SHARE PURCHASE AGREEMENT
dated as of February 7, 2000
Between
ARROW ELECTRONICS, INC.,
TEKELEC AIRTRONIC
ZEDTEK
INVESTITECH
NATEC
▇▇▇▇-▇▇▇▇▇▇ ASSCHER,
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Relating to the Purchase of
TEKELEC EUROPE SA
SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT dated as of February 7, 2000, (herein, together
with Exhibits ▇-▇, ▇-▇ and B, Schedules 1 through 9 and Lists 1 through 13,
referred to as the "Agreement") by and between Arrow Electronics, Inc., a
corporation organized and existing under the laws of the State of New York
("Arrow"), Tekelec Airtronic, a company organized and existing under the
laws of France (the "Selling Shareholder"), Zedtek, a company organized and
existing under the laws of France ("Zedtek"), Investitech, a company
organized and existing under the laws of France ("Investitech") and Natec, a
company organized and existing under the laws of Luxembourg ("Natec")
("Zedtek, Investitech and Natec each a "Selling Warrantholder" and
collectively with the Selling Shareholder, the "Selling Securityholders")
▇▇▇▇-▇▇▇▇▇▇ Asscher ("J-CA"), ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("JDA") and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
("FC") (all as further identified in Section 17).
W I T N E S S E T H
WHEREAS, the Selling Shareholder is the owner of 810,000 ordinary shares
(the "Shares") of Tekelec Europe SA, a company organized and existing under
the laws of France (the "Company"), such shares being all of the issued and
outstanding shares of capital stock of the Company; and
WHEREAS, the Selling Shareholder desires to sell to Arrow, and Arrow
desires to purchase or to cause one of its wholly-owned (direct or indirect)
subsidiaries to purchase from the Selling Shareholder, all of the Shares; and
WHEREAS, each Selling Warrantholder is the owner of that number of
warrants ("Warrants") to purchase ordinary shares of the Company as set forth
opposite such Selling Warrantholder's name in Exhibit A-1 hereto; such
warrants, in the aggregate being all of the issued and outstanding warrants
to purchase shares of capital stock of the Company; and
WHEREAS, each of the Selling Warrantholders desire to sell to Arrow, and
Arrow desires to purchase or to cause one of its wholly-owned (direct or
indirect) subsidiaries to purchase from such selling Warrantholder, all of
the Warrants owned by such Selling Warrantholder;
NOW, THEREFORE, in reliance upon the representations and warranties made
herein and in consideration of the mutual agreements herein contained, Arrow
and each Selling Securityholder, in the case of the Selling Securityholders,
jointly and severally, hereby agree as follows:
1. Sale and Purchase of the Shares.
(a) Sale of the Shares. The Selling Shareholder hereby agrees to
sell the Shares to Arrow (or to a wholly-owned, direct or indirect subsidiary
of Arrow designated by Arrow) at the closing on the later of February 28,
2000 and the date which is four (4) business days after the first date on
which all of the conditions set out in Sections 11 and 12 hereof have been
satisfied (herein called the "Closing" and the date of which is herein called
the "Closing Date"), but with effect as of January 1, 2000 with respect to
the dividends of the Company in respect of the year 2000. As used in this
agreement "business day" shall mean a day (other than a Saturday or Sunday)
on which banks are open for business in Paris and New York.
(b) Sale of the Warrants. Each Selling Warrantholder hereby agrees
to sell to Arrow (or to a wholly-owned direct or indirect subsidiary of Arrow
designated by Arrow) at the Closing, but with effect as of January 1, 2000
with respect to any entitlement to dividends of the Company in respect of the
year 2000, that number of Warrants as is set forth opposite such Selling
Warrantholder's name in Exhibit A-1 hereto.
(c) Purchase Price. In consideration of such sale, conveyance,
transfer and delivery of the Shares and Warrants to Arrow, Arrow will pay to
each Selling Securityholder such Selling Securityholder's Percentage (as set
forth opposite such Selling Securityholder's name in Exhibit A-2 hereto) of
FFR 305.9 million, subject to the adjustments set forth in Section 1(d)(ii)
(the "Purchase Price").
(d) Payment of Purchase Price. The Purchase Price shall be paid by
Arrow as follows:
(i) Initial Closing Payment. At the Closing Arrow will pay to
each Selling Securityholder such Selling Securityholder's Percentage of FFR
211.7 million in immediately available funds by wire transfer to an account
designated by such Selling Securityholder at least three (3) business days
prior to the Closing Date (the "Closing Payment").
(ii) Adjustment to Initial Purchase Price. (A) Not later than
April 30, 2000 Arrow shall prepare and deliver (or cause to be prepared and
delivered) (1) a consolidated balance sheet of the Company and its
Subsidiaries (as defined in Section 3(e)) as of December 31, 1999; (2) a
consolidated pro forma balance sheet of the Company and its Subsidiaries as
of December 31, 1999 (the "December 31, 1999 Pro Forma Balance Sheet") giving
effect to the property transfers referred to in Section 8(a) hereof as if
each such transfer had occurred on December 31, 1999 but excluding the effect
of any capital gain arising as a result of such transfers and excluding the
effect of the FFR 8.1 million dividend referred to in Section 3.1(s)(xi); and
(3) a consolidated income statement of the Company and its Subsidiaries (the
"TE Group") for the fiscal year ended as of December 31, 1999; which
consolidated balance sheets and consolidated income statement shall be
prepared in accordance with French generally accepted accounting principles
and the inventory valuation rules set forth on Schedule 1 hereto and shall be
audited by Arrow's accountant, Ernst & Young (together, the "Audited 1999
Financial Statements"). Arrow and Ernst & Young shall be granted full access
to the books and records of the Company and each Subsidiary for this purpose.
As part of such audit Ernst & Young shall review the appropriateness of the
change in the depreciation of systems and the releases of provisions referred
to in Section 3(s)(i) and such change and such releases shall only be
reflected in the Audited 1999 Financial Statements to the extent that Ernst &
Young are in agreement with the same. The Selling Securityholders and their
auditors, PriceWaterhouseCoopers, may participate in the preparation of the
Audited 1999 Financial Statements and they shall be granted full access to
the books and records of the Company and each Subsidiary for such purpose.
The December 31, 1999 Pro Forma Balance Sheet shall be used to calculate the
Purchase Price.
(B) Upon completion of the Audited Financial Statements, the Purchase
Price shall be decreased by the amount, if any, by which Total Shareholders
Equity at December 31, 1999 as set forth in the December 31, 1999 Pro Forma
Balance Sheet is less than FFR49,756,380.
(C) Upon completion of the calculation of the adjustment to the
Purchase Price pursuant to Section 1(d)(ii)(B) Arrow shall promptly
thereafter (but in no case more than five (5) business days thereafter) pay
to each Selling Securityholder such Selling Securityholder's Percentage of an
amount equal to the excess, if any, of the Purchase Price over the Closing
Payment. If the Closing Payment is greater than the Purchase Price, then
each Selling Securityholder shall promptly thereafter (but in no case more
than five (5) business days thereafter) pay to Arrow such Selling
Securityholder's Percentage of an amount equal to the excess of the Closing
Payment over the Initial Purchase Price.
(D) Interest. All payments required to be made pursuant to Section
1(d)(ii)(C), shall be in cash and with interest thereon at the rate of 4 per
cent per annum and accruing from the Closing Date to the date of payment.
If any dispute arises with respect to the adjustment to the Purchase Price
referred to in Section 1(d)(ii)(B) which the parties are unable to resolve by
negotiation, Arrow and the Selling Securityholders (acting through J-CA as
representative of the Selling Securityholders (the "Selling Securityholders
Representative") shall appoint KPMG or, in the event that KPMG is unwilling
to act on terms acceptable to Arrow and the Selling Securityholders
Representative, another independent nationally recognized accounting firm
(the "Expert") to resolve such dispute. Such firm shall act as an expert and
not as an arbitrator and shall render a decision within 45 days of being
selected. The Expert's decision shall be final and shall be binding on all
of the parties hereto. The Expert's fees and expenses shall be borne by the
Selling Securityholders, unless the Purchase Price, as determined by such
Expert shall be at least ten percent (10%) higher than the Purchase Price, as
determined on the basis of the Financial Statements prepared by Arrow, in
which event such fees and expenses shall be borne by Arrow.
Notwithstanding anything to the contrary contained in this Agreement, any
amount payable by Arrow to the Security Securityholders shall be reduced by
an amount equal to any indemnification payment owed by the Selling
Securityholders to Arrow pursuant to Section 10(a) hereof which has not been
fully satisfied at the time such amount becomes payable, provided that, such
right of setoff shall not limit the obligations of the Selling
Securityholders under Section 10(a).
2. Closing and Termination
(a) Closing. The Closing will take place at the offices of ▇▇▇▇▇▇
& Associes at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m. (local time) on the
Closing Date.
(b) Transactions on the Closing Date. (i) At the Closing, the
Selling Securityholders will deliver to the Arrow the following:
(A) duly completed and executed share transfer forms ("ordres de
mouvement") with respect to the Shares;
(B) duly completed and executed transfer forms ("ordres de mouvement")
with respect to the Warrants;
(C) evidence satisfactory to Arrow of the approval of the transfer of
the Shares and the Warrants by the Board of the Company;
(D) such documentation (in form satisfactory to Arrow) as is required to
effect the transfer to Arrow or a person designated by Arrow of (1) all
shares in the Company held by Directors or any other person holding such
Shares in addition to the Selling Shareholder and (2) with the exception only
of the shares held by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇ in D&D Electronics,
all shares in any Subsidiary held by J-CA or any other person (other than the
Company) holding such shares;
(E) such documentation (in form satisfactory to Arrow) as is required to
effect the resignation of all directors of the Company and each of the
Subsidiaries (other than such directors, if any, as may be nominated by Arrow
in writing) and the replacement of the same by the persons nominated by
Arrow;
(F) such documentation (in form satisfactory to Arrow) as is required to
effect the resignation of the auditors of the Company and each of the
Subsidiaries and the replacement of the same by the auditors nominated by
Arrow; and
(G) each of the certificates and other documents contemplated by Section
12(f).
(ii) At the Closing, Arrow will deliver to each Selling
Securityholder the following:
(A) by wire transfer in immediately available funds to the account
designated by such Selling Securityholder, such Selling Securityholder's
Percentage of the Closing Payment; and
(B) each of the certificates and other documents contemplated by
Section 11(e).
(c) Termination. This Agreement may be terminated at any time prior to
Closing:
(i) by the mutual written consent of Arrow and Selling
Securityholders the aggregate of whose Selling Securityholder's Percentages
is greater than 50% (the "Majority Selling Securityholders");
(ii) by either Arrow or the Majority Selling Securityholders, if
the transactions contemplated hereby are not consummated on or before July
31, 2000 (or such later date as may be agreed upon in writing by the parties
hereto);
(iii) by Arrow, if the Selling Securityholders shall breach in any
material respect any of their representations, warranties or obligations
hereunder and such breach shall not have been cured or waived.
(iv) by the Selling Securityholders, if Arrow shall breach in any
material respect any of its representations, warranties or obligations
hereunder and such breach shall not have been cured or waived.
3. Representations and Warranties (Guarantees) by the Selling Shareholder.
As a material inducement to Arrow to enter into this Agreement, to purchase
the Shares and the Warrants and to pay the Purchase Price, the Selling
Shareholder hereby represents and warrants (guarantees) that:
(a) Organization and Authority of the Selling Shareholder. The Selling
Shareholder is a duly organized and validly existing corporation under the
laws of France, with the corporate power and authority to enter into this
Agreement and perform its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Selling Shareholder and no other
proceedings on the part of the Selling Shareholder are necessary to authorize
this Agreement and the transactions contemplated hereby. The Selling
Shareholder is not subject to or obligated under any contract, license,
franchise, or permit, or, insofar as is known to the Selling Shareholder,
subject to any law, statute, rule or regulation or order, writ, injunction or
decree, which would be breached, violated, or exceeded by the execution and
performance of this Agreement by the Selling Shareholder. Assuming due
execution and delivery by Arrow, this Agreement constitutes a valid, binding,
and enforceable obligation of the Selling Shareholder, subject to applicable
bankruptcy, reorganization, insolvency, moratorium, and other laws affecting
creditors' rights generally from time to time in effect. Except as set forth
in Schedule 2, no authorization, consent, or approval of, or filing with, any
domestic or foreign public body or authority is necessary for the
consummation by the Selling Shareholder of the transactions contemplated by
this Agreement.
(b) Ownership of Shares. The Selling Shareholder is the lawful record
and beneficial owner of the Shares being sold by it hereunder. The Shares
constitute all of the issued and outstanding shares of capital stock of the
Company. Such Shares are owned free and clear of all liens, encumbrances and
restrictions of every kind; and upon delivery of the Shares in the manner
contemplated in Section 2, Arrow will acquire good, beneficial and legal,
valid and indefeasible title to the Shares free and clear of all liens,
encumbrances and restrictions of every kind.
(c) Organization and Authorization. The Company and each Subsidiary is a
corporation, duly organized, validly existing under the laws of the
jurisdiction of its organization and has the corporate power and authority to
carry on its business as now being conducted and to own its properties and is
duly licensed or qualified and in good standing (to the extent that the
concept of good standing exists in the relevant jurisdiction) as a foreign
corporation in each jurisdiction in which it is required to be so licensed or
so qualified, except where the failure to be so licensed or so qualified
would not have a material adverse effect on the business, financial
condition, assets, results of operations or business prospects of the Company
or such Subsidiary. The consummation of the transactions contemplated hereby
has been duly authorized by the Board of Directors of the Company and no
other proceedings on the part of the Company are necessary to authorize the
transactions contemplated hereby.
(d) Capitalization. The authorized capital stock of the Company consists
of 810,000 shares of common stock, FFR100 par value, all of which are issued
and outstanding. In addition, the Company has authorized the issuance of
48,210 Warrants all of which are issued and outstanding. All such issued and
outstanding Shares and Warrants have been validly issued and are fully paid
and non-assessable. Except for the Warrants and the rights created pursuant
to this Agreement, there are no outstanding options, warrants or other rights
of any kind to acquire any additional shares of capital stock of the Company
and no agreements obligating the Company to issue any such options, warrants
or other rights. Except as disclosed in Schedule 3 or as contemplated in
this Agreement, there are no agreements relating to the voting, purchase or
sale of capital stock (i) between or among the Company and any of its
shareholders or (ii) between or among any of the Company's shareholders.
(e) Subsidiaries and Equity Investment. List 9 sets forth the name,
jurisdiction of incorporation, authorized capitalization and share ownership
of each direct or indirect subsidiary of the Company (a "Subsidiary") and the
jurisdictions in which each Subsidiary is qualified to do business. As used
in the first sentence of this Section 3(e), the term "subsidiary" means any
corporation of which the Company, directly or indirectly, owns or controls
capital stock representing more than fifty percent of the general voting
power under ordinary circumstances of such corporation. Except as disclosed
in List 9, the Company does not own, directly or indirectly, any capital
stock or other equity securities of any corporation or have any direct or
indirect equity or ownership interest, including interests in partnerships
and joint ventures, in any business. Except as disclosed in List 9, all of
the outstanding capital stock of each Subsidiary is owned by the Company or
its Subsidiaries free and clear of all liens, encumbrances and restrictions
of every kind. All such shares of capital stock have been validly issued and
are fully paid and nonassessable. Except as disclosed in List 9, the
potential liability of the Company or any Subsidiary related to its
investment in any entity or business referred to in this Section 3(e) is
limited to the value of the Company's or such Subsidiary's investment
therein. Except as disclosed in List 9, there are no outstanding options,
warrants or other rights of any kind to acquire any additional shares of
capital stock of any Subsidiary or securities convertible into or
exchangeable for, or which otherwise confer on the holder thereof any right
to acquire, any such additional shares, nor is any Subsidiary committed to
issue any such option, warrant, right or security. Except as disclosed in
List 9, there are no agreements relating to the voting, purchase or sale of
capital stock of any Subsidiary or of any partnership or joint venture
interest held by the Company or any Subsidiary.
(f) No Violation; Ability to Conduct the Business. Neither the execution
and delivery of this Agreement, nor the performance and the consummation of
the transactions contemplated hereby will (i) violate any provision of the
Articles of Incorporation or Bylaws of the Selling Shareholder or of the
Company (ii) contravene any provision of any law, statute, rule or regulation
or any order, writ, injunction or decree of any court or governmental
instrumentality or (iii) violate, or be in conflict with, or constitute a
default (or an event which, with or without due notice or lapse of time, or
both, would constitute a default) under, or result in the modification or
termination of, or cause or permit the acceleration of the maturity of any
material debt, obligation, contract, commitment or other agreement to which
the Selling Shareholder, the Company or any Subsidiary is a party or by which
any of their property may be bound (provided that, Arrow acknowledges that it
is aware that (i) the financing agreements set forth in List 11 (the "Bank
Agreements") do, and (ii) franchise agreements with manufacturers of
electronic components to which the Company or any Subsidiary is a party may,
contain provisions allowing the financial party or the manufacturer to
terminate such agreement in the event of a change in control of such entity).
Neither the Company nor any Subsidiary is a party to, subject to or bound by
any judgment, award, order, writ, injunction or decree of any court,
governmental body or arbitrator which could prevent the use by the Company or
any Subsidiary of its assets or the conduct of any business of the Company or
any Subsidiary, in each case in accordance with present practices, after the
Closing Date or which, by operation of law, or pursuant to its terms, would
be breached, terminate, lapse, or be subject to termination upon consummation
of the transactions contemplated by this Agreement.
(g) Financial Statements. The Selling Shareholder has heretofore
furnished Arrow with complete copies of (i) the audited consolidated balance
sheet of the Company and the Subsidiaries as of December 31, 1998 and the
audited consolidated income statement and statement for the Company and the
Subsidiaries for the fiscal year ending on such date; (ii) audited balance
sheets as of December 31, 1998 of the Company and each of the Subsidiaries
and audited income statements for the Company and each of the Subsidiaries
for the fiscal year ended on such date; (iii) the unaudited consolidated
balance sheet of the Company and the Subsidiaries as of September 30, 1999
and the unaudited consolidated income statement for the Company and the
Subsidiaries for the nine-month period ended on such date; (iv) unaudited
balance sheets of the Company and each of the Subsidiaries as of September
30, 1999 and unaudited income statements for the Company and each of the
Subsidiaries for the nine-month period ended on such date; and (v) the
unaudited consolidated pro forma balance sheet of the Company and the
Subsidiaries as of September 30, 1999 giving effect to the property transfers
referred to in Section 8(a) hereof as if each had occurred on September 30,
1999 (but excluding the effect of any capital gain arising as a result of
such transfers). Such financial statements (i) fairly reflect, in accordance
with French (in the case of the consolidated and unconsolidated financial
statements of the Company) or local (in the case of the financial statements
of such subsidiaries) generally accepted accounting principles, the
consolidated financial position of the TE Group or the Company or such
Subsidiary, as the case may be, as of such date and the consolidated results
of operations of the TE Group or the results of operations of the Company or
such Subsidiary, as the case may be, for such period, and (ii) reflect all
liabilities of the TE Group or the Company or such Subsidiary, as the case
may be, including contingent and disputed liabilities, and all capital
commitments of the TE Group or the Company or such Subsidiary as the case may
be, as at the date thereof, and make adequate provision or reserve for all
bad and doubtful debts. In such financial statements appropriate provision
has been made for any slow moving, redundant, obsolete, defective or
otherwise non-saleable inventory and the value attributed to the remaining
inventory does not exceed the lower of cost or net realizable value at the
date of such statements. The results shown in such financial statements have
not to a material extent been affected (except as disclosed in such financial
statements) by any extraordinary or exceptional event or circumstance or by
any other factor rendering them unusually high or low.
(h) Receivables. All accounts receivable reflected in the unaudited
consolidated balance sheet of the TE Group as of September 30, 1999 represent
bona fide transactions in the ordinary course of business between the TE
Group and third parties not otherwise affiliated with the TE Group or the
Selling Securityholders, represent actual sales and require no further act
(other than routine clerical tasks) on the part of the TE Group to make such
accounts receivable payable by the account debtors. The accounts receivable
reflected in such consolidated balance sheet are reflected in accordance with
French generally accepted accounting principles. The reserves with respect
to such accounts receivable reflected in such consolidated balance sheet are
sufficient and the amount of such reserves is consistent with the TE Group's
past practice and procedure. Such accounts receivable, net of such reserves,
are fully collectible. Except as set forth in List 10 hereof, no such
receivable has been outstanding for more than 180 days or is the subject of a
dispute with respect to the amount or validity thereof and, to the best of
the knowledge of the Selling Securityholders, the Company and the
Subsidiaries, no such dispute is threatened or contemplated. Except as set
forth in List 10, all accounts receivable of the Company and its Subsidiaries
in France, Germany, the Netherlands and Spain are covered by credit insurance
for at least, in the case of accounts receivable of French customers, 90 per
cent, and in the case of accounts receivable in Germany, the Netherlands and
Spain, 85 per cent, of the amount owed.
(i) Inventory. (i) The inventories reflected in the unaudited
consolidated balance sheet of the TE Group as of September 30, 1999 consist
of inventories purchased in the ordinary course for resale. Such inventories
(A) are accounted for in accordance with French generally accepted accounting
principles; (B) are accounted for net of reserves which are sufficient to
cover any losses due to obsolescence and shrinkage; and (C) the amount and
mix of such inventories are consistent with the business's past business
practices and do not exceed their forecast of reasonable requirements, and
(D) the amount of such reserves is consistent with the TE Group's past
practice and procedures.
(ii) All items of inventory reflected in the unaudited consolidated
balance sheet of the TE Group as of September 30, 1999 which are not
merchantable products for sale in the ordinary course of business as first
quality goods at normal markups, or are technologically obsolete, slow-
moving, inactive or below standard quality or were purchased from a source
other than the manufacturer thereof or a distributor duly licensed or
franchised to distribute such items by such manufacturer have been adequately
reserved for in such balance sheet; all of the items in such inventory which
do not meet the requirements for return to the manufacturer under the
applicable franchise agreement (except that the quantity of such devices may
exceed the amount permitted to be returned at any one time) have been so
reserved for.
(iii) To the extent that any items of inventory are, in order to meet
military or similar specifications required to be accompanied by (or the
seller thereof is required to maintain) traceability, testing or other
documentation, all such documentation is in the possession of the businesses.
(iv) All of the items of inventory reflected in the unaudited
consolidated balance sheet of the TE Group as of September 30, 1999 which
represent products purchased for "special order" or have otherwise been
tested, programmed, marked or manufactured to the specification of any
businesses or their customers or otherwise have had value added at a
customer's request have been adequately reserved for in such balance sheet,
except to the extent that such items of inventory are subject to firm, valid
and existing purchase orders issued by customers not affiliated with the TE
Group.
(j) Inter-Company Sales. All inter-company sales between members of the
TE Group, or between any member of the TE Group and any Selling
Securityholder or any affiliate thereof were carried out at market prices.
Intercompany sales during 1999 are set forth on Schedule 4.
(k) Warranties. Neither the Company nor any of the Subsidiaries has
issued any warranties or other understandings or agreements to any customer
or other third party, other than warranties or other understandings or
agreements provided to the Company or such Subsidiary by the manufacturer of
any products sold by the Company or such Subsidiary, and which the Company or
such Subsidiary has the right to enforce against such manufacturer, relating
to the quality or condition of any products sold or services rendered by the
Company or such Subsidiary, the maintenance thereof, or any return or
adjustment privileges granted in connection therewith. Neither the Company
nor any Subsidiary has waived the benefit of any warranties of any
manufacturer. All sales by the Company or any Subsidiary have otherwise been
made on the terms previously disclosed to Arrow.
(l) Absence of Undisclosed Liabilities. Except as set forth in the
unaudited consolidated balance sheet of the TE Group as of September 30, 1999
or List 11, there were, as of September 30, 1999, no debts, liabilities or
obligations, whether absolute, accrued, contingent or otherwise, of the TE
Group. Except as otherwise disclosed in List 11, since September 30, 1999
none of the businesses has incurred any debts, liabilities or obligations,
whether absolute, accrued, contingent or otherwise, except (i) such as may
have arisen in the usual and ordinary course of business after such date and
(ii) such as are the result of the transactions contemplated by this
Agreement.
(m) Tax Matters. All Taxes (as hereinafter defined) relating to the
Company or any Subsidiary including interest and penalties, which are due and
payable by the Company or such Subsidiary have been paid. As used in this
Agreement, the term "Tax" or "Taxes" means any national, provincial,
municipal, foreign and other income, profits, franchise, sales, turnover,
value added, use, payroll, occupation, property, excise or other taxes, fees,
duties, assessments, withholdings or governmental charges of any nature
(including interest, penalties or additions to such taxes or charges). The
liabilities for Taxes reflected in the unaudited consolidated balance sheet
of the TE Group as of September 30, 1999 represent adequate provision for the
payment of all accrued and unpaid or deferred Taxes relating to the Company
and any Subsidiary for all periods ended on or prior to the date of such
balance sheet, whether or not disputed and whether or not asserted prior to
the date hereof. All Tax returns, declarations of estimated Tax, and Tax
reports relating to the Company or any Subsidiary required to be filed prior
to the date hereof by the Company or any Subsidiary have been duly filed.
All Taxes shown on such returns, declarations or reports and on assessments
received have been paid to the extent that such Taxes have become due.
Except as disclosed in List 4 hereto, no claims relating to the Company or
any Subsidiary have been asserted against the Selling Securityholders, the
Company or any Subsidiary which are currently unresolved for Taxes or for any
other assessments, including interest or penalties, with respect to Taxes.
The Tax returns of the Company and of each Subsidiary have been examined by
the relevant taxation authorities having jurisdiction over the Company or
such Subsidiary (or closed by applicable statute) for all taxable years prior
to and including the taxable year ended December 31, 1997 in the case of the
Company, December 31, 1995 in the case of A2M S.A. and December 31, 1993 in
the case of the other Subsidiaries. Except as disclosed in List 4, no
adjustments were made and no issues were raised as a result of any such
examination or audit. The Tax returns of the Company and of each Subsidiary
for the years since such year have not been audited and, to the knowledge of
the Selling Securityholders, are not currently under examination. Except as
disclosed in List 4, to the knowledge of the Selling Securityholders no
taxation authority having jurisdiction over the Company or any Subsidiary is
currently examining any returns or reports of, has issued a notice of audit
or proposed deficiency to, or assessed a deficiency against the Company or
any Subsidiary, for any taxable year beginning after December 31, 1997 in the
case of the Company, December 31, 1995 in the case of A2M S.A. and December
31,1993 in the case of the other Subsidiaries. Except as disclosed in List
4, neither the Selling Securityholders, the Company nor any Subsidiary has
waived any statute of limitations relating to the assessment or collection of
Tax with respect to any taxable year of the Company or any Subsidiary. All
Taxes or other assessments relating to the Company or any Subsidiary which
the Company or any Subsidiary is required by law to withhold or collect have
been duly withheld and collected and have been paid over to the proper
governmental authorities or properly held by the Company or any Subsidiary as
the case may be, for such payment.
(n) Title to and Condition of Certain Properties and Assets and
Description of Business, Assets and Properties. The Company and each
Subsidiary has good and marketable title to all of its business, assets and
properties which do not constitute real property, free and clear of all title
defects, obligations, liabilities, liens, encumbrances, options,
restrictions, charges, claims and security interests and rights of third
persons of any kind, except for (i) any of the foregoing which are
specifically set forth and identified in List 8 hereto, and (ii) liens for
current taxes or assessments not delinquent. The equipment, vehicles and
other tangible physical assets owned or leased by the Company and each
Subsidiary (other than items of inventory) are sufficient to operate their
respective businesses as it is being operated on the date hereof, are being
used or are useful in their respective businesses at their present level of
activity, have been properly and regularly maintained, comply with any
applicable legal requirement or restrictions and are in good repair and
regularly maintained and fully serviceable. All records and information
relating to the Company or any Subsidiary are in the possession of each
business.
(o) Real Property. Other than the properties (the "Real Estate") listed
on List 1 as owned by the Company or a Subsidiary, title to which is being
transferred to the Selling Shareholder or one of its affiliates prior to the
Closing Date, neither the Company nor any Subsidiary owns any real property.
List 1 also contains a complete and correct list of all leases of real
property (the "Leases") to which the Company or any Subsidiary is a party
whether as lessor or lessee. The Real Property and the Leases comprise all
of the real property used by the Company or any Subsidiary and the Company
and each Subsidiary is in peaceful and undisturbed possession under each
Lease under which it is a lessee, and there are no defaults by any party
under any of the Leases.
The Company and each of the Subsidiaries has good and valid rights of ingress
and egress to and from all the Real Property and all the real property leased
under a Lease from and to the public street systems for all usual street,
road and utility purposes. Neither the Company or any Subsidiary has
received any notice of any appropriation, condemnation or like proceeding, or
of any violation of any applicable zoning law, regulation or other law,
order, regulation or requirement relating to or affecting any such property;
and no such proceeding has been threatened or commenced.
All such buildings, structures and material leasehold improvements therein
currently are used by or useful to the businesses in the ordinary course of
their respective businesses, conform in all material respects with all
applicable law and are in good operating condition and in a good state of
maintenance and repair.
(p) Lists of Properties, Contracts and Other Data. The Selling
Securityholders have has delivered to Arrow true and complete lists,
specifying, as of December 31, 1999, with respect to the business, properties
and assets of the Company and each Subsidiary and the obligations of the
Company and each Subsidiary, the following:
(i) List 1. Each and every parcel of real property or interest
therein owned in whole or in part by the Company or any Subsidiary or held
under a lease;
(ii) List 2. All trademarks, trade names, brand names and all other
intellectual property rights presently owned, in whole or in part, or used by
the Company or any Subsidiary; and all licenses, registrations (or
applications for registration), assignments, grants and other contracts
relating to such property;
(iii) List 3. (A) All existing contracts, agreements (other than
distribution agreements referred to in clause (iii) (B) and labor agreements
contained in List 12) and commitments of any of the Company or any
Subsidiary, except those referred to in Lists 1 or 2, written or oral, which
(x) extend beyond the first anniversary of the Closing Date, (y) involve the
value of more than FFR 150,000 (or the equivalent amount in another currency)
or (z) by operation of law, or pursuant to its terms, would be breached,
terminate, lapse or subject to termination upon consummation of the
transactions contemplated by this Agreement absent the consent or other
action of any third person or agency; (B) all distribution, franchise or
similar agreements pertaining to products sold by the Company or any
Subsidiary; (C) all sales agent, sub-distributor or similar agreements to
which the Company or any Subsidiary is a party; and (D) copies of all forms
of sale agreements or terms and conditions of sale used by the Company or any
Subsidiary.
(iv) List 4. All litigation, governmental or regulatory proceedings,
investigations or labor disputes pending or threatened against the Company or
any Subsidiary or any or their respective officers, directors or shareholders
as such or any of their respective assets or properties, or to which the
Company or any Subsidiary or any of their respective officers, directors or
shareholders, as such, is a party;
(v) List 5. (A) All claims asserted or threatened or asserted at
any time against the Company or any Subsidiary in respect of personal injury,
wrongful death or property damage alleged to have resulted from products or
services provided by the Company or any Subsidiary together with a
description of each such claim, any action initiated with respect thereto and
the disposition thereof; and (B) all express warranties and disclaimers of
warranty used by in connection with the products or services provided
by;
(vi) List 6. All banking or other depository arrangements of the
Company or any Subsidiary specifying the bank or institution, type of
account, compensating balance arrangement, balance and the names of all
persons authorized to draw thereupon or to have access thereto, the names of
all persons, if any, now holding powers of attorney the Company or from any
Subsidiary and a list of the guarantees given by the Selling Shareholder or
J-CA to the banks or to a supplier;
(vii) List 7. All loans or advances made by the Company or any
Subsidiary to any person except normal travel advances or other reasonable
expense advances to an officer or employee of the Company or such Subsidiary;
(viii) List 8. All liens, encumbrances, charges, restrictions, claims,
security interests and (except those arising under contracts disclosed in
List 3) obligations and liabilities with respect to the business, assets and
property of The Company or any Subsidiary which do not constitute real
property;
(ix) List 9. The name of each subsidiary of the Company (whether
held directly by the Company or indirectly by a subsidiary), its jurisdiction
of organization and the percentage of its issued and outstanding securities
owned by the Company, another subsidiary of the Company, or by the Company
and one or more subsidiaries, as the case may be; all corporations, joint
ventures, partnerships or other entities (other than its subsidiaries) in
which the Company or any subsidiary owns an equity interest, including a
brief description of the activities conducted thereby, the total assets
thereof, the percentage of the Company's or any subsidiary's, as the case may
be, equity interest therein and identities of other equity participants;
(x) List 10. All exceptions to the representation set forth in the
last sentence of Section 3(h) hereof
(xi) List 11. All outstanding indebtedness for borrowed money of the
Company or any Subsidiary;
(xii) List 12. (A) All employees of the Company or any Subsidiary and
their position, seniority and individual remuneration (including bonus
entitlements and benefits), including a list of the directors of the Company
and each Subsidiary; and (B) all collective bargaining agreements, internal
rules (rSglement intrieur) and in-house collective agreements (accord
d'enterprise) to which the Company or any Subsidiary is a
party; and
(xii) List 13. (A) All agreements which any supplier or customer of
the Company or any Subsidiary has threatened to terminate or materially
reduce since December 31, 1998; and (B) all reports related to any supplier
audits carried out since January 1, 1998.
The agreements, documents and data set forth in the lists required by this
Section (p) have been made available to Arrow for examination and copies of
any thereof requested by Arrow have been delivered to Arrow. Neither the
availability of such agreements, documents and data, nor anything contained
therein or revealed thereby which is not specifically referred to in this
Agreement, shall be deemed to modify in any respect any of the
representations and warranties set forth in this Agreement or to impose any
duty on Arrow to review such agreements, documents and data.
Nothing has occurred since December 31, 1999 and prior to the Closing Date
which would be required to be included in the lists required by this Section
(p) were they to have been prepared as of such subsequent date and which,
taken singly or in the aggregate, would constitute a material adverse change
in the financial condition, assets, liabilities (contingent or otherwise),
results of operations, properties, business, business operations or business
prospects of the Company or any of Subsidiaries.
(q) Litigation. Except as set forth in List 4, no action, suit or
governmental, administrative, arbitration or regulatory proceeding or
investigation is pending or threatened against or relating to the Company or
any Subsidiary or their respective businesses, properties or assets.
(r) Books of Account and Other Records; Compliance with Law of Corporate
Action. The books of account of the Company and each Subsidiary have been
kept, and will be kept to and including the Closing Date, in accordance with
good business practices, and such books of account, and the minute books,
stock certificate books and ledgers of the Company and each Subsidiary at the
Closing Date will be correct and complete or, in respect of matters arising
within 30 days of the Closing Date, are capable of being written up within 10
days of the Closing Date, and will fairly present the operations of the
Company and each Subsidiary and if not in the possession of the Company or
the relevant Subsidiary will be delivered to Arrow at Closing. All
resolutions of the board of directors and of shareholders meetings of the
Company and each Subsidiary have been taken in compliance with all applicable
laws and are properly recorded in the minute books of the Company or such
Subsidiary, as the case may be.
(s) Absence of Changes or Events. Since December 31, 1998 neither the
Company nor any Subsidiary has experienced any material adverse change in its
financial condition, assets, liabilities (contingent or otherwise), results
of operations, properties, business, business operations or business
prospects, other than the loss of any customers, suppliers or employees as a
result of the announcement of the transaction contemplated by this Agreement,
and unless contemplated by this Agreement or done with Arrow's consent
evidenced in writing, neither the Company nor any Subsidiary has:
(i) made any change in its accounting principles, procedures,
methods or practices, including any change with respect to the appropriate
level of provisions or reserves, or released any provisions or reserves
reflected in the unaudited consolidated pro forma balance sheet of the
Company and the Subsidiaries as of September 30, 1999 referred to in Section
3(g), except for (A) the change in depreciation of systems referred to in the
report of PriceWaterhouseCoopers with respect to their review of the
September 30, 1999 financial statements of the Company, (B) the releases
referred to under the heading "Financial Performance" in the letter (the
"December 6th Letter") dated December 6, 1999 from J-CA to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, a
copy of which is attached hereto as Exhibit B and (C) the release of the FFR
6.2 million tax provision;
(ii) borrowed or agreed to borrow any funds, guaranteed or agreed to
guarantee the indebtedness of any third parties or incurred or become subject
to, any absolute or contingent obligation or liability, except obligations
and liabilities incurred in the ordinary course of business, none of which
are materially adverse;
(iii) mortgaged, pledged or subjected to lien, charge or other
encumbrance, any of its assets, tangible or intangible;
(iv) sold, transferred, leased or otherwise disposed of, or agreed to
sell, transfer, lease or otherwise dispose of, any of its assets, properties,
or rights (including leaseholds) or canceled, compromised or otherwise
terminated, or agreed to cancel, compromise or otherwise terminate, any debts
or claims, except in the ordinary course of its business, or waived any right
of substantial value;
(v) except as set forth on Schedule 5, authorized, made or committed
to make any single capital expenditure in excess of FFR 30,000 (or the
equivalent amount in another currency) or capital expenditures in excess of
FFR 75,000 (or the equivalent amount in another currency) in the aggregate,
or purchased or contracted to purchase any real property;
(vi) experienced any actual or threatened strike or other labor
trouble or dispute;
(vii) suffered any material damage, destruction or loss, whether or
not covered by insurance;
(viii) entered into any transaction or incurred any obligation or
liability (absolute, accrued, contingent or otherwise) other than in the
ordinary course of its business;
(ix) entered or agreed to enter into any agreement or arrangement
granting any preferential rights to purchase any of its assets, properties or
rights, or requiring the consent of any party to the transfer or assignment
of any of such assets, properties or rights;
(x) incurred or become subject to any claim or liability for any
material damages or alleged damages for any actual or alleged negligence or
other tort, or breach of contract;
(xi) paid any dividends or made any distributions with respect to its
capital stock, or otherwise distributed any profits, retained earnings or
capital or reserves, other than (A) dividends or distributions paid by any
wholly-owned Subsidiary to the Company, (B) a dividend in the amount of FFR
3.645 million paid by the Company on September 9, 1999 in respect of the year
ended December 31, 1998 and (C) a dividend in the amount of FFR 8.1 million
to be paid by the Company and recorded in the accounts of the Company at
December 31, 1999;
(xii) repaid any loans from the Selling Shareholder or any person
affiliated with the Selling Shareholder other than repayments made to the
Company;
(xiii) except for increases or changes in the ordinary course of
business consistent with past practice, increased or otherwise changed the
rate or nature of the compensation (including, without limitation, wages,
salaries, bonuses and other benefits) paid, payable or available to any of
the employees of the Company or any Subsidiary;
(xiv) changed or amended its Articles of Incorporation or Bylaws;
(xv) released any provisions or reserves reflected in the unaudited
consolidated pro forma balance sheet of the Company and its Subsidiaries as
of September 30, 1999 referred to in Section 3(g) other (A) than the releases
referred to under the heading "Financial Performance" in the December 6th
Letter and (B) the release of the FFR 6.2 million tax provision reflected in
the unaudited consolidated pro forma balance sheet of the Company and the
Subsidiaries as of September 30, 1999 referred to in Section 3(g);
(xvi) paid its creditors otherwise than in the ordinary course or
changed its policy in relation to the payment of creditors; or
(xvii) entered into or terminated any supply agreement or franchise
agreement with any supplier relating to products sold by the Company or such
Subsidiary.
(t) Trademarks, etc. List 2 contains a complete and correct list of all
trademarks, trade names, brand names and other intellectual property rights
and all domain names and URLs of the Company or any Subsidiary (collectively,
"Rights") and all licenses granted by or to the Company or any Subsidiary and
other agreements pertaining to any of the foregoing. There are no
trademarks, trade names or brand names other than the Rights that are used in
the business of the Company or any of the Subsidiaries. The transfer of
Rights referred to in Section 8(g) will effect the transfer of all Rights
owned by the Selling Shareholder or any of its affiliates (other than the
Company and the Subsidiaries). Except as set forth in List 2, (i) one or
more of the Company and the Subsidiaries has the sole and exclusive right to
use the Rights in the conduct of its business; (ii) no proceedings have been
instituted, are pending or threatened, which challenge the rights of any the
Company or any Subsidiary in respect of the Rights or the validity thereof;
(iii) to the best knowledge of Selling Securityholders, the Company and the
Subsidiaries, none of the Rights infringes upon or otherwise violates the
rights of others; (iv) none of the Rights is subject to any outstanding
order, decree, judgment or stipulation; (v) no licenses, sublicenses or
agreements pertaining to any of the Rights have been granted by the Company
or any Subsidiary (except to the extent set forth on List 2); (vi) none of
the businesses has received any charge of interference or infringement of any
of the Rights.
(u) Compliance with Law. (i) Neither the Company nor any Subsidiary has
failed, nor is it failing, to comply with any applicable law, rule or
regulation. The Company and each Subsidiary has operated, and is operating,
in compliance with all permits, licenses, approvals, and authorizations of
all national, provincial, municipal and foreign authorities necessary for the
Company and each Subsidiary to carry on their respective businesses as
presently conducted and all such permits, licenses, approvals and
authorizations have been validly obtained, are in full force and effect and
no suspension or cancellation of any of them is threatened.
(ii) The Company and each Subsidiary is operating in compliance with
all applicable laws, rules and regulations relating to customs, duties and
TVA.
(iii) Except as described in List 4, the Company and each Subsidiary
has been and is in compliance with all applicable provisions of anti-
pollution and environmental protection laws, all laws relating to
occupational safety and health standards and with rules and regulations
related to such laws. Except as described in List 4, no proceeding or
investigation is pending or threatened alleging or to the effect that the
Company or any Subsidiary has violated or is in violation of any such law,
rule or regulation.
(v) Labor Matters. (i) Except as disclosed in List 12, (A) neither
the Company nor any Subsidiary is a party to any collective bargaining
agreement with any labor union, confederation or association and there are no
discussions, negotiations, demands or proposals that are pending or have been
conducted or made with or by any labor union, confederation or association
and (B) there are not pending or threatened against the Company or any
Subsidiary any general labor disputes, strikes or work stoppages.
(ii) There is no present or former employee, manager or director of
any of the businesses who has any claim against the Company or any Subsidiary
(whether under law, any employee agreement or otherwise) on account of or
for: (i) overtime pay, other than overtime pay for the current payroll
period; (ii) wages or salaries, other than wages or salaries for the current
payroll period; or (iii) vacations, sick leave, time off or pay in lieu of
vacation, sick leave or time off, other than vacation, sick leave or time off
(or pay in lieu thereof) earned in the twelve-month period immediately
preceding the date of this Agreement
(iii) Except as disclosed in List 12 or in note 3.8 to the audited
consolidated financial statements of the Company and the Subsidiaries for
1998 referred to in Section 3(g), no employee, manager or director is
entitled to any bonus arrangement, pension or other benefits or any other
remuneration for his or her services.
(iv) The Selling Shareholder, the Company and each Subsidiary have
performed their duty to inform their respective employees about the
transactions contemplated by this Agreement in accordance with applicable law
concerning the employee's right to participate in the decision making
process.
(v) Neither the Company nor any subsidiary has received any
notification, recommendation or formal demand from any labor inspector or
labor authority in connection with (A) overtime pay; (B) staff
representation; or (C) working, health or safety conditions
(w) Status of Contracts, Etc. Except as disclosed in List 1, List 2 or
List 3, all of the contracts, agreements and commitments required to be
listed in such Lists are, with respect to the obligation of the other parties
thereto, in full force and effect in accordance with their respective terms,
covenants and conditions (provided that, Arrow acknowledges that it is aware
that (i) the Bank Agreements do, and (ii) franchise agreements with
manufacturers of electronic components to which the Company or such
Subsidiary is a party may, contain provisions allowing the banker or the
manufacturer to terminate such agreement in the event of a change in control
of the Company or such Subsidiary), neither the Company nor any Subsidiary is
in default thereunder and neither the Company nor any Subsidiary has waived
any right under any such contract agreement or commitment which could have a
material adverse effect on the Company or any Subsidiary and none of such
contracts, agreements or commitments is, either when considered singly or in
the aggregate with others, materially adverse to the business, properties,
assets, earnings or prospects of the Company or any Subsidiary or likely,
either before or after the Closing, to result in any material loss or
liability.
(x) Customers, Distributors and Suppliers.
(i) Except as disclosed on List 13, since December 31, 1998 no
material customer or supplier of the Company or any Subsidiary has announced
or threatened to end or materially reduce its relationship with the Company
or any Subsidiary.
(ii) Since December 31, 1998 there have been no bona fide complaints
in writing from customers of the Company or any Subsidiary in respect of
products supplied by it which were not capable of resolution by the
manufacturer without significant cost to the Company or any Subsidiary.
(iii) Except as disclosed on List 13, neither the Company nor any
Subsidiary has been the subject of a supplier audit.
(iv) None of the manufacturers or other persons from whom the Company
or any Subsidiary purchases its inventory have imposed any conditions or
undertakings on the Company or any Subsidiary which constitute material
negative deviations from such person's standard terms of business.
(y) Trading Practices. Each of the Company's and each Subsidiary's
directors and employees and independent commission agents are in compliance
with ethical standards and other trading practices mandated by applicable law
and contractual arrangements and have not made payments to any third parties
other than in the ordinary course of business or pursuant to contracts.
(z) Insurance. The Company and each Subsidiary maintains with
financially sound and reputable insurance companies, insurance in at least
such amounts and against such risks as is usually carried by owners of
similar businesses and properties in the same general areas in which the
Company or such Subsidiary operates. All of the insurance policies are in
full force and effect, all premiums with respect thereto covering all periods
up to and including the Closing Date have been paid, and no notice of
cancellation or termination has been received with respect to any such
policy. Such policies are sufficient for compliance with all requirements of
law and all agreements to which the Company or any Subsidiary is a party.
(aa) Brokers and Finders. Neither any Selling Securityholder, the
Company nor any Subsidiary, nor any person controlled, directly or indirectly
by of any of them has employed any broker, finder, consultant or intermediary
in connection with the transactions contemplated by this Agreement who would
be entitled to a broker's, finder's, or similar fee or commission from the
Company or any Subsidiary or Arrow in connection therewith or upon the
consummation thereof or from Arrow if the Closing does not occur. Without
limiting the generality of the foregoing, the Selling Shareholder agrees
that all fees and expenses of Broadview Int'l. Limited will be paid by the
Selling Shareholder.
(bb) Disclosure. No representation or warranty made by the Selling
Securityholder, the Company or any Subsidiary in this Agreement, and no
statement contained in any certificate, list, schedule, exhibit or other
instrument specified in this Agreement or otherwise furnished to Arrow in
connection with the transactions contemplated hereby, whether heretofore
furnished to Arrow or hereafter required to be furnished to Arrow, contains
or will contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary to make the statements contained therein
not misleading.
(cc) Factoring Arrangements. All factoring financing agreements and
similar arrangements (including "dailly") to which the Company or any
Subsidiary is a party involve sales of accounts receivable by the Company or
such Subsidiary to third parties not affiliated with the TE Group.
(dd) Directors. With the exception of JDA and, prior to his
resignation as a Director in June 1999, Laurent Asscher, no person who is, or
at any time since January 1, 1999 was, a Director of the Company is, or
during the period he was a Director was, an employee of the Company.
4. Representations and Warranties (Guarantees) by the Selling
Warrantholders. As a material inducement to Arrow to enter into this
Agreement, to purchase the Shares and the Warrants and to pay the Purchase
Price, the Selling Warrantholders hereby jointly and severally represent and
warrant (guarantee) that:
(a) Organization and Authority of the Selling Warrantholders. Each
of the Selling Warrantholders is a duly organized and validly existing
corporation under the laws of its jurisdiction of organization, with the
corporate power and authority to enter into this Agreement and perform its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by each of the Selling Warrantholders and no other proceedings on
the part of the Selling Warrantholder are necessary to authorize this
Agreement and the transactions contemplated hereby. Selling Warrantholder is
not subject to or obligated under any contract, license, franchise, or
permit, or, insofar as is known to Selling Warrantholder, subject to any
order or decree, which would be breached, violated, or exceeded by the
execution and performance of this Agreement by Selling Warrantholder.
Assuming due execution and delivery by Arrow, this Agreement constitutes a
valid, binding, and enforceable obligation of each of the Selling
Warrantholders, subject to applicable bankruptcy, reorganization, insolvency,
moratorium, and other laws affecting creditors' rights generally from time to
time in effect and, as to enforceability, general equitable principles.
Except as set forth in Schedule 2, no authorization, consent, or approval of,
or filing with, any domestic or foreign public body or authority is necessary
for the consummation by the Selling Warrantholders of the transactions
contemplated by this Agreement.
(b) Ownership of Warrants. Each of the Selling Warrantholders is
the lawful record and beneficial owner of the Warrants being sold by it
hereunder. The Warrants being sold by the Selling Warrantholders hereunder,
in the aggregate, constitute all of the issued and outstanding warrants to
purchase shares of capital stock of the Company. Such Warrants are owned
free and clear of all liens, encumbrances and restrictions of every kind; and
upon delivery of the Warrants in the manner contemplated in Section 2, Arrow
will acquire good, beneficial and legal, valid and indefeasible title to the
Warrants free and clear of all liens, encumbrances and restrictions of every
kind.
(c) No Violation; Ability to Conduct the Business. Neither the
execution and delivery of this Agreement, nor the performance and the
consummation of the transactions contemplated hereby will (i) violate any
provision of the Articles of Incorporation or Bylaws of any Selling
Warrantholder, (ii) contravene any provision of any law, statute, rule or
regulation or any order, writ, injunction or decree of any court or
governmental instrumentality, or (iii) violate, or be in conflict with, or
constitute a default (or an event which, with or without due notice or lapse
of time, or both, would constitute a default) under, or result in the
modification or termination of, or cause or permit the acceleration of the
maturity of any material debt, obligation, contract, commitment or other
agreement to which any Selling Warrantholder is a party or by which any of
their property may be bound.
5. Actions Pending Closing. Except as otherwise contemplated by this
Agreement and as Arrow may otherwise consent in writing, during the period
January 1, 2000 through the Closing, the Selling Shareholder shall procure
that:
(a) the Company and each Subsidiary conduct and carry on their
respective businesses only in the ordinary and regular course;
(b) the Company and each Subsidiary use their respective best
efforts to preserve their respective assets, businesses and relationships
with customers, suppliers and others having business relationships with each
of them;
(c) neither the Company nor any Subsidiary shall, sell, lease,
mortgage, pledge or otherwise acquire or except as contemplated by section
8(a) dispose of any of the properties, assets or rights (including
leaseholds) or cancel, compromise or otherwise terminate or agree to cancel,
compromise or otherwise terminate, any debts or claims, of the Company or
such Subsidiary except in the ordinary course of business, provided that, the
Company may dispose of its logistics operations at Troyes (including assets
having a book value of not more than FFR 100,000) on terms satisfactory to
Arrow;
(d) except for increases or changes in the ordinary course of
business consistent with past practice, neither the Company nor any
Subsidiary shall, increase or otherwise change the rate or nature of the
compensation (including, without limitation, wages, salaries, bonuses and
other benefits) paid, payable or available to any of the employees of the
Company or any Subsidiary;
(e) neither the Company nor any Subsidiary shall: (i) change or
amend its Articles of Incorporation or Bylaws or (ii) issue or sell any
shares of its capital stock of any class, or issue or sell any securities
convertible into, or options with respect to, any shares of its capital stock
of any class or enter into any agreement obligating it to do any of the
foregoing;
(f) neither the Company nor any Subsidiary shall, cancel or permit
any insurance policies covering its business to lapse or terminate, unless
renewed or replaced by like coverage;
(g) neither Company nor any Subsidiary shall make any change in its
accounting principles, procedures, methods or practices, including, without
limiting the generality of the foregoing, any change in its policies or
practices regarding the appropriate level of provisions or reserves;
(h) neither the Company nor any Subsidiary shall pay any dividends
or make any distributions with respect to their respective capital stock,
other than dividends or distributions paid by any wholly-owned Subsidiary to
the Company, or otherwise distribute any profits, retained earnings or
capital or reserves, provided that, notwithstanding the foregoing the Company
will pay a dividend in the amount of FFR 8.1 million which dividend was
recorded in the accounts of the Company at December 31, 1999;
(i) neither the Company nor any Subsidiary shall repay any loans
from the Selling Shareholder or any person affiliated with the Selling
Shareholder other than repayments made to the Company;
(j) neither the Company nor any Subsidiary shall borrow or agree to
borrow any funds, guarantee or agree to guarantee the indebtedness of any
third parties or incur or become subject to any absolute or contingent
obligation or liability, except obligations or liabilities incurred in the
ordinary course of business;
(k) neither the Company nor any Subsidiary shall enter into any
agreement or arrangement granting any preferential rights to purchase any of
its assets, properties or rights, or requiring the consent of any party to
the transfer or assignment of any of such assets, properties
or rights;
(l) neither the Company nor any Subsidiary shall authorize or make
any single capital expenditure in excess of FFR 30,000 (or the equivalent
amount in another currency) or capital expenditures in excess of FFR 75,000
(or the equivalent amount in another currency) in the aggregate, or purchase
or contract to purchase any real property;
(m) neither the Company nor any Subsidiary shall release any
provisions or reserves reflected in the unaudited consolidated pro forma
balance sheet of the Company and its Subsidiaries as of September 30, 1999
referred to in Section 3(g) other than (i) the releases referred to under the
heading "Financial Performance" in the December 6th Letter and (ii) the
release of the FFR 6.2 million tax provision;
(n) neither the Company nor any Subsidiary shall pay its creditors
otherwise than in the ordinary course or change its policy in relation to the
payment of creditors;
(o) neither the Company nor any Subsidiary shall enter into or
terminate any supply agreement or franchise agreement with any supplier
relating to products sold by the Company or such Subsidiary;
(p) neither the Company nor any Subsidiary shall enter into any
contract or commitment which is outside the ordinary course of its business;
and
(q) Arrow and its advisors are given as soon as reasonably
practicable on request, access to such facilities and information regarding
the assets, liabilities, contracts and affairs of the Company and each
Subsidiary as Arrow may reasonably require.
6. Representations and Warranties by Arrow. As a material inducement
to the Selling Securityholders to enter into this Agreement and to sell the
Shares and the Warrants, Arrow represents and warrants that:
(a) Organization and Authority of Arrow. Arrow is a corporation
duly incorporated and validly existing under the laws of New York with the
corporate power and authority to enter into this Agreement and perform its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of Arrow and no other proceedings on the
part of Arrow are necessary to authorize this Agreement and the transactions
contemplated hereby. Arrow is not subject to or obligated under any
contract, license, franchise, or permit, or, insofar as is known to Arrow,
subject to any order or decree, which would be breached, violated, or
exceeded by the execution and performance of this Agreement by Arrow.
Assuming due execution and delivery by the other parties hereto, this
Agreement constitute a valid, binding, and enforceable obligation of Arrow,
subject to applicable bankruptcy, reorganization, insolvency, moratorium, and
other rights affecting creditors' rights generally from time to time in
effect. Except for the filing with, and obtaining of approval from, the
European Commission under the Merger Control Regulation, no authorization,
consent, or approval of, or filing with, any domestic or foreign public body
or authority not already obtained or made is necessary for the consummation
by Arrow of the transactions contemplated by this Agreement. Neither the
execution and delivery of this Agreement nor compliance by Arrow with its
terms and provisions will violate any provision of the Articles of
Incorporation or Bylaws of Arrow or any law, statute, or regulation to which
Arrow is subject.
(b) Brokers and Finders. Arrow has not employed any broker,
finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement who would be entitled to a broker's, finder's,
or similar fee or commission from the Selling Securityholders, the Company or
any Subsidiary, or Arrow in connection therewith or upon the consummation
thereof or from the Selling Securityholders, the Company or any Subsidiary if
the Closing does not occur.
7. Covenant Against Competition. For purposes of this Section 7,
"Relevant Period" shall mean a period commencing on the date hereof and
ending on the date which is 30 months after the Closing Date and the
"Covenanting Parties" shall mean the Selling Shareholder, J-CA, JDA and FC.
As a further inducement to Arrow to enter into the transactions contemplated
hereunder each of the Covenanting Parties hereby agrees that neither any of
the Covenanting Parties, nor any person controlled, directly or indirectly,
by any Covenanting Party shall, for the Relevant Period, in any way, directly
or indirectly, (i) own, manage, operate, control, or actively participate in
as a director, officer or shareholder or in any other capacity, any
enterprise which engages in, or otherwise carries on, any business activity
in or into any country in which the Company or any Subsidiary carries on
business as of the date of this Agreement in competition with the Company or
any Subsidiary or (ii) except as specifically contemplated by Section 8(b),
solicit for employment, employ or hire any director, officer or other
employee of the Company or any Subsidiary. If any of the prohibitions or
restrictions contained in this clause is judged to go beyond what is
reasonable in the circumstances but would be judged reasonable and necessary
if any activity were deleted or a period or area were reduced, then the
prohibitions or restrictions apply with that activity deleted or period or
area reduced by the minimum amount necessary.
8. Other Covenants of the Selling Securityholders.
(a) Property Transfers. Prior to the Closing, the Selling
Shareholder shall, at its own cost, cause (i) title to the three properties
listed in List 1 as being owned by the Company or a Subsidiary and (ii) the
lessee's interest in the property in Troyes listed in List 1 as being leased
by the Company or a Subsidiary to be transferred out of the TE Group.
Notwithstanding such transfers the Company or a Subsidiary (or Arrow or
another affiliate of Arrow) shall occupy and use the properties in Sevres,
Troyes and Reading for a period of at least six months from the Closing Date.
If requested to do so by Arrow, the Selling Securityholders will procure that
a company affiliated with one or more of the Selling Securityholders will
provide to the Company or such Subsidiary as the Company shall designate, at
cost, logistic services necessary to operate the facility at Troyes for such
period not exceeding six months as Arrow may request. Arrow shall give the
Selling Shareholder at least three months' notice of its intention to cease
to occupy and use any such property. For so long as the Company or any
Subsidiary occupies any such property it shall pay to the owner of such
property the monthly rent applicable to such property set forth below:
Sevres - FFR 589,279.16
Reading - 9,757.56
Troyes - FFR 133,970.83
(b) Certain Employment matters. (i) The Selling Securityholders
shall procure that, prior to the Closing, the Company shall give notice of
termination of his employment contract to JDA. If requested by Arrow, the
Selling Securityholders will cause the Company to require JDA to perform his
duties during the advance notice period provided for in his employment
agreement to assist in the integration of the business of the TE Group with
Arrow's existing European distribution businesses. Any and all cost involved
in obtaining JDA's agreement to such arrangements and any and all costs and
charges of, or related, to, the termination of his employment and positions
with the TE Group, including any severance payments or benefits, shall be
borne (or paid) by the Selling Shareholder through a reduction in the
Purchase Price.
(ii) The Selling Securityholders shall procure that the Finance
Director of the Company, FC, shall enter into arrangements satisfactory to
Arrow whereby FC agrees to continue his employment with the Company following
the Closing.
(iii) Prior to the Closing, the Selling Securityholders shall
cause the transfer out of the TE Group of the one managing director and 10
employees listed on Schedule 6. Such transfers shall be with effect from
January 1, 2000 and neither the Company nor any Subsidiary shall make any
payment to or on behalf of any such employee in respect of any period after
December 31, 1999. Such transfers shall be carried out in compliance with
the requirements of all applicable employment and social legislation and
shall be implemented in such a way as to avoid any harm or disruption to the
business of the TE Group. All costs and charges of, or related to, such
transfers shall be borne (or paid) by the Selling Shareholder.
(iv) Prior to the Closing, the Selling Securityholders shall
use their best efforts to cause 14 employees listed on Schedule 7 to resign
from their employment within the TE Group and accept alternative employment
with a company affiliated with one or more of the Selling Securityholders.
Such arrangements shall be implemented in such a way as to comply with all
applicable employment and social legislation and as to avoid any harm or
disruption to the business of the TE Group. All costs and charges of, or
related to, such arrangements shall be borne (or paid) by the Selling
shareholder. In the event that, notwithstanding the best efforts of the
Selling Securityholders, fewer than 14 of such employees resigns and accepts
such alternative employment, the Purchase Price paid to the Selling
Shareholder shall be reduced by an amount equal to two (2) times the
aggregate annual gross compensation of such non-resigning employee(s)
(including all social costs payable by the Company or any Subsidiary in
respect of such non-resigning employee(s)) and the Closing Payment shall be
reduced by an amount equal to such reduction in the Purchase Price paid to
the Selling Shareholder. If requested to do so by Arrow the Selling
Securityholders will procure that a company affiliated with one or more of
the Selling Securityholders will provide to the Company or such Subsidiary as
the Company shall designate, at cost, back office services for such period
not exceeding one year as Arrow may request.
(v) Prior to the Closing, the Selling Securityholders shall cause
the transfer out of the TE Group to a company affiliated with one or more of
the Selling Securityholders of the 20 employees listed on Schedule 8. Such
transfers shall be carried out in compliance with the requirements of all
applicable employment and social legislation and shall be implemented in such
a way as to avoid any harm or disruption to the business of the TE Group.
All costs and charges of, or related to, such transfers shall be borne (or
paid) by the Selling Shareholder.
(vi) Prior to the Closing, the Selling Securityholders shall cause
the transfer out of the TE Group to a company affiliated with one or more of
the Selling Securityholders of the employee listed on Schedule 9; such
employee constituting all of the employees engaged in the business of the Rep
Design companies referred to in Section 8(e). Such transfers shall be
carried out in compliance with the requirements of all applicable employment
and social legislation and shall be implemented in such a way as to avoid any
harm or disruption to the business of the TE Group. All costs and charges
of, or related to, such transfers shall be borne (or paid) by the Selling
Shareholder.
(vii) Prior to the Closing, the Selling Securityholders shall cause
the transfer out of the TE Group to a company affiliated with one or more of
the Selling Securityholders of the 16 employees listed on Schedule 10; such
employees constituting all of the employees engaged in the business of the
TEMEX Divisions of the Subsidiaries in Germany and Italy. Prior to such
transfers all compensation costs of all of such employees (including all
social costs payable by the Company or any Subsidiary in respect of such
employees) shall be invoiced to and paid by Tekelec Temex SA. Such transfers
shall be carried out in compliance with the requirements of all applicable
employment and social legislation and shall be implemented in such a way as
to avoid any harm or disruption to the business of the TE Group. All costs
and charges of, or related to, such transfers shall be borne (or paid) by the
Selling Shareholder.
(c) Continued Trading. The Selling Shareholder shall procure that
any company affiliated with the Selling Shareholder that currently purchases
product from the TE Group shall continue to trade with the TE Group following
the Closing and to regard the TE Group as a preferred supplier on the same
basis as at present provided that the terms and prices offered by the TE
Group continue to be competitive.
(d) German Receivable. Prior to the Closing, the Selling
Shareholder shall purchase the DEM 400,000 outstanding account receivable due
from the former General Manager of the German Subsidiary for cash at a
purchase price equal to the value attributed to such account receivable in
the unaudited consolidated pro forma balance sheet of the Company and the
Subsidiaries as of September 30, 1999 referred to in Section 3(g).
(e) Rep Design. Prior to the Closing, the Selling Shareholder
shall cause the transfer out of the TE Group, for cash consideration equal to
the value attributed to such companies in the unaudited consolidated pro
forma balance sheet of the Company and the Subsidiaries as of September 30,
1999 referred to in Section 3(g), of Rep Design Ltd. and Rep Design GmbH.
(f) Temex Telecom Shareholding. Prior to the Closing, the Selling
Shareholder shall cause the transfer out of the TE group, for cash
consideration equal to the value attributed to such shareholding in the
unaudited consolidated pro forma balance sheet of the Company and the
Subsidiaries as of September 30, 1999 referred to in Section 3(g), of Tekelec
Airtronic GmbH's 51% shareholding in Temex Telecom.
(g) Transfer of Rights to Trade Name. Prior to the Closing, the
Selling Shareholder shall transfer to Sequoia Technology Ltd. for FFR1 all
rights to the trade name "Sequoia," including without limitation all
registrations (or applications for registration) of such trade name.
(h) Employee Loan. Prior to the Closing, the Selling Shareholder
shall purchase or cause an affiliate to purchase from the Company the
employee loan in an initial amount of FRF 200,000 referred to in List 7
(Tekelec Europe) for cash in an amount equal to the outstanding principal
amount thereof.
9. Survival of Covenants, Representations and Warranties. The
covenants contained in this Agreement shall survive the Closing Date without
limitation. The representations and warranties of the Selling Shareholder
contained in Sections 3(m), 3(u), 3(v), and 3(y) hereof shall survive the
Closing Date until the expiration of the relevant statute of limitation.
All other representations and warranties of the Selling Shareholders, the
Selling Warrantholders and Arrow contained herein shall survive the Closing
Date and any investigation made at any time with respect thereto until
December 31, 2001.
10. Indemnification.
(a) The Selling Securityholders, jointly and severally, shall
defend, indemnify and hold harmless Arrow, the Company and each Subsidiary
and their respective successors, assigns and affiliates against and in
respect of:
(i) any and all liabilities for Taxes, including, without
limitation, transfer taxes, capital gains taxes, income taxes, registration
taxes, stamp duties and TVA, and other charges arising out of or related to
the transfer of the properties referred to in Section 8 (a) and any or all
losses, damages, liabilities or costs arising out of or related to any claims
asserted by the lessor of the property in Troyes;
(ii) any and all losses, damages, liabilities or costs
resulting directly or indirectly from or related to any of the employment
matters referred to in Section 8(b), including, without limiting the
generality of the foregoing, any and all costs (including social costs)
incurred by the Company or any Subsidiary in respect of the compensation of
the 11 employees referred to in Section 8(b)(iii) in respect of any period
subsequent to December 31, 1999;
(iii) any and all losses, damages or costs resulting from any
and all: (A) misrepresentations or breaches of warranty, agreement or
undertaking hereunder on the part of the Selling Securityholders, the Company
and each Subsidiary; and (B) failures by the Selling Securityholders to
perform or otherwise fulfill any undertaking or other agreement or obligation
contemplated hereunder;
(iv) any and all losses, damages or costs resulting from
matters relating to hazardous waste, pollution or any other cause of
environmental harm in existence on or before the Closing Date or caused by
the action or inaction of the Seller, the Company or any Subsidiary on or
before the Closing Date;
(v) any and all losses, damages, deficiencies or liabilities
resulting from any claims against the Arrow, the Company or any Subsidiary
arising in connection with death, personal injury, other injury to persons,
property damage, loss of business or losses or deprivation of rights (whether
based on statute, negligence, breach of warranty, strict liability or any
other theory) caused by or resulting from, directly or indirectly, any defect
or claimed defect in or with respect to any products distributed or services
performed for customers (including value added work in connection with the
product) by the Company or any Subsidiary on or before the Closing Date;
(vi) any and all liabilities for Taxes relating to the Company
or any Subsidiary for any period ending on or prior to the Closing Date, or
which arises in whole or in part in respect of, or in consequence of, any
acts, omissions or transactions occurring or entered into on or before
Closing Date (except to the extent provided for in the Audited Financial
Statements);
(vii) any and all liabilities for Taxes, including, without
limitation, transfer taxes, capital gains taxes, income taxes, registration
taxes, stamp duties and TVA, and other charges arising out of or related to
(A) the transfer of Tekelec Airtronic GmbH's 51% shareholding in Temex
Telecom or (B) the breaking of the tax consolidation in Germany as a result
of such sale; and
(viii) any and all liabilities for Taxes, including, without
limitation, transfer taxes, capital gains taxes, income taxes, registration
taxes, stamp duties and TVA, and other charges, arising out of or related to
the transfers of Rep Design UK and Rep Design Germany out of the TE Group;
(ix) any and all losses, damages or costs resulting from or
related to the litigation with Hectronic GmbH referred to in List 4 (Tekelec
Airtronic GmbH); and
(x) any and all liabilities to employees (including ▇▇▇▇▇▇▇
▇▇▇▇▇) arising out of the decision of the court with respect to the case of
▇▇▇▇▇▇▇ ▇▇▇▇▇ referred to in List 4 (Tekelec Europe), including liabilities
to other employees with a similar qualification to that of ▇▇. ▇▇▇▇▇ on
account of any claim or alleged right covering the period up to the Closing
Date; and
(xi) any and all actions, suits, proceedings, claims,
liabilities, demands, assessments, judgments, costs and expenses, including
reasonable attorneys' fees, related to any of the foregoing or such
indemnification; provided, however, that if any action, suit, proceeding,
claim, liability, demand or assessment shall be asserted against Arrow or its
successors or assigns in respect of which it proposes to demand
indemnification pursuant to (i)-(xi), Arrow shall promptly notify the Selling
Securityholders thereof. Subject to rights of or duties to any insurer or
other third person having liability therefor, the Selling Securityholders,
acting through the Selling Securityholders Representative, shall have the
right promptly after receipt of such notice to assume the control of the
defense, compromise or settlement of any such action, suit, proceeding,
claim, liability, demand or assessment, including, at the expense of the
Selling Securityholders, employment of counsel satisfactory to Arrow,
provided that the Selling Securityholders shall not compromise or settle any
such action, suit, proceeding, claim, liability, demand or assessment without
the prior written consent of Arrow, which consent shall not be unreasonably
withheld. Notwithstanding the preceding sentence, in any such matter
described in the preceding sentence, Arrow shall have the right to retain its
own separate counsel, but the fees and expenses of such counsel shall be at
Arrow's expense unless (a) the Selling Securityholders, and Arrow shall have
agreed to the contrary, (b) the Selling Securityholders has failed within a
reasonable time to retain counsel satisfactory to Arrow, or (c) the named
parties in any such proceeding (including any impleaded parties) include both
(i) Arrow, the Company or any Subsidiary (each an "Arrow Party") and (ii) the
Selling Securityholders and representation of the Selling Securityholders and
the Arrow Party by the same counsel could be inappropriate due to actual or
potential differing interests between them. In any matter described above
where Arrow has retained counsel to represent an Arrow Party in addition to
counsel retained by the Selling Securityholders, counsel selected by the
Selling Securityholders shall be required to cooperate fully with counsel
selected by Arrow in such matter.
(b) In the event that the claim for indemnification under section
10(a) is capable of being satisfied in the alternative by indemnifying Arrow
or by indemnifying the Company or one of the Subsidiaries, Arrow shall choose
the party to be indemnified.
(c) The indemnification obligations of the Selling Shareholders
under Section 10(a)(iii) for breaches of representations and warranties
(other than the representations and warranties contained in Sections 3(m),
3(u), 3(v) and 3(y))(i) shall accrue only if the aggregate of all losses,
damages, deficiencies, liabilities and any other amounts for which
indemnification is sought by Arrow, the Company and the Subsidiaries pursuant
to Section 10(a)(iii) in respect of such representations and warranties shall
have first exceeded FFR one (1) million, in which case such indemnification
obligation shall apply to the entire amount and (ii) shall be limited to FFR
314 million in the aggregate.
(d) Notwithstanding anything to the contrary in Section 10(a) each
Selling Warrantholder shall only have liability under (i) Section 10(a)(iii),
and thereunder only for misrepresentations of the matters with respect to
such Selling Warrantholder set forth in Section 4 and the undertakings given
by such Selling Warrantholder in respect of such matters and (ii) Section
10(a)(xi) in relation to the matters referred to in 10(d)(i).
(e) Arrow shall defend, indemnify and hold harmless, the Selling
Securityholders (but only insofar as liability for the same arises as a
result of the Selling Securityholder's status as a shareholder or
warrantholder in the Company prior to the Closing Date) against and in
respect of:
(i) any and all losses, damages and costs resulting from any
and all: (A) misrepresentations or breaches of warranty, agreement or
undertaking hereunder on the part of Arrow; and (B) failures by Arrow to
perform or otherwise fulfill any undertaking or other agreement or obligation
hereunder;
(ii) any and all losses, damages or costs resulting from
matters relating to hazardous waste, pollution or any other cause of
environmental harm caused by the action of Arrow after the Closing Date;
(iii) any and all losses, damages, deficiencies or liabilities
resulting from any claims against the Selling Securityholders arising in
connection with death, personal injury, other injury to persons, property
damage, loss of business or losses or deprivation of rights (whether based on
statute, negligence, breach of warranty, strict liability or any other
theory) caused by or resulting from, directly or indirectly, any defect or
claimed defect in or with respect to any products distributed or services
performed for customers (including value added work in connection with the
product) by the Company or any Subsidiary after the Closing Date;
(iv) any and all liabilities for Taxes relating to the Company
or any Subsidiary which arises in whole or in part in respect of, or in
consequence of, any acts, omissions or transactions occurring or entered into
on or after the Closing Date; and
(v) any and all actions, suits, proceedings, claims,
liabilities, demands, assessments, judgments, costs and expenses, including
reasonable attorneys' fees, related to any of the foregoing or such
indemnification; provided, however, that if any action, suit, proceeding,
claim, liability, demand or assessment shall be asserted against the Selling
Securityholders in respect of which they propose to demand indemnification
pursuant to (i)-(v), the Selling Securityholders shall promptly notify Arrow
thereof. Subject to rights of or duties to any insurer or other third person
having liability therefor, Arrow shall have the right promptly after receipt
of such notice to assume the control of the defense, compromise or settlement
of any such action, suit, proceeding, claim, liability, demand or assessment,
including, at the expense of Arrow, employment of counsel reasonably
satisfactory to the Selling Securityholders Representative. Notwithstanding
the preceding sentence, in any such matter described in the preceding
sentence, the Selling Securityholders shall have the right to retain their
own separate counsel, but the fees and expenses of such counsel shall be at
the expense of the Selling Securityholders unless (a) Arrow and the Selling
Securityholders Representative shall have agreed to the contrary, (b) Arrow
has failed within a reasonable time to retain counsel reasonably satisfactory
to the Selling Securityholders, or (c) the named parties in any such
proceeding (including any impleaded parties) include both an Arrow Party and
the Selling Securityholders and representation of both parties by the same
counsel could be inappropriate due to actual or potential differing interests
between them. In any matter described above where the Selling
Securityholders have retained counsel to represent them in addition to
counsel retained by Arrow, counsel selected by Arrow shall be required to
cooperate fully with counsel selected by the Seller in such matter.
(f) The indemnification obligations of the Arrow under Section
10(e)(i) for breaches of representations and warranties (i) shall accrue only
if the aggregate of all losses, damages, deficiencies, liabilities and any
other amounts for which indemnification is sought by the Selling
Securityholders pursuant to Section 10(e)(i) in respect of such
representations and warranties shall have first exceeded FFR one (1) million,
in which case such indemnification obligation shall apply to the entire
amount and (ii) shall be limited to FFR 314 million in the aggregate.
(g) In the event that the matter giving rise to an indemnification
under this Section 10 also gives rise concurrently to a tax deduction on the
part of the indemnified party which operates to reduce the loss that is the
subject for the claim for indemnification the amount to be paid in respect of
such indemnification shall be reduced to the same extent.
11. Conditions Precedent Of The Selling Securityholders The obligation
of the Selling Securityholders to consummate the transactions described in
Section 1 hereof is subject to the fulfillment of each of the following
conditions prior to or at the Closing:
(a) Representations and Warranties The representations and
warranties of Arrow made hereunder shall be true and correct in all material
respects at and as of the Closing Date, with the same force and effect as
though made at and as of the Closing Date.
(b) Agreements. Arrow shall have performed and complied in all
material respects with all of its undertakings and agreements required by
this Agreement to be performed or complied with by Arrow prior to or at the
Closing.
(c) No Injunction. No injunction, restraining order or decree of
any nature of any court or governmental or regulatory authority shall exist
against Arrow, the Selling Securityholders, the Company, any Subsidiary or
any of their respective Affiliates, or any of the principals, officers or
directors of any of them, that restrains, prevents or materially changes the
transactions contemplated hereby.
(d) Consents. All consents, approvals and authorizations of
governmental and regulatory authorities, and all filings with and
notifications of governmental authorities and regulatory agencies which are
required in order for the parties hereto to consummate of the transactions
contemplated hereby, shall have been obtained or effected.
(e) Opinions and Certificates. The Selling Securityholders shall
have been furnished with an opinion dated the Closing Date of Winthrop,
Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to Arrow, to the effect that (i) Arrow is
a corporation duly incorporated, validly existing and in good standing under
the laws of the State of New York, with the corporate power and authority to
enter into this Agreement and perform its obligations hereunder and (ii) the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of Arrow and no other proceedings on the part of Arrow are
necessary to authorize this Agreement and the transactions contemplated
hereby.
12. Conditions Precedent Of Arrow The obligation of Arrow to consummate
the transactions described in Section 1 hereof is subject to the fulfillment
of each of the following conditions prior to or at the Closing:
(a) Representations and Warranties. The representations and
warranties of the Selling Securityholders made hereunder shall be true and
correct in all respects at and as of the Closing Date, with the same force
and effect as though made at and as of the Closing Date;
(b) Agreements. The Selling Securityholders shall have performed
and complied in all respects with all of their undertakings and agreements
required by this Agreement to be performed or complied with by them prior to
or at the Closing; without limiting the generality of the foregoing and for
the avoidance of doubt, it is agreed that the resignation of the auditors
referred to in Section 2(b)(i)(F) shall be a condition precedent to the
obligation of Arrow regardless of whether or not the Selling Securityholders
have the legal power to cause such resignation;
(c) Employment Matters. Without limiting the generality of Section
12(b), all of the arrangements specified in Section 8(b) shall have been
effected to Arrow's satisfaction;
(d) No Injunction. No injunction, restraining order or decree of
any nature of any court or governmental or regulatory authority shall exist
against Arrow, the Selling Securityholders, the Company, any Subsidiary or
any of their respective Affiliates, or any of the principals, officers or
directors of any of them, that restrains, prevents or materially changes the
transactions contemplated hereby;
(e) Consents. All consents, approvals and authorizations of
governmental and regulatory authorities, and all filings with and
notifications of governmental authorities and regulatory agencies which are
required in order for the parties hereto to consummate of the transactions
contemplated hereby, shall have been obtained or effected; and
(f) Opinions and Certificates. Arrow shall have been furnished
with (i) an opinion dated the Closing Date of Maison ▇▇▇, counsel to the
Company, each Selling Securityholder and each Seller Shareholder, to the
effect that
(A) the Company, each Selling Securityholder that is a
corporation and each Seller Shareholder that is a corporation are duly
incorporated and validly existing under the laws of its jurisdiction of
incorporation with the power to execute and deliver this Agreement and carry
out the transactions contemplated hereby;
(B) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of the Company, each Selling
Securityholder that is a corporation and each Seller Shareholder, and no
other proceedings on the part of the Company, any Selling Securityholder or
any Seller Shareholder are necessary to authorize this Agreement and the
transactions contemplated hereby; (C) the authorized capital stock of the
Company consists of 810,000 shares of common stock, FFR 100 par value (or
such other par value as may result from the refund of capital contribution
and subsequent capital reduction referred to in Section 23), all of which
shares are issued and outstanding, and 48,210 warrants to purchase shares of
common stock, all of which warrants are issued and outstanding; (D) the
property transfers referred to in Section 8(a) hereof have been duly
authorized by the Boards of Directors of the Selling Securityholders and the
Company and no other proceedings on the part of the Company or any Selling
Securityholder are necessary to authorize such transfers; and (E) the partial
contribution of assets made on December 31, 1998 complied with all applicable
laws; and (ii) certified copies of the resolutions of the Company, each
Selling Securityholder that is a corporation and each Seller Shareholder that
is a corporation authorizing the execution and delivery of this Agreement and
the performance of the transactions contemplated by this Agreement.
13. Expenses. Arrow and the Selling Securityholders will bear their own
expenses in connection with the Agreements and their performance, provided
however, that the one per cent registration tax assessed on transfers of the
Shares shall be paid fifty percent by Arrow and fifty percent by the relevant
Selling Securityholder.
14. Press Releases. Except as required by law or stock exchange
regulation, any public announcements regarding the transactions contemplated
hereby shall be made only with the mutual consent of Arrow and the Selling
Securityholders Representative.
15. Cooperation. Each of the parties hereto shall use its reasonable
best efforts to take or cause to be taken all actions, to cooperate with the
other parties hereto with respect to all actions, and to do or cause to be
done all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement.
16. Applicable Law and Jurisdiction. This Agreement shall be governed
by, and construed in accordance with, the law of France including all matters
of construction, validity and performance and each of the parties to this
Agreement hereby submits to the exclusive jurisdiction of the Paris
Commercial Court.
17. Notices. All notices, requests, permissions, demands, waivers and
other communications hereunder shall be in writing and shall be deemed to
have been duly given if signed by the respective persons giving them (in the
case of Arrow the signature shall be by an officer thereof) and (i) delivered
by hand, (ii) deposited in the mail (registered, return receipt requested),
properly addressed and postage prepaid, or (iii) transmitted by telecopier
with confirmation of receipt:
(a) if to Arrow, to:
Arrow Electronics, Inc.
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Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
With a copy to:
Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
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Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
(b) if to the Selling Shareholder, to:
Tekelec Airtronic SA
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Attn: ▇▇▇▇-▇▇▇▇▇▇ Asscher
(c) if to the Warrantholders, to:
Zedtek
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Investitech
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Natec
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(d) if to J-CA, to:
▇▇▇▇-▇▇▇▇▇▇ Asscher
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(e) if to JDA, to:
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(f) if to FC, to:
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Such names and addresses may be changed by such notice.
18. Entire Agreement; Amendments, etc. This Agreement (including
Exhibits ▇-▇, ▇-▇ and B, Schedules 1 through 9 and Lists 1 through 13 all of
which are a part hereof) contain the entire understanding of the parties
hereto with respect to the subject matter contained herein, supersedes and
cancels all prior agreements with respect hereto and may be amended only by a
written instrument executed by the parties or their respective successors or
assigns. There are no restrictions, promises, representations, warranties,
agreements or undertakings of any party hereto with respect to the
transactions under this Agreement other than those set forth herein or
therein or made hereunder or thereunder. The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. This
Agreement may be executed in one or more counterparts and each counterpart
shall be deemed to be an original.
19. Parties in Interest. Except with the express written consent of the
other parties hereto, this Agreement shall not be assignable or otherwise
transferred in whole or in part provided that Arrow may assign this Agreement
or any of Arrow's rights or obligations hereunder to any subsidiary or
Affiliate of Arrow, but such assignment shall not relieve Arrow of any of its
obligations hereunder to the extent that such assignee does not fully perform
any obligations hereunder. This Agreement shall inure to the benefit of and
be binding upon the parties and their respective successors and assigns.
Nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights or remedies under or by reason of this Agreement.
20. Confidentiality. Arrow and the Selling Securityholders will, and
will cause the Company and each of the Subsidiaries to, hold and will cause
their respective representatives to hold in confidence, unless compelled to
disclose by judicial or administrative process, or, in the opinion of its
counsel, by other requirements of law, all documents and information
concerning the Selling Securityholders, the Company and each Subsidiary
furnished to Arrow and all documents and information concerning Arrow
furnished to any Selling Securityholder, the Company or any Subsidiary in
connection with the transactions contemplated by this Agreement (except to
the extent that such information can be shown to have been (i) previously
known by Arrow prior to its disclosure by the Selling Securityholders, the
Company or any Subsidiary, (ii) previously known to the Selling
Securityholders, the Company or any Subsidiary prior to its disclosure by
Arrow, (iii) in the public domain through no violation of this Agreement by
Arrow, the Selling Securityholders, the Company or any Subsidiary or (iv)
later lawfully acquired by either the Selling Securityholders, the Company or
any Subsidiary or Arrow from other sources) and will not release or disclose
such information to any other person, except in connection with this
Agreement to its auditors, attorneys, financial advisors or other consultants
and advisors.
21. Severability. The invalidity of any portion hereof shall not affect
the validity, force or effect of the remaining portions hereof.
22. Language of Agreement. This Agreement is entered into in the
English language. Attached hereto as Annex 1 is an agreed upon French
translation of this Agreement. In the event of any discrepancy between this
Agreement and such translation, this Agreement shall govern.
23. Reduction of Capital. In connection with the property transfers
referred to in Section 8(a), the par value of the Shares may be reduced prior
to Closing in order to permit the transfers of the property in Sevres to take
the form of a refund of capital contribution and subsequent capital
reduction. Provided that such reduction does not result in a negative
shareholders equity or operate to impair the ability of the Company to pay
dividends out of earnings, Arrow agrees that such reduction shall not in
itself constitute a breach of the warranties given by the Selling
Securityholders in Section 3(d) and that an amendment to the Articles of
Incorporation of the Company which only gives effect to such reduction will
not in itself constitute a breach of Section 5(e).
24. Release of Guaranties. Arrow agrees to endeavor to obtain the
release of the Selling Shareholder and J-CA from any guaranties that they
have given in respect of the obligations of the Company or any Subsidiary as
promptly as practicable following the Closing. Pending such release, Arrow
agrees to indemnify the Selling Shareholder and J-CA against any liabilities
arising under such guaranties after the Closing. With respect to the
guarantee given by J-CA to the Natexis Bank with respect to its FFR18 million
loan to the Company, which loan is repayable in full on December 31, 2002,
Arrow agrees that, in the event it is unable to secure the release of such
guaranty and the collateral securing the same within 90 days of the Closing,
Arrow will cause the Company to promptly repay such loan in order to obtain
such release.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
ARROW ELECTRONICS, INC.
By
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Name :
Title:
TEKELEC AIRTRONIC SA.
By
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Name :
Title:
ZEDTEK
By:
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Name:
Title:
INVESTITECH
By:
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Name:
Title:
NATEC SA
By:
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Name:
Title:
▇▇▇▇-▇▇▇▇▇▇ ASSCHER
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EXHIBITS
Exhibit A-1 - Shares and Warrants Owned by Selling Securityholders
Exhibit A-2 - SellingSecurityholders Percentages
Exhibit B - December 6, 1999 Letter
SCHEDULES
Schedule 1 - Inventory Valuation Rules
Schedule 2 - Authorization, Consents and Approvals
Schedule 3 - Shareholders Agreements
Schedule 4 - Intercompany Sales
Schedule 5 - Capital Expenditures
Schedule 6 - Section 8(b) (iii) Employees
Schedule 7 -Section 8(b) (iv) Employees
Schedule 8 - Section 8(b) (v) Employees
Schedule 9 - Section 8(b)(vi) Employees
Schedule 10 - Section 8(b)(vii) Employees
LISTS
1 - Real Estate
2 - Trademarks, etc.
3 - Contracts
4 - Litigation
5 - Claims
6 - Banking
7 - Loans and advances
8 - Liens
9 - Subsidiaries
10 - Exceptions to Section 3(h)
11 - Indebtedness for Borrowed Money
12 - Employees
13 - Terminated Distributor Agreements