EXHIBIT 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
Dated as of January 9, 2006
between
THE HOME DEPOT, INC.,
and
HUGHES SUPPLY, INC.
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TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER........................................................................2
Section 1.1 The Merger...............................................................2
Section 1.2 Closing..................................................................2
Section 1.3 Effective Time...........................................................2
Section 1.4 Effects of the Merger....................................................3
Section 1.5 Articles of Incorporation and By-laws of the Surviving Corporation.......3
Section 1.6 Directors and Officers of the Surviving Corporation......................3
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES; COMPANY STOCK OPTIONS...............................................3
Section 2.1 Effect on Capital Stock..................................................3
Section 2.2 Exchange of Certificates.................................................4
Section 2.3 Company Stock Awards.....................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................................7
Section 3.1 Organization, Standing and Corporate Power...............................7
Section 3.2 Capitalization...........................................................9
Section 3.3 Authority; Noncontravention; Voting Requirements........................10
Section 3.4 Governmental Approvals..................................................12
Section 3.5 Company SEC Documents; Undisclosed Liabilities..........................12
Section 3.6 Absence of Certain Changes..............................................14
Section 3.7 Legal Proceedings.......................................................14
Section 3.8 Compliance With Laws; Permits...........................................14
Section 3.9 Information Supplied....................................................14
Section 3.10 Tax Matters.............................................................15
Section 3.11 Employee Benefits and Labor Matters.....................................15
Section 3.12 Environmental Matters...................................................17
Section 3.13 Properties..............................................................18
Section 3.14 Opinion of Financial Advisor............................................20
TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 3.15 Brokers and Other Advisors..............................................20
Section 3.16 Company Rights Agreement................................................20
Section 3.17 State Statutes..........................................................20
Section 3.18 Material Contracts......................................................21
Section 3.19 Intellectual Property Matters...........................................22
Section 3.20 Insurance...............................................................22
Section 3.21 Ethical Practices.......................................................23
Section 3.22 Related Party Transactions..............................................23
Section 3.23 Standstill Agreements...................................................23
Section 3.24 No Other Representations or Warranties..................................23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT.........................................23
Section 4.1 Organization; Standing..................................................23
Section 4.2 Authority; Noncontravention.............................................24
Section 4.3 Governmental Approvals..................................................24
Section 4.4 Information Supplied....................................................25
Section 4.5 Ownership and Operations of Merger Sub..................................25
Section 4.6 Capital Resources.......................................................25
Section 4.7 Brokers and Other Advisors..............................................25
Section 4.8 Ownership of Shares.....................................................25
ARTICLE V ADDITIONAL COVENANTS AND AGREEMENTS..............................................26
Section 5.1 Preparation of the Proxy Statement; Shareholders Meeting................26
Section 5.2 Conduct of Business.....................................................27
Section 5.3 No Solicitation.........................................................30
Section 5.4 Reasonable Best Efforts.................................................35
Section 5.5 Public Announcements....................................................37
Section 5.6 Access to Information; Confidentiality..................................37
Section 5.7 Notification of Certain Matters.........................................38
Section 5.8 Indemnification and Insurance...........................................38
Section 5.9 Fees and Expenses.......................................................40
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 5.10 Rule 16b-3..............................................................40
Section 5.11 Employee Matters........................................................40
Section 5.12 Delisting...............................................................42
Section 5.13 Indebtedness............................................................42
ARTICLE VI CONDITIONS PRECEDENT.............................................................44
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger..............44
Section 6.2 Conditions to Obligations of Parent.....................................44
Section 6.3 Conditions to Obligations of the Company................................45
ARTICLE VII TERMINATION......................................................................45
Section 7.1 Termination.............................................................45
Section 7.2 Effect of Termination...................................................47
Section 7.3 Termination Fee.........................................................47
Section 7.4 Remedies................................................................48
ARTICLE VIII MISCELLANEOUS....................................................................49
Section 8.1 No Survival of Representations and Warranties...........................49
Section 8.2 Amendment or Supplement.................................................49
Section 8.3 Extension of Time, Waiver, Etc..........................................49
Section 8.4 Assignment..............................................................49
Section 8.5 Counterparts............................................................49
Section 8.6 Entire Agreement; No Third-Party Beneficiaries..........................50
Section 8.7 Governing Law; Jurisdiction; Waiver of Jury Trial.......................50
Section 8.8 Specific Enforcement....................................................50
Section 8.9 Notices.................................................................50
Section 8.10 Severability............................................................52
Section 8.11 Definitions.............................................................52
Section 8.12 Interpretation..........................................................55
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of January 9, 2006 (this
"Agreement"), is between The Home Depot, Inc., a Delaware corporation
("Parent"), and Hughes Supply, Inc., a Florida corporation (the "Company").
Certain capitalized terms used in this Agreement are used as defined in Section
8.11.
WHEREAS, the Board of Directors of Parent and the Board of Directors
of the Company, based on the recommendation of a special committee thereof
formed to evaluate the Company's strategic alternatives (the "Special
Committee"), have each unanimously approved and adopted this Agreement and the
merger of Merger Sub with and into the Company (the "Merger") in accordance with
the Florida Business Corporation Act (the "FBCA"), upon the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, Parent and the Company hereby agree as follows:
ARTICLE I
The Merger
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Section 1.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the FBCA, at the Effective
Time a newly formed wholly-owned subsidiary of Parent, to be incorporated in
Florida ("Merger Sub"), shall be merged with and into the Company, and the
separate corporate existence of Merger Sub shall thereupon cease, and the
Company shall be the surviving corporation in the Merger (the "Surviving
Corporation").
Section 1.2 Closing. The closing of the Merger (the "Closing") shall
take place at 10:00 a.m. (New York City time) on a date to be specified by the
parties (the "Closing Date"), which date shall be no later than the second
business day after satisfaction or waiver of the conditions set forth in Article
VI (other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions at such
time), at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York,
New York 10153, unless another time, date or place is agreed to in writing by
the parties hereto.
Section 1.3 Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date the parties shall file
with the Secretary of State of the State of Florida the articles of merger,
executed in accordance with, and in such form as is required by, the relevant
provisions of the FBCA (the "Articles of Merger"). The Merger shall become
effective upon the filing of the Articles of Merger or at such later time and
date as is agreed to by the parties hereto (the time and date at which the
Merger becomes effective is herein referred to as the "Effective Time").
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Section 1.4 Effects of the Merger. The Merger shall have the effects
set forth herein and in the applicable provisions of the FBCA. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
the properties, rights, privileges, powers and franchises of the Company and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
Section 1.5 Articles of Incorporation and By-laws of the Surviving
Corporation. At the Effective Time, the articles of incorporation of the Company
shall be amended and restated in their entirety to be identical (subject to
Section 5.8 hereof) to the articles of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, except that the name of the Surviving
Corporation shall remain Hughes Supply, Inc., until thereafter amended as
provided therein or by applicable Law. The by-laws of Merger Sub in effect
immediately prior to the Effective Time shall be the by-laws of the Surviving
Corporation until thereafter amended as provided therein or by applicable Law.
Section 1.6 Directors and Officers of the Surviving Corporation.
(a) Each of the parties hereto shall take all necessary action to
cause the directors of Merger Sub immediately prior to the Effective Time to be
the directors of the Surviving Corporation immediately following the Effective
Time, until their respective successors are duly elected or appointed and
qualified or their earlier death, resignation or removal in accordance with the
certificate of incorporation and by-laws of the Surviving Corporation.
(b) Each of the parties hereto shall take all necessary action to
cause the officers of the Company immediately prior to the Effective Time to be
the officers of the Surviving Corporation until their respective successors are
duly appointed and qualified or their earlier death, resignation or removal in
accordance with the articles of incorporation and by-laws of the Surviving
Corporation.
ARTICLE II
Effect of the Merger on the Capital Stock of the Constituent Corporations;
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Exchange of Certificates; Company Stock Options
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Section 2.1 Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Merger Sub, the Company or
the holders of any shares of common stock, par value $1.00 per share, of the
Company ("Company Common Stock") or any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each share of capital stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and become one validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation.
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(b) Cancellation of Treasury Stock and Parent-Owned Stock. Any shares
of Company Common Stock that are owned by the Company as treasury stock, and any
shares of Company Common Stock owned by Parent, Merger Sub or any Subsidiary of
the Company, shall be automatically canceled and shall cease to exist and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 2.1(b) and Company Common Stock
received pursuant to Section 2.1(a)), together with the associated Preferred
Share (as defined in the Rights Agreement) purchase rights (the "Rights") issued
under the Rights Agreement, dated as of May 20, 1998, between the Company and
American Stock Transfer & Trust Company, as rights agent (the "Rights
Agreement"), shall be converted into the right to receive $46.50 in cash,
without interest (the "Merger Consideration"). As of the Effective Time, all
such shares of Company Common Stock shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate (or evidence of shares in book-entry form) which immediately prior
to the Effective Time represented any such shares of Company Common Stock (each,
a "Certificate") shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration to be paid in consideration therefor
upon surrender of such Certificate in accordance with Section 2.2(b), without
interest.
Section 2.2 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall designate
a bank or trust company reasonably acceptable to the Company to act as agent for
the benefit of the holders of shares of Company Common Stock in connection with
the Merger (the "Paying Agent") to receive, on terms reasonably acceptable to
the Company, for the benefit of holders of shares of Company Common Stock, the
aggregate Merger Consideration to which holders of shares of Company Common
Stock shall become entitled pursuant to Section 2.1(c). The Paying Agent shall
also act as the agent for the Company's shareholders for the purpose of holding
the Certificates and shall obtain no rights or interests in the shares
represented by such Certificates. Parent shall deposit such aggregate Merger
Consideration with the Paying Agent at or prior to the Effective Time. Such
aggregate Merger Consideration deposited with the Paying Agent shall, pending
its disbursement to such holders, be invested by the Paying Agent as directed by
Parent or the Surviving Corporation; provided that Parent shall promptly replace
any funds deposited with the Paying Agent lost through any investment made
pursuant to this paragraph.
(b) Payment Procedures. Promptly after the Effective Time (but in no
event more than three business days thereafter), the Surviving Corporation shall
cause the Paying Agent to mail to each holder of record of Company Common Stock
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Paying Agent, and which shall be in such
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form and shall have such other customary provisions (including customary
provisions with respect to delivery of an "agent's message" with respect to
shares held in book-entry form) as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions (and such
other customary documents as may reasonably be required by the Paying Agent),
the holder of such Certificate shall be entitled to receive in exchange therefor
the Merger Consideration, without interest, for each share of Company Common
Stock formerly represented by such Certificate, and the Certificate so
surrendered shall forthwith be canceled. If payment of the Merger Consideration
is to be made to a Person other than the Person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that (x) the
Certificate so surrendered shall be properly endorsed or shall otherwise be in
proper form for transfer and (y) the Person requesting such payment shall have
paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a Person other than the registered holder of such
Certificate surrendered or shall have established to the reasonable satisfaction
of the Surviving Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive the Merger Consideration as contemplated by this
Article II, without interest, and any declared and unpaid dividends to which the
holder of such Certificate is entitled.
(c) Transfer Books; No Further Ownership Rights in Company Stock. The
Merger Consideration paid in respect of shares of Company Common Stock upon the
surrender for exchange of Certificates in accordance with the terms of this
Article II shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock previously represented by such
Certificates, and at the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of Company Common Stock that were outstanding immediately prior to the Effective
Time. From and after the Effective Time, the holders of Certificates that
evidenced ownership of shares of Company Common Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
shares of Company Common Stock, except as otherwise provided for herein or by
applicable Law. Subject to the last sentence of Section 2.2(e), if, at any time
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article II.
Lost, Stolen or Destroyed Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond, in
such reasonable amount as Parent may direct, as indemnity against any claim that
may be made against it with respect to such Certificate, the Paying Agent will
pay, in exchange for such lost, stolen or destroyed Certificate, the applicable
Merger Consideration to be paid in respect of the shares of Company Common Stock
formerly represented by such Certificate, as contemplated by this Article II.
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(e) Termination of Fund. At any time following the first anniversary
of the Closing Date, the Surviving Corporation shall be entitled to require the
Paying Agent to deliver to it any funds (including any interest received with
respect thereto) that had been made available to the Paying Agent and which have
not been disbursed to holders of Certificates, and thereafter such holders shall
be entitled to look only to Parent or the Surviving Corporation (subject to
abandoned property, escheat or other similar Laws) as general creditors thereof
with respect to the payment of any Merger Consideration that may be payable upon
surrender of any Certificates held by such holders, as determined pursuant to
this Agreement, without any interest thereon. Any amounts remaining unclaimed by
such holders at such time at which such amounts would otherwise escheat to or
become property of any Governmental Authority shall become, to the extent
permitted by applicable Law, the property of Parent, free and clear of all
claims or interest of any Person previously entitled thereto.
(f) No Liability. Notwithstanding any provision of this Agreement to
the contrary, none of the parties hereto, the Surviving Corporation or the
Paying Agent shall be liable to any Person for Merger Consideration delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar Law.
(g) Withholding Taxes. Parent, the Surviving Corporation and the
Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable to any Person who was a holder of shares of Company Common
Stock pursuant to this Agreement such amounts as may be required to be deducted
and withheld with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder (the "Code"), or under any provision of state, local or foreign tax
Law. To the extent amounts are so withheld and paid over to the appropriate
Governmental Authority, the withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the Person in respect of which such
deduction and withholding was made.
Section 2.3 Company Stock Awards. Prior to the Effective Time, the
Company shall take all actions necessary to provide that each option that
represents the right to acquire shares of Company Common Stock granted under the
Company Stock Plans (each, an "Option") outstanding immediately prior to the
Effective Time (whether or not then vested or exercisable) shall be cancelled
and terminated and converted at the Effective Time into the right to receive a
cash amount equal to the Option Consideration (as defined below) for each share
of Company Common Stock then subject to the Option. The Option Consideration
shall be paid as soon after the Closing Date as shall be practicable.
Notwithstanding the foregoing, Parent and the Company shall be entitled to
deduct and withhold from the Option Consideration otherwise payable such amounts
as may be required to be deducted and withheld with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. For purposes of this Agreement, "Option Consideration" means, with respect
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to any share of Company Common Stock issuable under a particular Option, an
amount equal to the excess, if any, of (i) the Merger Consideration per share of
Company Common Stock over (ii) the exercise price payable in respect of such
share of Company Common Stock issuable under such Option. All shares of Company
Common Stock that are restricted shares pursuant to Company Stock Plans
(including performance based restricted shares) ("Restricted Company Common
Stock") outstanding immediately prior to the Effective Time shall vest at the
Effective Time. As of the Effective Time, such Restricted Company Common Stock
shall be converted into the right to receive the Merger Consideration in
accordance with Section 2.1(c). For purposes of this Agreement, "Company Stock
Plans" means the Hughes Supply, Inc. Directors' Stock Option Plan, the Hughes
Supply, Inc. 1988 Stock Option Plan, the Hughes Supply, Inc. 1997 Executive
Stock Plan and the Hughes Supply, Inc. 2005 Executive Stock Plan, each as
amended.
SECTION 2.4 Adjustments. Notwithstanding any provision of this Article
II to the contrary, if between the date of this Agreement and the Effective Time
the outstanding shares of Company Common Stock or any of the Rights shall have
been changed into a different number of shares or a different class by reason of
the occurrence or record date of any stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange of shares or
similar transaction, the Merger Consideration shall be appropriately adjusted to
reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination, exchange of shares or similar transaction.
ARTICLE III
Representations and Warranties of the Company
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The Company represents and warrants to Parent that except as set
forth in the disclosure schedule delivered by the Company to Parent immediately
prior to the execution of this Agreement (the "Company Disclosure Schedule")
(any matter set forth under any particular section or subsection of the Company
Disclosure Schedule shall also be deemed disclosed with respect to any other
section or subsection of Article III or to Section 5.2 of this Agreement, in
each case to the extent the relevance of such matter to such section or
subsection is reasonably apparent from the text of such disclosure) or the
consolidated financial statements, including any footnotes thereto, of the
Company included in the Company SEC Documents (as hereinafter defined) filed
prior to the date of this Agreement (the "Filed Company SEC Documents"):
Section 3.1 Organization, Standing and Corporate Power.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the Laws of the State of Florida and has all requisite
corporate power and authority necessary to own or lease all of its properties
and assets and to carry on its business as it is now being conducted. The
Company is duly licensed or qualified to do business and is in good standing in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
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licensed, qualified or in good standing (or equivalent status), individually or
in the aggregate, has not had and would not reasonably be expected to have a
Material Adverse Effect (as defined below) on the Company ("Company Material
Adverse Effect"). For purposes of this Agreement, "Material Adverse Effect"
shall mean, with respect to any party, any change, event, development or
occurrence that is materially adverse to (A) the ability of such party to timely
consummate the Transactions or (B) the results of operations, financial
condition or assets of such party and its Subsidiaries taken as a whole, other
than changes, events, developments or occurrences arising out of, resulting from
or attributable to (i) changes in conditions in the United States or the global
economy or the capital or financial or markets generally, including changes in
interest or exchange rates, fluctuating commodity prices and unexpected product
shortages, (ii) changes in general legal, regulatory, political, economic or
business conditions or changes in GAAP that, in each case, generally affect
industries in which such party and its Subsidiaries conduct business, (iii) the
negotiation and announcement of this Agreement and the identity of Parent and
its Affiliates, including the impact thereof on relationships, contractual or
otherwise, with customers, suppliers, distributors, partners or employees, (iv)
acts of war, sabotage or terrorism, or any escalation or worsening of any such
acts of war, sabotage or terrorism or (v) hurricanes, floods, earthquakes or
other natural disasters (in the case of unexpected product shortages referred to
in clause (i) and each of clauses (ii), (iv) and (v), other than to the extent
any change, event, development or occurrence has had or would reasonably be
expected to have a disproportionately adverse effect on such party and its
Subsidiaries as generally compared to other participants in the industries in
which such party and its Subsidiaries conduct business).
(b) Exhibit 21.1 of the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 2005, together with Schedule 3.1(b) of the Company
Disclosure Schedule, sets forth a true and complete list of each of the
Company's Subsidiaries, as of the date hereof. Each of the Company's
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has all requisite corporate or
other power and authority necessary to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, except as,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect. Each of the Company's
Subsidiaries is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except where the failure to
be so licensed, qualified or in good standing (or equivalent status),
individually or in the aggregate, has not had and would not reasonably be
8
expected to have a Company Material Adverse Effect. All the outstanding shares
of capital stock of, or other equity interests in, each such Subsidiary (except
for directors' qualifying shares or the like) are owned directly or indirectly
by the Company free and clear of liens, pledges, security interests and transfer
restrictions or other encumbrances ("Liens"), except for such transfer
restrictions of general applicability as may be provided under the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder
(the "Securities Act"), and other applicable securities Laws. The Company does
not own of record or beneficially (within the meaning of Rule 13d-3 of the
Exchange Act), any material equity or similar interest in, or any material
interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any other Person.
(c) The Company has made available to Parent prior to the date hereof
(i) complete and correct copies of the articles of incorporation and by-laws of
the Company and each of its Subsidiaries, as amended to the date of this
Agreement (the "Company Charter Documents") and (ii) the minutes (or, in the
case of draft minutes, the most recent drafts thereof) of all meetings of the
Company's stockholders, Board of Directors and each committee of the Board of
Directors (other than the Special Committee) held since February 1, 2002 through
the date hereof.
Section 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
200,000,000 shares of Company Common Stock par value $1.00 per share and
10,000,000 shares of preferred stock, no par value ("Company Preferred Stock").
At the close of business on December 31, 2005, (i) 66,877,913 shares of Company
Common Stock were issued and outstanding, which includes 2,079,423 shares
subject to outstanding grants of Restricted Company Common Stock and 850,462
shares held by the Hughes Supply, Inc. Cash or Deferred Profit Sharing Plan and
Trust, (ii) no shares of Company Common Stock were held by the Company in its
treasury, (iii) 4,622,214 shares of Company Common Stock were reserved for
issuance under the Company Stock Plans (of which 2,676,081 shares were subject
to outstanding Options granted under the Company Stock Plans) and (iv) no shares
of Company Preferred Stock were issued or outstanding. All outstanding shares of
Company Common Stock and all outstanding shares of capital stock or other equity
interests of each of the Company's Subsidiaries have been duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive and
similar rights in favor of third parties. Since December 31, 2005, the Company
has not issued, or entered into any agreement or arrangement to issue, any
shares of its capital stock, or entered into any agreement or arrangement to
issue securities convertible into or exchangeable or exercisable for any shares
of its capital stock, other than or pursuant to Options referred to above that
are outstanding as of the date of this Agreement or are hereafter issued without
violation of Section 5.2 hereof. All dividends on the Company Common Stock that
have been declared or have accrued prior to the date hereof have been paid in
full to the Company's paying agent.
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(b) Schedule 3.2(b) of the Company Disclosure Schedule contains a
true, accurate and complete list, as of December 31, 2005, of the number of
outstanding Options, the grant date of each such Option, the number of shares of
Company Common Stock that holders of such Options are entitled to receive upon
the exercise of the Options, the corresponding exercise price, and the
expiration date of such Option. Except for the Options set forth in such
Schedule and the shares of Restricted Company Common Stock referenced in Section
3.2(a)(i), there are no outstanding (i) securities of the Company or any of its
Subsidiaries convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in the Company or any of its
Subsidiaries, (ii) options, restricted stock, warrants, rights or other
agreements or commitments to acquire from the Company or any of its
Subsidiaries, or obligations of the Company or any of its Subsidiaries to issue
or transfer, any capital stock, voting securities or other ownership interests
(or securities convertible into or exchangeable for capital stock or voting
securities or other ownership interests) in the Company or any of its
Subsidiaries, (iii) obligations of the Company or any of its Subsidiaries to
grant, extend or enter into any subscription, warrant, right, convertible or
exchangeable security or other similar agreement or commitment relating to any
capital stock, voting securities or other ownership interests in the Company or
any of its Subsidiaries or (iv) obligations of the Company or any of its
Subsidiaries to make any payment based on the market price or value of any
securities of the Company or any of its Subsidiaries. There are no (i)
outstanding obligations of the Company or any of its Subsidiaries to purchase,
redeem or otherwise acquire any outstanding securities of the Company or any of
its Subsidiaries or (ii) voting trusts or other agreements or understandings to
which the Company or any of its Subsidiaries is a party with respect to the
voting of capital stock of the Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries has any obligation or commitment to provide
financing to or make any debt or equity investment in any entity other than
wholly-owned Subsidiaries of the Company.
Section 3.3 Authority; Noncontravention; Voting Requirements.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and
to consummate the Transactions, subject in the case of the consummation of the
Merger to obtaining the Company Shareholder Approval. The execution, delivery
and performance by the Company of this Agreement, and the consummation by it of
the Transactions, have been duly authorized by all necessary corporate action
and no other corporate action on the part of the Company is necessary to
authorize the execution, delivery and performance by the Company of this
Agreement and the consummation by it of the Transactions, subject in the case of
the consummation of the Merger to obtaining the Company Shareholder Approval.
This Agreement has been duly executed and delivered by the Company and, assuming
due authorization, execution and delivery hereof by Parent, constitutes a legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar Laws of general application affecting or relating to the
enforcement of creditors' rights generally and (ii) is subject to general
principles of equity, whether considered in a proceeding at Law or in equity
(the "Bankruptcy and Equity Exception").
10
(b) The Special Committee, at a meeting duly held and called, has
unanimously recommended the approval and adoption of this Agreement by the
Company's Board of Directors. The Company's Board of Directors, based upon the
recommendation of the Special Committee, at a meeting duly called and held, has
unanimously (i) approved and adopted this Agreement and approved the
Transactions, including the Merger, (ii) determined that the Merger is advisable
and fair to and in the best interests of, the shareholders of the Company, (iii)
consented to this Agreement and the transactions contemplated hereby in
accordance with the terms and provisions of the Confidentiality Agreement, dated
as of October 28, 2005, between Parent and the Company (as it may be amended
from time to time, the "Confidentiality Agreement") and (iv) resolved to submit
this Agreement to the shareholders of the Company for approval, file the Proxy
Statement with the SEC and, subject to Section 5.3 hereof, recommend that the
shareholders of the Company approve this Agreement.
(c) Neither the execution, delivery and performance of this Agreement
by the Company nor the consummation by the Company of the Transactions, nor
compliance by the Company with any of the terms or provisions hereof, will (i)
conflict with or violate any provision of the Company Charter Documents or (ii)
assuming that the authorizations, consents and approvals referred to in Section
3.4 (and, in the case of the consummation of the Merger, the Company Shareholder
Approval) are obtained and the filings referred to in Section 3.4 are made, (x)
violate any Law, judgment, writ or injunction of any Governmental Authority
applicable to the Company or any of its Subsidiaries or any of their respective
assets, properties or rights, (y) violate or constitute a default (or an event
which with notice or lapse of time or both would become a default) or give rise
to any right of termination, cancellation, modification or acceleration under
any of the terms, conditions or provisions of any loan or credit agreement,
debenture, note, bond, mortgage, indenture, deed of trust, lease, license,
contract or other instrument or agreement (each, a "Contract") to which the
Company or any of its Subsidiaries is a party or by which any of their assets,
properties or rights are bound or (z) result in the creation of any Lien upon
any of the assets, properties or rights of the Company or any of its
Subsidiaries other than Permitted Liens, except, in the case of clause (ii), for
such violations, defaults, rights or Liens, as, individually or in the
aggregate, have not had and would not reasonably be expected to have a Company
Material Adverse Effect.
(d) The affirmative vote (in person or by proxy) of the holders of at
least a majority of the outstanding shares of Company Common Stock at the
Company Shareholders Meeting, or any adjournment or postponement thereof, in
favor of the adoption of this Agreement (the "Company Shareholder Approval") is
the only vote or approval of the holders of any class or series of capital stock
of the Company or any of its Subsidiaries which is necessary to adopt this
Agreement and approve the Merger.
11
Section 3.4 Governmental Approvals. Except for (i) the filing with
the SEC of a proxy statement relating to the Company Shareholders Meeting (as
amended or supplemented from time to time, the "Proxy Statement"), and other
filings required under, and compliance with other applicable requirements of,
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"), and the rules of the NYSE, (ii) the
filing of the Articles of Merger with the Secretary of State of the State of
Florida pursuant to the FBCA and (iii) filings required under, and compliance
with other applicable requirements of, the HSR Act and any other applicable
Antitrust Law, no consents or approvals of, or filings, declarations or
registrations with, any Governmental Authority are necessary for the execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the Transactions, other than such other consents, approvals,
filings, declarations or registrations that, if not obtained, made or given,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
Section 3.5 Company SEC Documents; Undisclosed Liabilities.
(a) The Company and each of its Subsidiaries have timely filed all
required registration statements, reports, schedules, forms, certifications and
other documents with the Securities and Exchange Commission (the "SEC") since
February 1, 2004 (collectively, and in each case including all exhibits and
schedules thereto and documents incorporated by reference therein, the "Company
SEC Documents"). As of their respective filing dates, the Company SEC Documents
complied as to form in all material respects with the requirements of the
Exchange Act and the Securities Act and all other federal securities Laws
applicable to such Company SEC Documents, and none of the Company SEC Documents
as of such respective dates contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Company has made available to Parent prior
to the date hereof copies of all correspondence between the SEC and the Company
or any Company Subsidiary, since February 1, 2004 until the date hereof.
(b) The consolidated financial statements of the Company included in
the Company SEC Documents have been prepared in accordance with GAAP (except, in
the case of unaudited interim statements, as indicated in the notes thereto)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations, cash
flows and shareholders' equity (when required to be included in any such Company
SEC Document) for the periods then ended (subject, in the case of unaudited
interim statements, to normal year-end audit adjustments).
12
(c) Neither the Company nor any of its Subsidiaries has any
liabilities, whether accrued, absolute, fixed, contingent or otherwise, whether
due or to become due, whether or not known, and whether or not required to be
reflected or reserved against on a consolidated balance sheet of the Company
prepared in accordance with GAAP or the notes thereto, except liabilities (i)
reflected or reserved against on the balance sheet of the Company and its
Subsidiaries as of October 31, 2005 (the "Balance Sheet Date") (including the
notes thereto) included in the Filed Company SEC Documents, (ii) incurred after
the Balance Sheet Date in the ordinary course of business consistent with past
practice, (iii) as expressly contemplated by this Agreement or set forth in the
Company Disclosure Schedules or (iv) as, individually or in the aggregate, have
not had and would not reasonably be expected to have a Company Material Adverse
Effect.
(d) The Company has established and maintains effective internal
control over financial reporting (and since February 1, 2004 has had no material
weaknesses with respect to its internal control over financial reporting) and
disclosure controls and procedures (as such terms are defined in Rule 13a-15 and
Rule 15d-15 under the Exchange Act) sufficient to provide reasonable assurances
regarding the reliability of financial reporting and the preparation of
financial statements in accordance with GAAP; such disclosure controls and
procedures are designed to ensure that material information relating to the
Company, including its consolidated Subsidiaries, required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Company's principal executive officer and
its principal financial officer by others within those entities to allow timely
decisions regarding required disclosure; and such disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms. The Company's principal executive officer and its
principal financial officer have disclosed, based on their most recent
evaluation, to the Company's outside auditors and the audit committee of the
Board of Directors of the Company (x) all significant deficiencies in the design
or operation of internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data and have
identified for the Company's outside auditors any material weaknesses in
internal controls and (y) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company's
internal controls. The principal executive officer and the principal financial
officer of the Company have made all certifications required by the
Sarbanes-Oxley Act, the Exchange Act and any related rules and regulations
promulgated by the SEC with respect to the Company SEC Documents, and the
statements contained in such certifications are complete and correct. Any
written notifications the Company has received of a "reportable condition" or
"material weakness" (each as defined in the Statement of Auditing Standards No.
60, as in effect on the date hereof) in the Company's internal controls have
been made available to Parent prior to the date hereof.
13
Section 3.6 Absence of Certain Changes. Since the Balance Sheet Date,
(a) the Company, together with its Subsidiaries, has carried on and operated its
businesses in all material respects in the ordinary course of business
consistent with past practice, (b) there have not been any events, changes,
conditions, developments or occurrences that, individually or in the aggregate,
have had or would be reasonably be expected to have a Company Material Adverse
Effect and (c) neither the Company nor any of its Subsidiaries have taken any
action that, if taken after the date hereof, would constitute a breach of
Section 5.2(b)(ii), (iii), (iv), (v), (vi), (vii), (x), (xi), (xiii) or (xiv)
(or Section 5.2(b)(xvi) with respect to any such clauses) hereof.
Section 3.7 Legal Proceedings. There is no pending or, to the
Knowledge of the Company, threatened, legal or administrative proceeding, claim,
suit, action or, to the Knowledge of the Company, is there any pending
investigation against or relating to the Company or any of its Subsidiaries (or
any of their respective assets or properties), nor is there any injunction,
order, writ, judgment, ruling or decree imposed upon the Company or any of its
Subsidiaries, in each case, by or before any Governmental Authority that,
individually or in the aggregate, has had or would reasonably be expected to
have a Company Material Adverse Effect or, as of the date hereof, that
challenges or relates to the proposed sale of the Company, this Agreement or any
of the Transactions.
Section 3.8 Compliance With Laws; Permits. The Company and its
Subsidiaries are in compliance with all laws, statutes, ordinances, codes,
rules, regulations, decrees and orders of Governmental Authorities
(collectively, "Laws") applicable to the Company or any of its Subsidiaries or
any of their respective properties and assets, except for such non-compliance
as, individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect. The Company and each of its
Subsidiaries hold all licenses, franchises, permits, certificates, approvals and
authorizations from Governmental Authorities necessary for the lawful conduct of
their respective businesses (collectively, "Permits"), except where the failure
to hold the same, individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect. The Company
and its Subsidiaries are in compliance with the terms of all Permits, except for
such non-compliance as, individually or in the aggregate, has not had and would
not reasonably be expected to have a Company Material Adverse Effect. The
Company and its Subsidiaries are in compliance in all material respects with all
applicable listing and corporate governance rules and regulations of the NYSE.
Section 3.9 Information Supplied. The Proxy Statement will not, on
the date it is first mailed to shareholders of the Company and at the time of
the Company Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Proxy Statement will comply as to
form in all material respects with the applicable requirements of the Exchange
Act. Notwithstanding the foregoing, the Company makes no representation or
warranty with respect to information supplied by or on behalf of Parent or
Merger Sub expressly for inclusion or incorporation by reference in the Proxy
Statement.
14
Section 3.10 Tax Matters. Except for those matters that would not
reasonably be expected to have a Company Material Adverse Effect: (i) each of
the Company and its Subsidiaries has timely filed, or has caused to be timely
filed on its behalf (taking into account any extension of time within which to
file), all Tax Returns required to be filed by it, and all such filed Tax
Returns are correct and complete in all respects; (ii) all Taxes shown to be due
on such Tax Returns have been timely paid and all Taxes payable (whether or not
actually shown on such Tax Returns) have, to the Knowledge of the Company, been
adequately reserved for in the Company SEC Documents; (iii) no deficiency with
respect to Taxes has been proposed, asserted or assessed against the Company or
any of its Subsidiaries, which has not been fully paid or adequately reserved in
the Filed Company SEC Documents; (iv) no audit or other administrative or court
proceedings are pending with any Governmental Authority with respect to Taxes of
the Company or any of its Subsidiaries, and no written notice of threatened or
proposed audit or proceeding has been received; (v) there are no Liens for Taxes
other than Permitted Liens upon any assets of the Company or any of its
Subsidiaries and (vi) since the Balance Sheet Date, neither the Company nor any
of its Subsidiaries has incurred any liability for Taxes other than in the
ordinary course of business.
Section 3.11 Employee Benefits and Labor Matters.
(a) Schedule 3.11(a) of the Company Disclosure Schedule lists (i)
each "employee benefit plan" (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), whether or not
subject to ERISA, and (ii) all employment, consulting, and severance plans and
agreements and all bonus or other incentive compensation, stock purchase, equity
or equity-based compensation, deferred compensation, change in control,
vacation, salary continuation, profit-sharing, fringe benefit, life insurance
and other similar plans, programs, and agreements with respect to which the
Company or any of its Subsidiaries has any obligation or liability, contingent
or otherwise ((i) and (ii) collectively, the "Company Plans").
(b) The Company has made available to Parent prior to the date
hereof, with respect to each Company Plan (if applicable), a correct and
complete copy of the most recent (i) document constituting the Company Plan or,
with respect to any such Company Plan that is not in writing, a written
description thereof, and any modifications thereto, (ii) annual report on Form
5500, including all schedules thereto, (iii) summary plan description for each
Company Plan and any modifications thereto, (iv) trust agreement and insurance
or group annuity contract, (v) annual report, financial statement and/or
actuarial report, and (vi) determination letter from the Internal Revenue
Service.
15
(c) Each Company Plan has been maintained in all respects in
accordance with its terms and in compliance with the applicable provisions of
ERISA, the Code and all other applicable Laws and, to the Knowledge of the
Company, the terms of each Company Plan are in compliance with all such
applicable Laws, except in each case for any instances of noncompliance that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(d) All contributions, premiums and benefit payments under or in
connection with the Company Plans that are required to have been made as of the
date hereof in accordance with the terms of the Company Plans have been timely
made. Other than routine claims for benefits, there are no actions pending, or
to the Knowledge of the Company, threatened with respect to any Company Plan
that, individually or in the aggregate, have had or would reasonably be expected
to have a Company Material Adverse Effect.
(e) Each Company Plan that is intended to qualify under Section 401
and/or 409 of the Code (i) has received a favorable determination letter to such
effect and (ii) no facts, circumstances or events have occurred since the date
of the most recent determination letter or application therefor relating to any
such Company Plan that, individually or in the aggregate, have caused or would
reasonably be expected to cause the loss of such qualification which has had or
would reasonably be likely to result in a Company Material Adverse Effect.
(f) None of the Company Plans is subject to Title IV of ERISA or is a
multi-employer plan or a multiple employer plan described in Section 3(37) or
Section 4063/4064, respectively, of ERISA, and neither the Company nor any of
its Subsidiaries to its and their Knowledge has any obligation to contribute to
any such multi-employer plan or has any withdrawal liability associated with any
such multi-employer plan. There have been no non-exempt "prohibited
transactions" (as such term is defined in Section 406 of ERISA or Section 4975
of the Code) with respect to any Company Plan that, individually or in the
aggregate, have had or would reasonably be expected to have a Company Material
Adverse Effect.
(g) There are no strikes, work slowdowns, work stoppages, lockouts,
arbitrations, grievances, unfair labor practice charges or complaints pending
or, to the Knowledge of the Company, threatened with respect to the Company or
any of its Subsidiaries, and neither the Company nor any of its Subsidiaries has
experienced any such strikes, slowdowns, work stoppages, lockouts, arbitrations,
grievances, unfair labor practice charges or complaints within the past three
years, that, individually or in the aggregate, have had or would reasonably be
expected to have a Company Material Adverse Effect. Each of the Company and its
Subsidiaries is in compliance with all applicable Laws relating to labor,
employment, termination of employment or similar matters and has not engaged in
any unfair labor practices or similar prohibited practices except in each case
for any instances of noncompliance that, individually or in the aggregate, have
not had and would not reasonably be expected to have a Company Material Adverse
Effect.
16
(h) Neither the Company nor any of the Subsidiaries is a party to or
is bound by any labor or collective bargaining agreement, and, as of the date
hereof and to the Knowledge of the Company, there is no organizational
campaigns, petitions or other unionization activities seeking recognition of a
collective bargaining unit with respect to, or otherwise attempting to
represent, any of the employees of the Company or any of its Subsidiaries.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the Transactions will, either alone or in conjunction with any
other event, (i) result in any payment becoming due, or increase the amount of
any compensation due, to any current or former director, individual who is an
independent contractor or employee of the Company or its Subsidiaries, (ii)
increase the amount or value of any benefits or compensation otherwise payable
under any Company Plan or (iii) result in the acceleration of the time of
payment, vesting or funding of any such compensation or benefits.
Section 3.12 Environmental Matters.
(a) Except for those matters that, individually or in the aggregate,
have not had and would not reasonably be expected to have a Company Material
Adverse Effect, (i) each of the Company and its Subsidiaries is and has been in
compliance with all applicable Environmental Laws (as defined below), (ii) there
is no notice of violation in writing, investigation, suit, claim, action or
proceeding relating to or arising under Environmental Laws that is pending or,
to the Knowledge of the Company, threatened against the Company or any of its
Subsidiaries or any real property currently or, to the Knowledge of the Company,
formerly owned, operated or leased by the Company or any of its Subsidiaries,
(iii) neither the Company nor any of its Subsidiaries has received any notice
of, or entered into, any order, settlement, judgment, injunction or decree (or,
to the Knowledge of the Company, has agreed to perform or entered into any
contractual obligation with a reasonable likelihood of requiring a material
payment) involving uncompleted, outstanding or unresolved obligations,
liabilities or requirements relating to or arising under Environmental Laws; and
(iv) to the Knowledge of the Company, no Hazardous Materials have been released
at, on, above, under or from any properties currently or formerly owned, leased
or operated by the Company or any of its Subsidiaries, nor are there any
conditions or circumstances at any properties currently or formerly owned,
leased or operated by the Company that have or would reasonably be expected to
give rise to material liability for the Company or any of its Subsidiaries under
any Environmental Law.
(b) To the Knowledge of the Company, copies of all material
environmental and health and safety reports or assessments or other material
communications or documentation concerning environmental, health and safety
matters in the Company's possession, as of the date hereof, relating to the
Company and any of its Subsidiaries and any real property owned, operated or
leased by the Company or any of its Subsidiaries, have been made available to
Parent prior to the date hereof, to the extent any of the issues identified in
any such reports, assessments or other communications or documentation would
reasonably be expected to result in a material liability to the Company or any
of its Subsidiaries.
17
(c) For purposes of this Agreement, "Environmental Laws" shall mean
all applicable Laws relating to (i) the protection or remediation of the
environment, including soil and subsurface soil, surface water, groundwater,
drinking water, indoor and ambient air, and natural resources, (ii) human health
and safety as affected by exposure to Hazardous Materials, or (iii) the
presence, use, management, assessment, remediation, transportation, treatment,
storage, disposal or recycling of any Hazardous Materials.
(d) For purposes of this Agreement, "Hazardous Materials" shall mean
any material, substance, or waste defined or regulated as hazardous, toxic, a
pollutant, a contaminant or words of similar meaning, including without
limitation, petroleum and petroleum byproducts and any fraction thereof,
asbestos and asbestos containing material, mold of the concentrations and levels
that would reasonably be likely to adversely affect human health, radon or
polychlorinated biphenyls, in non-utility owned electrical equipment.
Section 3.13 Properties.
(a) Schedule 3.13(a) of the Company Disclosure Schedule contains a
true and complete list of (i) all real property owned by the Company or any of
its Subsidiaries where revenues attributable to each such real property site
exceeded $20,000,000 in the Company's last completed fiscal year and (ii) all
Material Real Property owned by the Company (collectively, the "Owned Real
Property") and for each parcel of Owned Real Property, identifies the correct
street address and current use (including business unit, if applicable) of such
Owned Real Property. Neither the Company nor any of its Subsidiaries has
received any notice of any, and to the Knowledge of the Company there is no,
default under any restrictive covenants, restrictions and conditions affecting
the Owned Real Property and there has not occurred any event that with the lapse
of time or the giving of notice or both would constitute such a default under
any such restrictive covenants, restrictions or conditions, except as,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(b) Schedule 3.13(b) of the Company Disclosure Schedule contains a
true and complete list of (i) all real property leased, subleased, licensed or
otherwise used or occupied (whether as a tenant, subtenant or pursuant to other
occupancy arrangements) by the Company or any of its Subsidiaries or which the
Company or any of its Subsidiaries has the right to use or occupy where revenues
attributable to each such real property site exceeded $20,000,000 in the
Company's last completed fiscal year and (ii) all Material Real Property leased,
subleased, licensed or otherwise used or occupied (whether as a tenant,
subtenant or pursuant to other occupancy arrangements) by the Company or any of
its Subsidiaries or which the Company or any of its Subsidiaries has the right
18
to use or occupy (collectively, including the improvements thereon, the "Leased
Real Property"), and for each Leased Real Property, identifies the correct
street address and current use (including business unit, if applicable) of such
Leased Real Property. True and complete copies of all agreements (including all
material written modifications, amendments, supplements, waivers and side
letters thereto) under which the Company or any Subsidiary is the landlord,
sublandlord, tenant, subtenant, or occupant (each a "Real Property Lease") that
have not been terminated or expired as of the date of this Agreement have been
made available to Parent prior to the date hereof.
(c) Except as, individually or in the aggregate, has not had and
would not reasonably be expected to have a Company Material Adverse Effect, the
Company and/or its Subsidiaries have good and marketable fee simple title to all
Owned Real Property and valid leasehold estates in all Leased Real Property free
and clear, in each case, of all Liens other than Permitted Liens.
(d) Except as, individually or in the aggregate, has not had and
would not reasonably be expected to have a Company Material Adverse Effect,
other than the Real Property Leases, none of the Owned Real Property or the
Leased Real Property is subject to any lease, sublease, license or other
agreement granting to any other Person any right to the use, occupancy or
enjoyment of such Owned Real Property or Leased Real Property or any part
thereof.
(e) Except as, individually or in the aggregate, has not had and,
would not reasonably be expected to have a Company Material Adverse Effect, each
Real Property Lease is in full force and effect and constitutes the valid and
legally binding obligation of the Company or its Subsidiaries, enforceable in
accordance with its terms (subject to the Bankruptcy and Equity Exception), and
there is no material default under any Real Property Lease either by the Company
or its Subsidiaries party thereto or, to the Knowledge of the Company, by any
other party thereto.
(f) Except as, individually or in the aggregate, has not had and,
would not reasonably be expected to have a Company Material Adverse Effect,
there does not exist any violations of building codes or pending condemnation or
eminent domain proceedings that affect any Owned Real Property or, to the
Knowledge of the Company, any such proceedings that affect any Leased Real
Property or, to the Knowledge of the Company, any threatened condemnation or
eminent domain proceedings that affect any Owned Real Property or Leased Real
Property, and neither the Company nor its Subsidiaries have received any written
notice of the intention of any Governmental Authority or other Person to take or
use any Owned Real Property or Leased Real Property.
(g) Except as, individually or in the aggregate, has not had and
would not reasonably be expected to have a Company Material Adverse Effect, the
buildings and improvements on the Owned Real Property and the Leased Real
Property are in good condition and in a state of good and working maintenance
and repair, ordinary wear and tear excepted.
19
(h) Except as, individually or in the aggregate, has not had and
would not reasonably be expected to have a Company Material Adverse Effect, the
Company and each of its Subsidiaries are in possession of and have good title
to, or have valid leasehold interests in, all tangible personal property used in
the business of the Company and each of its Subsidiaries, respectively, and all
such tangible personal property is owned by the Company or any of its
Subsidiaries, free and clear of all Liens other than Permitted Liens, or is
leased under a valid and subsisting lease, and in any case, is in good working
order and condition, ordinary wear and tear excepted.
Section 3.14 Opinion of Financial Advisor. The Board of Directors of
the Company has received the opinion of Lehman Brothers Inc., dated the date of
this Agreement, to the effect that, as of such date, and subject to the various
assumptions and qualifications set forth therein, the consideration to be
received in the Merger by holders of the Company Common Stock is fair from a
financial point of view to holders of such shares.
Section 3.15 Brokers and Other Advisors. Except for Lehman Brothers
Inc., the fees and expenses of which will be paid by the Company and a true and
correct copy of whose engagement letter has been made available to Parent prior
to the date hereof, no broker, investment banker, financial advisor or other
Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission, or the reimbursement of expenses, in connection with
the Transactions based upon arrangements made by or on behalf of the Company or
any of its Subsidiaries.
Section 3.16 Company Rights Agreement. The Company has taken all
actions necessary (subject only to execution by the Rights Agent, which the
Company shall cause to take place as soon as reasonably practicable on the date
hereof) to (a) render the Rights Agreement inapplicable to this Agreement and
the Transactions, (b) ensure that (i) none of Parent, Merger Sub or any other
Subsidiary of Parent is or may be reasonably expected to become an Acquiring
Person (as defined in the Rights Agreement) pursuant to the Rights Agreement as
a result of this Agreement or the transactions contemplated hereby and (ii) a
Distribution Date, a Triggering Event or a Share Acquisition Date (as such terms
are defined in the Rights Agreement) does not occur, in the case of clauses (i)
and (ii), by reason of the execution of this Agreement or the consummation of
the Transactions, and (c) provide that the Final Expiration Date (as defined in
the Rights Agreement) shall occur immediately prior to the Effective Time
without any payment being made in respect thereof. The Company has made
available to Parent prior to the date hereof a true and correct copy of the
Rights Agreement and all amendments thereto and exemptions, redemptions and
waivers thereunder.
Section 3.17 State Statutes. Assuming the representations and
warranties of Parent set forth in Section 4.8 of this Agreement are true and
correct in all respects, Section 607.0901 (Affiliated Transactions) and Section
607.0902 (Control-Share Acquisitions) of the FBCA are not applicable to the
Merger, this Agreement and the transactions contemplated hereby either because
20
(i) such statutes are not applicable by their terms or (ii) all actions
necessary to exempt the Company, Parent, Merger Sub, their Affiliates, the
Merger, this Agreement and the transactions contemplated hereby from such
statutes have been taken. To the Knowledge of the Company, no other state
takeover, "moratorium," "fair price," "affiliate transaction" or similar statute
or regulation under any applicable Law applies or purports to apply to any of
the Transactions.
Section 3.18 Material Contracts. Schedule 3.18 of the Company
Disclosure Schedule contains a true and complete list of all active Contracts
(other than purchase orders and invoices) to which the Company or any of its
Subsidiaries is a party (a) which is a joint venture, partnership or other
similar agreement involving co-investment with a third party; (b) except for any
Contract which has been filed as an exhibit to any Company SEC Document, under
which the Company or any of its Subsidiaries has created, incurred, assumed or
guaranteed indebtedness for borrowed money, or any capitalized lease obligation,
or any agreement under which it has granted a Lien on any of its assets,
tangible or intangible (but with a value in excess of $5,000,000), or any
currency or interest rate swap, collar or hedge agreement; (c) whereby the
Company or any of its Subsidiaries has an obligation to make an investment in or
loan to any Person in excess of $5,000,000; (d) that contains a minimum purchase
requirement for the Company and its Subsidiaries to purchase during the 12-month
period immediately following, or pursuant to which the Company and its
Subsidiaries have purchased during the 12-month period immediately preceding,
the Balance Sheet Date, in the aggregate, a minimum of $30,000,000 of goods
and/or services on an annual basis; (e) that contains a minimum supply
commitment for the Company and its Subsidiaries to sell during the 12-month
period immediately following, or pursuant to which the Company and its
Subsidiaries have sold during the 12-month period immediately preceding, the
Balance Sheet Date, in the aggregate, a minimum of $30,000,000 of goods and/or
services on an annual basis; (f) that contains covenants restricting or limiting
the ability of the Company, any of its Subsidiaries or any of their Affiliates
(including, without limitation, Parent or any of its Affiliates from and after
the Closing) to compete in any business or with any person or in any geographic
area; (g) that contains any indemnification rights or obligations, or credit
support relating to such indemnification rights or obligations, where the
contingent rights or obligations reasonably would be expected to exceed
$5,000,000; (h) to which any agency or department of the United States federal
government is a counterparty; or (i) for the lease of personal property to or
from any Person providing for lease payments in excess of $30,000,000 per annum.
The Company has made available to Parent prior to the date hereof a true and
correct copy of each such Contract. Each Contract required to be so listed is
valid and binding on the Company or its Subsidiary, as the case may be, and, to
the Knowledge of the Company, on each counterparty and is in full force and
effect, and neither the Company nor any of its Subsidiaries, nor, to the
Knowledge of the Company, any other party thereto, is in breach of, or default
under, any such Contract, and no event has occurred that with notice or lapse of
time or both would constitute such a breach or default thereunder by the Company
or any of its Subsidiaries, or, to the Knowledge of the Company, any other party
thereto, except for such failures to be valid, binding or in full force and
effect and such breaches and defaults that, individually or in the aggregate,
have not had and would not reasonably be expected to have a Company Material
Adverse Effect.
21
Section 3.19 Intellectual Property Matters. Except for those matters
which, individually and in the aggregate, have not had and would not reasonably
be expected to have a Company Material Adverse Effect, (i) the Company and each
of its Subsidiaries owns, or is licensed to use (in each case, free and clear of
any Liens, other than Permitted Liens), all Intellectual Property (as defined
below) used in or necessary for the conduct of its business as currently
conducted by it, (ii) to the Knowledge of the Company, the use of any
Intellectual Property by the Company and its Subsidiaries does not infringe on
or otherwise violate the rights of any Person and is in accordance with any
applicable license pursuant to which the Company or any of its Subsidiaries
acquired the right to use any Intellectual Property, (iii) to the Knowledge of
the Company, no Person is challenging or infringing upon or otherwise violating
any Intellectual Property owned or licensed by the Company or its Subsidiaries
and (iv) to the Knowledge of the Company, neither the Company nor any of its
Subsidiaries has received any written notice of any pending claim with respect
to any Intellectual Property owned or licensed by the Company or its
Subsidiaries and no Intellectual Property owned or licensed by the Company or
its Subsidiaries is being used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of such Intellectual Property. For
the purposes of this Agreement, "Intellectual Property" shall mean trademarks,
service marks, brand names, certification marks, trade dress and other
indications of origin, the goodwill associated with the foregoing and the
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patentable or not, in any jurisdiction; patents, applications for patents
(including divisions, continuations, continued prosecution applications,
continuations in part and renewal applications), and any renewals, extensions or
reissues thereof, in any jurisdiction; know-how, trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any Person; writings and other works, whether copyrightable or not,
in any jurisdiction; and registrations or applications for registration of
copyrights in any jurisdictions, and any renewals or extensions thereof.
Section 3.20 Insurance. The Company has made available to Parent
prior to the date hereof (i) a list of the material policies of insurance
currently maintained by the Company or any of its Subsidiaries (including any
material policies of insurance maintained for purposes of providing benefits
such as workers' compensation and employers' liability coverage) and (ii) a list
of all material claims currently pending (including with respect to insurance
obtained but not currently maintained). Except for those matters that,
individually and in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect, to the Knowledge of the
Company, (i) all such policies are in full force and effect and cover the assets
and risks of the Company and its Subsidiaries in a manner consistent with
customary practices of companies engaged in businesses and operations similar to
those of the Company and its Subsidiaries and (ii) all premiums due on such
policies have been paid and no notice of cancellation or termination or intent
to cancel has been received by the Company or any of its Subsidiaries with
respect to such policies.
22
Section 3.21 Ethical Practices. To the Knowledge of the Company,
except as permitted under applicable Law, neither the Company nor any of its
Subsidiaries has offered or given anything of value to any official of a
Governmental Authority, any political party or official thereof, or any
candidate for political office (i) with the intent of inducing such Person to
use such Person's influence with any Governmental Authority to affect or
influence any act or decision of such Governmental Authority to assist the
Company or any of its Subsidiaries in obtaining or retaining business for, or
with, or directing business to, any Person or (ii) constituting a bribe,
kickback or illegal or improper payment to assist the Company or any of its
Subsidiaries in obtaining or retaining business for or with any Governmental
Authority.
Section 3.22 Related Party Transactions. Except to the extent
disclosed in the Filed Company SEC Documents, there are and have been no
transactions, agreements, arrangements or understandings involving the Company
or its Subsidiaries that would be required to be disclosed under Item 404 of
Regulation S-K under the Securities Act.
Section 3.23 Standstill Agreements. Other than invitations to
participate in sale processes that are now concluded and terminated, since
October 31, 2005, neither the Company nor any of its Subsidiaries has
terminated, waived or amended any standstill agreement with any third party
relating to a Takeover Proposal.
Section 3.24 No Other Representations or Warranties. Except for the
representations and warranties made by the Company in this Article III, neither
the Company nor any other Person makes any representation or warranty with
respect to the Company or its Subsidiaries or their respective business,
operations, assets, liabilities, condition (financial or otherwise) or
prospects, notwithstanding the delivery or disclosure to Parent or any of its
Affiliates or representatives of any documentation, forecasts, projections or
other information with respect to any one or more of the foregoing.
ARTICLE IV
Representations and Warranties of Parent
----------------------------------------
Parent represents and warrants to the Company:
Section 4.1 Organization; Standing. Parent is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware and, as of the Closing Date, Merger Sub will be a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Florida.
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Section 4.2 Authority; Noncontravention.
(a) Parent has all necessary corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution, delivery and performance by Parent
of this Agreement, and the consummation by Parent of the Transactions, have been
duly authorized and approved by the Board of Directors of Parent, and no other
corporate action on the part of Parent is necessary to authorize the execution,
delivery and performance by Parent of this Agreement and the consummation by it
of the Transactions. This Agreement has been duly executed and delivered by
Parent and, assuming due authorization, execution and delivery hereof by the
Company, constitutes a legal, valid and binding obligation of Parent,
enforceable against it in accordance with its terms, subject to the Bankruptcy
and Equity Exception.
(b) Neither the execution, delivery and performance of this Agreement
by Parent, nor the consummation by Parent or Merger Sub of the Transactions, nor
compliance by Parent with any of the terms or provisions hereof, will (i)
conflict with or violate any provision of the certificate of incorporation or
bylaws of Parent or Merger Sub or (ii) assuming that the authorizations,
consents and approvals referred to in Section 4.3 are obtained and the filings
referred to in Section 4.3 are made, (x) violate any Law, judgment, writ or
injunction of any Governmental Authority applicable to Parent or any of its
Subsidiaries or any of their respective assets, properties or rights, (y)
violate or constitute a default (or an event which with notice or lapse of time
or both would become a default) or give rise to any right of termination,
cancellation, modification or acceleration under any of the terms, conditions or
provisions of any Contract to which Parent, Merger Sub or any of their
respective Subsidiaries is a party or (z) result in the creation of any Lien
upon any of the assets, property or rights of the Parent or any of its
Subsidiaries, except, in the case of clause (ii), for such violations, defaults,
rights or Liens, as, individually or in the aggregate, would not reasonably be
expected to impair in any material respect the ability of Parent to perform its
obligations hereunder or prevent or materially delay consummation of the
Transactions.
(c) As of the Closing Date, Merger Sub will have all necessary
corporate power and authority, and will be duly and validly authorized, to
consummate the Merger and perform its obligations hereunder.
Section 4.3 Governmental Approvals. Except for (i) filings required
under, and compliance with other applicable requirements of, the Exchange Act
and the rules of the NYSE, (ii) the filing of the Articles of Merger with the
Secretary of State of the State of Florida pursuant to the FBCA and (iii)
filings required under, and compliance with other applicable requirements of,
the HSR Act and any other applicable Antitrust Law, no consents or approvals of,
or filings, declarations or registrations with, any Governmental Authority are
necessary for the execution, delivery and performance of this Agreement by
Parent and the consummation by Parent and Merger Sub of the Transactions, other
than such other consents, approvals, filings, declarations or registrations
that, if not obtained, made or given, would not reasonably be expected to impair
in any material respect the ability of Parent or Merger Sub to perform its
obligations hereunder or prevent or materially delay consummation of the
Transactions.
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Section 4.4 Information Supplied. The information supplied by Parent
expressly for inclusion (or incorporation by reference) in the Proxy Statement
will not, on the date the Proxy Statement is first mailed to shareholders of the
Company and at the time of the Company Shareholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading.
Section 4.5 Ownership and Operations of Merger Sub. As of the Closing
Date, Parent will own beneficially and of record all of the outstanding capital
stock of Merger Sub. Merger Sub will be formed solely for the purpose of
engaging in the Transactions, will engage in no other business activities and
will conduct its operations only as contemplated hereby.
Section 4.6 Capital Resources. Parent has cash and cash equivalents
and available amounts under an existing commercial paper facility, and Parent
and Merger Sub collectively will have at the Effective Time cash and cash
equivalents, that are sufficient to pay the aggregate Merger Consideration and
Option Consideration, to satisfy all indebtedness to be repaid by the Parent (or
the Company) at or following the Closing, to pay all related fees and expenses
of Parent and the Company payable by them in connection with the Transactions,
to make any payments that may be required to be made in respect of the Company's
indebtedness at or following the Closing as a consequence of the Transactions
and to fund the ongoing operations of the Company.
Section 4.7 Brokers and Other Advisors. Except for Morgan Stanley &
Co., the fees and expenses of which will be paid by Parent, no broker,
investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
Parent or any of its Subsidiaries.
Section 4.8 Ownership of Shares. Neither Parent nor any of its
controlled Affiliates owns (directly or indirectly, beneficially or of record)
any shares of Company Common Stock and neither Parent nor any of its controlled
Affiliates holds any rights to acquire shares of Company Common Stock except
pursuant to this Agreement.
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ARTICLE V
Additional Covenants and Agreements
-----------------------------------
Section 5.1 Preparation of the Proxy Statement; Shareholders Meeting.
--------------------------------------------------------
(a) As soon as practicable following the date of this
Agreement, (i) the Company shall prepare the Proxy Statement, (ii) Parent shall
promptly provide to the Company any information concerning itself and its
Affiliates required for inclusion in the Proxy Statement and shall promptly
provide such other information or assistance in the preparation thereof as may
be reasonably requested by the Company and (iii) after consulting with Parent,
the Company shall file the Proxy Statement with the SEC. The Company shall
thereafter use its reasonable best efforts to respond as promptly as practicable
to any comments of the SEC with respect to the Proxy Statement and to cause the
Proxy Statement to be mailed to the shareholders of the Company as promptly as
practicable after the date of this Agreement. The Company shall promptly notify
Parent upon the receipt of any comments from the SEC or its staff or any request
from the SEC or its staff for amendments or supplements to the Proxy Statement,
shall consult with Parent prior to responding to any such comments or request or
filing any amendment or supplement to the Proxy Statement, and shall provide
Parent with copies of all correspondence between the Company and its
representatives, on the one hand, and the SEC and its staff, on the other hand.
In the event that the Company receives any comments from the SEC or its staff or
any request from the SEC or its staff for amendments or supplements to the Proxy
Statement, Parent shall promptly provide to the Company, upon receipt of notice
from the Company, any information concerning itself and its Affiliates required
for inclusion in the response of the Company to such comments or such request
and shall promptly provide such other information or assistance in the
preparation thereof as may be reasonably requested by the Company. If at any
time prior to the Effective Time any information relating to Parent or the
Company, or any of their respective Affiliates, officers or directors, should be
discovered by Parent or the Company which should be set forth in an amendment or
supplement to the Proxy Statement so that any of such documents would not
include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party that discovers such information
shall promptly notify the other party hereto and, to the extent required by law,
rules or regulations, an appropriate amendment or supplement describing such
information shall be promptly filed with the SEC and disseminated to the
shareholders of the Company.
(b) The Company shall, as soon as practicable following the date of
this Agreement, establish a record date for, duly call, give notice of, convene
and hold a meeting of its shareholders (the "Company Shareholders Meeting") for
the purpose of obtaining the Company Shareholder Approval. Subject to Section
5.3(b), the Company shall, through its Board of Directors, recommend to its
shareholders adoption of this Agreement and include such recommendation in the
Proxy Statement. Without limiting the generality of the foregoing, the Company's
obligations pursuant to the first sentence of this Section 5.1(b) shall not be
affected by (i) the commencement, public proposal, public disclosure or
communication to the Company of any Takeover Proposal or (ii) any Company
Adverse Recommendation Change. Notwithstanding anything to the contrary
contained in this Agreement, the Company shall not be required to hold the
Company Shareholders Meeting only if this Agreement is terminated in accordance
with Section 7.1.
26
Section 5.2 Conduct of Business.
(a) Except as contemplated by this Agreement, or Schedule 5.2(a) of
the Company Disclosure Schedule, or required by applicable Law, during the
period from the date of this Agreement until the Effective Time, unless Parent
otherwise consents (which consent shall not be unreasonably withheld or
delayed), the Company shall, and shall cause its Subsidiaries to, conduct its
business in all material respects in the ordinary course consistent with past
practice and policies and use commercially reasonable efforts consistent with
past practice and policies to preserve intact its present business
organizations, keep available the services of its present executive officers and
key employees and preserve its relationships with Persons having significant
business dealings with it and take no action which would adversely affect or
delay in any material respect the ability of either Parent or the Company to
obtain any necessary approvals of any Governmental Authority required for the
Transactions.
(b) Neither the Company nor its Subsidiaries shall, unless Parent
otherwise consents (which consent, except with respect to clause (vii)(B), shall
not be unreasonably withheld or delayed):
(i) (A) issue, sell or grant any shares of its capital stock, or
any securities or rights convertible into, exchangeable or exercisable
for, or evidencing the right to subscribe for any shares of its
capital stock, or any rights, warrants or options to purchase any
shares of its capital stock, or any securities or rights convertible
into, exchangeable or exercisable for, or evidencing the right to
subscribe for, any shares of its capital stock, provided that the
Company may issue shares of Company Common Stock upon the exercise of
Options or shares of Company Preferred Stock or Company Common Stock
as required by the Company's Rights Agreement; (B) redeem, purchase or
otherwise acquire any of its outstanding shares of capital stock, or
any rights, warrants or options to acquire any shares of its capital
stock, except pursuant to commitments in effect as of the date hereof;
(C) declare, set aside for payment or pay any dividend on, or make any
other distribution in respect of, any shares of its capital stock,
except for regular quarterly dividends of no more than $0.09 per
share, consistent with past practice; or (D) split, combine, subdivide
or reclassify any shares of its capital stock;
(ii) incur any indebtedness for borrowed money or guarantee any
such indebtedness, other than short-term indebtedness under the
Company's existing revolving credit agreement not in excess of $30
million;
27
(iii) sell, lease, dispose of or grant, create or incur any Lien
on (x) any Material Real Property or (y) any of its properties or
assets with a fair market value in excess of $30 million in the
aggregate, except (A) sales, leases, rentals and licenses of inventory
in the ordinary course of business consistent with past practice or
(B) transfers among the Company and its wholly owned Subsidiaries;
(iv) except with respect to leases or acquisitions of real
property, which are intended to be covered in Section 5.2(b)(xi) below
(it being understood that any business combination transaction with
another Person, even if such transaction includes the acquisition of
the real property of such Person, shall be covered by this clause (iv)
and not by clause (xi)), make any acquisition (including by merger) of
the capital stock, or purchase or lease (except for purchases of
inventory in the ordinary course of business consistent with past
practice) the assets or properties, of any other Person for
consideration that, when taken together with the consideration in all
other such transactions not prohibited by this clause (iv), is not in
excess of $50 million in the aggregate;
(v) (A) amend or terminate any Company Plan, fail to make any
required contribution to any Company Plan or establish, adopt or enter
into any plan, agreement or policy that would be a Company Plan if it
were in existence on the date of this Agreement or (B) increase the
compensation or other benefits payable or to become payable to any of
its current or former directors, officers, or employees, other than
(i) as required pursuant to applicable Law or the terms of Contracts
in effect on the date of this Agreement, (ii) increases in salaries,
wages and benefits of employees other than the Company Senior
Executives made in the ordinary course of business consistent with
past practice and (iii) payments of performance based bonuses for
fiscal 2006 based on the Company's actual performance and in
accordance with the bonus targets in effect on the date of this
Agreement in the aggregate amount accrued on the balance sheet of the
Company and its Subsidiaries as of January 31, 2006 (it being
understood that the fourth fiscal quarter accrual for fiscal 2006
shall be sufficient to fully accrue for the actual amount of all such
bonuses that will become payable pursuant to the terms of the bonus
plans and agreements set forth on Schedule 3.11(a));
(vi) make any changes in financial or Tax accounting methods,
principles or practices (or change an annual accounting period),
except insofar as may be required by a change in GAAP or applicable
Law;
(vii) (A) amend the Company Charter Documents or (B) amend or
grant any waiver under the Rights Agreement (provided that this clause
(vii) shall not prevent the Company's Board of Directors from taking
the action set forth in the first parenthetical in clause (ii) of
Section 1(h) of the Rights Agreement);
28
(viii) amend in a material way or waive any material rights under
or enter into a Contract that would be required to be listed in the
Company Disclosure Schedules if the value at issue in any such
amendment, waiver or entrance (or any group of related amendments,
waivers or entrances) exceeds $30 million;
(ix) enter into any transaction that would be required to be
reported pursuant to Item 404 of Regulation S-K in a future SEC
report;
(x) forgive or make any loans, advances or capital contributions
to, or investments in, any other Person, other than (A) loans or
advances in immaterial amounts in the ordinary course of business
consistent with past practice or (B) to wholly owned Subsidiaries of
the Company;
(xi) make any lease or acquisition of real property or any
commitment for any other capital expenditure in excess of $40 million
in the aggregate (it being understood that (A) the total present value
of all future lease payments shall be taken into account for purposes
of determining whether the $40 million basket has been filled and (B)
leases, acquisitions and commitments that would be covered by clause
(iv) shall not be included in the $40 million basket in this clause
(xi)); provided that the Company shall consult with Parent prior to
any such individual lease, acquisition or expenditure in excess of
$2,500,000;
(xii) enter into, amend, or extend any collective bargaining or
other labor agreement;
(xiii) settle or agree to settle any material suit, action,
claim, proceeding or investigation (including any suit, action, claim,
proceeding or investigation relating to this Agreement or the
Transactions) or pay, discharge or satisfy or agree to pay, discharge
or satisfy any material claim, liability or obligation (absolute or
accrued, asserted or unasserted, contingent or otherwise) other than
the payment, discharge or satisfaction of liabilities reflected or
reserved against in full in the financial statements as at October 31,
2005 or incurred in the ordinary course of business consistent with
past practice subsequent to that date;
(xiv) adopt a plan or agreement of complete or partial
liquidation or dissolution;
(xv) unless requested or directed by a Governmental Authority,
convene any regular or special meeting (or any adjournment thereof) of
the stockholders of the Company other than the Company Shareholders
Meeting; and
29
(xvi) agree to take any of the foregoing actions.
(c) The Company and Parent agree that, during the period from the
date of this Agreement until the Effective Time, the Company and Parent shall
not, and shall not permit any of their respective Subsidiaries to, take, or
agree or commit to take, any action that could reasonably be expected to (i)
impose any material delay in the obtaining of, or significantly increase the
risk of not obtaining, any authorizations, consents, orders, declarations or
approvals of any Governmental Authority necessary to consummate the Transactions
or the expiration or termination of any applicable waiting period, (ii)
significantly increase the risk of any Governmental Authority entering an order
or Restraint prohibiting or impeding the consummation of the Transactions or
(iii) otherwise materially delay the consummation of the Transactions (each, a
"Delay"). Without limiting the generality of the foregoing, Parent agrees that,
during the period from the date of this Agreement until the Effective Time,
Parent shall not, and shall not permit any of its Subsidiaries to, acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of or equity in, or by any other manner, any
Person or portion thereof, or otherwise acquire or agree to acquire any assets
or rights, if the entering into of a definitive agreement relating to or the
consummation of such acquisition, merger or consolidation would reasonably be
expected to result in a Delay.
Section 5.3 No Solicitation.
(a) The Company shall, and shall cause its Subsidiaries and its and
its Subsidiaries' respective directors, officers and employees and each
investment banker, financial advisor, attorney, accountant and each other
advisor, agent or representative retained by or acting at the direction of the
Company or any of its Subsidiaries in connection with the Transactions
(collectively, "Representatives") to, (i) cease any discussions or negotiations
with any Person with respect to a Takeover Proposal or that would reasonably be
expected to lead to a Takeover Proposal, (ii) request the prompt return or
destruction of any confidential information or evaluation material previously
provided or furnished to any such Person and (iii) not terminate, waive, amend,
modify or fail to enforce any provision of any standstill or confidentiality
agreement to which it or any of its Subsidiaries is a party. The Company shall
not, and shall cause its Subsidiaries and its and their Representatives not to,
directly or indirectly (i) solicit, initiate, knowingly facilitate or otherwise
knowingly encourage any Takeover Proposal or any inquiry that constitutes or
would reasonably be likely to lead to a Takeover Proposal or (ii) other than to
inform such third party of the provisions of this Section 5.3, participate in
any discussions or negotiations regarding any Takeover Proposal or any inquiry
that constitutes or would reasonably be likely to lead to a Takeover Proposal,
furnish to any Person any information or data with respect to, or otherwise
cooperate with or take any action to knowingly facilitate any proposal that
30
constitutes or would reasonably be expected to lead to any Takeover Proposal, or
requires the Company to abandon, terminate or fail to consummate the
Transactions or (iii) enter into any letter of intent, memorandum of
understanding, merger agreement or other agreement or understanding relating to,
or that would reasonably be expected to lead to, any Takeover Proposal.
Notwithstanding the foregoing, prior to the Company Shareholder Approval, if
there is a portion of a statement in an unsolicited written Takeover Proposal
received after the date hereof that is not reasonably understandable or clear on
its face, then the Company may submit a written question to the party making
such Takeover Proposal that is restricted exclusively to asking for
clarification of such portion of such statement (it being understood that such
request may neither provide information about the Company nor otherwise
encourage or facilitate such Takeover Proposal), provided that both such
Takeover Proposal and such written request for clarification have been provided
concurrently to Parent with the delivery of such written request to such party.
Notwithstanding the foregoing, prior to the Company Shareholder Approval, if
each of the Special Committee and the Board of Directors of the Company
determines, after consultation with outside counsel, in good faith by resolution
duly adopted that an unsolicited written Takeover Proposal received after the
date hereof other than in breach of this Section 5.3 constitutes or is
reasonably likely to constitute a Superior Proposal and that it is reasonably
necessary to take such action to comply with its fiduciary duties to the
shareholders of the Company under applicable Law, then the Company, after giving
Parent prompt written notice of such determination (and in any event no later
than 24 hours after such determination), may (A) furnish any information with
respect to the Company and its Subsidiaries to the Person (and its
Representatives) making such Takeover Proposal pursuant to a confidentiality
agreement not less restrictive of such Person than the Confidentiality
Agreement, provided, that all such information provided or furnished to such
Person has been provided or furnished previously to Parent or is provided or
furnished to Parent concurrently with it being provided or furnished to such
Person and (B) participate in discussions and negotiations with such Person (and
its Representatives) regarding a Takeover Proposal. The Company agrees that any
violation of this Section 5.3(a) by any Representative of the Company or any of
its Subsidiaries shall be deemed a breach of this Section 5.3(a) by the Company.
(b) In the event the Company receives a Takeover Proposal or request
for information or inquiry that relates to or would be reasonably likely to lead
to a Takeover Proposal, the Company shall promptly (within 24 hours) provide
Parent with a copy (if in writing) and summary of the material terms and
conditions of such Takeover Proposal, request or inquiry and the identity of the
Person (and its equity investors, if known by the Company) making such Takeover
Proposal, request or inquiry, and shall keep Parent reasonably informed of the
status of any financial or other material modifications to such Takeover
Proposal, request or inquiry, including by conveying a copy of all such
modifications that are in writing, promptly (within 24 hours) of any of the
Company's officers', directors' or financial advisors' receipt thereof.
31
(c) Except as expressly permitted by this Section 5.3(c), the Board
of Directors of the Company or any committee thereof shall not and shall not
publicly propose to (i)(A) withdraw or modify, in a manner adverse to Parent,
the approval or adoption of this Agreement or the recommendation by such Board
of Directors or committee that shareholders of the Company adopt this Agreement
(the "Company Board Recommendation"), (B) recommend to the shareholders of the
Company, or approve or adopt, a Takeover Proposal or (C) in the event that any
Takeover Proposal is publicly announced or any Person commences a tender offer
or exchange offer for any outstanding shares of Company Common Stock, fail to
issue a press release that reaffirms the Company Board Recommendation and, in
the case of a tender offer or exchange offer, recommend against acceptance of
such tender offer or exchange offer by the Company shareholders, in each case
within 10 business days of such announcement or commencement (for the avoidance
of doubt, the taking of no position by the Board of Directors of the Company in
respect of the acceptance of any tender offer or exchange offer by its
shareholders shall constitute a failure to recommend against any such offer)
(any action, publicly proposed action or inaction described in this clause (i)
being referred to as a "Company Adverse Recommendation Change") or (ii) enter
into, approve or authorize the Company or any of its Subsidiaries to enter into
any letter of intent, memorandum of understanding, or any merger, acquisition,
option, joint venture, partnership or similar agreement with respect to any
Takeover Proposal (other than a confidentiality agreement, subject to the
requirements set forth in Section 5.3(a)) (each, a "Company Acquisition
Agreement"). Notwithstanding the foregoing, (x) the Board of Directors of the
Company may, subject to compliance with this Section 5.3, withdraw or modify the
Company Board Recommendation if such Board determines (after receiving the
advice of its outside counsel) in good faith by resolution duly adopted that it
is reasonably necessary to do so to comply with its fiduciary duties to the
shareholders of the Company under applicable Law and (y) if the Board of
Directors of the Company receives a Takeover Proposal that such Board
determines, in good faith by resolution duly adopted, constitutes a Superior
Proposal, the Company or its Subsidiaries may, subject to compliance with this
Section 5.3, enter into a definitive Company Acquisition Agreement with respect
to such Superior Proposal if the Company shall have made the determination set
forth in clause (x) of this sentence and concurrently with entering into such
Company Acquisition Agreement terminates this Agreement pursuant to Section
7.1(d)(ii). If the Company desires to enter into such a Company Acquisition
Agreement with respect to a Takeover Proposal or to make a Company Adverse
Recommendation Change, it shall give Parent written notice (a "Company Adverse
Recommendation Notice") containing a description of the material terms of such
Takeover Proposal or any other basis for a Company Adverse Recommendation
32
Change, the most current version of any Company Acquisition Agreement relating
to the Superior Proposal, if any, any other information required by Section
5.3(b) and, if applicable, advising Parent that the Board of Directors of the
Company has determined that such Takeover Proposal is a Superior Proposal, that
the Board has made the determination in clause (x) above and that the Board
intends to enter into a Company Acquisition Agreement with respect to such
Superior Proposal. The Company may make a Company Adverse Recommendation Change
or terminate this Agreement pursuant to Section 7.1(d)(ii) only (i) if at least
seven business days have passed since the date of the Company Adverse
Recommendation Notice and (ii) if after taking into account any revised proposal
that may be made by Parent since receipt of the Company Adverse Recommendation
Notice, the Board of Directors of the Company shall have not changed its
determination under clause (x) above or its determination that such Takeover
Proposal is a Superior Proposal (it being understood that any amendment to the
financial terms or other material terms of such Superior Proposal shall require
a new Company Adverse Recommendation Notice and a new seven business day
period).
(d) For purposes of this Agreement:
"Takeover Proposal" means any inquiry, proposal or offer, whether or
not conditional, from any Person (other than Parent and its Subsidiaries)
relating to any direct or indirect (A) acquisition of assets of the Company and
its Subsidiaries (including securities of Subsidiaries, but excluding sales of
assets in the ordinary course of business in compliance with this Agreement)
equal to 20% or more of the Company's consolidated assets or to which 20% or
more of the Company's revenues or earnings on a consolidated basis are
attributable, (B) acquisition of 20% or more of the outstanding Company Common
Stock, voting power of the Company or any class of equity securities of the
Company, (C) tender offer or exchange offer that if consummated would result in
any Person beneficially owning 20% or more of the outstanding Company Common
Stock, (D) merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company, (E) acquisition by the Company or any of its Subsidiaries of any third
party in any of the foregoing types of transactions in which the shareholders of
such third party immediately prior to the consummation of such transaction will
own more than 20% of the outstanding Company Common Stock immediately following
such transaction, or (F) without limiting any of the foregoing, any of the
foregoing types of transactions involving the acquisition of greater than 49% of
the voting equity interests in any Subsidiary or Subsidiaries of the Company
with assets, revenue or earnings representing 20% or more of the consolidated
assets, revenue or earnings of the Company on a consolidated basis.
"Superior Proposal" means a bona fide written proposal or offer to
acquire, directly or indirectly, for consideration consisting of cash and/or
publicly listed and traded securities, more than 68.5% of the equity securities
of the Company or all or substantially all of the assets of the Company and its
Subsidiaries on a consolidated basis, made by a third party, and which is
otherwise on terms and conditions which the Board of Directors of the Company
determines in its good faith and reasonable judgment and by resolution duly
adopted (after consultation with a financial advisor of national reputation and
in light of all relevant circumstances, including all the terms and conditions
of such proposal and this Agreement and the timing and certainty of
consummation) to be more favorable to the Company's shareholders from a
financial point of view than the terms set forth in this Agreement or the terms
of any other proposal made by Parent after Parent's receipt of a Company Adverse
Recommendation Notice, and which the Board of Directors of the Company
determines in good faith is reasonably capable of being consummated on the terms
so proposed, taking into account any financing and approval requirements, timing
of such consummation and all financial, regulatory, legal and other aspects of
such proposal.
33
(e) Nothing in this Section 5.3 shall prohibit the Board of Directors
of the Company from taking and disclosing to the Company's shareholders a
position contemplated by Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of Regulation
M-A promulgated under the Exchange Act, or other applicable Law, if such Board
determines, after consultation with outside counsel, that there is a reasonable
likelihood failure to so disclose such position would constitute a violation of
applicable Law. In addition, it is understood and agreed that, for purposes of
this Agreement (including Article VII), (i) a factually accurate public
statement by the Company that merely describes the Company's receipt of a
Takeover Proposal and the operation of this Agreement with respect thereto shall
not be deemed a withdrawal or modification, or proposal by the Board of
Directors of the Company to withdraw or modify, such Board's recommendation of
this Agreement or the Transactions, or an approval or recommendation with
respect to such Takeover Proposal and (ii) any "stop, look and listen"
communication by the Board of Directors to the shareholders of the Company
pursuant to Rule 14d-9(f) of the Exchange Act or any similar communication to
the shareholders shall not constitute a Company Adverse Recommendation Change
provided that, in no event will the Company, the Board of Directors of the
Company or any committee thereof (A) recommend that the shareholders of the
Company tender their shares in connection with any such tender or exchange offer
(or otherwise approve or recommend any Takeover Proposal) or (B) withdraw or
modify the Company Board Recommendation, in each case other than in accordance
with Section 5.3(c).
(f) The Company shall not take any action (including any action by
any of its disinterested directors under subsection (4) of Section 607.0901 of
the FBCA) to cause subsection (2) of such Section not to apply to any affiliated
transaction, and in the event of a control-share acquisition (as defined in
Section 607.0902 of the FBCA), the Board of Directors of the Company (and any
committee thereof), at any shareholders meeting at which the voting rights of
any control shares so acquired are to be considered, shall recommend against
granting to such control shares the same voting rights as were accorded the
shares prior to such control-share acquisition (for the avoidance of doubt, the
taking of no position by the Board of Directors of the Company in respect of the
granting of such voting rights shall constitute a failure to recommend against
any such granting of such voting rights).
(g) Nothing in this Section 5.3 shall permit the Board of Directors
to take any action that would result in the representation contained in the
second sentence of Section 3.3(a) to become untrue at any time prior to the
Effective Time as if restated on and as of such time.
34
Section 5.4 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement, each of
the parties hereto shall cooperate with the other parties and use (and shall
cause their respective Subsidiaries to use) their respective reasonable best
efforts to promptly (i) take, or cause to be taken, all actions, and do, or
cause to be done, all things, necessary, proper or advisable to cause the
conditions to Closing to be satisfied as promptly as practicable and to
consummate and make effective, in the most expeditious manner practicable, the
Transactions, including preparing and filing promptly and fully all
documentation to effect all necessary filings, notices, petitions, statements,
registrations, submissions of information, applications and other documents
(including any required or recommended filings under applicable Antitrust Laws)
and (ii) obtain all approvals, consents, registrations, permits, authorizations
and other confirmations from any Governmental Authority or third party
necessary, proper or advisable to consummate the Transactions. For purposes
hereof, "Antitrust Laws" means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, and all
other applicable Laws issued by a foreign, United States or federal Governmental
Authority that are designed or intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or restraint of trade or
lessening of competition through merger or acquisition.
(b) In furtherance and not in limitation of the foregoing, (i) each
party hereto agrees to make an appropriate filing of a Notification and Report
Form pursuant to the HSR Act with respect to the Transactions as promptly as
practicable and in any event within ten business days of the date hereof and to
supply as promptly as practicable any additional information and documentary
material that may be requested pursuant to the HSR Act and use its reasonable
best efforts to take, or cause to be taken, all other actions consistent with
this Section 5.4 necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act (including any extensions thereof)
as soon as practicable and (ii) the Company and Parent shall each use its
reasonable best efforts to (x) take all action necessary to ensure that no state
takeover, "moratorium," "fair price," "affiliate transaction" or similar statute
or regulation under any applicable Law is or becomes applicable to any of the
Transactions and (y) if any state takeover, "moratorium," "fair price,"
"affiliate transaction" or similar statute or regulation under any applicable
Law becomes applicable to any of the Transactions, take all action necessary to
ensure that the Transactions may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise minimize the effect of
such Law on the Transactions.
(c) Each of the parties hereto shall use its reasonable best efforts
to (i) cooperate in all respects with each other in connection with any filing
or submission with a Governmental Authority in connection with the Transactions
and in connection with any investigation or other inquiry by or before a
Governmental Authority relating to the Transactions, including any proceeding
initiated by a private party and (ii) keep the other party informed in all
material respects and on a reasonably timely basis of any material communication
35
received by such party from, or given by such party to, the Federal Trade
Commission, the Antitrust Division of the Department of Justice or any other
Governmental Authority and of any material communication received or given in
connection with any proceeding by a private party, in each case regarding any of
the Transactions. Subject to applicable Laws relating to the exchange of
information, each of the parties hereto shall have the right to review in
advance, and to the extent practicable each will consult the other on, all the
information relating to the other parties and their respective Subsidiaries, as
the case may be, that appears in any filing made with, or written materials
submitted to, any third party and/or any Governmental Authority in connection
with the Transactions. Each party shall have the right to attend conferences and
meetings between the other party and regulators concerning the Transactions,
unless objection is raised by the Governmental Authority. Notwithstanding
anything in this Agreement to the contrary, nothing in the Agreement shall
require Parent or Merger Sub to provide to the Company any or any access to
non-public information about Parent and its Affiliates.
(d) In furtherance and not in limitation of the covenants of the
parties contained in this Section 5.4, each of the parties hereto shall use its
reasonable best efforts to resolve such objections, if any, as may be asserted
by a Governmental Authority or other Person with respect to the Transactions.
Without limiting any other provision hereof, Parent and the Company shall each
use its reasonable best efforts to (i) avoid the entry of, or to have vacated or
terminated, any decree, order or judgment that would restrain, prevent or delay
the consummation of the Transactions, on or before the later of the Walk-Away
Date and the Extended Walk-Away Date, including by defending through litigation
on the merits any claim asserted in any court by any Person, and (ii) avoid or
eliminate each and every impediment under any Antitrust Law that may be asserted
by any Governmental Authority with respect to the Transactions so as to enable
the consummation of the Transactions to occur as soon as reasonably possible
(and in any event no later than the later of the Walk-Away Date and the Extended
Walk-Away Date). Notwithstanding anything in this Agreement to the contrary,
Parent shall take all such actions, including (y) proposing, negotiating,
committing to and effecting, by consent decree, hold separate order, or
otherwise, the sale, divestiture or disposition of such assets or businesses of
Parent or any of its Subsidiaries (including, after giving effect to the Merger,
the Company and its Subsidiaries) and (z) otherwise taking or committing to take
actions that limit Parent or its Subsidiaries' (including, after giving effect
to the Merger, the Company and its Subsidiaries) freedom of action with respect
to, or its ability to retain, one or more of its or its Subsidiaries'
businesses, product lines or assets, in each case, as may be required in order
to cause the expiration or termination of the applicable waiting period under
the HSR Act (including any extensions thereof) as soon as practicable and to
avoid the entry of, or to effect the dissolution of, any injunction, temporary
restraining order, or other order in any suit or proceeding, which would
otherwise have the effect of preventing or materially delaying the consummation
of the Transactions provided, that, notwithstanding the foregoing or anything
else in this Agreement, Parent shall be required to take any of the actions
described in clauses (y) and (z) only to the extent reasonably necessary to
consummate the Transactions prior to the later of the Walk Away Date and, if
applicable, the Extended Walk Away Date. The Company shall take such of the
foregoing actions only if requested by Parent and conditioned upon the
consummation of the Merger.
36
Section 5.5 Public Announcements. The initial press release with
respect to the execution of this Agreement shall be a joint press release to be
reasonably agreed upon by Parent and the Company. Thereafter, neither the
Company nor Parent shall issue or cause the publication of any press release or
other public announcement (to the extent not previously issued or made in
accordance with this Agreement) with respect to the Merger, this Agreement or
the other Transactions without the prior consent of the other party (which
consent shall not be unreasonably withheld or delayed), except (i) as may be
required by Law or by any applicable listing agreement with a national
securities exchange or Nasdaq as determined in the good faith judgment of the
party proposing to make such release (in which case such party shall not issue
or cause the publication of such press release or other public announcement
without prior consultation with the other party) and (ii) each of Parent and the
Company may make any public statement in response to specific questions by the
press, analysts, investors or those attending industry conferences or financial
analyst conference calls, so long as such statements are substantially similar
to previous press releases, public disclosures or public statements made jointly
by Parent and the Company (or individually, if approved by the other party).
Section 5.6 Access to Information; Confidentiality. Subject to
applicable Laws relating to the exchange of information, the Company shall (i)
afford to Parent and Parent's Representatives reasonable access during normal
business hours to the Company's properties, books, Contracts, records (including
Tax Returns) and employees (subject to reasonable procedures, including
appointment of a management representative to coordinate and supervise such
access to such employees), (ii) use reasonable best efforts to cause the
Company's consultants and independent public accountants to provide access to
their work papers and such other information as Parent may reasonably request
and (iii) furnish promptly to Parent (A) a copy of each report, schedule and
other document filed by it pursuant to the requirements of Federal or state
securities Laws, (B) each written update provided to its Board of Directors on
the financial performance and projections for the Company or any of its
Subsidiaries and (C) other information concerning its business and properties as
Parent may reasonably request; provided, however, that the Company shall not be
obligated to provide such access or information if the Company determines, in
its reasonable judgment, that doing so would violate applicable Law or a
Contract or obligation of confidentiality owing to a third-party or jeopardize
the protection of an attorney-client privilege. The Company shall use reasonable
best efforts to obtain waivers of any of the foregoing confidentiality
obligations and the Company and Parent shall use reasonable best efforts to
enter into appropriate joint defense agreements to preserve attorney-client
privilege. Until the Effective Time, the information provided will be subject to
the terms of the Confidentiality Agreement.
37
Section 5.7 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) any notice or other communication received by such party from any
Governmental Authority in connection with the Transactions or from any Person
alleging that the consent of such Person is or may be required in connection
with the Transactions, (ii) any actions, suits, claims, investigations or
proceedings commenced or, to such party's knowledge, threatened against,
relating to or involving or otherwise affecting such party or any of its
Subsidiaries which relate to the Transactions, or (iii) the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence, of which is
likely (A) to cause any representation or warranty of such party contained in
this Agreement to be untrue or inaccurate in any material respect if made as of
any time at or prior to the Effective Time or (B) to result in any material
failure of such party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied hereunder; provided, however, that
the delivery of any notice pursuant to this Section 5.7 shall not limit or
otherwise affect the remedies or conditions to Closing available hereunder to
the party receiving such notice.
Section 5.8 Indemnification and Insurance.
(a) From and after the Effective Time, Parent shall, and shall cause
the Surviving Corporation to, (i) indemnify and hold harmless each individual
who at the Effective Time is, or at any time prior to the Effective Time was, a
director or officer of the Company or of a Subsidiary of the Company (each, an
"Indemnitee" and, collectively, the "Indemnitees") with respect to all claims,
liabilities, losses, damages, judgments, fines, penalties, costs (including
amounts paid in settlement or compromise) and expenses (including fees and
expenses of legal counsel) in connection with any claim, suit, action,
proceeding or investigation (whether civil, criminal, administrative or
investigative), whenever asserted, based on or arising out of, in whole or in
part, acts or omissions by an Indemnitee in the Indemnitee's capacity as a
director, officer, employee or agent of the Company or such Subsidiary or taken
at the request of the Company or such Subsidiary (including in connection with
serving at the request of the Company or such Subsidiary as a director, officer,
employee or agent of another Person (including any employee benefit plan)), at,
or at any time prior to, the Effective Time (including in connection with the
Transactions), to the fullest extent permitted under applicable Law and provided
under the Company Charter Documents or any existing agreements with such
Indemnitee, and (ii) assume all obligations of the Company and such Subsidiaries
to the Indemnitees in respect of indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time as
provided in the Company Charter Documents. Without limiting the foregoing,
Parent, from and after the Effective Time, shall cause the certificate of
incorporation and by-laws of the Surviving Corporation to contain provisions no
less favorable to the Indemnitees with respect to limitation of liabilities of
directors and officers and indemnification than are set forth as of the date of
this Agreement in the Company Charter Documents, which provisions shall not be
amended, repealed or otherwise modified in a manner that would adversely affect
the rights thereunder of the Indemnitees. In addition, from and after the
38
Effective Time, Parent shall, and shall cause the Surviving Corporation to, pay
any expenses (including fees and expenses of legal counsel) of any Indemnitee
under this Section 5.8 (including in connection with enforcing the indemnity and
other obligations provided for in this Section 5.8) as incurred to the fullest
extent permitted under applicable Law, provided that the person to whom expenses
are advanced provides an undertaking to repay such advances to the extent
required by applicable Law.
(b) At the Company's election in consultation with Parent, (i) the
Company shall obtain prior to the Effective Time "tail" insurance policies with
a claims period of at least six years from the Effective Time with respect to
directors' and officers' liability insurance in amount and scope at least as
favorable as the Company's existing policies for claims arising from facts or
events that occurred on or prior to the Effective Time or (ii) if the Company
shall not have obtained such tail policy, the Surviving Corporation shall
maintain in effect for six years from the Effective Time the Company's current
directors' and officers' liability insurance covering acts or omissions
occurring at or prior to the Effective Time with respect to those persons who
are currently (and any additional persons who prior to the Effective Time
become) covered by the Company's directors' and officers' liability insurance
policy on terms with respect to such coverage, and in amount, not less favorable
to such individuals than those of such policy in effect on the date hereof (or
Parent may cause the Surviving Corporation to substitute therefor policies,
issued by reputable insurers, of at least the same coverage with respect to
matters occurring prior to the Effective Time); provided, however, that, if the
aggregate annual premiums for such insurance shall exceed 300% of the current
aggregate annual premium, then Parent shall provide or cause to be provided a
policy for the applicable individuals with the best coverage as shall then be
available at an annual premium of 300% of the current aggregate annual premium.
(c) The provisions of this Section 5.8 are (i) intended to be for the
benefit of, and shall be enforceable by, each Indemnitee, his or her heirs and
his or her representatives and (ii) in addition to, and not in substitution for,
any other rights to indemnification or contribution that any such Person may
have by contract or otherwise. The obligations of Parent and the Surviving
Corporation under this Section 5.8 shall not be terminated or modified in such a
manner as to adversely affect the rights of any Indemnitee to whom this Section
5.8 applies unless (x) such termination or modification is required by
applicable Law or (y) the affected Indemnitee shall have consented in writing to
such termination or modification (it being expressly agreed that the Indemnitees
to whom this Section 5.8 applies shall be third party beneficiaries of this
Section 5.8).
(d) In the event that Parent, the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other Person and is not the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any Person, then, and in each such case,
proper provision shall be made so that the successors and assigns of Parent and
the Surviving Corporation shall assume all of the obligations thereof set forth
in this Section 5.8.
39
Section 5.9 Fees and Expenses. All fees and expenses incurred in
connection with this Agreement and the Transactions shall be paid by the party
incurring such fees or expenses, whether or not the Transactions are
consummated, except as otherwise provided in Sections 5.13 and 7.3.
Section 5.10 Rule 16b-3. Prior to the Effective Time, the Company
shall take such steps as may be reasonably requested by any party hereto to
cause dispositions of Company equity securities (including derivative
securities) pursuant to the Transactions by or in respect of each individual who
is a director or officer of the Company to be exempt under Rule 16b-3
promulgated under the Exchange Act, including any such actions specified in that
certain No-Action Letter dated January 12, 1999 issued by the SEC regarding such
matters.
Section 5.11 Employee Matters.
(a) Parent shall, for a period of 12 months immediately following the
Closing Date, cause the Surviving Corporation and its Subsidiaries to provide
employees of the Company and its Subsidiaries (treated as a group) and who are
not covered by a collective bargaining agreement (the "Company Employees") with
(x) the same level of salary and bonus opportunity as in effect on the Closing
Date and (y) benefits that are substantially similar, in the aggregate, to the
benefits provided under the Company Plans by the Company and its Subsidiaries to
Company Employees prior to the Closing Date; provided that nothing in this
Section 5.11(a) shall limit the right of Parent or any of its Subsidiaries to
terminate the employment of any Company Employee at any time or require Parent
or any of its Subsidiaries to provide any such salary, hourly wage, bonus
opportunity or benefits for any period following any such termination.
(b) Notwithstanding anything contained in this Agreement to the
contrary, Parent shall, for a period of 24 months immediately following the
Closing Date, cause the Surviving Corporation and its Subsidiaries to (i)
provide the members of the Company's management set forth on Schedule 5.11(b)
("Company Senior Executives") with (x) the same level of salary and bonus
opportunity as in effect on the Closing Date and (y) benefits that are no less
favorable, in the aggregate, than benefits provided under the Company Plans by
the Company and its Subsidiaries to Company Senior Executives prior to the
Closing Date (provided that nothing in this Section 5.11(b) shall limit the
right of Parent or any of its Subsidiaries to terminate the employment of any
Company Senior Executive at any time or require Parent or any of its
Subsidiaries to provide any such salary, bonus opportunity or benefits for any
period following any such termination) and (ii) continue the Company
Supplemental Executive Retirement Plan without any reduction of benefits
thereunder.
40
(c) Parent or one of its Affiliates shall recognize the service of
Company Employees with the Company prior to the Closing Date as service with
Parent and its Affiliates in connection with any 401(k) savings plan and welfare
benefit plan and policy (including vacations and severance policies) maintained
by Parent or one of its Affiliates which is made available following the Closing
Date by Parent or one of its Affiliates for purposes of any waiting period,
vesting, eligibility and benefit entitlement (but excluding benefit accruals).
(d) Parent shall (i) waive, or cause its insurance carriers to waive,
all limitations as to pre-existing and at-work conditions, if any, with respect
to participation and coverage requirements applicable to Company Employees under
any group health plan (as defined in Section 4980(B) of the Code) which is made
available to Company Employees following the Closing Date by Parent or one of
its Affiliates and (ii) provide credit to Company Employees for any co-payments,
deductibles and out-of-pocket expenses paid by such employees under any group
health plan (as defined in Section 4980(B) of the Code) of the Company and its
Subsidiaries during the portion of the relevant plan year including the Closing
Date for purposes of any applicable co-payments, deductibles and out-of-pocket
expense requirements under any such group health plan of Parent or any of its
Subsidiaries.
(e) Notwithstanding Section 5.11(a), Parent shall cause the Surviving
Company and its Subsidiaries to maintain for a period of 12 months immediately
following the Closing Date a severance pay plan under which the amount of
severance pay to a Company Employee shall not be less than the amount that such
employee would have received under the Company's applicable severance pay plan
in effect on the Closing Date as set forth on Schedule 5.11(e) of the Company
Disclosure Schedule, to be calculated, however, on the basis of the employee's
compensation and service at the time of the layoff or other termination.
(f) If the Closing occurs prior to the payment of performance based
bonuses for the fiscal 2006 year referred to in Section 5.2(b)(v)(iii), Parent
shall cause the Surviving Company and its Subsidiaries (as applicable) to pay
such bonuses in accordance with Section 5.2(b)(v)(iii) the Company's existing
schedule for payment and other policies; provided that any employee (other than
a Company Senior Executive) who is employed as of the Effective Time and who is
involuntarily terminated without cause as defined in Schedule 5.11(f) prior to
the payment of such fiscal 2006 bonus shall be entitled to the payment of such
fiscal 2006 bonus upon termination. The Company may establish annual bonus plans
("2007 Bonus Plans") for the fiscal 2007 year on terms consistent with past
practice and including customary provisions permitting reasonable management
flexibility to adjust bonus performance targets following the Closing to reflect
changes in the business of the Company and its Subsidiaries resulting from the
Transactions. If the Effective Time occurs during the fiscal 2007 year, Parent
shall cause the Surviving Company and its Subsidiaries (as applicable) to pay to
each employee (other than a Company Senior Executive) who was employed as of the
Effective Time and who is involuntarily terminated without cause during the
fiscal 2007 year, a pro rata amount of such employee's target bonus measured to
the date of termination in accordance with the terms of the 2007 Bonus Plan as
in effect as of the Effective Time as soon as practicable following such
termination.
41
(g) Effective no later than immediately prior to the Effective Time,
the Company shall terminate or cause to be terminated any Company Plan intended
to include an arrangement under Section 401(k) of the Code (each, a "Company
401(k) Plan") unless Parent provides written notice to the Company that any such
Company 401(k) Plan shall not be terminated. Unless Parent provides such written
notice to the Company, no later than three business days prior to the Closing
Date, the Company shall provide Parent with evidence that such Company 401(k)
Plan(s) have been terminated (effective no later than immediately prior to the
Effective Time) pursuant to resolutions of the Board of Directors of the Company
or one of its Subsidiaries, as the case may be. The Company also shall take such
other actions in furtherance of terminating such Company 401(k) Plan(s) as
Parent may reasonably require.
Section 5.12 Delisting. Parent shall cause the Company's securities
to be de-listed from the NYSE and de-registered under the Exchange Act as soon
as practicable following the Effective Time.
Section 5.13 Indebtedness.
(a) The Company shall commence, on or prior to the date of filing the
Proxy Statement in preliminary form with the SEC or on any other date agreed to
in writing between the Company and Parent, an offer to purchase, and related
consent solicitation to eliminate certain covenants with respect to, all of the
outstanding notes set forth in Schedule 5.13(a) of the Company Disclosure
Schedule (the "Notes") on the terms and conditions set forth on such Schedule
(or as may be agreed in writing between the Company and Parent) and such other
customary terms and conditions as may be agreed between Parent and the Company
(together with the related consent solicitation, the "Debt Offers"). Unless
otherwise agreed by the Company, all Debt Offers shall be contingent upon the
consummation of the Merger. Subject to the foregoing, the Company (i) shall
waive any of the conditions to the Debt Offers (other than that the Merger shall
have been consummated and that there shall be no Restraint that has the effect
of preventing the consummation of any of the Debt Offers) as may be reasonably
requested by Parent and (ii) shall not, without the written consent of Parent,
waive any condition to the Debt Offers or make any changes to the terms and
conditions of the Debt Offers.
(b) As promptly as practicable after the date hereof, the Company
shall prepare all necessary and appropriate documentation in connection with the
Debt Offers, including offers to purchase, related letters of transmittal and
other related documents (collectively, the "Debt Offer Documents"), forms of
which shall be provided by Parent to the Company as promptly as practicable
after the date hereof. Subject to the preceding sentence, Parent and the Company
shall cooperate with each other in the preparation of the Debt Offer Documents.
All mailings to the holders of Notes in connection with the Debt Offers shall be
42
subject to prior review and comment by Parent, and no Debt Offer Document shall
be mailed or otherwise distributed to holders of Notes without the written
consent of Parent. If at any time prior to the completion of any Debt Offer any
information in or concerning any Debt Offer Document is discovered by the
Company or Parent, which information should be included in an amendment or
supplement to the Debt Offer Documents to prevent the Debt Offer Documents from
containing any untrue statement of a material fact or from omitting to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, the party that discovers such information shall promptly notify the
other party, and an appropriate amendment or supplement describing such
information shall be disseminated to the holders of the Notes.
(c) The Company agrees that, immediately following any consent
payment deadline specified in any Debt Offer Documents, assuming the requisite
consents are received, it shall, and shall cause its Subsidiaries (as
applicable) and use reasonable best efforts to cause the other parties to the
agreements and documents relating to the Notes, as applicable, to, execute
supplemental indentures or amendments, as applicable, to implement the proposed
amendments set forth in the applicable Debt Offer Documents to become operative
substantially concurrently with the Effective Time. At least two business days
prior to Closing, the Company shall deliver to Parent a certificate setting
forth the amount to be paid, together with wire transfer instructions, and
substantially concurrently with the Effective Time, Parent shall cause the
Surviving Corporation to accept for payment and, as promptly as practicable
thereafter, pay, for any Notes that have been properly tendered and not
withdrawn pursuant to the Debt Offers and in accordance with the Debt Offer
Documents.
(d) Notwithstanding anything to the contrary in this Section 5.13,
the Company shall comply with the requirements of Rule 14e-1 under the Exchange
Act and any other Law to the extent such Law is applicable in connection with
the Debt Offers. To the extent that the provisions of any applicable Law
conflict with this Section 5.13, the Company shall comply with such applicable
Law and shall not be deemed to have breached its obligations hereunder by such
compliance.
(e) At least two business days prior to Closing, the Company shall
deliver to Parent an executed payoff letter with respect to its revolving credit
agreement that sets forth (i) the amount to be paid at the Effective Time,
together with wire transfer instructions and (ii) that the payment of such
amount shall result in a complete release of the Company and its Subsidiaries
from all obligations and Liens relating to such credit agreement.
(f) The Company shall cooperate with Parent with respect to any
request by Parent to obtain consents to (i) this Agreement and the Transactions
from landlords and other nongovernmental counterparties to agreements with the
Company and its Subsidiaries, (ii) the prepayment of amounts owing to such
parties (including the provision of customary pay-off letters) or (iii) the
amendment of covenants under such agreements.
43
(g) Parent shall reimburse, indemnify and hold harmless the Company
for all out-of-pocket costs, expenses and liabilities relating to its
performance of its obligations under this Section 5.13, provided that the
Company shall not incur any material expenses (including printer, dealer manager
and agency fees) without prior consultation with Parent.
ARTICLE VI
Conditions Precedent
--------------------
Section 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party hereto to effect the Merger
shall be subject to the satisfaction (or waiver, if permissible under applicable
Law) on or prior to the Closing Date of the following conditions:
(a) Company Shareholder Approval. The Company Shareholder Approval
shall have been obtained;
(b) Antitrust. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired; and
(c) No Injunctions or Restraints. No Law, injunction, judgment or
ruling enacted, promulgated, issued, entered, amended or enforced by any
Governmental Authority (collectively, "Restraints") shall be in effect
enjoining, restraining, preventing or prohibiting consummation of the Merger or
making the consummation of the Merger illegal.
Section 6.2 Conditions to Obligations of Parent. The obligation of
Parent to effect the Merger is further subject to the satisfaction (or waiver,
if permissible under applicable Law) on or prior to the Closing Date of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement (other than the
representations and warranties in Section 3.2), disregarding all qualifications
and exceptions contained therein relating to materiality or Material Adverse
Effect, shall be true and correct as of the Closing Date as if made on and as of
the Closing Date (or, if given as of a specific date, at and as of such date),
except where the failure or failures to be so true and correct, individually or
in the aggregate, have not had and would not reasonably be expected to have a
Company Material Adverse Effect. The representations and warranties in Section
3.2 shall be true and correct, individually and in the aggregate, in all
material respects as of the Closing Date as if made on and as of the Closing
Date (or, if given as of a specific date, at and as of such date);
44
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date;
(c) Officer's Certificate. Parent shall have received a certificate
signed on behalf of the Company by an executive officer of the Company
certifying that the conditions set forth in Sections 6.2(a) and (b) have been
satisfied; and
(d) No Pending Governmental Authority Actions. No Governmental
Authority shall have instituted an action or proceeding that remains pending
seeking to enjoin, restrain, prevent or prohibit consummation of the Merger.
Section 6.3 Conditions to Obligations of the Company. The obligation
of the Company to effect the Merger is further subject to the satisfaction (or
waiver, if permissible under applicable Law) on or prior to the Closing Date of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent contained in this Agreement, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect, shall be true and correct as of the Closing Date as if
made on and as of the Closing Date (or, if given as of a specific date, at and
as of such date), except where the failure or failures to be so true and
correct, individually or in the aggregate, would not reasonably be expected to
impair in any material respect the ability of Parent to perform its obligations
under this Agreement or prevent or materially delay consummation of the
Transactions;
(b) Performance of Obligations of Parent. Parent shall have performed
in all material respects all obligations required to be performed by them under
this Agreement at or prior to the Closing Date; and
(c) Officer's Certificate. The Company shall have received a
certificate signed on behalf of Parent by an executive officer of each of Parent
certifying that the conditions set forth in Sections 6.3(a) and (b) have been
satisfied.
ARTICLE VII
Termination
-----------
Section 7.1 Termination. This Agreement may be terminated and the
Transactions abandoned at any time prior to the Effective Time, whether before
or after receipt of the Company Shareholder Approval:
(a) by the mutual written consent of the Company and Parent duly
authorized by each of their respective Boards of Directors; or
45
(b) by either of the Company or Parent:
(i) if the Merger shall not have been consummated on or before
June 9, 2006 (the "Walk-Away Date"); provided, however, that the right
to terminate this Agreement under this Section 7.1(b)(i) shall not be
available to a party if the failure of the Merger to have been
consummated on or before the Walk-Away Date was primarily due to the
failure of such party to perform any of its obligations under this
Agreement and provided, further, that if the condition set forth in
Section 6.1(b) shall not have been satisfied, the earliest date on
which the Company may terminate this Agreement because the Merger
shall not have been consummated shall be July 10, 2006 (the "Extended
Walk-Away Date"); and provided, further, that the right to terminate
this Agreement under this Section 7.1(b)(i) shall not be available to
(A) Parent if the condition set forth in Section 6.1(b) shall not have
been satisfied or (B) the Company if a vote on the adoption and
approval of this Agreement and the Merger shall not yet have occurred
at a duly convened Company Shareholder Meeting;
(ii) if any Restraint having the effect set forth in Section
6.1(c) shall be in effect and shall have become final and
nonappealable; or
(iii) if the Company Shareholder Approval shall not have been
obtained at the Company Shareholders Meeting duly convened therefor or
at any adjournment or postponement thereof;
(c) by Parent:
(i) if the Company shall have breached or failed to perform any
of its representations, warranties, covenants or agreements set forth
in this Agreement, which breach or failure to perform (x) would give
rise to the failure of a condition set forth in Section 6.2(a) or (b)
and (y) cannot be cured by the Company by the Walk-Away Date or, if
curable, is not cured within 45 days after the Company receives
written notice from Parent of such breach;
(ii) if Parent shall have received a Company Adverse
Recommendation Notice, provided that Parent shall be permitted to
terminate this Agreement pursuant to this Section 7.1(c)(ii) only on
or before the end of the seventh (7th) business day after Parent's
receipt of the related Company Adverse Recommendation Notice; or
(iii) if a Company Adverse Recommendation Change shall have
occurred; or
(d) by the Company:
(i) if Parent shall have breached or failed to perform any of its
representations, warranties, covenants or agreements set forth in this
Agreement, which breach or failure to perform (x) would give rise to
the failure of a condition set forth in Section 6.3(a) or (b) and (y)
46
cannot be cured by Parent by the Walk-Away Date or, if curable, is not
cured within 45 days after Parent receives written notice from the
Company of such breach (for purposes of clarity, a termination by the
Company pursuant to this Section 7.1(d)(i) shall not constitute a
Company Adverse Recommendation Change); or
(ii) prior to the Company Shareholder Approval, if the Company
(A) has materially complied with its obligations under Sections 5.1
and 5.3, (B) has paid the Termination Fee pursuant to Section 7.3(a)
and (C) concurrently enters into a definitive Company Acquisition
Agreement providing for a Superior Proposal provided that the Company
may not terminate this Agreement pursuant to this Section 7.1(d)(ii)
until at least seven business days have passed since the date of the
most recent Company Adverse Recommendation Notice.
Section 7.2 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 7.1, written notice thereof shall be given
to the other party or parties, specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall forthwith become null and
void (other than Sections 5.9, 7.2 and 7.3, Article VIII and the last sentence
of Section 5.6, and the Confidentiality Agreement in accordance with its terms,
all of which shall survive termination of this Agreement), and there shall be no
liability on the part of Parent, Merger Sub or the Company or their respective
directors, officers and Affiliates, except (i) the Company may have liability as
provided in Section 7.3 and (ii) nothing shall relieve any party from liability
for fraud or any willful breach of this Agreement.
Section 7.3 Termination Fee.
(a) In the event that this Agreement is terminated by the Company
pursuant to Section 7.1(d)(ii), then the Company shall pay to Parent a
termination fee of $124,800,000 in cash (the "Termination Fee"), which
Termination Fee shall be paid concurrently with such termination, payable by
wire transfer of same-day funds.
(b) In the event that this Agreement is terminated by Parent either
(i) pursuant to Section 7.1(c)(i) based on a willful breach of Section 5.3 or
(ii) pursuant to Section 7.1(c)(ii) or 7.1(c)(iii), the Company shall pay to
Parent the Termination Fee within two business days of such termination, payable
by wire transfer of same-day funds.
(c) In the event this Agreement is terminated by the Company or
Parent pursuant to Section 7.1(b)(i) or 7.1(b)(iii) and (A) after the date of
this Agreement but prior to the date of such termination a Takeover Proposal or
a request or communication reasonably likely to lead to a Takeover Proposal
shall have been made known to the Company (or any director or officer of the
Company) or shall have been made directly to its shareholders generally or any
Person shall have publicly announced an interest in making or an intention
(whether or not conditional) to make a Takeover Proposal and (B) the Company
enters into a Company Acquisition Agreement with respect to, or consummates the
47
transaction contemplated by, a Takeover Proposal within twelve months of the
date this Agreement is so terminated pursuant to Section 7.1(b)(i) or
7.1(b)(iii), then the Company shall pay to Parent the Termination Fee
concurrently with (and as a condition to) the event under clause (B), payable by
wire transfer of same-day funds; provided, that in the event of a termination
pursuant to Section 7.1(b)(i), no Termination Fee shall be payable unless the
conditions set forth in Section 6.1(b), 6.1(c) (except for any Restraint that
was not issued in connection with Antitrust Law), 6.3(a) and 6.3(b) shall have
been satisfied.
(d) In the event that this Agreement is terminated by Parent pursuant
to Section 7.1(c)(i) (other than as described in Section 7.3(b)(i)), the Company
shall pay to Parent the Termination Fee only if (A) the Company's breach or
failure triggering such termination shall have been willful, (B) after the date
of this Agreement but prior to the date of such termination a Takeover Proposal
or a request or communication reasonably likely to lead to a Takeover Proposal
shall have been made known to the Company (or any director or officer of the
Company) or shall have been made directly to its shareholders generally or any
Person shall have publicly announced an interest in making or an intention
(whether or not conditional) to make a Takeover Proposal and (C) the Company
enters into a Company Acquisition Agreement with respect to, or consummates the
transaction contemplated by, a Takeover Proposal within twelve months of the
date this Agreement is so terminated pursuant to Section 7.1(c)(i), then the
Company shall pay to Parent the Termination Fee concurrently with (and as a
condition to) the event under clause (C) giving rise to the obligation to make
such payment, payable by wire transfer of same-day funds.
(e) Each of the Company and Parent acknowledges that the agreements
contained in this Section 7.3 are an integral part of the Transactions. If the
Company shall fail to pay the Termination Fee when due, the Company shall
reimburse Parent for all reasonable costs and expenses actually incurred or
accrued by Parent (including reasonable fees and expenses of counsel) in
connection with the collection under and enforcement of this Section 7.3
together with interest on the amount of the Termination Fee from the date such
payment was required to be made until the date of payment at the prime rate of
Citibank N.A. in effect on the date such payment was required to be made. Solely
for the purposes of Section 7.3(c) and 7.3(d), the term "Takeover Proposal"
shall have the meaning assigned to such term in Section 5.3(d), except that all
references to "20%" shall be changed to "40%".
Section 7.4 Remedies. Except as otherwise provided in this Agreement,
any and all remedies expressly conferred upon a party to this Agreement shall be
cumulative with, and not exclusive of, any other remedy contained in this
Agreement, at law or in equity. The exercise by a party to this Agreement of any
one remedy shall not preclude the exercise by it of any other remedy.
48
ARTICLE VIII
Miscellaneous
-------------
Section 8.1 No Survival of Representations and Warranties. The
representations, warranties and agreements in this Agreement shall terminate at
the Effective Time or, except as otherwise provided in Section 7.2, upon the
termination of this Agreement pursuant to Section 7.1, as the case may be,
except that the agreements set forth in Article II and Sections 5.8, 5.10, 5.11,
and 5.12 and any other agreement in this Agreement which contemplates
performance after the Effective Time shall survive the Effective Time
indefinitely and those set forth in Sections 5.9, 7.2 and 7.3 and this Article
VIII shall survive termination indefinitely. The Confidentiality Agreement shall
(i) survive termination of this Agreement in accordance with its terms and (ii)
terminate as of the Effective Time.
Section 8.2 Amendment or Supplement. At any time prior to the
Effective Time, this Agreement may be amended or supplemented in any and all
respects, whether before or after receipt of the Company Shareholder Approval,
by written agreement of the parties hereto, by action taken or authorized by
their respective Boards of Directors; provided, however, that following receipt
of the Company Shareholder Approval, there shall be no amendment or change to
the provisions hereof which by Law would require further approval by the
shareholders of the Company without such approval.
Section 8.3 Extension of Time, Waiver, Etc. At any time prior to the
Effective Time, any party may, subject to applicable Law, (a) waive any
inaccuracies in the representations and warranties of any other party hereto,
(b) extend the time for the performance of any of the obligations or acts of any
other party hereto or (c) waive compliance by the other party with any of the
agreements contained herein or, except as otherwise provided herein, waive any
of such party's conditions. Notwithstanding the foregoing, no failure or delay
by the Company or Parent in exercising any right hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right hereunder.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
Section 8.4 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of Law or otherwise, by any of the parties without the prior written
consent of the other party, provided, that Parent may assign any of its rights
and obligations to any direct or indirect wholly owned Subsidiary of Parent, but
no such assignment shall relieve Parent of its obligations hereunder. Subject to
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and permitted assigns. Any purported assignment not permitted under
this Section 8.4 shall be null and void.
Section 8.5 Counterparts. This Agreement may be executed in
counterparts (each of which shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement) and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other party.
49
Section 8.6 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, including the Company Disclosure Schedule, the exhibits hereto, the
documents and instruments relating to the Merger referred to herein and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
other prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and thereof and (b) except for
the provisions of Section 5.8 are not intended to and shall not confer upon any
Person other than the parties hereto any rights, benefits or remedies hereunder.
Section 8.7 Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be governed by and interpreted under the
laws of the State of Delaware (without regard to its principles of conflicts of
laws), except that the Merger and all applicable fiduciary duties of the Board
of Directors of the Company and any committee thereof hereunder shall be
governed by and interpreted under the Laws of the State of Florida. Each party
irrevocably and unconditionally (a) consents to submit to the jurisdiction of
the Chancery Court of the State of Delaware for any action, suit or proceeding
arising out of or relating to this agreement (and each party irrevocably and
unconditionally agrees not to commence any such action, suit or proceeding
except in such courts), (b) waives any objection to the laying of venue of any
such action, suit or proceeding in any such courts and (c) waives and agrees not
to plead or claim that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
(b) Each of the parties hereto hereby irrevocably waives any and all
rights to trial by jury in any legal proceeding arising out of or related to
this Agreement.
Section 8.8 Specific Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the Chancery Court of
the State of Delaware this being in addition to any other remedy to which they
are entitled at law or in equity.
Section 8.9 Notices. All notices, requests and other communications
to any party hereunder shall be in writing and shall be deemed given if
delivered personally, facsimiled (which is confirmed) or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses:
If to Parent, to:
The Home Depot, Inc.
Legal Department, Building C-20
2455 Paces Ferry Road
Atlanta, GA 30339
Attention: L. Briley Brisendine, Esq., Director - Legal Mergers
and Acquisitions
Facsimile: 770-384-2739
50
with a copy (which shall not constitute notice) to:
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, NY 10006
Attention: Ethan A. Klingsberg
Facsimile: (212) 225-3999
If to the Company, to:
Hughes Supply, Inc.
501 West Church Street
Orlando, FL 32805
Attention: General Counsel
Facsimile: 407-649-3018
with a copy (which shall not constitute notice) to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Thomas A. Roberts
Marita A. Makinen
Facsimile: (212) 310-8007
and to:
Holland & Knight LLP
200 South Orange Avenue
Suite 2600
Orlando, FL 32801
Attention: Tom McAleavey
Facsimile: (407) 244-5288
or such other address or facsimile number as such party may hereafter specify by
like notice to the other party hereto. All such notices, requests and other
communications shall be deemed received on the date of receipt by the recipient
thereof if received prior to 5 P.M. in the place of receipt and such day is a
business day in the place of receipt. Otherwise, any such notice, request or
communication shall be deemed not to have been received until the next
succeeding business day in the place of receipt.
51
Section 8.10 Severability. If any term or other provision of this
Agreement is determined by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced by any rule of Law or public policy, all
other terms, provisions and conditions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable Law in an acceptable manner to the end that the
Transactions are fulfilled to the extent possible.
Section 8.11 Definitions.
As used in this Agreement, the following terms have the meanings
ascribed thereto below:
"Affiliate" shall mean, as to any Person, any other Person that,
directly or indirectly, controls, or is controlled by, or is under common
control with, such Person. For this purpose, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of management or policies of a Person, whether through the ownership
of securities or partnership or other ownership interests, by contract or
otherwise.
"business day" shall mean a day except a Saturday, a Sunday or other
day on which the SEC or banks in the City of New York, New York are authorized
or required by Law to be closed.
"Company Supplemental Executive Retirement Plan" shall mean the
Company's Second Amended and Restated Supplemental Executive Retirement Plan, as
in effect on the date hereof.
"GAAP" shall mean generally accepted accounting principles in the
United States.
"Governmental Authority" shall mean any government, court, regulatory
or administrative agency, commission or authority, securities exchange, Nasdaq
or other governmental instrumentality, whether federal, state or local,
domestic, foreign or multinational.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Knowledge" shall mean, in the case of the Company, the actual
knowledge, as of the date of this Agreement and at and as of the Closing Date,
of the individuals listed on Schedule 8.11 of the Company Disclosure Schedule.
52
"Material Real Property" shall mean the land, improvements and
fixtures constituting real property owned or leased by the Company or any of its
Subsidiaries that comprise each of (i) the Atlanta, Georgia and Miami, Florida
"Megacenters", (ii) any portion of the Orlando, Florida "Megacenter", (iii) the
"Distribution Centers" located in Orlando, Florida, Phoenix, Arizona, Monroe,
North Carolina, Greenville, Ohio, Stafford, Texas, Tampa, Florida, College Park,
Georgia and Aurora, Colorado, (iv) any manufacturing or fabrication shop or
plant, (v) any facility with building square footage of 100,000 square feet or
more and (vi) the Company's corporate headquarters located at One Hughes Way,
Orlando, Florida 32805.
"NYSE" shall mean The New York Stock Exchange.
"Permitted Liens" shall mean Liens specifically disclosed on the
Balance Sheet; Liens for taxes not yet due or being contested in good faith
(and, with respect to those being contested, for which adequate accruals or
reserves have been established on the Balance Sheet); or Liens that do not
materially detract from the value or materially interfere with any present or
intended use of such property or assets.
"Person" shall mean an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity, including a
Governmental Authority.
"Subsidiary" when used with respect to any party, shall mean any
corporation, limited liability company, partnership, association, trust or other
entity of which securities or other ownership interests representing more than
50% of the equity and more than 50% of the ordinary voting power (or, in the
case of a partnership, more than 50% of the general partnership interests) are,
as of such date, owned by such party or one or more Subsidiaries of such party
or by such party and one or more Subsidiaries of such party.
"Tax Returns" shall mean any return, report, claim for refund,
estimate, information return or statement or other similar document relating to
or required to be filed with any Governmental Authority with respect to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
"Taxes" shall mean (i) all federal, state, local or foreign taxes,
charges, fees, imposts, levies or other assessments, including all net income,
gross receipts, capital, real property, personal property, sales, use, ad
valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind and all interest, penalties,
fines, additions to tax or additional amounts imposed by any Governmental
Authority with respect thereto, (ii) any liability for the payment of any
amounts described in clause (i) as a result of being a member of an affiliated,
consolidated, combined, unitary or similar group or as a result of transferor or
successor liability; and (iii) any liability for the payments of any amounts as
a result of being a party to any tax sharing agreement or as a result of any
express or implied obligation to indemnify any other Person with respect to the
payment of any amounts of the type described in clause (i) or (ii).
53
"Transactions" refers collectively to this Agreement and the
transactions contemplated hereby, including the Merger.
The following terms are defined on the page of this Agreement set forth after
such term below:
2007 Bonus Plans...............................41
Agreement.......................................2
Antitrust Laws.................................35
Articles of Merger..............................2
Balance Sheet Date.............................13
Bankruptcy and Equity Exception................11
Certificate.....................................4
Closing.........................................2
Closing Date....................................2
Code............................................6
Company.........................................2
Company 401(k) Plan............................42
Company Acquisition Agreement..................32
Company Adverse Recommendation Change..........32
Company Adverse Recommendation Notice..........32
Company Board Recommendation...................32
Company Charter Documents.......................9
Company Common Stock............................3
Company Disclosure Schedule.....................7
Company Employees..............................40
Company Material Adverse Effect.................8
Company Plans..................................15
Company Preferred Stock.........................9
Company SEC Documents..........................12
Company Senior Executives......................40
Company Shareholder Approval...................11
Company Shareholders Meeting...................26
Company Stock Plans.............................7
Confidentiality Agreement......................11
Contract.......................................11
Debt Offer Documents...........................42
Debt Offers....................................42
Delay..........................................30
Effective Time..................................2
54
Environmental Laws.............................18
ERISA..........................................15
Exchange Act...................................12
Extended Walk-Away Date........................46
FBCA............................................2
Filed Company SEC Documents.....................7
Hazardous Materials............................18
Indemnitee.....................................38
Indemnitees....................................38
Intellectual Property..........................22
Laws...........................................14
Leased Real Property...........................19
Liens...........................................9
Material Adverse Effect.........................8
Merger..........................................2
Merger Consideration............................4
Merger Sub......................................2
Notes..........................................42
Option..........................................6
Option Consideration............................7
Owned Real Property............................18
Parent..........................................2
Paying Agent....................................4
Permits........................................14
Proxy Statement................................12
Real Property Lease............................19
Representatives................................30
Restraints.....................................44
Restricted Company Common Stock.................7
Rights..........................................4
Rights Agreement................................4
SEC............................................12
Securities Act..................................9
Special Committee...............................2
Superior Proposal..............................33
Surviving Corporation...........................2
Takeover Proposal..............................33
Termination Fee................................47
Walk-Away Date.................................46
Section 8.12 Interpretation.
(a) When a reference is made in this Agreement to an Article, a
Section, Exhibit or Schedule, such reference shall be to an Article of, a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used in any
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a Person are also to its
permitted successors and assigns.
(b) The parties hereto have participated jointly in the negotiation
and drafting of this Agreement and, in the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as jointly
drafted by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
THE HOME DEPOT, INC.
By:
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Name:
Title:
HUGHES SUPPLY, INC.
By:
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Name: Thomas I. Morgan
Title: Chief Executive Officer and
President