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EXHIBIT (99.1)
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of October 1,
1998, by and between Arrow Electronics, Inc., a New York corporation ("Arrow"),
and Bell Industries, Inc., a California corporation (the "Company").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company and Arrow are entering into an Agreement of Purchase and
Sale, dated as of the date hereof (the "Purchase Agreement"; capitalized terms
used herein but not defined herein shall have the meanings set forth in the
Purchase Agreement), which provides that, among other things, upon the terms and
subject to the conditions thereof, Arrow will purchase the electronic components
distribution business of the Company; and
WHEREAS, as a condition and inducement to Arrow's willingness to
enter into the Purchase Agreement, Arrow has required that the Company agree,
and the Company has so agreed, to grant to Arrow an option with respect to
certain shares of the Company's common stock on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements set forth herein and in the Purchase Agreement,
the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants Arrow an
irrevocable option (the "Company Option") to purchase up to 1,888,000
shares (the "Company Shares") of common stock of the Company (the
"Company Common Stock") in the manner set forth below at a price which
shall equal the arithmetic average of the closing sales prices of the
Company Common Stock reported on the New York Stock Exchange for the
ten (10) trading days ending and including the trading day immediately
preceding the date hereof (the "Exercise Price").
2. Exercise of Option. The Company Option may be
exercised by Arrow, in whole or in part, at any time or from time to
time after the Purchase Agreement becomes terminable by Arrow under
circumstances which could entitle Arrow to expenses reimbursement under
Section 16 of the Purchase Agreement (other than the circumstances
contemplated by the forepart of clause (b) thereof, excluding the
proviso thereto). In the event Arrow wishes to exercise the Company
Option, Arrow shall deliver to the Company a written notice (an
"Exercise Notice") specifying the total number of Company Shares it
wishes to purchase. Each closing of a purchase of Company Shares (a
"Closing") shall occur at a place, on a date and at a time designated
by Arrow and reasonably acceptable to the Company in an Exercise Notice
delivered at least six business days prior to the date of the Closing.
The Company Option shall terminate upon the earlier of: (i) the closing
of the transactions contemplated by the Purchase Agreement; (ii) the
termination of the Purchase Agreement pursuant to Section 17(a) thereof
(other than a termination in connection with which Arrow is entitled to
the payment specified in Section 16 thereof); and (iii)
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EXHIBIT (99.1)
180 days following any termination of the Purchase Agreement in
connection with which Arrow is entitled to the payment specified in
Section 16 thereof (or if, at the expiration of such 180 day period,
the Company Option cannot be exercised by reason of any applicable
judgment, decree, order, law or regulation, ten business days after
such impediment to exercise shall have been removed or shall have
become final and not subject to appeal, but in no event under this
clause (iii) later than the second anniversary of the date hereof).
Notwithstanding the foregoing, the Company Option may not be exercised
if Arrow is in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or in
the Purchase Agreement.
3. Conditions to Closing. The obligation of the Company
to issue the Company Shares to Arrow hereunder is subject to the
conditions that (i) all waiting periods, if any, under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder ("HSR Act"),
applicable to the issuance of the Company Shares hereunder shall have
expired or have been terminated; (ii) all consents, approvals, orders
or authorizations of, or registrations, declarations or filings with,
any Federal, state or local administrative agency or commission or
other Federal state or local governmental authority or instrumentality,
if any, required in connection with the issuance of the Company Shares
hereunder shall have been obtained or made, as the case may be; (iii)
no preliminary or permanent injunction or other order by any court of
competent jurisdiction prohibiting or otherwise restraining such
issuance shall be in effect; and (iv) Arrow shall not be in material
breach of the Purchase Agreement.
4. Closing. At any Closing, (a) the Company will deliver
to Arrow a single certificate in definitive form representing the
number of the Company Shares designated by Arrow in its Exercise
Notice, such certificate to be registered in the name of Arrow and to
bear the legend set forth in Section 11, and (b) Arrow will deliver to
the Company the aggregate price for the Company Shares so designated
and being purchased by wire transfer of immediately available funds or
certified check or bank check. At any Closing at which Arrow is
exercising the Company Option in part, Arrow shall present and
surrender this Agreement to the Company, and the Company shall deliver
to Arrow an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of
Company Common Stock purchasable hereunder.
5. Representations and Warranties of the Company. The
Company represents and warrants to Arrow that (a) the Company is a
corporation duly incorporated, validly existing and in good standing
under the laws of the State of California and has the corporate power
and authority to enter into this Agreement and to carry out its
obligations hereunder, (b) the execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or any of the transactions contemplated hereby,
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EXHIBIT (99.1)
(c) this Agreement has been duly executed and delivered by the Company
and constitutes a valid and binding obligation of the Company, and,
assuming this Agreement constitutes a valid and binding obligation of
Arrow, is enforceable against the Company in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally
and subject to usual equity principles, (d) the Company has taken all
necessary corporate action to authorize and reserve for issuance and to
permit it to issue, upon exercise of the Company Option, and at all
times from the date hereof through the expiration of the Company Option
will have reserved, 1,888,000 unissued Company Shares and such other
shares of Company Common Stock or other securities which may be issued
pursuant to Section 10, all of which, upon their issuance, payment and
delivery in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable, and free and clear of all
claims, liens, charges, encumbrances and security interests of any
nature whatsoever (other than those created by or through Arrow), (e)
the execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not conflict
with, or result in any violation of, or material default (with or
without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or
the loss of a material benefit under, or the creation of a lien,
pledge, security interest or other encumbrance on assets pursuant to
(any such conflict, violation, default, right of termination,
cancellation or acceleration, loss or creation, a "Violation"), (A) any
provision of the Restated Articles of Incorporation or Restated By-laws
of the Company or (B) any provisions of any loan or credit agreement,
note, mortgage, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, license, except
that the payment upon the exercise by Arrow of its rights under Section
7 would violate the Credit Agreement or (C) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the
Company or its properties or assets, which Violation, in the case of
each of clauses (B) and (C), individually or in the aggregate would
prevent or materially delay the exercise by Arrow of the Company Option
or any other right of Arrow under this Agreement and (f) except as
described in Section 6(c) of the Purchase Agreement, the execution and
delivery of this Agreement by the Company does not, and the performance
of this Agreement by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority.
6. Representations and Warranties of Arrow. Arrow
represents and warrants to the Company that (a) Arrow is a corporation
duly organized, validly existing and in good standing under the laws of
the State of New York and has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder,
(b) the execution and delivery of this Agreement by Arrow and the
consummation by Arrow of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Arrow
and no other corporate proceedings on the part of Arrow are necessary
to authorize this Agreement or any of the transactions contemplated
hereby, (c) this Agreement has been duly executed and delivered by
Arrow and constitutes a valid and binding obligation of Arrow, and,
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EXHIBIT (99.1)
assuming this Agreement constitutes a valid and binding obligation of
the Company, is enforceable against Arrow in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally
and subject to usual equity principles, (d) the execution and delivery
of this Agreement by Arrow does not, and the performance of this
Agreement by Arrow will not, result in any Violation pursuant to, (A)
any provision of the Certificate of Incorporation or By-laws of Arrow,
(B) any provisions of any loan or credit agreement, note, mortgage,
indenture, lease, or other agreement, obligation, instrument, permit,
concession, franchise, license or (C) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Arrow or its
properties or assets, which Violation, in the case of each of clauses
(B) and (C), would, individually or in the aggregate have a material
adverse effect on Arrow's ability to consummate the transactions
contemplated by this Agreement, (e) except as described in Section 7(b)
of the Purchase Agreement and Section 3(i) of this Agreement, the
execution and delivery of this Agreement by Arrow does not, and the
performance of this Agreement by Arrow will not, require any consent,
approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority and (f) any Company Shares
acquired upon exercise of the Company Option will not be, and the
Company Option is not being, acquired by Arrow with a view to the
public distribution or resale in any manner which would be in violation
of federal or state securities laws.
7. Put Right.
(a) Exercise of Put. At any time during which the Company Option is exercisable
pursuant to Section 2 (the "Repurchase Period"), upon demand by Arrow, Arrow
shall have the right to sell to the Company (or any successor entity
thereof) and the Company (or such successor entity) shall be obligated to
repurchase from Arrow (the "Put"), all or any portion of the Company Option,
at the price set forth in subparagraph (i) below, or, at any time prior to
the second anniversary of the date hereof, all or any portion of the Company
Shares purchased by Arrow pursuant hereto, at a price set forth in
subparagraph (ii) below:
(i) the difference between the "Market/Tender Offer Price"
for shares of Company Common Stock as of the date (the "Notice Date")
notice of exercise of the Put is given to the Company (defined as the
higher of (A) the price per share offered as of the Notice Date pursuant
to any tender or exchange offer or other Alternative Proposal which was
made prior to the Notice Date and not terminated or withdrawn as of the
Notice Date (the "Tender Price") and (B) the average of the closing
prices of shares of the Company Common Stock on the New York Stock
Exchange ("NYSE") for the five trading days immediately preceding the
Notice Date, (the "Market Price")), and the Exercise Price, multiplied
by the number of Company Shares purchasable pursuant to the Company
Option (or portion thereof with respect to which Arrow is exercising its
rights under this Section 7);
(ii) the Exercise Price paid by Arrow for the Company
Shares acquired pursuant to the Company Option plus the difference
between the Market/Tender Offer Price and the Exercise Price, multiplied
by the number of Company Shares so purchased.
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EXHIBIT (99.1)
For purposes of this clause (ii), the Tender Price shall be the highest
price per share offered pursuant to a tender or exchange offer or other
Alternative Proposal during the Repurchase Period.
(b) Payment and Redelivery of Company Option or Shares. In the event Arrow
exercises its rights under this Section 7, the Company shall, within five
business days of the Notice Date, pay the required amount to Arrow in
immediately available funds and Arrow shall surrender to the Company the
Company Option or the certificates evidencing the Company Shares purchased
by Arrow pursuant hereto, and Arrow shall warrant that it owns such shares
and that such shares are then free and clear of all liens, claims, charges
and encumbrances of any kind or nature whatsoever.
1. Restrictions on Certain Actions. The Company shall
not adopt any Rights Agreement or shareholder rights plan in any manner
which would cause Arrow, if Arrow has complied with its obligations
under this Agreement, to become an "Acquiring Person" under such Rights
Agreement or shareholder rights plan solely by reason of the beneficial
ownership of the shares purchasable hereunder.
2. Registration Rights.
(a) The Company will, if requested by Arrow at any time and from
time to time within three years of the exercise of the Company Option, as
expeditiously as possible prepare and file up to three registration statements
under the Securities Act of 1933, as amended (the "Securities Act") if such
registration is necessary in order to permit the sale or other disposition of
any or all shares of securities that have been acquired by or are issuable to
Arrow upon exercise of the Company Option in accordance with the intended method
of sale or other disposition stated by Arrow, including a "shelf" registration
statement under Rule 415 under the Securities Act or any successor provision,
and the Company will use its best efforts to qualify such shares or other
securities under any applicable state securities laws. The Company will use
reasonable efforts to cause each such registration statement to become
effective, to obtain all consents or waivers of other parties which are required
therefor, and to keep such registration statement effective for such period not
in excess of 180 calendar days from the day such registration statement first
becomes effective as may be reasonably necessary to effect such sale or other
disposition. The obligations of the Company hereunder to file a registration
statement and to maintain its effectiveness may be suspended for up to 90
calendar days in the aggregate if the Board of Directors of the Company shall
have determined that the filing of such registration statement or the
maintenance of its effectiveness would require premature disclosure of material
nonpublic information that would materially and adversely affect the Company or
otherwise interfere with or adversely affect any pending or proposed offering of
securities of the Company or any other material transaction involving the
Company. Any registration statement prepared and filed under this Section 9, and
any sale covered thereby, will be at the Company's expense except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Arrow's counsel related thereto. Arrow will provide and be
responsible for, in connection with indemnification provisions, all information
reasonably requested by the Company for inclusion in any registration statement
to be filed hereunder. If, during the time periods referred to in the first
sentence of this Section 9, the Company effects a registration under the
Securities
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EXHIBIT (99.1)
Act of Company Common Stock for its own account or for any other stockholders of
the Company (other than on Form S-4 or Form S-8, or any successor form), it will
allow Arrow the right to participate in such registration, and such
participation will not affect the obligation of the Company to effect demand
registration statements for Arrow under this Section 9; provided that, if the
managing underwriters of such offering advise the Company in writing that in
their opinion the number of shares of Company Common Stock requested to be
included in such registration exceeds the number which can be sold in such
offering, the Company will include the shares requested to be included therein
by Arrow after the shares intended to be included therein by the Company have
been included and prior to any shares requested to be included by any third
parties are included. In connection with any registration pursuant to this
Section 9, the Company and Arrow will provide each other and any underwriter of
the offering with customary representations, warranties, covenants,
indemnification, and contribution in connection with such registration. The
Company shall provide to any underwriters such documentation (including
certificates, opinions of counsel and "comfort" letters from auditors) as are
customary in connection with underwritten public offerings as such underwriters
may reasonably require.
(b) If the Company's securities of the same type as the Company
Common Stock beneficially owned by Arrow are then authorized for quotation or
trading or listing on the NYSE, Nasdaq National Market System, or any other
securities exchange or automated quotations system, the Company, upon the
request of Arrow, shall promptly file an application, if required, to authorize
for quotation, trading or listing such shares of Company Common Stock on such
exchange or system and will use its reasonable efforts to obtain approval, if
required, of such quotation, trading or listing as soon as practicable.
3. Adjustment Upon Changes in Capitalization.
(a) In the event of any change in Company Common Stock by reason
of stock dividends, splitups, mergers, recapitalizations, combinations, exchange
of shares or the like, the type and number of shares or securities subject to
the Company Option, and the purchase price per share provided in Section 1,
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction so that Arrow shall receive, upon exercise
of the Company Option, the number and class of shares or other securities or
property that Arrow would have received in respect of the Company Common Stock
if the Company Option had been exercised immediately prior to such event or the
record date therefor, as applicable.
(b) In the event that the Company shall enter in an agreement:
(i) to consolidate with or merge into any person, other than Arrow or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Arrow or one of
its subsidiaries, to merge into the Company and the Company shall be the
continuing or surviving corporation, but, in connection with such merger, the
then-outstanding shares of Company Common Stock shall be changed into or
exchanged for stock or other securities of the Company or any other person or
cash or any other property or the outstanding shares of Company Common Stock
immediately prior to such merger shall after such merger represent less than 50%
of the outstanding shares and share equivalents of the merged company; or (iii)
to sell or otherwise transfer all or substantially all of its assets to any
person, other than Arrow or one of its subsidiaries, then, and in each such
case, the agreement
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EXHIBIT (99.1)
governing such transaction shall make proper provisions so that upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, Arrow shall, upon exercise of the Company Option, receive for each
Company Share with respect to which the Company Option has not been exercised an
amount of consideration in the form of and equal to the per share amount of
consideration that would be received by the holder of one share of Company
Common Stock less the Exercise Price (and, in the event of an election or
similar arrangement with respect to the type of consideration to be received by
the holders of Company Common Stock, subject to the foregoing, proper provision
shall be made so that the holder of the Company Option would have the same
election or similar rights as would the holder of the number of shares of
Company Common Stock for which the Company Option is then exercisable).
4. Restrictive Legends. Each certificate representing
shares of Company Common Stock issued to Arrow hereunder shall include
a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE.
Certificates representing shares sold in a registered public offering pursuant
to Section 9 shall not be required to bear the legend set forth in this Section
11.
5. Binding Effect; No Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Except as expressly
provided for in this Agreement, neither this Agreement nor the rights
or the obligations of either party hereto are assignable, except by
operation of law, or with the written consent of the other party.
Nothing contained in this Agreement, express or implied, is intended to
confer upon any person other than the parties hereto and their
respective permitted assigns any rights or remedies of any nature
whatsoever by reason of this Agreement.
6. Specific Performance. The parties recognize and agree
that if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each
party agrees that, in addition to other remedies, the other party shall
be entitled to an injunction restraining any violation or threatened
violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of this
Agreement, neither party will allege, and each party hereby waives the
defense, that there is adequate remedy at law.
7. Entire Agreement. This Agreement and the Purchase
Agreement (including the Exhibits and Schedules thereto) constitute the
entire agreement among the parties with respect to the subject matter
hereof and supersede all
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other prior agreements and understandings, both written and oral, among
the parties or any of them with respect to the subject matter hereof.
8. Further Assurances. Each party will execute and
deliver all such further documents and instruments and take all such
further action as may be necessary in order to consummate the
transactions contemplated hereby.
9. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of the other provisions of this Agreement, which shall
remain in full force and effect. In the event any court or other
competent authority holds any provision of this Agreement to be null,
void or unenforceable, the parties hereto shall negotiate in good faith
the execution and delivery of an amendment to this Agreement in order,
as nearly as possible, to effectuate, to the extent permitted by law,
the intent of the parties hereto with respect to such provision. Each
party agrees that, should any court or other competent authority hold
any provision of this Agreement or part hereof to be null, void or
unenforceable, or order any party to take any action inconsistent
herewith, or not take any action required herein, the other party shall
not be entitled to specific performance of such provision or part
hereof or to any other remedy, including but not limited to money
damages, for breach hereof or of any other provision of this Agreement
or part hereof as the result of such holding or order.
10. Notices. Any notice or communication required or
permitted hereunder shall be in writing and either delivered
personally, telegraphed or telecopied or sent by certified or
registered mail, postage prepaid, and shall be deemed to be given,
dated and received when so delivered personally, telegraphed or
telecopied or, if mailed, five business days after the date of mailing
to the following address or telecopy number, or to such other address
or addresses as such person may subsequently designate by notice given
hereunder.
(a) if to Arrow, to:
Arrow Electronics, Inc.
25 Hub Drive
Melville, New York 11747
Attention: Robert E. Klatell
Telecopy: (516) 391-1683
Telephone: (516) 391-1830
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attention: Howard S. Kelberg, Esq.
Telecopy: (212) 530-5219
Telephone: (212) 530-5530
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EXHIBIT (99.1)
and
(b) if to the Company, to:
Bell Industries, Inc.
2201 E. El Segundo Blvd.
El Segundo, California 90245
Attention: Gordon Graham
Telecopy: (310) 563-2355
Telephone: (310) 563-2500
with a copy to:
Irell & Manella LLP
333 South Hope Street
Suite 3300
Los Angeles, California 90071
Attention: John Cost, Esq.
Ben Orlanski, Esq.
Telecopy: (213) 229-0515
Telephone: (213) 620-1555
1. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such
State without regard to any applicable conflicts of law rules.
2. Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this
Agreement.
3. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original,
but all of which, taken together, shall constitute one and the same
instrument.
4. Expenses. Except as otherwise expressly provided
herein or in the Purchase Agreement, all costs and expenses incurred in
connection with the transactions contemplated by this Agreement shall
be paid by the party incurring such expenses.
5. Amendments; Waiver. This Agreement may be amended by
the parties hereto and the terms and conditions hereof may be waived
only by an instrument in writing signed on behalf of each of the
parties hereto, or, in the case of a waiver, by an instrument signed on
behalf of the party waiving compliance.
[Next Page is Signature Page]
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EXHIBIT (99.1)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
ARROW ELECTRONICS, INC.
By: /s/ Robert E. Klatell
------------------------------------
Name: Robert E. Klatell
Title: Executive Vice President
BELL INDUSTRIES, INC.
By: /s/ Gordon Graham
------------------------------------
Name: Gordon Graham
Title: President & CEO
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