Item 1.01.
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Entry into a Material Definitive Agreement
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On September 19, 2016, Tech Data Corporation
(Tech Data), entered into an Interest Purchase Agreement (the Acquisition Agreement) with Avnet, Inc. (Avnet) to acquire (the Acquisition) all the shares of AVT Technology Solutions LLC
(AVT) and another company that will be formed by Avnet, Inc. (together with AVT, the Acquired Companies), which will hold all assets and liabilities primarily relating to the technology solutions business of Avnet (the
Acquired Business) following completion of the Reorganization (as defined below).
Concurrently with the execution of the
Acquisition Agreement, Tech Data entered into (i) a Reorganization Agreement (the Reorganization Agreement) with Avnet and AVT, pursuant to which Avnet will, prior to the consummation of the Acquisition, transfer the Acquired Business,
to the Acquired Companies (the Reorganization) and (ii) an Employment Matters Agreement in order to allocate between Avnet and Tech Data assets, liabilities and responsibilities with respect to certain employee compensation, pension and
benefit plans, programs and arrangements and to provide for certain employment matters in connection with the Acquisition.
Pursuant to
the Acquisition Agreement, and subject to the terms and conditions contained therein, at the closing of the Acquisition, Tech Data will acquire all of the outstanding shares of the Acquired Companies for an aggregate purchase price comprised of $2.4
billion in cash and 2,785,402 shares of Tech Datas common stock (representing approximately 7.3% of Tech Datas outstanding common stock after giving effect to the issuance of the new shares) (the Share Consideration), with
the cash consideration subject to certain working capital and other adjustments, as described in the Acquisition Agreement.
Under the
Acquisition Agreement, Tech Data has agreed to register the Share Consideration for resale under the U.S. federal securities laws. Avnets rights to registration are subject to customary blackout and suspension periods. Subject to customary
exceptions, Avnet has agreed not to transfer any of the Share Consideration for 180 days after closing of the Acquisition. Thereafter, subject to the terms of the Acquisition Agreement, Avnet may transfer up to 50% of the Share Consideration and
after the first anniversary of the closing of the Acquisition, Avnet may transfer the full amount of the Share Consideration.
Consummation of the Acquisition is subject to customary conditions, including, among others: (i) the absence of any law or order
prohibiting the transactions contemplated by the Acquisition Agreement or the Reorganization Agreement, (ii) expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act, as amended, and
obtaining certain regulatory approvals under the antitrust laws of Canada, Colombia, the European Union, Mexico, Switzerland and Turkey without the imposition of a burdensome condition (as defined in the Acquisition Agreement), (iii) completion
of the Reorganization in accordance with the Reorganization Agreement, (iv) the accuracy of representations and warranties set forth in the Acquisition Agreement and compliance with covenants set forth in the Acquisition Agreement (in each case,
subject to certain materiality qualifications) and (v) the absence of any material adverse effect with respect to the Acquired Business or Tech Data.
The parties to the Acquisition Agreement each have made customary representations and warranties for a transaction of this type. The
Acquisition Agreement also contains customary covenants, including a covenant requiring Avnet to operate the Acquired Business in the ordinary course of business consistent with past practice in all material respects during the period between the
execution of the Acquisition Agreement and the closing of the Acquisition.
Either party may terminate the Acquisition Agreement (i) by
the mutual consent of the parties, (ii) if the closing has not occurred by 5:00 p.m. on June 19, 2017, (iii) if a governmental authority issues a final, non-appealable order or takes any other action (a) enjoining, restraining or otherwise
prohibiting the transactions contemplated by the Acquisition Agreement or (b) constituting or imposing a burdensome condition
or (iv) if the other party has breached its representations, warranties or covenants, subject to customary materiality qualifications and cure rights. In addition, Tech Data may terminate
the Acquisition Agreement within 15 business days of delivery of the Acquired Business audited financial statements for the fiscal year ended July 2, 2016 (which Avnet is required to deliver to Tech Data prior to closing of the Acquisition),
if the amount of the line item operating income plus the absolute value of the amount of the line items (A) Depreciation expense (not to exceed $27,563,000), (B) Stock compensation expense and (C)
Restructuring, amortization, integration and other expenses for the fiscal year ended July 2, 2016 reflected in the Acquired Businesss audited financial statements is less than an agreed upon amount. Subject to certain
limitations and conditions set forth in the Acquisition Agreement, Tech Data and Avnet have agreed to indemnify each other for, among other things, breaches of representations, warranties and covenants contained in the Acquisition Agreement, and
certain tax liabilities.
In connection with the Acquisition, Tech Data has entered into the Reorganization Agreement, which provides for
the transfer of the Acquired Business to the Acquired Companies and their subsidiaries. The Reorganization Agreement governs certain aspects of the relationship between the parties thereto after the Reorganization, including provisions with
respect to release of claims, indemnification, access to financial and other information and access to and provision of records. The parties have mutual ongoing indemnification obligations following the Reorganization with respect to losses
related to the Acquired Business and Retained Business (as defined in the Acquisition Agreement), respectively.
The foregoing
description of the Acquisition Agreement and the Reorganization Agreement and the transactions contemplated thereby do not purport to be complete, and are qualified in their entirety by reference to the Acquisition Agreement and the Reorganization
Agreement. Copies of the Acquisition Agreement and the Reorganization Agreement are filed as Exhibit 2.1 and Exhibit 2.2 respectively hereto and are incorporated herein by reference.
In connection with the proposed Acquisition, Tech Data has obtained a commitment letter providing for a $3.1 billion senior unsecured bridge
facility (the Facility), subject to customary conditions, in order to finance a portion of the proposed Acquisition and, if necessary, refinance amounts under certain existing facilities and securitization facilities in the event that
proposed amendments in connection with the Acquisition are not obtained. Tech Data expects to issue approximately $1 billion in unsecured notes and incur $1 billion in term loans in lieu of drawing the Facility at close, with the balance of the
cash consideration to be paid using Tech Datas corporate revolver and from available cash.
The Acquisition Agreement and the Reorganization Agreement attached as exhibits hereto have been
included solely to provide investors and security holders with information regarding their respective terms. None of these agreements are intended to be a source of financial, business or operational information about the Acquired Business, Tech
Data, Avnet or their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the Acquisition Agreement and the Reorganization Agreement are made only for purposes of the applicable agreement and are made as
of specific dates; are solely for the benefit of the parties; are in specific cases subject to qualifications and limitations agreed upon by the parties in connection with negotiating the terms of the agreements, respectively, including being
qualified by confidential disclosures made for the purpose of allocating contractual risk between the parties instead of establishing matters as facts; and are subject to standards of materiality applicable to the contracting parties that differ
from those applicable to investors or security holders. Investors and security holders should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of the
Acquired Business, Tech Data, Avnet or their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Acquisition Agreement and the
Reorganization Agreement, which subsequent information may or may not be fully reflected in public disclosures.