflict
with the memorandum and articles of association of Farnell (subject to the
shareholders approval referred to in Section 4.2) or the certificate of
incorporation or bylaws of Merger Subsidiary, (b) assuming compliance with the
matters referred to in Section 4.3 contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree in effect as of the date of this Agreement and binding upon or
applicable to Farnell or any of its Subsidiaries, (c) constitute a breach of, or
default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of Farnell or any of its Subsidiaries or
to a loss of any benefit to which Farnell or any of its Subsidiaries is entitled
under any provision of any agreement, contract or other instrument binding upon
Farnell or any of its Subsidiaries or any license, franchise, permit or other
similar authorization held by Farnell or any of its Subsidiaries, or (d) result
in the creation or imposition of any Lien on any asset of Farnell or any of its
Subsidiaries (other than Liens created in connection with the financing referred
to in Section 4.15 obtained by Farnell and Merger Subsidiary in connection with
the Merger or otherwise created by Farnell and Merger Subsidiary in connection
with the Merger), except for such conflicts or violations described in clause
(b) or breaches, defaults, rights of termination, loss of any benefits,
cancellation or acceleration or Liens described in clause (c) or (d) that would
not, individually or in the aggregate, have a Farnell Material Adverse Effect.
SECTION 4.5. CAPITALIZATION. (a) The authorized capital stock of
Farnell consists of 272,000,000 Ordinary Shares. As of January 12, 1996, there
were 136,480,556 Ordinary Shares in issue (none of which are held in the
treasury of Farnell) and outstanding employee share options to subscribe for an
aggregate of 2,125,500 Ordinary Shares (of which options to subscribe for an
aggregate of 243,000 Ordinary Shares were exercisable). All issued ordinary
share capital of Farnell has been duly authorized and validly issued and are
fully paid. Except as set forth in this Section 4.5 or as contemplated by this
Agreement or the
26
Rights Offering and except for changes since January 12, 1996 resulting from the
exercise of employee share options outstanding on such date, there are (i) no
other issued shares or other voting securities of Farnell, (ii) no securities of
Farnell convertible into or exchangeable for shares or voting securities of
Farnell, and (iii) no options or other rights to acquire from Farnell, and no
obligation of Farnell to issue, any shares, voting securities or securities
convertible into or exchangeable for shares or voting securities of Farnell (the
items in clauses (i), (ii) and (iii) being referred to collectively as the
"FARNELL SECURITIES"); there are no outstanding obligations of Farnell or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any Farnell
Securities. There are no restrictions upon the voting or transfer of any
Farnell Shares except as set forth in the memorandum and articles of association
of Farnell as in full force and effect on the date of this Agreement.
(b) The allotment and issuance of the Stock Consideration will comply
with the Companies Xxx 0000, the UK Financial Services Xxx 0000, the rules and
requirements of the LSE, the Listing Rules of the LSE, the rules and
requirements of the NYSE, the Securities Act and all other applicable laws,
rules and regulations of the United Kingdom and the United States (including
federal and state securities and "blue sky" laws, rules and regulations), and
the Stock Consideration will, upon issuance, be free and clear of all Liens and
the Farnell Ordinary Shares will rank PARI PASSU in all respects with the
existing Ordinary Shares of Farnell, except that they will not rank for the 1996
Dividend.
SECTION 4.6. SUBSIDIARIES. (a) Each Subsidiary of Farnell is a
corporation, duly organized, validly existing and (with respect to jurisdictions
which recognize the concept of "good standing") in good standing under the laws
of its jurisdiction of incorporation and has all corporate power and authority
required to own, operate and lease its properties and carry on its business as
now conducted and is duly qualified to do business as a foreign corporation and
(with respect to jurisdictions which recognize the concept of "good standing")
in good standing in each jurisdiction where the character of the property owned
or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where failure to be so qualified would
not, individually or in the aggregate, have a Farnell Material Adverse Effect.
(b) Except for directors' qualifying shares and other similar
holdings, all of the outstanding capital stock of, or other voting securities or
ownership interests in, each Subsidiary of Farnell, is owned by Farnell,
directly or
27
indirectly, free of any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other voting securities or ownership interests
and free of any rights of third parties to acquire the voting securities of any
of its Subsidiaries.
SECTION 4.7. PRIOR UK DISCLOSURES. (a) With respect to each
document (a "PRIOR UK DOCUMENT") issued and each announcement (a "PRIOR UK
ANNOUNCEMENT" and, all Prior UK Announcements collectively with all Prior UK
Documents, the "PRIOR UK DISCLOSURE") filed with the LSE by Farnell since
February 1, 1992 (and except as disclosed in any subsequent Prior UK Document or
Prior UK Announcement issued or made prior to the date hereof), all statements
of fact contained therein which are material in the context of the Merger and
the Rights Offering were when made and are at the date hereof true and accurate
in all material respects and all statements of opinion, intention and
expectation expressed therein which are material in the context of the Merger
and the Rights Offering were when made and are on the date hereof fairly and
reasonably held and none of such statements were or are rendered incorrect or
misleading in any material respect by the omission of any fact or matter.
(b) With respect to each document issued and each announcement filed
with the LSE by Farnell after the date hereof (other than the UK Disclosure
Document) all statements of fact contained therein which are material in the
context of the Merger and the Rights Offering will be when made true and
accurate in all material respects and all statements of opinion, intention and
expectation expressed therein which are material in the context of the Merger
and the Rights Offering will be when made fairly and reasonably held and none of
such statements will be when made rendered incorrect or misleading in any
material respect by the omission of any fact or matter.
SECTION 4.8. FINANCIAL STATEMENTS. The audited consolidated
financial statements of Farnell and its Subsidiaries included in its annual
reports delivered to its shareholders for the fiscal years ended January 31,
1993, January 30, 1994 and January 29, 1995 have been prepared in accordance
with accounting principles generally accepted in the United Kingdom applied on a
consistent basis (except as may be indicated in the notes thereto) and give a
true and fair view of the state of affairs and profits of Farnell and its
Subsidiaries as of the dates thereof and for the periods then ended. The
financial information contained in the interim unaudited statements of the
results of operations of Farnell and its Subsidiaries for the six months ended
July 31, 1995 have been prepared with all due care and attention and in
accordance with accounting principles generally accepted in the United Kingdom
or practice consistent with
28
those used in the preparation of the audited consolidated accounts of Farnell
and its Subsidiaries insofar as appropriate in the preparation of an interim
unaudited statement. For purposes of this Agreement, "FARNELL BALANCE SHEET"
means the consolidated balance sheet of Farnell and its Subsidiaries as of
January 29, 1995 set forth in Farnell's annual report sent to shareholders for
such year (the "ANNUAL REPORT") and "FARNELL BALANCE SHEET DATE" means January
29, 1995.
SECTION 4.9. DISCLOSURE DOCUMENTS. (a) None of the information to
be provided by Farnell for inclusion or incorporation by reference in the
Registration Statement or the Proxy Statement (or any amendment or supplement
thereto) will, (i) on the date the Proxy Statement (or such amendment or
supplement) is first mailed to the shareholders of the Company, (ii) at the time
the Registration Statement (or such amendment or supplement) becomes effective
or (iii) at the time of the Company Shareholder Meeting (as amended or
supplemented prior to such time, if applicable), contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(b) None of the information included or incorporated by reference in
the UK Disclosure Document (or any amendment or supplement thereto) will, (i) on
the date the UK Disclosure Document (or such amendment or supplement) is first
mailed to the shareholders of Farnell, (ii) on the last day for acceptance and
payment under the rights issue being made by Farnell (as amended or supplemented
prior to such time, if applicable) or (iii) at the time of the Company
Shareholder Meeting (as amended or supplemented prior to such time, if
applicable), contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The UK Disclosure Document will contain all information
required to comply in all material respects with all statutory and other legal
provisions of the United Kingdom, the rules and requirements of the LSE and the
Listing Rules of the LSE.
(c) The representations and warranties contained in this Section 4.9
will not apply to statements or omissions included in the Registration
Statement, Proxy Statement or UK Disclosure Document based upon information
furnished to Farnell by the Company for use therein.
SECTION 4.10. ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
Prior UK Disclosure made prior to the date of this Agreement, copies of which
have been furnished
29
by Farnell to the Company or as contemplated by this Agreement, from the Farnell
Balance Sheet Date to the date of this Agreement, Farnell and its Subsidiaries
have conducted their business in the ordinary course consistent with past
practice and there has not been:
(a) any event, occurrence or development of a state of circumstances
or facts which, individually or in the aggregate, has had or is reasonably
likely to have, a Farnell Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of Farnell (other
than regular annual and interim dividends), or any repurchase, redemption or
other acquisition by Farnell or any of its Subsidiaries of any outstanding
shares of capital stock or other securities of, or other ownership interests in,
Farnell or any of its Subsidiaries; or
(c) any amendment of any material term of any outstanding security of
Farnell or any of its Subsidiaries.
SECTION 4.11. NO UNDISCLOSED MATERIAL LIABILITIES. There are no
liabilities of Farnell or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
other than
(a) liabilities provided for in the consolidated balance sheet of
Farnell included in the interim accounts for the six months ended July 31,
1995;
(b) liabilities incurred since July 31, 1995 which, individually or
in the aggregate, do not have, and are not reasonably likely to have, a
Farnell Material Adverse Effect;
(c) other liabilities the presence of which, individually or in the
aggregate, do not have, and are not reasonably likely to have, a Farnell
Material Adverse Effect; and
(d) liabilities incurred in connection with this Agreement, the
Merger and the financing for the Merger.
SECTION 4.12. LITIGATION. Except as disclosed in the Prior UK
Disclosure, as of the date of this Agreement, there is no action, suit, claim,
investigation or proceeding pending against or, to the knowledge of Farnell,
threatened against or affecting Farnell or any of its Subsidiaries or any of
their respective assets, properties or business before any court or arbitrator
or any governmental body,
30
agency or official which, individually or in the aggregate, is reasonably likely
to have a Farnell Material Adverse Effect.
SECTION 4.13. COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed
in the Prior UK Disclosure, neither Farnell nor any of its Subsidiaries is in
violation of, or has violated, any applicable provisions of any law, statute,
ordinance, regulation, judgment, order, decree, license or permit of any
governmental entity except for violations which individually, or in the
aggregate, have not had, and in the future are not reasonably likely to have, a
Farnell Material Adverse Effect. Farnell and its Subsidiaries have all material
governmental licenses, authorizations, consents and approvals required to
operate, own and lease their properties and carry on their business as now
conducted.
SECTION 4.14. MERGER SUBSIDIARY. The Merger Subsidiary was formed
solely for the purpose of engaging in the transactions contemplated hereby.
Except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated hereby, the
Merger Subsidiary has not incurred any obligations or liabilities or engaged in
any business or activities of any type or kind whatsoever or entered into any
agreements or arrangements with any Person.
SECTION 4.15. FINANCING. Farnell and the Merger Subsidiary intend to
finance the Merger from its and the Company's existing cash resources and the
proceeds of (i) a rights offering and (ii) a medium term loan facility.
Attached hereto as Schedule 4.15 are copies of (a) an underwriting agreement
dated January 23, 1996 among Farnell, Farnell Finance PLC and NatWest Markets
Corporate Finance Limited ("NATWEST MARKETS"), pursuant to which NatWest Markets
has agreed to underwrite the Rights Offering to Farnell's shareholders,
consisting of 64,648,684 units of convertible unsecured loan stock ("CONVERTIBLE
STOCK UNITS") in Farnell Finance PLC, a wholly owned subsidiary of Farnell (each
unit of which is automatically convertible into one new Ordinary Share of 5p.
each (the "RIGHTS OFFERING SHARES") of Farnell), (the "RIGHTS OFFERING") and
(b) a Credit Agreement ("CREDIT AGREEMENT") dated January 23, 1996 among
Farnell, Merger Subsidiary, certain other Subsidiaries of Farnell and National
Westminster Bank plc, with respect to the medium term loan facility.
SECTION 4.16. FINDERS' FEES. Except for Gleacher NatWest Inc., whose
fees will be paid by Farnell, and the fees of Lazard Freres & Co. LLC and Lazard
Brothers & Co., Limited referred to in Section 3.16, there is no investment
banker, broker, finder or other intermediary who might be entitled to any fee or
commission from Farnell or any of its
31
affiliates upon consummation of the transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.1. CONDUCT OF THE COMPANY. (a) From the date of this
Agreement until the Effective Time, the Company shall and shall cause its
Subsidiaries to conduct their respective businesses in the ordinary course
consistent with past practice and shall use their reasonable best efforts to
preserve intact their respective business organizations and relationships with
third parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, except as
otherwise contemplated or permitted by this Agreement, from the date of this
Agreement until the Effective Time:
(i) the Company will not adopt or propose any change in its amended
articles of incorporation or regulations;
(ii) the Company will not, and will not permit any of its
Subsidiaries to, merge or consolidate with any other Person or acquire a
material amount of assets of any other Person, except for acquisitions by
the Company or any of its Subsidiaries of products to be held in inventory
consistent with past practice;
(iii) the Company will not, and will not permit any of its
Subsidiaries to, sell, lease, license or otherwise dispose of any material
assets or property except (i) pursuant to existing contracts or commitments
and (ii) in the ordinary course consistent with past practice;
(iv) the Company will not (x) declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of its capital stock
(other than regular quarterly cash dividends of $0.125), (y) split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (z) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any of its Subsidiaries or
any other securities thereof (other than the acquisition of shares
surrendered in whole or partial satisfaction of the exercise price for any
stock options outstanding on January 18, 1996 and
32
properly exercised in accordance with their terms) or any rights, warrants
or options to acquire any such shares or other securities;
(v) the Company will not issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock, any other voting securities or
any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities,
(other than the issuance of Shares upon the exercise of Company director or
employee stock options outstanding on January 18, 1996 and in accordance
with their terms on such date);
(vi) the Company will not, and will not permit any of its
Subsidiaries to, make or agree to make any new capital expenditure or
expenditures in excess of $10,000,000 which have not been disclosed in
writing to Farnell at least 5 days prior thereto or which are part of its
current plans for such expenditures identified to Farnell prior to the date
hereof;
(vii) the Company will not, and will not permit any of its
Subsidiaries to, make any material tax election or settle or compromise any
material tax liability or refund or execute any extension or waiver of any
statute of limitations on the assessment or collection of any federal
income tax, and the Company will, and will cause its Subsidiaries to, use
reasonable best efforts to consult with Farnell in respect of all other
extensions or waivers of any statute of limitations on the assessment or
collection of any other tax;
(viii) the Company will not, and will not permit any of its
Subsidiaries to (i) grant any severance or termination pay to any director,
officer or employee of the Company or any of its Subsidiaries, (ii) enter
into any employment, deferred compensation or other similar agreement (or
any amendment to any such existing agreement) with any director, officer or
employee of the Company or any of its Subsidiaries, (iii) increase benefits
payable under any existing severance or termination pay policy or
employment agreement or (iv) increase any compensation, bonus or other
benefits payable to directors, officers or employees of the Company or any
of its Subsidiaries, in the case of clauses (i) through (iv), other than in
the ordinary course of business consistent with past practice; and
(ix) the Company will not, and will not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
33
(b) The Company will cooperate with Farnell to make its cash and
investments available to Farnell at the Effective Time for use in funding the
Merger Consideration.
SECTION 5.2. SHAREHOLDER MEETING; PROXY MATERIAL. The Company shall
cause a meeting of its shareholders (the "COMPANY SHAREHOLDER MEETING") to be
duly called and held as soon as reasonably practicable for the purpose of voting
on the adoption of this Agreement and the authorization of the Merger. The
directors of the Company shall, subject to their fiduciary duties as advised by
counsel, recommend adoption of this Agreement and authorization of the Merger by
the Company's shareholders. The Company will, in cooperation with Farnell, as
promptly as practicable, prepare and file with the SEC a preliminary proxy
statement in connection with the Merger and related transactions contemplated
hereby (which Proxy Statement shall be combined with the Registration Statement)
and will use its best efforts in cooperation with Farnell to respond to the
comments of the SEC in connection therewith, furnish all information required to
prepare the definitive Proxy Statement (the "PROXY STATEMENT") (including,
without limitation, financial statements and supporting schedules and
certificates and reports of independent public accountants) and cause the
combined Proxy Statement and Registration Statement to be declared effective.
The Company (a) will cause the Proxy Statement to be mailed to its shareholders
and, if necessary, after the Proxy Statement shall have been so mailed, promptly
circulate amended, supplemental or supplemented proxy material and, if required
in connection therewith, resolicit proxies, (b) will use its best efforts
(subject to the fiduciary duties, as advised by counsel, of its Board of
Directors) to obtain the necessary adoption by its shareholders of this
Agreement and the authorization of the Merger and (c) will otherwise comply with
all legal requirements applicable to such meeting. Without limiting the
generality of the foregoing, the Company agrees that its obligations pursuant to
this Section 5.2 (other than pursuant to clause (b)) shall not be altered by the
commencement, public proposal, public disclosure or communication to the Company
of any Acquisition Proposal.
SECTION 5.3. ACCESS TO INFORMATION. (a) From the date hereof until
the Effective Time, the Company will give Farnell, its counsel, financial
advisors, auditors and other authorized representatives full access during
normal business hours and in a manner that does not unreasonably interfere with
the ordinary business practices of the Company, to the offices, properties,
books and records of the Company and the Subsidiaries, will furnish to Farnell,
its counsel, financial advisors, auditors and other authorized representatives
such financial, commercial and
34
operating data and other data or information as such Persons may reasonably
request and will instruct its appropriate employees, counsel and financial
advisors to fully cooperate with Farnell in its investigation of the business
and potential liabilities of the Company and the Subsidiaries; PROVIDED that
such cooperation does not unreasonably interfere with the ordinary business
practices of the Company; PROVIDED, FURTHER that no investigation pursuant to
this Section shall affect any representation or warranty given by the Company to
Farnell hereunder; PROVIDED, FURTHER, that the parties shall cooperate,
consistent with the legal obligations of the Company and without waiving any
rights of the Company, to ensure that all data and information reasonably
requested by Farnell hereunder shall be made available to Farnell.
(b) All requests for information made pursuant to this Section shall
be directed to one or more executive officers designated by the Company. All
information obtained by Farnell or its advisors and representatives pursuant to
this Section 5.3 shall be subject to the provisions of the letter agreement
dated November 17, 1995 addressed to Farnell by the Company (the
"CONFIDENTIALITY AGREEMENT").
SECTION 5.4. NO SOLICITATION. (a) From the date hereof until the
termination hereof, the Company will not and will cause its Subsidiaries and the
officers, directors, employees or other agents of the Company and its
Subsidiaries not to, directly or indirectly, (i) take any action to solicit,
initiate or encourage any Acquisition Proposal or (ii) subject to the fiduciary
duties of the Board of Directors under applicable law as advised by counsel to
the Company, engage in negotiations with, or disclose any nonpublic information
relating to the Company or any of its Subsidiaries or afford access to the
properties, books or records of the Company or any of its Subsidiaries in each
case to, any Person who is reasonably likely to be considering making, or has
made, an Acquisition Proposal. The Company will promptly notify Farnell after
receipt of any Acquisition Proposal or any indication that any Person is
considering making an Acquisition Proposal or any such request for nonpublic
information relating to the Company or any of its Subsidiaries or for such
access to the properties, books or records of the Company or any of its
Subsidiaries by any Person who is reasonably likely to be considering making, or
has made, an Acquisition Proposal and will keep Farnell informed of the status
of any such Acquisition Proposal, indication or request; PROVIDED, HOWEVER, that
nothing contained in this Section 5.4 will prohibit the Board of Directors of
the Company from, to the extent applicable, complying with Rule 14e-2
promulgated under the Exchange Act with regard to any Acquisition
35
Proposal. If otherwise permitted under this Section 5.4, prior to furnishing
any non-public information to, or entering into discussions or negotiations
with, any Person the Company will obtain an executed confidentiality agreement
from such Person on terms substantially the same as, or no less favorable to the
Company in any material respect than, those contained in the Confidentiality
Agreement. For purposes of this Agreement, "ACQUISITION PROPOSAL" means any
offer or proposal for, or any indication of interest in, a merger or other
business combination involving the Company or any of its Subsidiaries or the
acquisition of any substantial equity interest in, or a substantial portion of
the assets of, the Company or any of its Subsidiaries, other than the
transactions contemplated by this Agreement.
(b) Subject to the fiduciary duties, as advised by counsel, of its
Board of Directors and to the provisions of Section 10.4(b), neither the Board
of Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Farnell, the
adoption, approval or recommendation by such Board of Directors or any such
committee of this Agreement or the Merger or (ii) approve or recommend or
propose to approve or recommend, any Acquisition Proposal.
SECTION 5.5. NOTICES OF CERTAIN EVENTS. The Company shall promptly
notify Farnell of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries which, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to
Section 3.12, 3.13 or 3.17 or which seek to or may reasonably be expected
to have the effect of preventing, enjoining or materially delaying the
consummation of the transactions contemplated by this Agreement.
SECTION 5.6. TAX CERTIFICATION. Within 30 days prior to the
Effective Time the Company shall provide to Farnell a certificate signed by the
Company to the effect
36
that the Company is not, nor has it been within 5 years of the date thereof, a
"United States real property holding corporation" as defined in Section 897 of
the Code.
SECTION 5.7. AFFILIATES AND CERTAIN OTHER SHAREHOLDERS. Prior to
the Effective Time, the Company shall deliver to Farnell a letter identifying
all Persons who are to the knowledge of the Company, at the time this Agreement
is submitted for adoption by the shareholders of the Company, (i) "affiliates"
of the Company for purposes of Rule 145 under the Securities Act, (ii) holders
of 5% or more of the outstanding Shares and (iii) officers and directors of the
Company within the meaning of Treas. Reg. Section 1.367(a)-3T(c)(1)(ii). The
Company shall use its best efforts to cause each such Person to deliver to
Farnell on or prior to the Effective Time a written agreement (a) substantially
in the form attached as Exhibit 5.7(a), with respect to Persons identified as
affiliates, (b) substantially in the form attached as Exhibit 5.7(b), with
respect to Persons identified as beneficial owners of 5% or more of the
outstanding Shares who are not Founder Shareholders, (c) substantially in the
form attached as Exhibit 5.7(c), with respect to Founder Shareholders and (d)
substantially in form attached as Exhibit 5.7(d), with respect to officers or
directors of the Company within the meaning of Treas. Reg. Section 1.367(a)-
3T(c)(1)(ii).
SECTION 5.8. LETTERS OF COMPANY'S ACCOUNTANTS. The Company shall
use its reasonable best efforts to cause to be delivered to Farnell a letter
with respect to the financial information regarding the Company included in the
Registration Statement of KPMG Peat Marwick LLP, the Company's independent
public accountants, dated a date within two business days before the date on
which the Registration Statement shall become effective and addressed to
Farnell, in form and substance reasonably satisfactory to Farnell and customary
in scope and substance for letters delivered by independent public accountants
in connection with registration statements similar to the Registration Statement
and a bring down of such letter in form and substance reasonably satisfactory to
Farnell dated as of two days prior to the Company Shareholder Meeting.
ARTICLE 6
COVENANTS OF FARNELL
Farnell agrees that:
SECTION 6.1. CONDUCT OF FARNELL. Except as otherwise contemplated
or permitted by this Agreement, including Section 4.15, from the date of this
Agreement
37
until the Effective Time, Farnell shall, and shall cause its Subsidiaries to,
use their reasonable best efforts to preserve intact their respective business
organizations and relationships with third parties and to keep available the
services of their present executive officers. Without limiting the generality
of the foregoing, except as otherwise contemplated or permitted by this
Agreement, including Section 4.15, from the date of this Agreement until the
Effective Time:
(a) Farnell will not adopt or propose any changes in its memorandum
and articles of association;
(b) Farnell will not (x) declare, set aside or pay any dividends on,
or make any other distributions with respect to any shares or its capital
stock (other than regular semi-annual cash dividends), (y) split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (z) purchase, redeem or otherwise acquire
any shares of capital stock of Farnell or any of its Subsidiaries or any
other securities thereof or any rights, warrants or options to acquire any
such shares or other securities, other than stock options issued to
employees;
(c) Farnell will not issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock (other than pursuant to the
exercise of stock options issued to employees), any other voting securities
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities; or
(d) Farnell will not, and shall not permit any of its Subsidiaries
to, acquire or agree to acquire a substantial portion of the assets of, or
equity in, any entity or dispose of, or agree to dispose of, a substantial
portion of the assets of Farnell, if such acquisition or disposition would
impede or materially delay the consummation of the Merger.
SECTION 6.2. ACCESS TO INFORMATION. (a) From the date hereof until
the Effective Time, Farnell will give the Company, its counsel, financial
advisors, auditors and other authorized representatives reasonable access during
normal business hours to financial, commercial and operating data and other
information as such Persons may reasonably request; PROVIDED that no
investigation pursuant to this Section shall affect any representation or
warranty given by Farnell to the Company hereunder; and PROVIDED, FURTHER, that
the parties shall cooperate, consistent with the
38
obligations of Farnell and without waiving any rights of Farnell, to ensure that
all information reasonably requested by the Company hereunder shall be made
available to the Company.
(b) All requests for information made pursuant to this Section shall
be directed to one or more executive officers designated by Farnell. All
information obtained by the Company or its advisors and representatives pursuant
to this Section 6.2 shall be subject to the provisions of the Confidentiality
Agreement.
SECTION 6.3. NOTICES OF CERTAIN EVENTS. Farnell shall promptly
notify the Company of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contem-plated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the knowledge of Farnell, threatened against Farnell or
any of its Subsidiaries which, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to Section 4.12 or
which seek to or may reasonably be expected to have the effect of
preventing, enjoining or materially delaying the consummation of the
transactions contemplated by this Agreement.
SECTION 6.4. NO SOLICITATION. (a) From the date hereof until the
termination hereof, Farnell will not, and will cause its Subsidiaries and the
officers, directors, employees or other agents of Farnell and its Subsidiaries
not to, directly or indirectly, subject to the fiduciary duties and other
obligations of Farnell's Board of Directors under the Companies Xxx 0000
("COMPANIES ACT") and the City Code on Takeovers and Mergers, (A) solicit, seek
to effect, negotiate with or provide non-public information to any person with
respect to or (B) otherwise encourage any public announcement or proposal
whatsoever with respect to, any form of business combination transaction (with
any Person) involving a change of control (Persons acting in concert acquiring
or beneficially owning voting securities of Farnell representing more than 50%
of the total voting securities of Farnell, including a merger, consolidation,
Takeover Offer (within the meaning of Section 428 of the Companies Act)),
exchange offer or liquidation of Farnell's
39
assets, or any scheme of arrangement or recapitalization with respect to Farnell
and its Subsidiaries (a "FARNELL ACQUISITION PROPOSAL"). Farnell will promptly
notify the Company after receipt of a Farnell Acquisition Proposal or any
indication that any Person is considering making a Farnell Acquisition Proposal
or any such request for non-public information relating to Farnell or any of its
Subsidiaries or for such access to the properties, books or records of Farnell
or any of its Subsidiaries. If otherwise permitted under this Section 6.4,
prior to furnishing any non-public information to, or entering into discussions
or negotiations with, any Person, Farnell will obtain an executed
confidentiality agreement from such Person on terms substantially the same as,
or no less favorable to Farnell in any material respect than, the terms
contained in the Confidentiality Agreement.
(b) Subject to the fiduciary duties of the Board of Directors of
Farnell under applicable law as advised by counsel and Section 10.4(c), neither
the Board of Directors of Farnell nor any committee thereof shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to the Company
and holders of the Shares, the adoption, approval or recommendation by such
Board of Directors or any such committee of this Agreement, the Rights Offering
or the Merger or (ii) approve or recommend or propose to approve or recommend,
any Farnell Acquisition Proposal.
SECTION 6.5. OBLIGATIONS OF MERGER SUBSIDIARY. Farnell will take
all action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
SECTION 6.6. INDEMNIFICATION. (a) From and after the Effective
Time, Farnell will cause the Surviving Corporation to indemnify, defend and hold
harmless to the fullest extent permitted by Delaware Law, each Person who is
now, or has been at any time prior to the date hereof, an officer (whether
elected or appointed), director, employee or agent of the Company or any of its
Subsidiaries (each, an "Indemnified Person") against all losses, claims,
damages, liabilities, costs or expenses (including attorneys' fees), judgments,
fines, penalties and amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation arising out of or pertaining to acts
or omissions, or alleged acts or omissions, by them in their capacities as such
occurring at or prior to the Effective Time.
(b) Farnell will cause the Surviving Corporation to keep in effect
provisions in its certificate of
40
incorporation and by-laws providing for exculpation of director, officer,
employee and agent liability for Persons who are directors, officers, employees
or agents of the Surviving Corporation at the Effective Time and its
indemnification of and advancement of expenses for such persons to the fullest
extent permitted under Delaware Law, which provisions will not be amended except
as required by applicable law or except to make changes permitted by law that
would enlarge such person's rights in respect thereof.
(c) For a period of three years after the Effective Time, Farnell
will cause to be maintained officers' and directors' liability insurance
covering the Indemnified Persons who are currently covered, in their capacities
as officers and directors, by the Company's existing officers' and directors'
liability insurance policies on terms substantially no less advantageous to the
Indemnified Persons than such existing insurance; PROVIDED, HOWEVER, that
Farnell will not be required in order to maintain or procure such coverage to
pay premiums on an annualized basis in excess of $150,000 (the "INSURANCE CAP");
and PROVIDED FURTHER that if equivalent coverage cannot be obtained, or can be
obtained only by paying an annualized premium in excess of the Insurance Cap,
then Farnell will be required to obtain as much coverage as can be obtained by
paying premiums on an annualized basis equal to the Insurance Cap.
SECTION 6.7. SHAREHOLDER'S MEETING. Farnell shall cause a meeting
of its shareholders (the "FARNELL SHAREHOLDER MEETING") to be duly called and
held as soon as reasonably practicable for the purpose of approving the issuance
of Farnell Shares in connection with the Merger, the Rights Offering, the
amendments to the articles of association of Farnell included in Exhibit 1.4,
changing the name of Farnell as provided in Section 6.13 and any other matters
requiring the approval of its shareholders in connection with this Agreement,
the Rights Offering, the Merger and the other transactions contemplated hereby.
The directors of Farnell shall, subject to their fiduciary duties, recommend
approval of such issuance and all such other matters. In connection with such
meeting, (a) Farnell will promptly prepare and file with the LSE, and will use
its best efforts to have cleared by the LSE and will thereafter mail to its
shareholders an information circular for such meeting which will also serve as
the solicitation document for the Rights Offering and as listing particulars for
Farnell Shares (the "UK DISCLOSURE DOCUMENT") for such meeting and will
otherwise comply with all legal requirements applicable to such meeting, (b) if
necessary, after the UK Disclosure Document has been so posted, promptly
circulate amended, supplemental or supplemented materials and, if required in
connection therewith, resolicit votes and (c) will use its best efforts (subject
41
to the fiduciary duties, as advised by counsel, of its Board of Directors) to
obtain the necessary approvals by its shareholders in connection with this
Agreement, the Rights Offering, the Merger and the other transactions
contemplated hereby, it being understood that Farnell shall not be obligated to
hold more than one meeting of shareholders. Without limiting the generality of
the foregoing, Farnell agrees that its obligations pursuant to this Section 6.7
(other than pursuant to clause (c)) shall not be altered by the commencement,
public disclosure or communication to Farnell of any Farnell Acquisition
Proposal.
SECTION 6.8. REGISTRATION STATEMENT. Farnell will, in cooperation
with the Company, promptly prepare and file with the SEC under the Securities
Act a Registration Statement on Form F-4 (which Registration Statement shall be
combined with the Proxy Statement) to register Farnell Shares (other than
Farnell Shares being issued to the Founder Shareholders) being issued in the
Merger (the "REGISTRATION STATEMENT") and a Registration Statement on Form F-6
(the "ADR REGISTRATION STATEMENT", and, together with the Registration
Statement, the "REGISTRATION STATEMENTS") to register the Farnell ADRs being
issued in the Merger and the Restricted ADRs being issued in the Merger to Rule
145 Affiliates who are not Founder Shareholders, and shall use its best efforts
to cause the Registration Statements to be declared effective by the SEC as
promptly as practicable. Farnell shall promptly take any action required to be
taken under foreign or state securities or Blue Sky laws in connection with the
issuance of Farnell Shares in the Merger.
SECTION 6.9. STOCK EXCHANGE LISTING. Farnell shall use its best
efforts (a) to cause the Farnell ADRs being issued in the Merger and a number of
additional Farnell ADRs equal to the number of Restricted ADRs being issued in
the Merger, to be listed on the NYSE, subject to official notice of issuance and
evidence of satisfactory distribution, and (b) to obtain the agreement of the
LSE to admit to the Official List of the LSE the Ordinary Shares and Preference
Shares to be issued in the Merger.
SECTION 6.10. LETTER OF FARNELL'S ACCOUNTANTS. Farnell shall use its
reasonable best efforts to cause to be delivered to the Company a letter with
respect to the financial information regarding Farnell included in the
Registration Statement of Price Waterhouse, Farnell's independent public
accountants, dated a date within two business days before the date on which the
Registration Statement shall become effective and addressed to the Company, in
form and substance reasonably satisfactory to the Company and customary in scope
and substance for letters delivered by independent public accountants in
connection
42
with registration statements similar to the Registration Statement and a bring
down of such letter in form and substance reasonably satisfactory to the Company
dated as of two business days prior to the Company Shareholder Meeting.
SECTION 6.11. COMPANY EMPLOYEES AND EMPLOYEE BENEFIT PLANS. (a)
From and after the Effective Time, the Surviving Corporation shall have sole
discretion over the hiring, promotion, retention, firing and other terms and
conditions of the employment of employees of the Surviving Corporation
including, without limitation, those individuals who are employees of the
Company or any of its Subsidiaries immediately prior to the Effective Time
("Company Employees") and individuals who ceased to be employees of the Company
or of any of its Subsidiaries at any time prior to the Effective Time ("Company
Retirees"), subject to the following provisions of this Section 6.11 and to any
collective bargaining agreements that may be binding on the Surviving
Corporation or its Subsidiaries and except as required by law.
(b) For a period of not less than 24 months after the Effective Time,
Farnell shall cause the Surviving Corporation to provide compensation and
benefits which are substantially comparable in the aggregate to the compensation
and benefits provided to Company Employees and Company Retirees at the date
hereof under the Company's Employee Plans and Benefit Arrangements other than
stock option or stock purchase plans and shall provide such comparable benefits
without any additional waiting periods, limitations or exclusions relating to
any pre-existing condition or disability, except to the extent that any waiting
period, limitation or exclusion may have applied prior to the Effective Time
with respect to any covered person. Following the Effective Time, Farnell shall
in due course make available to Company Employees stock acquisition plans
substantially similar to the XXXX Option Scheme made available to Farnell's
employees in the United Kingdom, with appropriate changes in respect of
applicable tax law.
(c) From and after the Effective Time, for purposes of determining
eligibility, vesting and benefit accrual under any replacement compensation,
severance, welfare, pension benefit or savings plan of Farnell or and of its
affiliates in which Company Employees become eligible to participate, service
with the Company or any of its Subsidiaries shall be credited as if such
services were rendered to Farnell or any of its Subsidiaries; provided, that
Farnell shall not be obligated to permit Company Employees to participate in
nor, upon participation, to receive such credited service, with respect to, any
plan maintained by Farnell or its Subsidiaries which is not intended to
constitute a replacement plan for any existing
43
plan, program or arrangement of the Company and its Subsidiaries.
SECTION 6.12. U.S. HEADQUARTERS. Farnell represents that it is its
intention to maintain its U.S. headquarters at the present location of the
Company's headquarters in Cleveland, Ohio or at another location within the
greater Cleveland area.
SECTION 6.13. NAME. At the Farnell Shareholders Meeting, Farnell
shall submit for approval by its shareholders the change of its name to Premier
Farnell PLC, and, if approved, shall take all required actions to effect such
name change as soon as practicable following the Effective Time.
SECTION 6.14. CERTAIN TAX MATTERS. (a) Farnell or an affiliate has
been and will be engaged in the active conduct of a trade or business, within
the meaning of Temp. Reg. section 1.367(a)-2T(b)(2) and (3), that is substantial
in comparison to the trade or business of the Company for purposes of Temp. Reg.
section 1.367(a)-3T(c)(1)(iii) (T.D. 8638) and any applicable successor
provision, for the entire period of time since January 1, 1993 through the
Effective Time.
(b) All debt service payments on any debt of Merger Subsidiary
incurred in connection with the transactions contemplated by this Agreement will
be made out of post-Effective Time U.S. federal taxable income computed before
deductions for interest, less taxes payable, of the Surviving Corporation or out
of equity capital of the Surviving Corporation provided by Farnell.
(c) Notwithstanding any other provision of this Agreement to the
contrary, the provisions of this Section 6.14 will survive the consummation of
the Merger.
ARTICLE 7
COVENANTS OF FARNELL
AND THE COMPANY
The parties hereto agree that:
SECTION 7.1. CERTAIN ACTIONS. Subject to the terms and conditions
of this Agreement, each party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement. In connection with
and without limiting the
44
foregoing, the Company and its Board of Directors shall use their reasonable
best efforts to (a) take all reasonable action necessary so that no state
takeover statute or similar statute or regulation is or becomes applicable to
the Merger, this Agreement, the Voting Agreement or any of the other
transactions contemplated by this Agreement or the Voting Agreement and (b) if
any state takeover statute or similar statute or regulation becomes applicable
to any of the foregoing, take all action necessary so that the Merger and the
other transactions contemplated by this Agreement and the Voting Agreement may
be consummated as promptly as practicable on the terms contemplated by this
Agreement and the Voting Agreement and otherwise to minimize the effect of such
statute or regulation on the Merger and the other transactions contemplated by
this Agreement and the Voting Agreement.
SECTION 7.2. CERTAIN FILINGS. The Company and Farnell shall
cooperate with one another (a) in connection with the preparation of the Proxy
Statement, Registration Statements and UK Disclosure Document and related
matters, (b) in determining whether any action by or in respect of, or filing
with, any governmental body, agency or official, or authority is required, or
any actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (c) in seeking any such actions,
consents, approvals or waivers or making any such filings, furnishing
information required in connection therewith or with the Proxy Statement,
Registration Statements, UK Disclosure Document and related matters and seeking
timely to obtain any such actions, consents, approvals or waivers. The parties
will cooperate in order that the Proxy Statement and Registration Statements
(and any amendment or supplement thereto) will, on the date the Proxy Statement
and Registration Statements (or such amendment or supplement) is first mailed to
the shareholders of the Company and at the time of the Company Shareholder
Meeting will comply as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act. The parties will, as
promptly as practicable, provide copies to each other of any written comments
received from the SEC with respect to the Registration Statements or Proxy
Statement and advise one another of any verbal comments with respect to the
Registration Statements or Proxy Statement received from the SEC. No amendment
or supplement to the Registration Statements or Proxy Statement will be made by
Farnell or the Company without the approval of the other party, such approval
not to be unreasonably withheld or delayed.
SECTION 7.3. PUBLIC ANNOUNCEMENTS. Farnell and the Company will
consult with each other before issuing any
45
press release or making any public statement with respect to this Agreement and
the transactions contemplated hereby and, except as may be required by
applicable law or any listing agreement with the NYSE or the rules of the LSE,
will not issue any such press release or make any such public statement.
SECTION 7.4. FURTHER ASSURANCES. At and after the Effective Time,
the officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
SECTION 7.5. TAX TREATMENT. (a) Each of Farnell and the Company
shall use its reasonable best efforts to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code and to obtain
the opinions of counsel referred to in Sections 8.2(e) and 8.3(c).
(b) Following the Effective Time, (i) neither the Surviving
Corporation, Farnell nor any of their affiliates shall knowingly take any
action, or knowingly cause any action to be taken, which would cause or permit
the Merger to fail to qualify as a reorganization under Section 368(a) of the
Code and (ii) each of the Surviving Corporation, Farnell and their respective
affiliates agree to be bound by and comply with the agreements set forth in
Schedule 7.5.
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.1. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
obligations of the Company, Farnell and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
(a) this Agreement shall have been adopted by the shareholders of the
Company in accordance with the OGCL;
(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been terminated;
46
(c) no injunction or other court order issued by any court of
competent jurisdiction or other legal restraint or prohibition shall
prohibit the consummation of the transactions contemplated by this
Agreement; PROVIDED, however, that neither of the parties may assert its
rights with respect to this condition unless it shall have used its
reasonable best efforts to prevent the entry of any such injunction or
other order and to appeal as promptly as possible any such injunction or
other order that may be entered;
(d) the shareholders of Farnell shall have voted or passed a special
resolution to approve the Merger and create and authorize the issuance of
Farnell Shares in connection with the Merger (subject to the Effective Time
having occurred) in accordance with applicable law;
(e) the Registration Statements shall have been declared
effective and no stop order suspending the effectiveness of the
Registration Statements shall be in effect and no proceedings for such
purpose shall be pending before or threatened in writing by the SEC,
and Farnell shall have received all state securities or "blue sky"
authorizations necessary to issue Restricted ADRs and Farnell ADRs
pursuant to this Agreement;
(f) the Farnell ADRs to be delivered in the Merger and a number
of additional Farnell ADRs equal to the number of Restricted ADRs
being issued in the Merger shall have been approved for listing on the
NYSE, subject to official notice of issuance and satisfactory
distribution, and the LSE shall have agreed to admit to the Official
List of the LSE (subject to allotment) the Ordinary Shares and
Preference Shares to be issued in the Merger;
(g) there shall not have been a referral of the transactions
contemplated hereby to the Monopolies and Mergers Commission by the
Secretary of State for Trade and Industry;
(h) any applicable waiting period under the German Competition Law
shall have expired or been terminated or the German Federal Cartel Office
shall have notified Farnell that the Merger may be completed; and
(i) there shall not be pending any suit, action or proceeding by any
government or governmental authority or agency, domestic or foreign, before
any court or governmental authority or agency, domestic or foreign, which
is reasonably likely to succeed, (i) seeking to restrain or prohibit
Farnell's ownership or operation (or
47
that of its respective subsidiaries or affiliates) of all or any material
portion of the business or assets of the Company and its Subsidiaries,
taken as a whole, or of Farnell and its Subsidiaries, taken as a whole, or
to compel Farnell or any of its Subsidiaries or affiliates to dispose of or
hold separate all or any material portion of the business or assets of the
Company and its Subsidiaries, taken as a whole, or of Farnell and its
Subsidiaries, taken as a whole, (ii) seeking to impose or confirm material
limitations on the ability of Farnell or any of its Subsidiaries or
affiliates effectively to exercise full rights of ownership of the shares
of capital stock of the Surviving Corporation, including, without
limitation, the right to vote any of such shares acquired or owned by
Farnell or any of its Subsidiaries or affiliates on all matters properly
presented to the stockholders of the Surviving Corporation, or (iii)
seeking to require divestiture by Farnell or any of its Subsidiaries or
affiliates of any such shares.
SECTION 8.2. CONDITIONS TO THE OBLIGATIONS OF FARNELL AND MERGER
SUBSIDIARY. The obligations of Farnell and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
(a) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time, the representations and warranties of the Company contained
in this Agreement shall be true in all material respects at and as of the
Effective Time as if made at and as of such time (other than the
representations and warranties contained in Section 3.5, 3.10, 3.12,
3.17(a)(ii), the last sentence of Section 3.18 and Section 3.19 which shall
be true in all material respects on the date of this Agreement) and Farnell
shall have received a certificate signed by the chief executive officer of
the Company to the foregoing effect;
(b) Farnell shall have received an opinion of counsel to the Company,
dated as of the Effective Time, in form and substance satisfactory to
Farnell;
(c) no development or change (other than changes that generally
affect enterprises within the industry in which the Company and its
Subsidiaries operate or changes resulting from the transactions
contemplated by this Agreement or the announcement thereof) shall have
occurred after the date of this Agreement in the financial condition,
business, assets or results of operations of the Company and its
Subsidiaries taken as a whole that has had or is reasonably likely to have
a Company Material Adverse Effect;
48
(d) the Board of Directors of the Company shall not have withdrawn or
materially modified its approval or recommendation of the Merger;
(e) Farnell shall have received an opinion, in form and substance
satisfactory to Farnell, dated the day preceding the Effective Time or
immediately prior to the Effective Time from tax counsel reasonably
satisfactory to Farnell, based upon representation letters substantially in
the form set forth in Exhibits 5.7(b), 5.7(c) and 5.7(d) and dated on or
about the Effective Time, and such other facts, representations and
assumptions as set forth therein, to the effect that the Merger will
qualify as a reorganization under the provisions of Section 368(a) of the
Code and that Temp. Reg. Section 1.367(a)-3T(c)(1)(iii)(T.D. 8638) is
satisfied; and
(f) the holders of no more than 8% of the Shares outstanding
immediately prior to the Effective Time shall have demanded payment of the
fair cash value of their Shares in accordance with Section 1701.85 of the
OGCL.
SECTION 8.3. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) Farnell and Merger Subsidiary shall have performed in all
material respects all of their respective obligations hereunder
required to be performed by them at or prior to the Effective Time,
the representations and warranties of Farnell and Merger Subsidiary
contained in this Agreement shall be true in all material respects at
and as of the Effective Time as if made at and as of such time (other
than the representations and warranties contained in Section 4.5,
4.10, 4.12 and 4.15 which shall be true in all material respects on
the date of this Agreement) and the Company shall have received a
certificate signed by the chief executive officer and president of
each of Farnell and Merger Subsidiary, respectively to the foregoing
effect;
(b) The Company shall have received an opinion of special U.S.
counsel to Farnell and special U.K. counsel to Farnell, dated as of the
Effective Time, each in form and substance satisfactory to the Company;
(c) the Company shall have received an opinion, in form and substance
satisfactory to the Company, dated the day preceding the Effective Time or
immediately prior to the Effective Time from tax counsel reasonably
49
satisfactory to the Company, based upon representation letters
substantially in the form set forth in Exhibits 5.7(b), 5.7(c) and 5.7(d)
dated on or about the Effective Time, and such other facts, representations
and assumptions concerning, among other things, the actions of the
Shareholders of the Company, as counsel may reasonably deem relevant, to
the effect that the Merger will qualify as a reorganization under the
provisions of Section 368(a) of the Code and that, except as may be
otherwise provided by Section 356 of the Code, no Company shareholder will
recognize gain or have an amount included in income by reason of the
transaction unless, with respect to any Company shareholder who is required
to file an agreement to recognize gain under Temp. Reg. section 1.367(a)-
3T(g) to avoid recognition of gain or inclusion of an amount in income,
such agreement is not properly and timely filed, maintained or renewed or
any action occurs or does not occur which would require the recognition of
gain under the terms of such agreement or any provision of law;
(d) no development or change (other than changes that generally
affect enterprises within the industry in which Farnell and its
Subsidiaries operate or changes resulting from the transactions
contemplated by this Agreement or the announcement thereof) shall have
occurred after the date of this Agreement in the financial condition,
business, assets or results of operations of Farnell and its Subsidiaries
taken as a whole that has had or is reasonably likely to have a Farnell
Material Adverse Effect; and
(e) the Board of Directors of Farnell shall not have withdrawn or
materially modified its approval or recommendation of the Merger.
ARTICLE 9
TERMINATION
SECTION 9.1. TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement or the Merger by the shareholders of the Company
or Farnell):
(a) by mutual written consent of the Company and Farnell;
(b) by either the Company or Farnell if, at a duly held shareholders
meeting of the Company or any adjournment thereof at which this Agreement
is voted
50
upon, the shareholder adoption shall not have been obtained; PROVIDED that
the Company may give written notice to Farnell of its intention to adjourn
or hold another meeting to obtain such adoption in which case no such
termination right shall exist;
(c) by either Farnell or the Company if, at a duly held shareholders
meeting of Farnell or any adjournment thereof at which Farnell's necessary
shareholder approvals are voted upon, such shareholder approvals shall not
have been obtained; PROVIDED that Farnell may give written notice to the
Company of its intention to adjourn or hold another meeting to obtain such
approval in which case no such termination right shall exist;
(d) by either the Company or Farnell, if the Merger has not been
consummated by July 15, 1996; PROVIDED, HOWEVER, that the right to
terminate this Agreement under this paragraph shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure to consummate the Merger;
(e) by either the Company or Farnell, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining
Farnell or the Company from consummating the Merger is entered and such
judgment, injunction, order or decree shall become final and nonappealable;
(f) by Farnell, upon the occurrence of any Company Trigger Event
described in clauses (i) or (ii) of Section 10.4(b) or a Farnell Trigger
Event described in clause (iii) of Section 10.4(c); or
(g) by the Company, upon the occurrence of any Farnell Trigger Event
described in clauses (i), (ii) or (iii) of Section 10.4(c).
No termination pursuant to this Section 9.1 by a party required to make payments
pursuant to Section 10.4 shall be effective unless such party shall
simultaneously make the payments, if any, required by Section 10.4. The party
desiring to terminate this Agreement pursuant to clauses (b) through (g) shall
give written notice of such termination to the other party in accordance with
Section 10.1.
SECTION 9.2. EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 9.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except that the agreements
contained in the last sentences of Sections
51
5.3(b) and 6.2(b) and Sections 10.4, 10.6, 10.7, 10.10 and 10.11 shall survive
the termination hereof.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and shall be given,
if to Farnell or Merger Subsidiary, to:
Xxxxxxx X. Xxxxxx
Farnell Electronics PLC
Xxxxxxx Xxxxx
Xxxxxxxx Xxx
Xxxxxxxx
Xxxx Xxxxxxxxx XX00 0XX
Telecopy: 44-1937-580-070
with a copy to: Xxxxxx Xxxxxxx
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
if to the Company, to:
Xxxxxx X. Gold
Premier Industrial Corporation
0000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Vice President and General Counsel
with a copy to: Xxxxxxx X. Xxxxxxx
Xxxxx, Day, Xxxxxx & Xxxxx
00 Xxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (a) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section and the
appropriate telecopy
52
confirmation is received or (b) if given by any other means, when delivered at
the address specified in this Section.
SECTION 10.2. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time except for the agreements set forth in Article 1 and Sections
6.6, 6.11, 6.13, 6.14, 10.4, 10.6, 10.7, 10.10 and 10.11.
SECTION 10.3. AMENDMENTS; NO WAIVERS. (a) Any provision of this
Agreement may be amended or waived prior to the Effective Time if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment,
by the Company, Farnell and Merger Subsidiary or in the case of a waiver, by the
party against whom the waiver is to be effective; PROVIDED that after the
adoption of this Agreement by the shareholders of the Company, no such amendment
or waiver shall, without the further approval of such shareholders, alter or
change (i) the amount or kind of consideration to be received in exchange for
any shares of capital stock of the Company, (ii) any term of the certificate of
incorporation of the Surviving Corporation or (iii) any of the terms or
conditions of this Agreement if such alteration or change would materially
adversely affect the holders of any shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. Except as otherwise herein
provided, the rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 10.4. FEES AND EXPENSES.
(a) Except as otherwise provided in this Section, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
(b) The Company agrees to pay to Farnell a fee in immediately
available funds equal to $50 million (the "Termination Fee") promptly, but in no
event later than two business days, after the termination of this Agreement if
any of the events set forth below (a "COMPANY TRIGGER EVENT") have occurred:
(i) the Company shall have entered into, or shall have
publicly announced its
53
intention to enter into, an agreement or an agreement in principle
with respect to any Acquisition Proposal or the Company's Board of
Directors shall have withdrawn, revoked or materially modified in a
manner adverse to Farnell the Board's approval or recommendation of
the Merger;
(ii) any person or group (as defined in Section
13(d)(3) of the 1934 Act) (other than Farnell or any of its
affiliates or the Founder Shareholders) shall have become
the beneficial owner (as defined in Rule 13d-3 promulgated
under the 0000 Xxx) of at least a majority of the
outstanding voting stock of the Company;
(iii) the shareholders of the Company shall not have
approved the Merger for whatever reason;
(iv) any representation or warranty made by the Company
in this Agreement as of the date of this Agreement shall not
have been true and correct in all material respects when
made; or
(v) the Company shall have failed to observe or perform in any
material respect any of its obligations under this Agreement.
(c) Farnell agrees to pay to the Company a fee in immediately
available funds equal to the Termination Fee promptly, but in no event later
than two business days, after the termination of this Agreement if any of the
events set forth below (a "FARNELL TRIGGER EVENT") have occurred:
(i) Farnell shall have entered into, or shall have
publicly announced its intention to enter into, an agreement
or an agreement in principle with respect to any Farnell
Acquisition Proposal or Farnell's Board of Directors shall
have withdrawn, revoked or materially modified in a manner
adverse to the Company the Board's approval or
recommendation of the Merger;
(ii) any person or group (as defined in Section
13(d)(3) of the 0000 Xxx) shall have become the beneficial
owner (as defined in Rule 13d-3 promulgated under the 0000
Xxx) of at least a majority of the outstanding voting stock
of Farnell;
54
(iii) Merger Subsidiary shall not, at the Effective
Time, have sufficient funds available to pay the Cash
Consideration pursuant to the terms of this Agreement; or
(iv) any representation or warranty made by Farnell in
this Agreement as of the date hereof shall not have been
true and correct in all material respects when made, or
Farnell shall have failed to observe or perform in any
material respect any of its obligations under this
Agreement.
(d) In the event that a Termination Fee is paid by either party under
this Section 10.4 it shall constitute the exclusive remedy for any breach of
this Agreement by the other party. Each of Farnell and the Company agree that
due to the difficulty of determining damages in the event of the occurrence of
any of the events set forth in this Section 10.4 that the Termination Fee and
expense reimbursement shall be deemed liquidated damages payable as full and
complete compensation for the losses incurred by Farnell or the Company, as the
case may be, in connection with the termination of this Agreement and the
transactions contemplated hereby and for the other losses and damages incurred
by such party (including without limitation damages to reputation and the loss
of other opportunities).
(e) In the event that a party is obligated to make a payment to the
other under Section 10.4(b) or (c), the payor shall assume and pay, or at the
election of the payee, reimburse payee for, all expenses incurred by payee
(including the fees and expenses of its counsel, financial advisors and
institutions that are considering making or have made a commitment to provide
financing for the Merger) in connection with this Agreement and the Merger. All
such fees and expenses shall be paid within five days of receipt of an invoice
therefor.
(f) Each of the Company and Farnell acknowledges that the agreements
contained in this Section 10.4 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, the other
party would not enter into this Agreement; accordingly, if either party fails to
promptly pay the amount due pursuant to this Section 10.4, and, in order to
obtain such payment, the other party commences a suit which results in a
judgment against the defaulting party for the fee or fees and expenses set forth
in this Section 10.4, the defaulting party shall also pay to the other party its
costs and expenses incurred in connection with such litigation.
55
SECTION 10.5. SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, PROVIDED that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
SECTION 10.6. JURISDICTION. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the State of New
York, or, if it has or can acquire jurisdiction, in the United States District
Court for the Southern District of New York, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any obligation to venue laid
therein. Process in any such action or proceeding may be served on any party
anywhere in the world, whether within or without the State of New York.
SECTION 10.7. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of New York, without regard
to the conflict of laws rules of such state.
SECTION 10.8. COUNTERPARTS; EFFECTIVENESS. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
SECTION 10.9. HEADINGS. The headings in this Agreement are for
convenience of reference only and will not control or affect the meaning or
construction of any provisions hereof.
SECTION 10.10. ENTIRE AGREEMENT. This Agreement, the Confidentiality
Agreement and any documents delivered by the parties in connection herewith,
constitute the entire agreement among the parties with respect to the subject
matter of this Agreement and supersede all prior agreements and understandings,
both oral and written, between the parties with respect to the subject matter
hereof.
SECTION 10.11. SEVERABILITY. If any provision of this Agreement or
the application of any such provision to any person or circumstance is held
invalid, illegal or unenforceable in any respect by a court of competent
56
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision hereof.
SECTION 10.12. CERTAIN INTERPRETIVE MATTERS. Unless the context
otherwise requires, (a) all references to Sections, Articles, Exhibits or
Schedules are to be Sections, Articles, Exhibits or Schedules of or to this
Agreement, (b) each of the Schedules will apply only to the corresponding
Section or subsection of this Agreement, (c) words in the singular include the
plural and VICE VERSA, (d) the term "affiliate" of a Person shall have the
meaning set forth in Rule 12b-2 of the Exchange Act, (e) the term "Person" means
an individual, corporation, partnership, association, trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof, and (f) when used with respect to either the Company or
Farnell, the term "knowledge of such party" or any similar phrase means the
knowledge, after due inquiry, of their respective executive officers.
57
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
PREMIER INDUSTRIAL CORPORATION
By____________________________
Title:
FARNELL ELECTRONICS PLC
By____________________________
Title:
FAC DELAWARE CORP.
By____________________________
Title:
58
SCHEDULE 1.4(a)
Xxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Xxxx X. Xxxxxx Revocable Trust created by the Xxxx X. Xxxxxx Revocable Trust
Agreement, originally dated August 27, 1976, as amended
Xxxxxx X. Xxxxxx Revocable Trust created by the Xxxxxx X. Xxxxxx Revocable Trust
Agreement, originally dated September 27, 1976, as amended
Xxxxxx X. Xxxxxx Revocable Trust created by the Xxxxxx X. Xxxxxx Revocable Trust
Agreement, originally dated September 14, 1977, as amended
Xxxxxxxx Xxxxxx Revocable Trust Created by the Xxxxxxxx Xxxxxx Revocable Trust
Agreement, originally dated August 17, 1978, as amended
Xxxxxxx X. Xxxxxx Revocable Trust created by the Xxxxxxx X. xxxxxx Revocable
Trust Agreement, originally dated December 16, 1977, as amended
The Xxxx X. and Xxxxxx Xxxxxx Foundation, including
the The Xxxxxx Xxxxxx Fund of the Xxxx X. and Xxxxxx
Xxxxxx Foundation
The Xxxxxx and Xxxxxxxx Xxxxxx Foundation
Xxxxxx and Xxxxxxx Xxxxxx Family Foundation
59
EXHIBIT 5.7(a)
[FORM OF AFFILIATE LETTER]
Farnell Electronics PLC
Xxxxxxx Xxxxx
Xxxxxxxx Xxx
Xxxxxxxx
Xxxx Xxxxxxxxx, XX00 0XX
Ladies and Gentlemen:
I have been advised that as of the date of this letter agreement I may
be deemed to be an "affiliate" of Premier Industrial Corporation, an Ohio
corporation (the "Company"), as such term is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), or (ii) used in and for
purposes of Accounting Series Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger, dated as
of January 23, 1996 (as amended from time to time, the "Merger Agreement"), by
and among the Company, Farnell Electronics PLC, a public limited company formed
under the laws of England ("Farnell") and FAC Delaware Corporation, a Delaware
Corporation ("Merger Subsidiary"), the Company will be merged with and into
Merger Subsidiary (the "Merger").
Pursuant to the Merger each share of Common Stock, without par value,
of the Company owned by the undersigned, will be converted into the right to
receive American Depositary Receipts ("Ordinary ADRs") evidencing Ordinary
Shares of 5p. each of Farnell, American Depositary Receipts ("Preference ADRs")
evidencing $1.35 Cumulative Convertible Redeemable Preference Shares of L1 each
of Farnell and cash.
I represent, warrant and covenant to Farnell that, with respect to all
Ordinary Shares, Ordinary ADRs, Preference Shares and Preference ADRs
(collectively, the "Securities") received as a result of the Merger:
(1) I shall not make any sale, transfer or other disposition of such
Securities in violation of the Act or the Rules and Regulations.
(2) I have carefully read this letter and the Merger Agreement and
have had an opportunity to discuss the requirements of such documents and
any other applicable limitations upon my ability to sell, transfer or
otherwise dispose of the Securities with my counsel or counsel for the
Company.
(3) I have been advised that the issuance of the Securities to me
pursuant to the Merger has been registered with the Commission under the
Act. I have also been advised that, since at the time the Merger was
submitted for a vote of the stockholders of the Company, I may be deemed to
have been an affiliate of the Company and the distribution by me of the
Securities has not been registered under the Act, I may not offer to sell,
sell, transfer or otherwise dispose of the Securities issued to me in the
Merger unless (i) such offer, sale, transfer or other disposition has been
registered under the Act or is made in conformity with Rule 145 under the
Act, or (ii) in the opinion of counsel reasonably acceptable to Farnell, or
pursuant to a "no action" letter obtained by the undersigned from the staff
of the Commission, such sale, transfer or other disposition is otherwise
exempt from registration under the Act.
(4) I understand that Farnell is under no obligation to register
under the Act the sale, transfer or other disposition of the Securities by
me or on my behalf or to take any other action necessary in order to make
compliance with an exemption from such registration available.
(5) I understand that Farnell will give stop transfer instructions to
Farnell's transfer agents with respect to the Securities, that the
Securities issued to me will all be in certificated form and that the
certificates therefor, or any substitutions therefor, will bear a legend
substantially to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY ONLY
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN ACCORDANCE WITH
THE TERMS OF AN AGREEMENT, DATED _______ __, 1996, BETWEEN THE
REGISTERED HOLDER HEREOF AND FARNELL, A COPY OF WHICH AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICES OF FARNELL."
(6) I also understand that unless the transfer by me of the
Securities has been registered under the Act or is a sale made in
conformity with the provisions of Rule 000, Xxxxxxx reserves the right to
place a legend substantially to the following effect on the certificates
issued to any transferee:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SECURITIES IN A TRANSACTION TO
WHICH RULE 145 UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SECURITIES HAVE NOT BEEN ACQUIRED
2
BY THE HOLDER WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OF 1933."
It is understood and agreed that the legends set forth in paragraphs 5
and 6 above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act. It is understood
and agreed that such legends and the stop orders referred to above will be
removed if (i) two years shall have elapsed from the date the undersigned
acquired the Securities received in the Merger and the provisions of Rule
145(d)(2) are then available to the undersigned, (ii) three years shall have
elapsed from the date the undersigned acquired the Securities received in the
Merger and the provisions of Rule 145(d)(3) are then available to the
undersigned, or (iii) Farnell has received either an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to Farnell, or a "no
action" letter obtained by the undersigned from the staff of the Commission, to
the effect that the restrictions imposed by Rule 145 under the Act no longer
apply to the undersigned.
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first paragraph
of this letter.
Sincerely,
_________________________
Name:
Accepted this ____ day of
_______ __, 1996:
Farnell Electronics PLC
By: ________________________
Name:
Title:
3
Exhibit 5.7(b)
[Form of Tax Letter for non-Founder 5% Shareholders]
[Date]
Premier Industrial Corporation
0000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Xxxxx, Day, Xxxxxx & Xxxxx
Att: Xxxx X. Xxxxxxxx
00 Xxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Farnell Electronics PLC
Xxxxxxx Xxxxx
Xxxxxxxx Xxx
Xxxxxxxx
Xxxx Xxxxxxxxx, XX00 0XX
Xxxxx Xxxx & Xxxxxxxx
Att: Xxxxx X. Xxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Dear Sirs:
This letter is given in connection with the proposed Merger of the
Company into the wholly-owned subsidiary of Farnell and in order to allow Xxxxx,
Day, Xxxxxx & Xxxxx to advise the Company and the shareholders of the Company
and to allow Xxxxx Xxxx & Xxxxxxxx to advise Farnell as to the United States
federal income tax consequences of the Merger. Capitalized terms used but not
defined herein shall have the same meanings given to such terms in the Merger
Agreement. References herein to Farnell Shares shall be deemed to include any
Farnell ADRs evidencing the same. [ ] represents and covenants as
follows:
[1. [ ] is an investment adviser registered with the Securities and
Exchange Commission under the Investment Advisers Act of 1940.]
2. For purposes of reporting under the provisions of Section 13(d) of the
Securities Exchange Act of 1934 and Rule 13d-1 thereunder, [ ] is
deemed to be the beneficial owner of 5% or more of the shares of the
Company.
3. [ ] represents that it has no agreement, arrangement, or plan or
intention to direct the sale, exchange, or other transfer of any of the
Farnell Shares owned by it [its advisory clients] after the Merger.
4. [ ] constantly re-evaluates and adjusts the various investments
in its [clients'] portfolios based on its views about the future prospects
of a particular portfolio position in light of both internal corporate
changes and external economic and market developments. Nothing in this
letter should be construed as a representation that [ ] will not
direct the sale or other transfer of all or part of its [clients'] holdings
of Farnell [under its fiduciary responsibility to such clients] as a result
of its routine re-evaluations in the regular course of its investment
[advisory] activities.
5. [ ] covenants that if, at any time before the Merger it forms a
plan or intent to dispose of any of its [clients'] holdings of Farnell, it
will promptly notify Xxxxx, Day, Xxxxxx & Xxxxx and Xxxxx Xxxx & Xxxxxxxx
by fax to the attention of Xxxx X. Xxxxxxxx and Xxxxx X. Xxxx,
respectively, as soon as possible but in any event before the Effective
Time of the Merger.
6. [ ] represents that it does not currently own any Farnell Shares
either directly or constructively under Section 958 of the Internal Revenue
Code of 1986, as amended (the "Code").
7. [ ] covenants that (other than pursuant to the Merger) it will
not, at any time before or immediately after the Effective Time of the
Merger, acquire Farnell Shares directly or cause or permit any person to
acquire Farnell Shares that would be considered to be constructively owned
by [ ] under Section 958 of the Code. If a person does acquire
or forms an intention to acquire Farnell Shares that would be considered to
be constructively owned by [ ], [ ] will promptly
notify Xxxxx, Day, Xxxxxx & Xxxxx and Xxxxx Xxxx & Xxxxxxxx by fax to the
attention of Xxxx X. Xxxxxxxx and Xxxxx X. Xxxx, respectively, as soon as
possible but in any event before the Effective Time of the Merger.
Very truly yours,
2
Exhibit 5.7(c)
[Form of Tax Letter for Founder Shareholders]
[Date]
Premier Industrial Corporation
0000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Xxxxx, Day, Xxxxxx & Xxxxx
Att: Xxxx X. Xxxxxxxx
00 Xxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Farnell Electronics PLC
Xxxxxxx Xxxxx
Xxxxxxxx Xxx
Xxxxxxxx
Xxxx Xxxxxxxxx, XX00 0XX
Xxxxx Xxxx & Xxxxxxxx
Att: Xxxxx X. Xxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Dear Sirs:
This letter is given in connection with the proposed Merger of the
Company into the wholly-owned subsidiary of Farnell and in order to allow Xxxxx,
Day, Xxxxxx & Xxxxx to advise the Company and the shareholders of the Company
and to allow Xxxxx Xxxx & Xxxxxxxx to advise Farnell as to the United States
federal income tax consequences of the Merger. Capitalized terms used but not
defined herein shall have the same meanings given to such terms in the Merger
Agreement. References herein to Farnell Shares shall be deemed to include any
Restricted ADRs evidencing the same. The Founder Shareholder represents and
covenants as follows:
1. Except as required by law, the Founder Shareholder will not sell, transfer
or otherwise dispose or authorize the disposition of any stock of Farnell
held by the Founder Shareholder, for the two-year period following the
Effective Time of the Merger unless the Founder Shareholder obtains a
Ruling or an Opinion, as required by paragraph 4 below.
2. The Founder Shareholder represents that it has no plan or intention to
sell, transfer or otherwise dispose or authorize the disposition of any
stock of Farnell received by the Founder Shareholder in the Merger.
3. The Founder Shareholder covenants that if, at any time before the Effective
Time, the Founder Shareholder has such a plan or intention, the Founder
Shareholder will notify Xxxxx, Day, Xxxxxx & Xxxxx and Xxxxx Xxxx &
Xxxxxxxx by fax to the attention of Xxxx X. Xxxxxxxx and Xxxxx X. Xxxx,
respectively, as soon as possible, but in any event before the Effective
Time.
4. The Founder Shareholder covenants that if it decides to sell, transfer or
otherwise dispose or authorize the disposition of Farnell stock acquired in
the Merger within the two-year period following the Effective Time, it will
only do so if it has received either (i) a ruling satisfactory to both
Xxxxx, Day, Xxxxxx & Xxxxx and Xxxxx Xxxx & Xxxxxxxx from the Internal
Revenue Service (a "Ruling") or (ii) an opinion of independent tax counsel
recognized as expert in federal tax matters, which opinion and counsel are
satisfactory to both Xxxxx, Day, Xxxxxx & Xxxxx and Xxxxx Xxxx & Xxxxxxxx
(an "Opinion") in either case to the effect that such disposition will not
cause the Merger not to qualify as a merger under 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
5. The foregoing representations and covenants in paragraphs 1-4 shall be
binding upon the Founder Shareholder's successors and assigns.
6. The Founder Shareholder represents that it does not currently own any
Farnell Shares either directly or constructively under Section 958 of the
Code.
7. The Founder Shareholder covenants that (other than pursuant to the Merger)
the Founder Shareholder will not, at any time before or immediately after
the Effective Time of the Merger, acquire Farnell Shares directly or cause
any person to acquire Farnell Shares that would be considered to be
constructively owned by the Founder Shareholder under Section 958 of the
Code. If a person does acquire or forms an intention to acquire Farnell
Shares that would be considered to be constructively owned by the Founder
Shareholder, the Founder Shareholder will promptly notify Xxxxx, Day,
Xxxxxx & Xxxxx and Xxxxx Xxxx & Xxxxxxxx by fax to the attention of Xxxx X.
Xxxxxxxx and Xxxxx X. Xxxx, respectively, as soon as possible but in any
event before the Effective Time of the Merger.
Very truly yours,
2
Exhibit 5.7(d)
[Form of Tax Letter for Officers and Directors]
[Date]
Premier Industrial Corporation
0000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Xxxxx, Day, Xxxxxx & Xxxxx
Att: Xxxx X. Xxxxxxxx
00 Xxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Farnell Electronics PLC
Xxxxxxx Xxxxx
Xxxxxxxx Xxx
Xxxxxxxx
Xxxx Xxxxxxxxx, XX00 0XX
Xxxxx Xxxx & Xxxxxxxx
Att: Xxxxx X. Xxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Dear Sirs:
This letter is given in connection with the proposed Merger of the
Company into the wholly-owned subsidiary of Farnell and in order to allow Xxxxx,
Day, Xxxxxx & Xxxxx to advise the Company and the shareholders of the Company
and to allow Xxxxx Xxxx & Xxxxxxxx to advise Farnell as to the United States
federal income tax consequences of the Merger. Capitalized terms used but not
defined herein shall have the same meanings given to such terms in the Merger
Agreement. References herein to Farnell Shares shall be deemed to include any
Farnell ADRs or Restricted ADRs evidencing the same. The [Officer/Director of
the Company] represents and covenants as follows:
1. The [Officer/Director] represents that he does not currently own any
Farnell Shares either directly or constructively under Section 958 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. The [Officer/Director] covenants that (other than pursuant to the Merger)
he will not, at any time before or immediately after the Effective Time of
the Merger, acquire Farnell Shares directly or cause or permit any person
to acquire Farnell Shares that would be considered to be constructively
owned by [Officer/Director] under Section 958 of the Code. If a person
does acquire or
forms an intention to acquire Farnell Shares that would be considered to be
constructively owned by the [Officer/Director], the [Officer/Director] will
promptly notify Xxxxx, Day, Xxxxxx & Xxxxx and Xxxxx Xxxx & Xxxxxxxx by fax
to the attention of Xxxx X. Xxxxxxxx and Xxxxx X. Xxxx, respectively, as
soon as possible but in any event before the Effective Time of the Merger.
Very truly yours,
2
SCHEDULE 7.5
Certain Tax Matters
Farnell and the Surviving Corporation represent, warrant and covenant
to each shareholder of the Company who (i) receives any Stock Consideration
pursuant to the Merger, (ii) owns at least five percent of either the total
voting power or the total value of Farnell (either directly or constructively
under Section 958 of the U.S. Internal Revenue Code (the "Code")) immediately
after the Merger and (iii) identifies himself to Farnell in writing within 30
days of the Effective Time of the Merger (a "Five-Percent Transferee
Shareholder") that:
(a) For the period from the closing date of the Merger to the
expiration of the 10th taxable year following the year in which the Merger
occurs, neither Farnell nor any transferee or subsequent transferee under
paragraph (f) shall dispose of any stock of the Surviving Corporation in a
transaction in which gain or loss would be required to be recognized under
U.S. federal income tax principles (other than in a liquidation of the
Surviving Corporation into Farnell);
(b) For the period from the closing date of the Merger to the
expiration of the 10th taxable year following the year in which the Merger
occurs, neither the Surviving Corporation nor any transferee or subsequent
transferee under paragraph (f) shall dispose of substantially all the
assets (within the meaning of Section 368(a)(1)(C) of the Code) received
from the Company pursuant to the Merger in a disposition not in the
ordinary course of business (other than in a distribution, including a
liquidating distribution, by the Surviving Corporation to Farnell or in a
transaction in which gain or loss would not be required to be recognized
under U.S. federal income tax principles);
(c) For the period from the closing date of the Merger to the
expiration of the 10th taxable year following the year in which the Merger
occurs, neither Farnell, the Surviving Corporation nor any transferee or
subsequent transferee under paragraph (f) shall effect any "other
disposition" within the meaning of U.S. Prop. Treas. Reg. Section 1.367(a)-
8(e)(3)(iii) (proposed 8/26/91);
(d) Paragraphs (a), (b) and (c) however, will not apply if Farnell,
the Surviving Corporation, or any transferee or subsequent transferee under
paragraph (f) is required by law to take the actions described therein.
Notwithstanding the preceding sentence, paragraphs (a), (b) and (c) will
apply if such legal requirement is the direct result of an action taken by
such person, or an action knowingly not taken by such person where such
action would not harm or damage such person, provided that at the time such
action was taken or omitted, such person knew or reasonably should have
known that such
action or omission would result in the legal requirement to take the
actions described in paragraph (a), (b) or (c).
(e) Notwithstanding (a), (b) or (c) above, and without diminishing
any remedies otherwise available to any Five-Percent Transferee Shareholder
in the event of a disposition described in (a), (b) or (c) above, if there
occurs a disposition described in (a), (b), (c) or (d) above, Farnell shall
inform each Five-Percent Transferee Shareholder, or cause each Five-Percent
Transferee Shareholder to be informed, within 30 days of such disposition,
of such disposition;
(f) If there occurs a disposition that would be described in (a) or
(b) above but for the fact that the disposition is one in which gain or
loss would not be required to be recognized under U.S. federal income tax
principles, Farnell shall (i) provide, or cause to be provided, to each
Five-Percent Transferee Shareholder, within 30 days of the disposition, a
notice that includes the following information: a description of the
transfer; the applicable non-recognition provision; and the name, address
and identifying number (if any) of the transferee, (ii) arrange, or cause
to be arranged, for the transferee to inform each Five-Percent Transferee
Shareholder of any subsequent disposition described in (a), (b), (c) or (d)
above, and (iii) arrange, or cause to be arranged, such transferee's
assumption of Farnell's duties and obligations under this Exhibit without
Farnell being released from any such duty or obligation. Any interest
received by Farnell or any other transferor in any disposition referred to
in the first sentence of this paragraph (f) shall be subject to the
principles of this Exhibit;
(g) The provisions of this Exhibit will survive the consummation of
the Merger and are expressly intended to benefit each Five-Percent
Transferee Shareholder (and any successor to the gain recognition agreement
of any Five-Percent Transferee Shareholder) under U.S. Treas. Reg. Section
1.367(a)-3T(g) and the provisions of this Exhibit are to be interpreted
with reference thereto.
2
