AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 12, 2002
REGISTRATION NO. 333 - 81268
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
DYCOM INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
FLORIDA 1632 59-1277135
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
4440 PGA BOULEVARD, SUITE 500
PALM BEACH GARDENS, FLORIDA 33410
(561) 627-7171
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------------
MARC R. TILLER, ESQ.
DYCOM INDUSTRIES, INC.
4440 PGA BOULEVARD, SUITE 500
PALM BEACH GARDENS, FLORIDA 33410
(561) 627-7171
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES TO:
STEPHEN M. BESEN, ESQ. HOWARD B. ADLER, ESQ.
SHEARMAN & STERLING GIBSON, DUNN & CRUTCHER LLP
599 LEXINGTON AVENUE 1050 CONNECTICUT AVE., N.W.
NEW YORK, NEW YORK 10022 WASHINGTON, D.C. 20036-5306
(212) 848-4000 (202) 955-8500
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
promptly as practicable after this Registration Statement becomes effective and
upon consummation of the transactions described in the enclosed prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRELIMINARY PROSPECTUS, DATED FEBRUARY 12, 2002. THE INFORMATION IN THIS
PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. DYCOM INDUSTRIES, INC. MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND DYCOM INDUSTRIES, INC. IS NOT SOLICITING
OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE EXCHANGE OFFER OR SALE IS
NOT PERMITTED.
[DYCOM INDUSTRIES, INC. LOGO]
OFFER TO EXCHANGE
0.3333 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHT TO PURCHASE PREFERRED SHARES)
OF
DYCOM INDUSTRIES, INC.
FOR
EACH OUTSTANDING SHARE OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHT TO PURCHASE PREFERRED STOCK)
OF
ARGUSS COMMUNICATIONS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, FEBRUARY 20, 2002, UNLESS EXTENDED. SHARES TENDERED
PURSUANT TO THIS OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF
THE OFFER, BUT NOT DURING ANY SUBSEQUENT OFFERING PERIOD.
On January 7, 2002, we entered into an Agreement and Plan of Merger with
Arguss Communications, Inc. to acquire all the outstanding shares of Arguss
common stock. The board of directors of Arguss has determined that the merger
agreement and the transactions contemplated thereby, including the offer and the
merger, are fair to and in the best interests of Arguss and Arguss stockholders,
has approved, adopted and declared the advisability of the merger agreement and
the transactions contemplated thereby, including the offer and the merger, and
recommends that Arguss stockholders accept the offer and tender their shares
pursuant to the offer.
Through our wholly owned subsidiary, Troy Acquisition Corp., we are
offering to exchange 0.3333 shares of Dycom common stock (including the
associated right to purchase preferred shares), for each outstanding share of
Arguss common stock (including the associated right to purchase preferred stock)
that is validly tendered and not properly withdrawn.
Our obligation to exchange Dycom common stock for Arguss common stock is
subject to the conditions listed under "The Offer -- Conditions to the Offer",
including that a majority of the outstanding shares of Arguss common stock, on a
fully-diluted basis, are validly tendered in the offer and not withdrawn.
Dycom's common stock is listed on the New York Stock Exchange under the symbol
"DY" and Arguss' common stock is listed on the New York Stock Exchange under the
symbol "ACX."
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS
PROSPECTUS OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF IMPORTANT
FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH THE OFFER.
WE ARE NOT ASKING FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
Any solicitation of proxies will be made only pursuant to separate proxy
solicitation materials complying with the requirements of Section 14(a) of the
Securities Exchange Act of 1934.
The Dealer Manager for this Offer is:
MERRILL LYNCH & CO.
The date of this prospectus is February 12, 2002.
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS ABOUT THE PROPOSED ACQUISITION........ 1
WHERE YOU CAN FIND MORE INFORMATION ABOUT DYCOM AND
ARGUSS.................................................... 5
SUMMARY..................................................... 7
RISK FACTORS................................................ 12
DYCOM INDUSTRIES, INC. SELECTED CONSOLIDATED HISTORICAL
FINANCIAL DATA............................................ 17
ARGUSS COMMUNICATIONS, INC. SELECTED CONSOLIDATED HISTORICAL
FINANCIAL DATA............................................ 19
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
DATA...................................................... 20
COMPARATIVE PER SHARE DATA.................................. 21
COMPARATIVE MARKET PRICE INFORMATION........................ 22
THE COMPANIES............................................... 23
Dycom Industries, Inc. and Purchaser...................... 23
Arguss Communications, Inc................................ 24
REASONS FOR THE ARGUSS BOARD'S RECOMMENDATION; FACTORS
CONSIDERED................................................ 25
BACKGROUND OF THE OFFER..................................... 27
THE OFFER................................................... 30
Basic Terms............................................... 30
Extension, Termination and Amendment...................... 30
Subsequent Offering Period................................ 31
Exchange of Arguss Shares; Delivery of Dycom Shares....... 32
Cash Instead of Fractional Dycom Shares................... 33
Withdrawal Rights......................................... 33
Procedure For Tendering................................... 33
Material United States Federal Income Tax Consequences.... 36
Purpose of the Offer...................................... 38
The Merger................................................ 38
Appraisal Rights.......................................... 38
Conditions to the Offer................................... 39
Regulatory Approvals...................................... 41
Certain Effects of the Offer.............................. 43
Opinion of Financial Advisor to Arguss.................... 44
Certain Information Provided to Dycom..................... 50
Accounting Treatment of the Merger........................ 51
Fees and Expenses......................................... 51
Stock Exchange Listing.................................... 52
THE MERGER AGREEMENT........................................ 53
The Offer................................................. 53
The Merger................................................ 53
Arguss Board of Directors................................. 54
Treatment of Arguss Stock Options......................... 54
Covenants and Representations and Warranties.............. 55
Conditions to the Offer................................... 58
Conditions to the Merger.................................. 58
Termination of the Merger Agreement....................... 59
Termination Fees.......................................... 60
i
PAGE
----
THE STOCKHOLDERS' AGREEMENT................................. 62
INTERESTS OF CERTAIN PERSONS................................ 64
Employment Agreements and Change-in-Control Provisions.... 64
Arguss Stock Options...................................... 65
Indemnification of Directors and Officers................. 65
COMPARATIVE STOCK PRICES AND DIVIDEND INFORMATION........... 67
Dycom Dividend Policy..................................... 68
Arguss Dividend Policy.................................... 68
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS................................................ 69
DESCRIPTION OF DYCOM CAPITAL STOCK.......................... 77
Transfer Agent and Registrar.............................. 77
COMPARISON OF STOCKHOLDER RIGHTS............................ 78
LEGAL MATTERS............................................... 85
EXPERTS..................................................... 85
FORWARD-LOOKING STATEMENTS.................................. 85
SCHEDULE I -- Directors and Executive Officers of Dycom and
Purchaser
ANNEX A Agreement and Plan of Merger
ANNEX B Stockholders' Agreement
ANNEX C Opinion of Allen & Company Incorporated
ANNEX D Appraisal Rights Procedures Relating to Arguss Common Stock
ii
THIS DOCUMENT INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT DYCOM AND ARGUSS FROM DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION THAT HAVE NOT BEEN INCLUDED IN OR DELIVERED WITH THIS DOCUMENT. THIS
INFORMATION IS AVAILABLE AT THE INTERNET WEB SITE THAT THE SEC MAINTAINS AT
HTTP://WWW.SEC.GOV, AS WELL AS FROM OTHER SOURCES. SEE "WHERE YOU CAN FIND MORE
INFORMATION ABOUT DYCOM AND ARGUSS" BEGINNING ON PAGE 5.
YOU ALSO MAY REQUEST COPIES OF THESE DOCUMENTS FROM US, WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST TO OUR INFORMATION AGENT, GEORGESON SHAREHOLDER
COMMUNICATIONS INC., 111 COMMERCE ROAD, CARLSTADT, NEW JERSEY 07072, CALL
COLLECT AT 201-896-1900 OR TOLL-FREE AT 1-877-748-9122. IN ORDER TO RECEIVE
TIMELY DELIVERY OF THE DOCUMENTS, YOU MUST MAKE YOUR REQUESTS NO LATER THAN
FEBRUARY 13, 2002.
iii
QUESTIONS AND ANSWERS ABOUT THE PROPOSED ACQUISITION
Q: WHO IS OFFERING TO EXCHANGE MY SECURITIES?
A: We are Dycom Industries, Inc. We are a leading provider of engineering,
construction, and maintenance services to telecommunications providers
throughout the United States. Troy Acquisition Corp., which we refer to as
Purchaser, is a newly formed Delaware corporation and our wholly owned
subsidiary. Purchaser has been organized in connection with this offer and
has not carried on any activities other than in connection with this offer.
Q: WHAT ARE DYCOM AND ARGUSS PROPOSING?
A: We have entered into a merger agreement with Arguss pursuant to which we are
offering, through Purchaser, to exchange a fractional share of Dycom common
stock and the associated preferred share purchase right, which we refer to as
Dycom shares, for each outstanding share of Arguss common stock and the
associated preferred stock purchase right, which we refer to as Arguss
shares. After successful completion of the offer and satisfaction of other
conditions specified in the merger agreement, Purchaser will merge with and
into Arguss and Arguss will become our wholly owned subsidiary.
Q: WHAT WOULD I RECEIVE IN EXCHANGE FOR MY ARGUSS SHARES?
A: We are offering to exchange 0.3333 Dycom shares for each outstanding Arguss
share that is validly tendered and not properly withdrawn. After successful
completion of the offer and satisfaction of other conditions specified in the
merger agreement, each Arguss share not tendered into the offer will be
exchanged for 0.3333 Dycom shares in a subsequent merger.
You will not receive any fractional Dycom shares in the offer or the merger.
Instead, you will receive cash in an amount equal to the market value of any
fractional shares that you would otherwise have been entitled to receive.
Q: HOW LONG WILL IT TAKE TO COMPLETE THE OFFER AND THE MERGER?
A: The offer is scheduled to expire on Wednesday, February 20, 2002, the initial
scheduled expiration date. We may decide to extend the offer or, under
certain circumstances, may be required to extend the offer, if the conditions
of the offer have not been satisfied by the initial scheduled expiration
date. We expect to complete the merger shortly after successful completion of
the offer, or if Arguss stockholder approval is required, shortly after the
special meeting of the Arguss stockholders to approve the merger.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS?
A: If you are the record owner of your Arguss shares and you tender your shares
directly to the exchange agent, you will not have to pay brokerage fees or
incur similar expenses. If you own your shares through a broker or other
nominee, and your broker tenders the shares on your behalf, your broker may
charge you a fee for doing so. You should consult your broker or nominee to
determine whether any charges will apply.
Q: WHAT DOES ARGUSS' BOARD OF DIRECTORS THINK OF THE OFFER?
A: Arguss' board of directors has determined that the merger agreement and the
transactions contemplated thereby, including the offer and the merger, are
fair to and in the best interests of Arguss and Arguss stockholders, has
approved, adopted and declared the advisability of the merger agreement and
the transactions contemplated thereby, including the offer and the merger,
and recommends that Arguss stockholders accept the offer and tender their
shares pursuant to the offer. Information about the recommendation of Arguss'
board of directors is more fully set forth under "Reasons for the Arguss
Board's Recommendation; Factors Considered" beginning on page 25 and in
Arguss' Solicitation/Recommendation Statement on Schedule 14D-9, which is
being mailed to Arguss stockholders together with this prospectus.
Q: HAVE ANY ARGUSS STOCKHOLDERS AGREED TO TENDER THEIR SHARES?
A: Yes. The current directors and certain executive officers of Arguss have
agreed to tender
into the offer all of their Arguss shares, representing approximately 6.7% of
the outstanding Arguss shares as of February 11, 2002 (or 5.4% on a
fully-diluted basis).
Q: HAS ARGUSS RECEIVED A FAIRNESS OPINION IN CONNECTION WITH THE OFFER AND THE
MERGER?
A: Yes. Arguss has received an opinion from its financial advisor, Allen &
Company Incorporated, to the effect that, as of January 7, 2002, based upon
and subject to various considerations set forth in its opinion, the
consideration to be received by holders of Arguss shares pursuant to the
merger agreement was fair, from a financial point of view, to such holders.
You should read the opinion carefully and in its entirety. The opinion does
not constitute a recommendation as to whether or not Arguss stockholders
should tender shares pursuant to the offer.
Q: WHAT PERCENTAGE OF DYCOM'S SHARES WILL ARGUSS STOCKHOLDERS OWN AFTER THE
OFFER AND THE MERGER?
A: After completion of the merger, former stockholders of Arguss would own
approximately 10% of the outstanding Dycom shares, based on the number of
outstanding Dycom shares and Arguss shares on February 1, 2002 and not taking
into account unexercised stock options.
Q: WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
A: We are not obligated to exchange any Arguss shares unless, among other
things:
- a majority of the outstanding Arguss shares, on a fully-diluted basis, are
validly tendered and not properly withdrawn, which we refer to as the
minimum tender condition,
- all waiting periods under applicable antitrust laws have expired or have
been terminated,
- the registration statement, of which this prospectus is a part, has been
declared effective by the SEC,
- Arguss has not breached any obligation, covenant or agreement in a material
manner,
- Arguss' representations and warranties are true or, if any are not true,
they are not reasonably likely to, individually or in the aggregate, result
in a material adverse effect on Arguss,
- the Arguss forbearance agreement with certain banks is amended to extend
the forbearance period until the effective time of the merger, and
- the Dycom shares to be issued in the offer and the merger have been
approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.
These conditions and other conditions to the offer are discussed in this
prospectus under "The Offer -- Conditions to the Offer" beginning on page 39.
Q: HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
A: You will have at least until 12:00 midnight, New York City time, on
Wednesday, February 20, 2002, to decide whether to tender your shares in the
offer. If you cannot deliver everything that is required in order to make a
valid tender by that time, you may be able to use a guaranteed delivery
procedure which is described under "The Offer -- Procedure for Tendering"
beginning on page 33.
Q: CAN THE OFFER BE EXTENDED, AND UNDER WHAT CIRCUMSTANCES?
A: We may, without the consent of Arguss, but subject to the terms of the merger
agreement and applicable law, extend the period of time during which the
offer remains open. We have agreed in the merger agreement that we will
extend the offer for a period of not more than 15 business days if the
minimum tender condition has not been satisfied at the initial scheduled
expiration date. In addition, we may, although we do not currently intend to,
extend the offer for a subsequent offering period of not less than three
business days nor more than 20 business days. You will have withdrawal rights
during any extension period but not during any subsequent offering period.
See "The Offer -- Extension, Termination and Amendment" beginning on page 30.
2
Q: HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
A: If we decide or are required to extend the offer, or if we decide to provide
for a subsequent offering period, we will inform the exchange agent of that
fact and we will make a public announcement of the results of the exchange
offer, and give the new expiration date no later than 9:00 a.m., New York
City time, on the day after the day on which the offer was previously
scheduled to expire. See "The Offer -- Extension, Termination and Amendment"
beginning on page 30.
Q: HOW DO I ACCEPT THE OFFER?
A: To tender your shares, you should do the following:
- if you hold Arguss shares in your own name, complete and sign the enclosed
letter of transmittal and return it with your share certificates to First
Union National Bank, the exchange agent for the offer, at the appropriate
address specified on the back cover page of this prospectus before the
expiration date of the offer,
- if you hold your Arguss shares in "street name" through a broker, instruct
your broker to tender your shares before the expiration date, or
- if your Arguss share certificates are not immediately available or if you
cannot deliver your Arguss share certificates and other documents to the
exchange agent prior to the expiration of the offer, or you cannot complete
the procedure for delivery by book-entry transfer on a timely basis, you
may still tender your Arguss shares if you comply with the guaranteed
delivery procedures described under "The Offer -- Procedure for Tendering"
beginning on page 33.
Q: UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
A: You may withdraw previously tendered Arguss shares any time prior to the
expiration of the offer, and, unless we have accepted the shares pursuant to
the offer, you may also withdraw any tendered shares at any time after March
23, 2002. Any Arguss shares tendered during the subsequent offering period
may not be withdrawn. Also, once we have accepted shares for exchange
pursuant to the offer, all tenders become irrevocable. See "The Offer --
Withdrawal Rights" on page 33.
Q: HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
A: To withdraw previously tendered Arguss shares, you must deliver a written or
facsimile notice of withdrawal with the required information to the exchange
agent while you still have the right to withdraw. If you tendered shares by
giving instructions to a broker or bank, you must instruct the broker or bank
to arrange for the withdrawal of your shares. See "The Offer -- Withdrawal
Rights" on page 33.
Q: WILL I BE TAXED ON THE DYCOM SHARES THAT I RECEIVE?
A: Assuming that the merger is completed and other factual conditions are
satisfied, an Arguss stockholder's receipt of Dycom shares in the offer or
the merger will be tax free for United States federal income tax purposes
(except for taxes resulting from the receipt of cash instead of any fraction
of a Dycom share). Currently, Arguss and Dycom have no reason to believe that
the exchange of Arguss shares for Dycom shares will not be tax-free. However,
if these factual conditions are not satisfied, the exchange of Arguss shares
for Dycom shares in the offer and the merger could be a taxable transaction,
depending upon the surrounding facts. In that event, an Arguss stockholder
could be taxed on gain, if any, in respect of the exchange of the Arguss
shares for Dycom shares, but would not receive cash in either the offer or
the merger from which to pay the resulting tax liability (other than any cash
received in lieu of fractional Dycom shares).
You are urged to carefully read the discussion under "The Offer -- Material
United States Federal Income Tax Consequences" beginning on page 36, and to
consult your tax advisor on the consequences of participation in the offer or
the merger.
Q: IS DYCOM'S FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER MY SHARES IN
THE OFFER?
A: Yes. Arguss shares accepted in the offer will be exchanged for Dycom shares
and you should therefore consider our financial condition before you decide
to become one of our
3
shareholders through the offer. In considering Dycom's financial condition,
you should review the documents incorporated by reference in this prospectus
because they contain detailed business, financial and other information about
us. See "Where You Can Find More Information About Dycom and Arguss"
beginning on page 5.
Q: IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
A: If you decide not to tender your Arguss shares in the offer and the merger
occurs, you will receive in the merger the same number of Dycom shares for
each Arguss share you own that you would have received had you tendered your
Arguss shares in the offer. In connection with the merger, Arguss
stockholders may have a right to dissent and demand appraisal of their Arguss
shares.
Q: WILL ARGUSS CONTINUE AS A PUBLIC COMPANY?
A: If the merger occurs, Arguss will no longer be publicly owned. Additionally,
if we purchase all the Arguss shares tendered, prior to the merger (or in the
event we fail to satisfy or waive all the conditions to the merger and the
merger is not completed), there may be so few remaining Arguss stockholders
and publicly held Arguss shares that Arguss shares may no longer be eligible
to be traded on the New York Stock Exchange or other securities markets,
there may not be a public trading market for the Arguss shares or Arguss may
cease making filings with the SEC or otherwise cease to be required to comply
with SEC rules relating to publicly held companies.
Q: DO THE STATEMENTS ON THE COVER PAGE REGARDING THIS PROSPECTUS BEING SUBJECT
TO CHANGE AND THE REGISTRATION STATEMENT FILED WITH THE SEC NOT YET BEING
EFFECTIVE MEAN THAT THE OFFER HAS NOT COMMENCED?
A: No. The offer has commenced and change of this prospectus and effectiveness
of the registration statement are not necessary for you to tender your Arguss
shares. The SEC rules permit exchange offers to begin before the related
registration statement has become effective, and we are relying on these
rules, with the goal of quickly combining Dycom and Arguss, subject to the
SEC declaring the registration statement effective.
Q: WHERE CAN I FIND OUT MORE INFORMATION ABOUT DYCOM AND ARGUSS?
A: You can find out more information about Dycom and Arguss from various sources
described under "Where You Can Find More Information About Dycom and Arguss"
beginning on page 5.
Q: WHO CAN I CALL WITH QUESTIONS ABOUT THE OFFER?
A: You can contact our information agent, Georgeson Shareholder Communications
Inc., collect at 201-896-1900 or toll-free at 1-877-748-9122, or the dealer
manager, Merrill Lynch & Co., toll-free at 1-866-276-1462.
4
WHERE YOU CAN FIND MORE INFORMATION
ABOUT DYCOM AND ARGUSS
Dycom and Arguss file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission, or
the SEC, under the Securities Exchange Act of 1934. You may read and copy this
information at the following SEC locations:
Midwest Regional Office Northeast Regional
Public Reference Room 500 West Madison Street Office
450 Fifth Street, N.W. Suite 1400 233 Broadway
Room 1024 Chicago, Illinois 60661 Woolworth Building
Washington, D.C. 20549 New York, New York 10279
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. You may also obtain copies of this
information by mail from the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like Dycom and
Arguss, who file electronically with the SEC. The address of that site is
http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
Dycom and Arguss at the offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005.
We filed a registration statement on Form S-4 to register with the SEC the
Dycom shares to be issued pursuant to the offer and the merger. This prospectus
is a part of that registration statement. As allowed by SEC rules, this
prospectus does not contain all the information you can find in the registration
statement or the exhibits to the registration statement. In addition, we also
filed with the SEC a statement on Schedule TO pursuant to Rule 14d-3 under the
Securities Exchange Act of 1934 to furnish certain information about the offer.
You may obtain copies of the Form S-4 and the Schedule TO (and any amendments to
those documents) in the manner described above.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus.
This prospectus incorporates by reference the documents set forth below that
Dycom and Arguss have previously filed with the SEC. These documents contain
important information about Dycom and Arguss and their financial condition.
The following documents listed below that Dycom and Arguss have previously
filed with the SEC are incorporated by reference:
DYCOM SEC FILINGS PERIOD
----------------- ------
Annual Report on Form 10-K.................. Year ended July 28, 2001, as filed on
October 10, 2001 (including the information
incorporated therein from the Dycom Proxy
Statement filed on October 9, 2001)
Quarterly Report on Form 10-Q............... Quarter ended October 27, 2001, as filed on
December 11, 2001
5
DYCOM SEC FILINGS PERIOD
----------------- ------
Current Reports on Form 8-K................. Filed on January 7, 2002 and January 24,
2002
ARGUSS SEC FILINGS PERIOD
------------------ ------
Annual Report on Form 10-K.................. Year ended December 31, 2000, as filed on
March 7, 2001 (including the information
incorporated therein from the Arguss Proxy
Statement filed on March 20, 2001)
Quarterly Reports on Form 10-Q.............. Quarters ended March 31, 2001, as filed on
May 11, 2001, June 30, 2001, as filed on
August 3, 2001, and September 30, 2001, as
filed on November 14, 2001
The description of Arguss common stock set
forth in Arguss' registration statement on
Form 8-A filed by Arguss pursuant to
Section 12 of the Securities Exchange Act
of 1934, including any amendment or report
filed with the SEC for the purpose of
updating any such description............. Filed on December 6, 2000
Current Reports on Form 8-K................. Filed on December 3, 2001, December 31,
2001, January 8, 2002, January 16, 2002,
January 22, 2002 and February 1, 2002
All documents filed by Dycom and Arguss pursuant to Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 from the date of this
prospectus to the date that shares are accepted for exchange pursuant to our
offer (or the date that our offer is terminated) will also be deemed to be
incorporated herein by reference.
Information that we file later with the SEC and that is incorporated by
reference into this prospectus will automatically update and supersede
information provided in this prospectus including information on previously
filed documents or reports that have been incorporated by reference in this
prospectus, to the extent that the new information differs from or is
inconsistent with the old information.
DOCUMENTS INCORPORATED BY REFERENCE ARE AVAILABLE FROM US WITHOUT CHARGE
UPON REQUEST TO OUR INFORMATION AGENT, GEORGESON SHAREHOLDER COMMUNICATIONS
INC., 111 COMMERCE ROAD, CARLSTADT, NEW JERSEY 07072, CALL COLLECT AT
201-896-1900 OR TOLL-FREE AT 1-877-748-9122. IN ORDER TO ENSURE TIMELY DELIVERY,
ANY REQUEST SHOULD BE SUBMITTED NO LATER THAN FEBRUARY 13, 2002. IF YOU REQUEST
ANY INCORPORATED DOCUMENTS FROM US, WE WILL MAIL THEM TO YOU BY FIRST CLASS
MAIL, OR ANOTHER EQUALLY PROMPT MEANS, WITHIN ONE BUSINESS DAY AFTER WE RECEIVE
YOUR REQUEST.
We have not authorized anyone to give any information or make any
representation about our offer that is different from, or in addition to, what
is contained in this prospectus or in any of the materials that we have
incorporated by reference into this prospectus. Therefore, if anyone does give
you information, you should not rely on it. If you are in a jurisdiction where
offers to exchange or sell, or solicitations of offers to exchange or purchase,
the securities offered by this document are unlawful, or if you are a person to
whom it is unlawful to direct these types of activities, then the offer
presented in this document does not extend to you. The information contained in
this document speaks only as of the date of this document unless the information
specifically indicates that another date applies.
6
SUMMARY
The following is a brief summary of information contained in the
prospectus. You should carefully read this entire document and the other
documents to which this document refers you to fully understand the offer. See
"Where You Can Find More Information About Dycom and Arguss" beginning on page
5.
THE OFFER AND THE MERGER AGREEMENT (PAGES 30 AND 53)
We are proposing to acquire Arguss. We are offering to exchange 0.3333
Dycom shares for each outstanding Arguss share that is validly tendered and not
properly withdrawn.
We intend, promptly after completion of the offer, to seek to merge
Purchaser, our wholly owned subsidiary and the purchaser in the offer, with and
into Arguss. As a result, Arguss will become our wholly owned subsidiary. Each
Arguss share that has not been exchanged or accepted for exchange in the offer
would be converted in the merger into the same number of Dycom shares as is paid
per Arguss share in the offer. Dycom seeks to acquire ownership of 100% of
Arguss' shares through the offer and the merger.
The board of directors of Arguss has determined that the merger agreement
and the transactions contemplated thereby, including the offer and the merger,
are fair to and in the best interests of, Arguss and Arguss stockholders, has
approved, adopted and declared the advisability of the merger agreement and the
transactions contemplated thereby, including the offer and the merger, and
recommends that Arguss stockholders accept the offer and tender their shares
pursuant to the offer.
INFORMATION ABOUT DYCOM AND ARGUSS (PAGE 5)
DYCOM INDUSTRIES, INC.
4440 PGA BOULEVARD, SUITE 500
PALM BEACH GARDENS, FLORIDA 33410
(561) 627-7171
WWW.DYCOMIND.COM
Dycom is a leading provider of engineering, construction and maintenance
services to telecommunications providers throughout the United States. Dycom's
comprehensive range of telecommunications infrastructure services includes the
engineering, placement and maintenance of aerial, underground, fiber-optic,
coaxial and copper cable systems owned by local and long distance
communications-carriers, competitive local exchange carriers, and cable
television multiple system operators.
ARGUSS COMMUNICATIONS, INC.
ONE CHURCH STREET, SUITE 302
ROCKVILLE, MARYLAND 20850
(301) 315-0027
WWW.ARGX.COM
Arguss, through its subsidiaries, is engaged in the construction,
reconstruction, maintenance, engineering, design, repair and expansion of
communications systems, cable television systems and data systems, including
providing aerial, underground, wireless and long-haul construction and splicing
of both fiber-optic and coaxial cable to major telecommunications customers.
Arguss also manufactures and sells highly advanced, computer-controlled
equipment used in the surface mount, electronics circuit assembly industry.
DYCOM DIVIDEND POLICY (PAGE 68)
The holders of Dycom shares have not received cash dividends since 1982.
Our dividend policy after completion of the merger will depend upon our board's
consideration of business conditions, operating
7
results, capital and reserve requirements and other relevant factors; however,
we expect to continue not to pay any cash dividends for the foreseeable future.
THE OFFER (PAGE 30)
Summary of the Offer
We are offering, upon the terms and subject to the conditions set forth in
this prospectus and in the related letter of transmittal, to exchange Dycom
shares for Arguss shares at an exchange ratio of 0.3333 Dycom shares for each
outstanding Arguss share that is validly tendered and not properly withdrawn on
or prior to the expiration date of the offer or during any subsequent offering
period.
The term "expiration date" means 12:00 midnight, New York City time, on
Wednesday, February 20, 2002 unless we extend the period of time during which
this offer is open, in which case the term "expiration date" means the latest
time and date on which the offer, as so extended, expires.
We are making this offer in order to acquire control of, and ultimately all
outstanding equity securities of, Arguss. We intend, as soon as possible after
consummation of the offer, to seek to have Arguss and Purchaser consummate the
merger. At the effective time of the merger, each Arguss share, except for
treasury shares and shares held by Dycom, Purchaser or any of Dycom's or
Purchaser's subsidiaries and shares in respect of which appraisal rights, if
available, have been properly perfected, will be converted into the right to
receive the same number of Dycom shares as is paid per Arguss share in the
offer.
Conditions to the Offer
Our obligation to exchange Dycom shares for Arguss shares is subject to
several conditions referred to under "The Offer -- Conditions to the Offer"
beginning on page 39, including conditions that require the tender of at least a
majority of the total number of outstanding Arguss shares on a fully diluted
basis, which we refer to as the minimum tender condition, and receipt of all
required regulatory approvals.
Timing of the Offer
Our offer is currently scheduled to expire at 12:00 midnight, New York City
time, on Wednesday, February 20, 2002. However, we may extend our offer from
time to time as necessary until all the conditions to the offer have been
satisfied. See "The Offer -- Extension, Termination and Amendment" beginning on
page 30.
Extension, Termination and Amendment
We expressly reserve the right, in our sole discretion (subject to the
provisions of the merger agreement), at any time or from time to time, to extend
the period of time during which our offer remains open (a) beyond the initial
scheduled expiration date or extension of the offer if, at the scheduled or
extended expiration date of the offer, any of the conditions to the offer have
not been satisfied or waived, until the conditions to the offer are satisfied or
waived, (b) for any period required by any rule, regulation, interpretation or
position of the SEC applicable to the offer or (c) for an aggregate period of
not more than ten business days beyond the latest applicable date that would
otherwise be permitted under clause (a) or (b) above, if, as of the expiration
date, all of the conditions to the offer have been satisfied or waived but the
number of Arguss shares validly tendered and not withdrawn equals more than 50%,
but less than 90%, of the outstanding Arguss shares on a fully diluted basis. We
have agreed, pursuant to the merger agreement, to extend the offer if the
minimum tender condition is not met for up to 15 business days after the initial
scheduled expiration date.
We can extend our offer by giving oral or written notice of extension to
the exchange agent. If we decide to extend our offer, we will make an
announcement to that effect no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date. During any
such extension, all Arguss shares previously tendered and not properly withdrawn
will remain tendered, subject
8
to your right to withdraw your Arguss shares. An extension of the offer is
different than a subsequent offering period. The consequences of a subsequent
offering period are described below.
Subject to the SEC's applicable rules and regulations and the terms of the
merger agreement, we also reserve the right, in our sole discretion, at any time
or from time to time, to (1) delay our acceptance for exchange or the exchange
of any Arguss shares pursuant to our offer, regardless of whether we previously
accepted Arguss shares for exchange, or to terminate our offer and not accept
for exchange or exchange any Arguss shares not previously accepted for exchange
or exchanged, upon the failure of any of the conditions of the offer to be
satisfied and (2) waive any of the conditions to the offer and to make any
change in the terms of or conditions to the offer provided that we will not (a)
make any change in the form of consideration to be paid in the offer, (b)
decrease the consideration payable in the offer, (c) reduce the maximum number
of Arguss shares to be purchased in the offer, (d) impose conditions to the
offer in addition to those set forth in the merger agreement, or (e) make any
other change that is adverse to the stockholders of Arguss. We will give oral or
written notice of any such delay, termination or amendment to the exchange agent
and by making a public announcement.
We will follow any extension, termination, amendment or delay, as promptly
as practicable, with a public announcement. In the case of an extension, any
such announcement will be issued no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date. Subject to
applicable law (including Rules 14d-4(d), 14d-6(c) and 14e-1 under the
Securities Exchange Act of 1934, which require that any material change in the
information published, sent or given to Arguss stockholders in connection with
the offer be promptly sent to stockholders in a manner reasonably designed to
inform stockholders of such change) and without limiting the manner in which we
may choose to make any public announcement, we assume no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service or the PR Newswire Association,
Inc.
Exchange of Shares
Upon the terms and subject to the conditions of the offer (including, if
the offer is extended or amended, the terms and conditions of any extension or
amendment), we will accept for exchange, and will exchange, Arguss shares
validly tendered and not properly withdrawn as promptly as practicable after the
expiration date and promptly after they are tendered during any subsequent
offering period.
Withdrawal Rights
Arguss shares tendered pursuant to the offer may be withdrawn at any time
prior to the expiration date, and, unless we previously accepted them pursuant
to the offer, may also be withdrawn at any time after Saturday, March 23, 2002.
Once we have accepted shares for exchange pursuant to the offer, all tenders not
previously withdrawn become irrevocable.
You will not have the right to withdraw Arguss shares tendered in any
subsequent offering period.
Subsequent Offering Period
We may, although we do not currently intend to, elect to provide a
subsequent offering period of three to 20 business days after the acceptance of
Arguss shares pursuant to the offer if the requirements under Rule 14d-11 of the
Securities Exchange Act of 1934 have been met. You will not have the right to
withdraw Arguss shares that you tender during a subsequent offering period. If
we elect to provide a subsequent offering period, we will make a public
announcement of the results of the exchange offer, including the approximate
number and percentage of Arguss shares deposited, no later than 9:00 a.m., New
York City time, on the next business day after the expiration date of the
initial offering period and immediately begin the subsequent offering period.
9
Procedure for Tendering Arguss Shares
For you to validly tender Arguss shares pursuant to our offer, you must
either:
- properly complete a duly executed letter of transmittal (or manually
executed facsimile of that document), along with any required signature
guarantees, or an agent's message, which is explained below, in
connection with a book-entry transfer, and any other required documents,
and the transmittal letter must be transmitted to and received by First
Union National Bank, the exchange agent for the offer, at one of its
addresses set forth on the back cover of this prospectus, and
certificates for tendered Arguss shares must be received by the exchange
agent at such address, or those Arguss shares must be tendered pursuant
to the procedures for book-entry tender set forth in "The
Offer -- Procedure for Tendering" beginning on page 33 (and a
confirmation of receipt of such tender received), in each case before the
expiration date, or
- comply with the guaranteed delivery procedures set forth in "The
Offer -- Procedure for Tendering" beginning on page 33.
APPROVAL OF THE MERGER (PAGE 38)
If at the end of the offer we have received 90% or more of the outstanding
Arguss shares, we will effect a short-form merger as permitted under Delaware
law, which does not require notice to or approval by Arguss stockholders. If,
however, at the end of the offer we have received more than the majority, but
less than 90%, of the outstanding Arguss shares, we will effect a long-form
merger as permitted under Delaware law. A long-form merger would require notice
to and approval by Arguss stockholders and would take considerably longer to
complete.
Dycom's shareholders do not have to, and will not, vote on the approval of
the merger.
THE STOCKHOLDERS' AGREEMENT (PAGE 62)
Concurrently with entering into the merger agreement, the current directors
and certain executive officers of Arguss entered into a stockholders' agreement
pursuant to which such persons have agreed, among other things, to validly
tender (and not withdraw) their Arguss shares into the offer, and to vote their
Arguss shares in favor of the merger, if applicable. On February 11, 2002, these
persons owned (either beneficially or of record) 972,839 Arguss shares,
constituting approximately 6.7% of the outstanding Arguss shares (or
approximately 5.4% on a fully diluted basis). For a more detailed description of
the terms and conditions of the stockholders' agreement, see "The Stockholders'
Agreement" beginning on page 62.
APPRAISAL RIGHTS (PAGE 38)
The offer does not entitle you to appraisal rights. However, the merger may
entitle you to appraisal rights with respect to your Arguss shares. See "The
Offer -- Appraisal Rights" beginning on page 38.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES (PAGE 36)
The offer and merger have been structured so as to qualify as a "tax-free
reorganization" for United States federal income tax purposes. Accordingly,
assuming that the merger is completed, holders of Arguss shares generally will
not recognize any gain or loss for United States federal income tax purposes on
the exchange of their Arguss shares for Dycom shares in the offer and merger,
except for any gain or loss recognized in connection with any cash received
instead of a fractional Dycom share. The companies themselves, as well as
current holders of Dycom shares, will not recognize gain or loss as a result of
the offer and the merger.
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES DESCRIBED ABOVE MAY NOT
APPLY TO ALL HOLDERS OF ARGUSS SHARES, INCLUDING CERTAIN HOLDERS SPECIFICALLY
REFERRED TO ON PAGE 36. YOUR UNITED STATES FEDERAL
10
INCOME AND OTHER TAX CONSEQUENCES WILL DEPEND ON YOUR OWN SITUATION. YOU SHOULD
CONSULT YOUR TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES OF THE
OFFER AND THE MERGER TO YOU.
OPINION OF FINANCIAL ADVISOR TO ARGUSS (PAGE 44)
Allen & Company has delivered to the Arguss board its written opinion,
dated January 7, 2002, to the effect that, as of that date, based upon and
subject to various considerations and assumptions set forth in the opinion, the
consideration to be received by the Arguss stockholders pursuant to each of the
offer and the merger is fair to the stockholders from a financial point of view.
The full text of the opinion of Allen & Company, which outlines the assumptions
made, matters considered and limitations on the review undertaken with respect
to its opinion, is attached as Annex C to this prospectus and is incorporated by
reference herein. ARGUSS STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE OPINION
IN ITS ENTIRETY. See "The Offer -- Opinion of Financial Advisor to Arguss"
beginning on page 44.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS IN THE TRANSACTIONS (PAGE 64)
Some directors and executive officers of Arguss may have interests in the
offer and the merger that are different from or in addition to your interests.
As a result of the offer, options that certain of these directors and executive
officers hold will accelerate and become exercisable on the acceptance date of
the offer. Also, the Arguss executive officers have employment agreements which
may entitle them to various payments upon a change of control of Arguss. The
consummation of the offer would constitute such a change of control under these
agreements. As a result, certain Arguss directors and executive officers may
have interests in the transaction that are different from, or in addition to,
your interests. See "Interests of Certain Persons" beginning on page 64.
COMPARISON OF STOCKHOLDER RIGHTS (PAGE 78)
Your right to receive Dycom shares in exchange for your Arguss shares may
result in differences between your rights as an Arguss stockholder, governed by
Delaware law and Arguss' organizational documents, and your rights as a Dycom
shareholder, governed by Florida law and Dycom's organizational documents.
ACCOUNTING TREATMENT OF THE MERGER (PAGE 51)
Dycom will account for the merger as a purchase for financial reporting
purposes.
11
RISK FACTORS
In deciding whether to tender your Arguss shares pursuant to the offer, you
should carefully read this prospectus, the accompanying Schedule 14D-9 of Arguss
and the other documents to which we refer you. You should also carefully
consider the following risk factors relating to the offer and the merger and
with respect to ownership of Dycom shares.
RISKS RELATING TO THE OFFER AND THE MERGER
DYCOM SHARES TO BE RECEIVED BY ARGUSS STOCKHOLDERS IN THE OFFER AND THE
MERGER WILL FLUCTUATE IN VALUE
The market price of the shares of our common stock to be issued in the
offer and the merger may change as a result of changes in our or Arguss'
business, operations or prospects, market assessments of the impact of the offer
and the merger or general market conditions. Although our business is similar to
that of Arguss, our results of operations, as well as the market price of our
common stock, may be affected by factors different from those affecting Arguss'
results of operations and the market price of Arguss shares. As the market price
of our common stock fluctuates, the value of the Dycom shares to be received by
Arguss stockholders in the offer or the merger will depend upon the market price
of Dycom shares at the time they are received pursuant to the offer or the
merger. The actual value of the Dycom shares to be received by an Arguss
stockholder will not be known at the time the Arguss stockholders tender their
Arguss shares. There can be no assurance as to this value. Additionally, since
the market price of our common stock fluctuates and could decline prior to the
time Dycom shares are received pursuant to the offer and the merger, the value
of the Dycom shares to be received could decline between the time Arguss shares
are tendered in the offer and the time Dycom shares are received. In addition,
because the fraction of a Dycom share being offered for each Arguss share is
fixed, the amount by which the value of the consideration that you actually
receive in the offer or the merger could decline is not limited.
BENEFITS OF THE COMBINATION MAY NOT BE REALIZED
If we complete the merger, we will integrate two companies that have
previously operated independently. Integrating our operations and personnel with
those of Arguss will be a complex process. We may not be able to integrate the
operations of Arguss with our operations rapidly or without encountering
difficulties. The successful integration of Dycom with Arguss will require,
among other things, integration of Arguss' and Dycom's network service
offerings, sales and marketing operations, information and software systems,
coordination of employee retention, hiring and training operations, and
coordination of future research and development efforts. The diversion of
management's attention to the integration effort and any difficulties
encountered in combining operations could adversely affect the combined
company's businesses. Further, the process of combining Dycom and Arguss could
negatively affect employee morale and the ability of Dycom to retain some of
Arguss' key personnel after the merger. Also, we could face additional risks
inherent in Arguss' business that we were not previously subject to. For
example, the additional requirements that we may have in the future to fund our
operations could be significantly increased due to the capital requirements of
Arguss' business.
OFFICERS AND DIRECTORS OF ARGUSS HAVE POTENTIAL CONFLICTS OF INTEREST IN
THE OFFER AND THE MERGER
Arguss stockholders should be aware of potential conflicts of interest and
the benefits available to Arguss officers and directors when considering Arguss'
board of directors' adoption and approval of the merger agreement and its
recommendation to Arguss stockholders to tender their Arguss shares in the
offer. For example, Arguss' Chief Executive Officer and Chairman of the Board
and its two other executive officers each have unvested and otherwise
unexercisable stock options to purchase 50,000 Arguss shares that Arguss' board
of directors has accelerated to vest upon the completion of the offer and, as a
result, would become options to acquire Dycom shares and they also have
employment agreements that, in the aggregate, provide for cash payments of
$960,000 and a continuation of health and related benefits upon a change of
control of Arguss, which will occur as a result of the offer. The merger
agreement also provides for continuing indemnification of officers and directors
of Arguss after the effective date of the merger. In addition, the current
directors and certain executive officers of Arguss have entered into a
12
stockholders' agreement with Dycom that, among other things, requires these
directors and executive officers to tender their Arguss shares in the offer and
support the offer and the merger. Arguss' officers and directors are also
indemnified by Arguss with respect to some of their actions. As a result, Arguss
officers and directors may have interests in the transaction that are different
from, or in addition to, the interests of other Arguss stockholders. See
"Interests of Certain Persons" beginning on page 64.
THE RECEIPT OF DYCOM SHARES COULD BE TAXABLE TO YOU, DEPENDING ON FACTS
SURROUNDING THE OFFER AND THE MERGER
We and Arguss have structured the offer and the merger so as to qualify as
a tax-free reorganization for United States federal income tax purposes. We
believe that the offer and the merger will be treated for United States federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended, or the Code, if the minimum
tender condition for the offer is satisfied, and the merger is completed
promptly after the offer, in accordance with the current terms of the merger
agreement and applicable state law. Dycom has received an opinion from Shearman
& Sterling, and Arguss has received an opinion from Gibson, Dunn & Crutcher LLP
to the effect that, subject to the assumptions set forth therein, the offer and
the merger qualify as a tax-free reorganization for United States federal income
tax purposes. The consummation of the merger is conditioned upon Dycom and
Arguss receiving substantially similar opinions from Shearman & Sterling and
Gibson, Dunn & Crutcher LLP, respectively, at the effective time of the merger.
Currently, Dycom and Arguss have no reason to believe that either Shearman &
Sterling or Gibson, Dunn & Crutcher LLP would be unable to deliver the required
opinions at closing. However, the United States federal income tax consequences
of the offer and the merger and, as a result, the ability of Shearman & Sterling
and Gibson, Dunn & Crutcher to issue these opinions, will depend in part on
facts that will not be known before the completion of the merger and only after
you have tendered your Arguss shares in the offer. In addition, if the opinions
cannot be delivered upon the consummation of the merger, Dycom and Arguss expect
to waive the condition requiring the delivery thereof and will thereafter
complete the merger. If these factual conditions are not satisfied, your
exchange of Arguss shares for Dycom shares in the offer or the merger could be a
taxable transaction, depending on surrounding facts. In that event, you could be
taxed on gain, if any, in respect of the exchange of the Arguss shares for Dycom
shares, but would not receive cash in either the offer or the merger from which
to pay the resulting tax liability (other than any cash received in lieu of
fractional Dycom shares). You are urged to carefully read the discussion under
"The Offer -- Material United States Federal Income Tax Consequences" beginning
on page 36, and to consult your tax advisor on the consequences of participation
in the offer and/or the merger.
THE ACCEPTANCE OF ARGUSS SHARES IN THE OFFER MAY REDUCE THEIR LIQUIDITY AND
MARKET VALUE, MAY RESULT IN THEIR DELISTING FROM THE NEW YORK STOCK EXCHANGE AND
MAY CAUSE THE SHARES TO LOSE THEIR STATUS AS "MARGIN SECURITIES"
The acceptance of Arguss shares pursuant to the offer will reduce the
number of holders of Arguss shares that might otherwise trade publicly, and may
therefore reduce the liquidity and market value of the remaining Arguss shares
held by the public. Depending on the number of Arguss shares acquired pursuant
to the offer, Arguss shares may no longer meet the requirements of the New York
Stock Exchange for continued listing. Should that occur, it is possible that
Arguss shares would be traded on other securities exchanges or in the
over-the-counter market, and that price quotations would be reported by those
other exchanges, or through the NASDAQ National Market or by other sources. The
Arguss shares may also no longer constitute "margin securities" for the purposes
of the Federal Reserve Board's margin regulations, in which event the Arguss
shares would be ineligible as collateral for margin loans made by brokers.
THE CONSIDERATION OFFERED BY DYCOM IN THE OFFER AND THE MERGER MAY BE LESS
THAN ARGUSS' NET BOOK VALUE
Arguss is primarily engaged in services in which book value is typically
comprised largely of goodwill and, to a relatively small extent, tangible
assets. However, to the extent that stockholders may consider book value to be a
relevant measure of Arguss' intrinsic value, Arguss stockholders should be aware
that,
13
based upon the current market price of Dycom shares, if the offer were
consummated, Arguss stockholders would receive consideration that is less than
Arguss' net book value per share.
RISKS RELATING TO OWNERSHIP OF DYCOM SHARES
The following risks are risks that you may be exposed to as a Dycom
shareholder.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY
We have experienced, and expect to continue to experience, quarterly
variations in revenues and net income as a result of many factors, including:
- the timing and volume of customers' construction and maintenance
projects,
- budgetary spending patterns of customers,
- the commencement or termination of master service agreements and
long-term agreements,
- costs incurred to support growth internally or through acquisitions,
- fluctuations in operating results caused by acquisitions,
- changes in our mix of customers, contracts and business activities, and
- fluctuations in insurance expense accruals due to changes in claims
experience and actuarial assumptions.
In addition, revenues and net income in our second quarter and,
occasionally, in our third quarter have in the past been, and may in the future
be, adversely affected by weather conditions and year-end budgetary spending
patterns of our customers.
WE DEPEND ON A SMALL GROUP OF KEY CUSTOMERS
Our customer base is highly concentrated. Our top five customers in fiscal
1999, 2000 and 2001 and for the quarter ended October 27, 2001 accounted in the
aggregate for approximately 60%, 53%, 52% and 50%, respectively, of our total
contract revenues. During fiscal 1999, 2000 and 2001 and for the quarter ended
October 27, 2001 approximately 23%, 17%, 18% and 12%, respectively, of our total
contract revenues were derived from BellSouth Telecommunications, Inc.; 15%, 9%,
16% and 18%, respectively, from Comcast Cable Communications, Inc.; and 10%,
13%, 4% and 4%, respectively, from AT&T Broadband, Inc. Qwest Communications
International, Inc., also a top customer in fiscal 2001 and for the quarter
ended October 27, 2001, accounted for approximately 7% of our total contract
revenues for each of those time periods. We believe that a substantial portion
of our contract revenues and operating income will continue to be derived from a
concentrated group of key customers. The loss of any one key customer, if not
replaced, could have a material adverse effect on our business, financial
condition and results of operations.
OUR MASTER SERVICE AGREEMENTS MAY BE TERMINATED OR MAY NOT BE RENEWED
We derive a substantial portion of our revenues pursuant to multi-year
master service agreements. We are currently a party to 75 master service
agreements, which include agreements with BellSouth Telecommunications, Inc.,
Verizon, Sprint Corporation and Qwest. Under the terms of these agreements, our
customers can typically terminate the agreement on 90 days' prior written
notice. The termination of any such agreements or our failure to renew master
service agreements with our customers could have a material adverse effect on
our business, financial condition and results of operations.
OUR CUSTOMERS' FUTURE REQUIREMENTS MAY BE LESS THAN OUR BACKLOG ESTIMATE
Our backlog is comprised of the uncompleted portion of services expected to
be performed under job specific agreements and the estimated value of future
services that we expect to provide our customers
14
under master service agreements. Our master service agreements are generally
requirements contracts. Customers are only committed to purchase services under
the contracts if they require them. Additionally, these agreements give our
customers the option to perform these services with their own regularly employed
personnel rather than pursuant to the contract and typically permit a customer
to terminate an agreement upon 90 days prior written notice. As a result of the
factors discussed above, our backlog is comprised of only that portion of the
services to be provided under these agreements that we expect to actually
perform, based on historical relationships and similar circumstances. There can
be no assurance as to our customers' requirements during a particular period or
that our estimate of such requirements, including those used to formulate
backlog, are accurate at any point in time.
WE MAY NOT BE ABLE TO IMPLEMENT SUCCESSFULLY OUR ACQUISITION STRATEGY
As part of our growth strategy, we may acquire companies that expand,
complement or diversify our business. We regularly review various strategic
acquisition opportunities and periodically engage in discussions regarding such
possible acquisitions. We cannot assure you that we will be able to identify
attractive acquisition candidates, enter into acceptable acquisition agreements
or close any such transactions. Other than with respect to the acquisition of
Arguss, we are not party to any agreements, understandings or arrangements
regarding any material acquisitions. Failure to achieve our acquisition strategy
could materially and adversely affect our ability to sustain growth and maintain
our competitive position. In addition, increased competition for acquisition
candidates could increase the cost of making acquisitions and reduce the number
of attractive companies to be acquired. Although we maintain a decentralized
operations structure, we may encounter difficulties in integrating acquired
companies or their management teams. We may also encounter difficulties in
retaining key personnel or customers. These difficulties could increase the cost
of any acquisition or reduce or eliminate any expected benefit. In addition,
acquisitions may have adverse effects on our results of operations caused by the
amortization of acquired intangible assets or unanticipated liabilities or
contingencies.
We may be required to incur debt or issue equity to pay for any future
acquisitions, and these sources of financing may not be available to us on
favorable terms or at all. In addition, if we use common stock to pay for future
acquisitions, the value of any Dycom shares you own may become diluted. If we
cannot use common stock or borrow sufficient funds to pay for future
acquisitions, our growth strategy could be limited.
WE ARE SELF-INSURED AGAINST POTENTIAL LIABILITIES
We are primarily self-insured, up to a limited amount, for automobile,
general liability, workers' compensation and employee group health claims. A
liability for unpaid claims and associated expenses, including incurred but not
reported losses, is actuarially determined and reflected in our consolidated
balance sheet as an accrued liability. The determination of such claims and
expenses and the extent of the accrued liability are continually reviewed and
updated. If we were to experience insurance claims or costs above our estimates
and were unable to offset such increases with earnings, our business could be
materially and adversely affected.
WE ARE DEPENDENT ON KEY PERSONNEL
We are highly dependent upon the continued services and experience of our
senior management team, including Steven E. Nielsen, our President and Chief
Executive Officer, and one or more managers of key operating subsidiaries. Any
loss of the services of these individuals or other members of our senior
management could have a material adverse effect on our business.
FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT OUR STOCK PRICE
Future sales of substantial amounts of our common stock in the public
market, or the perception that such sales could occur, could adversely affect
the market price of our common stock. As of February 11, 2002, we had
outstanding 42,939,885 shares of common stock, plus 2,398,310 shares of common
stock
15
reserved for issuance upon exercise of outstanding options, including 697,603
options that are currently exercisable. Of the outstanding shares, approximately
41,635,282 are freely tradable in the public market. The remaining 1,304,603
shares are "restricted securities" as that term is defined in Rule 144 under the
Securities Act of 1933. These shares were issued in connection with various
acquisitions in fiscal 2000 and 2001. Restricted shares may be sold in the
public market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the Securities Act
of 1933. Of the 1,304,603 restricted shares, 871,208 shares are currently
eligible for resale pursuant to a transaction complying with Rule 144 and the
remaining shares will become eligible for resale during April 2002 pursuant to a
transaction complying with Rule 144.
OUR COMMON STOCK PRICE MAY BE VOLATILE
The market price for our common stock has been, and may continue to be,
highly volatile. Numerous factors could have a significant effect on the price
of our common stock. Such factors include:
- announcements of fluctuations in our operating results or the operating
results of one of our competitors,
- announcements of new contracts or customers by us or one of our
competitors,
- market conditions for telecommunications or telecommunications services
company stocks in general,
- changes in recommendations or earnings estimates by securities analysts,
and
- announcements of acquisitions by us or one of our competitors.
In addition, the stock market has experienced significant price and volume
fluctuations in recent years that have been unrelated or disproportionate to the
operating performance of companies. These broad fluctuations may adversely
affect the market price of our common stock.
ANTI-TAKEOVER PROVISIONS MAY INHIBIT CHANGES OF CONTROL
Our articles of incorporation and by-laws contain provisions which may
deter, discourage or make more difficult a takeover or change of control of
Dycom by another corporation. These anti-takeover provisions include:
- the authority of our board of directors to issue up to 1,000,000 shares
of preferred stock without stockholder approval on such terms and with
such rights as our board of directors may determine, and
- the requirement of a classified board of directors serving staggered
three-year terms.
We have also adopted a shareholder rights plan and have executed change of
control agreements with key officers, which may make it more difficult to effect
a change in control of Dycom and replace incumbent management. Lastly, we are
subject to certain anti-takeover provisions of the Florida Business Corporation
Act. These anti-takeover provisions could discourage or prevent a change of
control even if such change of control would be beneficial to shareholders and
could adversely affect the market price of our common stock.
16
DYCOM INDUSTRIES, INC.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following table sets forth certain selected financial data of Dycom as
of and for the years ended July 28, 2001, July 29, 2000, and July 31, 1999, 1998
and 1997, which have been derived from Dycom's audited consolidated financial
statements which have been audited by Deloitte & Touche LLP. The financial data
as of and for the three-month periods ended October 27, 2001 and October 28,
2000 have been derived from Dycom's unaudited condensed consolidated financial
statements, which include all adjustments, consisting of normal recurring
accruals, that Dycom considers necessary to present fairly the results of
operations and financial position of Dycom for the periods and dates presented.
Results for the interim periods are not necessarily indicative of results for
the entire year. This data should be read in conjunction with the respective
audited and unaudited consolidated financial statements of Dycom, including
notes to the financial statements, incorporated in this prospectus by reference
and the "Unaudited Pro Forma Condensed Combined Financial Statements" beginning
on page 69.
Dycom acquired Communications Construction Group, Inc. in July 1997, Cable
Com Inc. and Installation Technicians, Inc. in April 1998, and Niels Fugal Sons
Company in March 2000. These acquisitions were accounted for as poolings of
interests and, accordingly, the consolidated financial statements for the
periods presented include the accounts of Communications Construction, Cable
Com, Installation Technicians and Niels Fugal. The table has been adjusted to
reflect the 3-for-2 stock split effected in the form of a stock dividend and
paid on January 4, 1999 and the 3-for-2 stock split effected in the form of a
stock dividend and paid on February 16, 2000.
THREE MONTHS ENDED YEAR ENDED
------------------------- ----------------------------------------------------
OCTOBER 27, OCTOBER 28, JULY 28, JULY 29, JULY 31, JULY 31, JULY 31,
2001 2000 2001(1) 2000(2) 1999(3) 1998(4) 1997(4)
----------- ----------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Total revenues................... $167,815 $234,690 $826,746 $806,270 $501,155 $389,475 $332,882
Income before income taxes....... 13,742 36,015 104,983 109,233 66,590 37,525 26,655
Net income....................... 8,026 21,618 61,410 65,032 40,103 23,930 17,613
PER COMMON SHARE:
Basic net income................. $ 0.19 $ 0.51 $ 1.45 $ 1.56 $ 1.08 $ 0.69 $ 0.57
Diluted net income............... 0.19 0.51 1.44 1.54 1.06 0.68 0.56
PRO FORMA EARNINGS(5):
Income before income taxes....... $ 37,525 $ 26,655
Pro forma provision for income
taxes.......................... 14,970 10,927
Pro forma net income............. 22,555 15,728
PRO FORMA PER COMMON SHARE:
Basic pro forma net income....... $ 0.65 $ 0.51
Diluted pro forma net income..... 0.65 0.50
BALANCE SHEET DATA (END OF
PERIOD):
Total assets..................... $573,883 $528,031 $575,696 $514,000 $399,672 $178,580 $124,513
Long-term obligations(6)......... 22,076 21,045 21,867 21,263 19,291 25,037 24,487
Shareholders' equity............. 476,091 402,218 468,881 377,978 297,442 104,764 48,034
Cash dividends per share......... -- -- -- -- -- -- --
---------------
Footnotes on following page
17
(1) Amounts include the results and balances of Cable Connectors, Inc.,
Schaumburg Enterprises, Inc., Point to Point Communications, Inc., Stevens
Communications, Inc., and Nichols Construction, Inc. from their respective
acquisition dates until July 28, 2001.
(2) Amounts include the results and balances of Lamberts' Cable Splicing
Company, C-2 Utility Contractors, Inc., Artoff Construction Co., Inc., K.H.
Smith Communications, Inc., and Selzee Solutions, Inc. from their respective
acquisition dates until July 29, 2000.
(3) Amounts include the results and balances of Locating, Inc., Ervin Cable
Construction, Inc., Apex Digital, Inc., and Triple D Communications, Inc.
from their respective acquisition dates until July 31, 1999.
(4) The results of operations for fiscal 1998 and fiscal 1997 include a $0.4
million and $0.3 million reduction in the deferred tax valuation allowance,
respectively.
(5) The provision for income taxes has been adjusted to reflect a pro forma tax
provision for pooled companies which were previously subchapter "S"
corporations under the Code.
(6) For fiscal 1998, certain customer advances have been reclassified as current
liabilities in order to present comparable periods.
18
ARGUSS COMMUNICATIONS, INC.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The selected data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" for, and as of the end of, each of the
years in the five-year period ended December 31, 2000, are derived from the
consolidated financial statements of Arguss, which financial statements have
been audited by KPMG LLP, independent auditors. The consolidated financial
statements as of December 31, 2000 and 1999, and for each of the years in the
three-year period ended December 31, 2000, and the report thereon, are
incorporated by reference in this prospectus. The selected data presented below
as of and for the nine-month periods ended September 30, 2001 and 2000 are
derived from the unaudited consolidated financial statements of Arguss
incorporated by reference in this prospectus, which include all adjustments,
consisting of normal recurring accruals, that Arguss considers necessary to
present fairly the results of operations and financial position of Arguss for
the periods and dates presented. Results for the interim periods are not
necessarily indicative of results for the entire year. This data should be read
in conjunction with the respective audited and unaudited consolidated financial
statements of Arguss, including the notes to those financial statements,
incorporated in this prospectus by reference and the "Unaudited Pro Forma
Condensed Combined Financial Statements" beginning on page 69.
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- --------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net sales............................ $146,688 $200,685 $270,172 $197,408 $145,017 $53,284 $15,653
Depreciation......................... 9,517 8,127 11,215 8,407 6,197 1,243 295
Goodwill amortization................ 5,394 4,874 6,668 4,568 2,754 946 --
Interest expense..................... 4,577 5,036 7,037 4,435 3,113 652 236
Income (loss) before income taxes.... (5,308) 18,064 19,349 13,160 6,698 2,803 103
Net income (loss).................... (5,341) 9,032 9,397 6,450 2,995 1,805 88
Income (loss) per share:
Basic.............................. $ (0.37) $ 0.66 $ 0.68 $ 0.54 $ 0.28 $ 0.24 $ 0.04
Diluted............................ (0.37) 0.63 0.66 0.50 0.26 0.22 0.04
Weighted average number of shares:
Basic.............................. 14,458 13,779 13,858 12,048 10,575 7,674 2,033
Diluted............................ 14,458 14,343 14,239 13,004 11,537 8,061 2,082
BALANCE SHEET DATA (END OF PERIOD):
Total assets......................... $230,526 $280,783 $260,399 $199,201 $152,922 $59,035 $19,107
Current portion of long-term debt.... 12,970 7,357 7,322 7,340 11,429 1,632 48
Long-term debt excluding current
portion............................ 1,497 14,512 12,688 19,423 23,187 6,995 1,038
Cash dividends....................... -- -- -- -- -- -- --
19
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following selected unaudited pro forma condensed combined financial
data present the effect of the pending acquisition of Arguss by Dycom, which is
to be accounted for as a purchase. The unaudited pro forma condensed combined
balance sheet presents the combined financial position of Dycom and Arguss as of
October 27, 2001 assuming that the acquisition had occurred as of that date. The
unaudited combined statements of operations for the year ended July 28, 2001 and
three-month period ended October 27, 2001 give effect to the acquisition of
Arguss by Dycom as if it had occurred on July 30, 2000 (the first day of Dycom's
fiscal year ended July 28, 2001). Such pro forma information is based upon the
historical consolidated financial information of Dycom and Arguss. Pro forma
operations for the year-end and three-month periods for Dycom consist of its
results of operations for the year ended July 28, 2001 and three months ended
October 27, 2001, respectively. Pro forma operations for the year end and three-
month periods for Arguss consist of its results of operations for the four
quarters ended June 30, 2001 and three months ended September 30, 2001,
respectively. The use of different closing dates is necessary as each entity has
a different fiscal year end.
The unaudited pro forma condensed combined financial statements are based
on the estimates and assumptions set forth in the notes to such statements,
which are preliminary and have been made solely for the purposes of developing
such pro forma information. The unaudited pro forma condensed combined financial
statements are not necessarily an indication of the results that would have been
achieved had the transaction been consummated as of the dates indicated or that
may be achieved in the future.
These selected unaudited pro forma condensed combined financial data should
be read in conjunction with the unaudited pro forma condensed combined financial
statements included herein and the historical consolidated financial statements
and notes thereto of Dycom and Arguss and other financial information pertaining
to Dycom and Arguss including "Management's Discussion and Analysis of Financial
Condition and Results of Operations" incorporated herein by reference to their
public filings, which are incorporated herein.
See "Unaudited Pro Forma Condensed Combined Financial Statements" beginning
on page 69.
THREE MONTHS ENDED YEAR ENDED
OCTOBER 27, 2001(1) JULY 28, 2001(2)
-------------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS:
Total revenues............................................. $216,741 $1,071,233
Income before income taxes................................. 15,568 116,985
Net income................................................. 9,156 68,683
Net income per common share:
Basic.................................................... $ 0.19 $ 1.45
Diluted.................................................. $ 0.19 $ 1.44
Weighted-average common shares outstanding:
Basic.................................................... 47,786 47,285
Diluted.................................................. 47,861 47,710
---------------
(1) The Arguss per share amounts for the three months ended October 27, 2001
were derived from the historical financial statements of Arguss as of and
for the three-month period ended September 30, 2001.
(2) The Arguss per share amounts for the year ended July 28, 2001 were derived
from the historical financial statements of Arguss as of and for the
twelve-month period ended June 30, 2001.
20
COMPARATIVE PER SHARE DATA
We have summarized below the per share information for Dycom and Arguss on
a historical basis, and a pro forma combined basic and pro forma combined
diluted equivalent basis for the periods and as of the dates indicated below.
The pro forma information gives effect to the acquisition of Arguss accounted
for as a purchase as if it had occurred on July 30, 2000, the first day of
Dycom's fiscal year 2001.
The selected unaudited pro forma condensed combined information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have occurred if the
merger had been consummated as of the assumed date, nor is it necessarily
indicative of future operating results or the financial position of the combined
companies. The pro forma adjustments are based upon available information and
certain assumptions that Dycom's management believes are reasonable.
You should read this information in conjunction with our and Arguss'
historical financial statements and related notes contained in our and Arguss'
reports and other information that have been filed with the SEC and are
incorporated in this prospectus by reference. See "Where You Can Find More
Information About Dycom and Arguss" beginning on page 5. You should also read
this information in conjunction with the unaudited pro forma condensed combined
financial information. See "Unaudited Pro Forma Condensed Combined Financial
Statements" beginning on page 69.
THREE
MONTHS ENDED YEAR ENDED
OCTOBER 27, 2001(1) JULY 28, 2001(2)
------------------- ----------------
STATEMENT OF OPERATIONS DATA:
Income (loss) from continuing operations per basic share:
Dycom.................................................. $ 0.19 $ 1.45
Arguss................................................. (0.04) 0.02
Dycom pro forma........................................ 0.19 1.45
Arguss merger equivalent(3)............................ 0.06 0.48
Income (loss) from continuing operations per diluted
share:
Dycom.................................................. 0.19 1.44
Arguss................................................. (0.04) 0.02
Dycom pro forma........................................ 0.19 1.44
Arguss merger equivalent(3)............................ 0.06 0.48
BALANCE SHEET DATA (END OF PERIOD):
Net book value per diluted share(4):
Dycom.................................................. $11.09
Arguss................................................. 8.81
Dycom pro forma........................................ 11.84
Arguss merger equivalent(3)............................ 3.95
---------------
(1) The Arguss per share amounts for the three months ended October 27, 2001
were derived from the historical financial statements of Arguss as of and
for the three-month period ended September 30, 2001.
(2) The Arguss per share amounts for the year ended July 28, 2001 were derived
from the historical financial statements of Arguss as of and for the
twelve-month period ended June 30, 2001.
(3) The "Arguss merger equivalent" amounts were calculated by multiplying the
"Dycom pro forma" amounts by 0.3333, the exchange ratio for the offer.
(4) The net book value per diluted share is computed by dividing the unaudited
stockholders' equity by the shares outstanding at October 27, 2001 and
September 30, 2001 for Dycom and Arguss, respectively. The net book value
per diluted share for the Dycom pro forma amount is computed by dividing the
unaudited pro forma stockholders' equity by the pro forma shares outstanding
at October 27, 2001.
21
COMPARATIVE MARKET PRICE INFORMATION
The following table sets forth the last per share sale prices of Dycom
shares and Arguss shares on the New York Stock Exchange on January 4, 2002, the
last trading day prior to the public announcement of the proposed merger, and on
February 11, 2002, the most recent date for which prices were available prior to
filing this document. The table also sets forth the value of the Dycom shares
that an Arguss stockholder would have received for one Arguss share, assuming
that the merger had taken place on those dates. These numbers have been
calculated by multiplying the exchange ratio of 0.3333 by the last sale price
per share of Dycom shares on those dates. The actual value of the Dycom shares
that an Arguss stockholder will receive on the date of the merger may be higher
or lower than the prices set forth below.
LAST SALE PRICE LAST SALE PRICE ARGUSS MERGER
OF DYCOM SHARES OF ARGUSS SHARES EQUIVALENT
--------------- ---------------- -------------
January 4, 2002................................. $17.30 $4.42 $5.77
February 11, 2002............................... $15.66 $5.17 $5.22
22
THE COMPANIES
DYCOM INDUSTRIES, INC. AND PURCHASER
Dycom was incorporated as a Florida corporation on August 4, 1969.
Dycom is a leading provider of engineering, construction and maintenance
services to telecommunications providers throughout the United States. Dycom's
comprehensive range of telecommunications infrastructure services includes the
engineering, placement and maintenance of aerial, underground, and buried
fiber-optic, coaxial and copper cable systems owned by local and long distance
communications carriers, competitive local exchange carriers, and cable
television multiple system operators. Additionally, Dycom provides similar
services related to the installation of integrated voice, data, and video local
and wide area networks within office buildings and similar structures. Dycom
also provides underground locating services to various utilities and provides
construction and maintenance services to electrical utilities. Through its
wholly owned subsidiaries, Dycom maintains relationships with many local
exchange carriers, long distance providers, competitive access providers, cable
television multiple system operators and electric utilities.
Dycom's principal executive offices are located at 4440 PGA Boulevard,
Suite 500, Palm Beach Gardens, Florida 33410. Dycom's telephone number is (561)
627-7171.
Purchaser was incorporated as a Delaware corporation on January 4, 2002 and
is a wholly owned subsidiary of Dycom.
Purchaser was incorporated solely for the purposes of acquiring the Arguss
shares tendered in the offer and merging with Arguss in the merger. Since its
incorporation, Purchaser has not carried on any activities other than in
connection with the offer and the merger. Its principal offices are located at
4440 PGA Boulevard, Suite 500, Palm Beach Gardens, Florida 33410. Purchaser's
telephone number is (561) 627-7171.
The name, citizenship, business address, business phone number, principal
occupation or employment and five-year employment history for each of the
directors and executive officers of Dycom and Purchaser are listed in Schedule I
to this prospectus.
Recent Developments
On September 10, 2001, as amended on November 9, 2001, Williams
Communications, LLC filed suit against one of our subsidiaries, Niels Fugal Sons
Company, in United States District Court for the Northern District of Oklahoma
for claims which include breach of contract with respect to a fiber-optic fiber
installation project that Niels Fugal was constructing for Williams
Communications. Williams Communications seeks an unspecified amount of damages,
including compensatory, liquidated and punitive damages. We have answered and
asserted affirmative defenses to their complaint and have filed a counterclaim
for unpaid amounts in excess of $6 million due under the contract. No trial date
has been set and discovery has not yet commenced. We believe we have meritorious
defenses against these claims and intend to defend against them vigorously. We
believe that this litigation will not materially affect our financial position
or future operating results, although no assurance can be given with respect to
the ultimate outcome of any litigation.
On November 20, 2001, the Compensation Committee of Dycom's board of
directors approved a grant of a total of 700,000 stock options to executive
officers and employees under the 1998 Incentive Stock Option Plan, including
grants in the following amounts to executive officers: 75,000 to Steven E.
Nielsen, President and Chief Executive Officer; 20,000 to Timothy R. Estes,
Executive Vice President and Chief Operating Officer; 10,000 to Richard L. Dunn,
Senior Vice President and Chief Financial Officer; 6,500 to Marc R. Tiller,
General Counsel and Corporate Secretary; and 5,000 to Dennis P. O'Brien, Vice
President and Director of Corporate Development. The options were granted at an
exercise price of $14.34, the fair market value at the date of grant. The
options vest over a four-year period.
23
The backlog of Dycom as of October 27, 2001 was $915 million. Dycom expects
to complete approximately 50% of this backlog during the twelve months following
such date.
ARGUSS COMMUNICATIONS, INC.
Arguss was incorporated as a Delaware corporation on June 1, 1987 as
Conceptronic (U.S.) Ltd. Its name was first changed on June 19, 1987 to
Conceptronic Inc. and again on May 9, 1997 to Arguss Holdings, Inc. Its present
name was adopted on May 31, 2000.
Arguss is a holding company that conducts operations through its wholly
owned subsidiaries, Arguss Communications Group (formerly White Mountain Cable
Construction Corp.) and Conceptronic, Inc. Arguss, through Arguss Communications
Group, is engaged in the construction, reconstruction, maintenance, engineering,
design, repair and expansion of communications systems, cable television systems
and data systems, including providing aerial, underground, wireless and
long-haul construction and splicing of both fiber-optic and coaxial cable to
major telecommunications customers. Arguss is also involved in the
telecommunications industry's expansion of capacity by deploying fiber-optic
cable, replacing aging copper and coaxial infrastructure and upgrading the
capacity of existing infrastructure.
Through Conceptronic, Arguss also manufactures and sells highly advanced,
computer-controlled equipment used in the surface mount, electronics circuit
assembly industry. In December 2001, Arguss announced that it was considering a
variety of strategic alternatives in connection with Conceptronic, including its
possible sale.
Arguss' principal executive offices are located at One Church Street, Suite
302, Rockville, Maryland 20850. Arguss' telephone number is (301) 315-0027.
Recent Developments
On November 30, 2001, Ronald D. Pierce, a holder of approximately 8.5% of
the outstanding Arguss shares, and Kenneth R. Olsen, a holder of approximately
0.09% of the outstanding Arguss shares, filed a preliminary consent statement
with the SEC, seeking consent of Arguss' stockholders to remove and replace all
directors of Arguss and revoke certain amendments to Arguss' bylaws. On January
12, 2002, Arguss entered into a settlement agreement and release with Mr. Pierce
and Mr. Olsen, which provides, among other things, that (a) Mr. Pierce and Mr.
Olsen terminate the consent solicitation (which provision remains in effect
unless certain events occur) (b) Arguss pay Mr. Pierce $500,000 as a partial
reimbursement for expenses incurred in connection with the consent solicitation
and related legal proceedings and (c) Mr. Pierce and Mr. Olsen release Arguss
from all claims arising from the consent solicitation, the merger and related
transactions, and Arguss release Mr. Pierce and Mr. Olsen from all claims
arising from the consent solicitation and related transactions. Dycom has agreed
that, under certain circumstances, it will reimburse Arguss for the $500,000
paid to Mr. Pierce. Dycom has indicated that, in the event that the offer and
the merger are successful, it is currently considering selling or otherwise
disposing of Conceptronic, but is not otherwise, at this time, considering
engaging in any of the other actions proposed by Mr. Pierce and Mr. Olsen in
their consent statement.
24
REASONS FOR THE ARGUSS BOARD'S RECOMMENDATION; FACTORS CONSIDERED
In making its recommendations to the stockholders with respect to the offer
and the merger, the Arguss board of directors considered a number of factors,
the most material of which were the following:
Transaction Financial Terms/Premium to Market Price. The relationship
between the historical and current market prices of, and recent trading
activity in, the Arguss shares and the Dycom shares, in particular the fact
that the consideration to be paid by Dycom of 0.3333 Dycom shares per
Arguss share in the offer and the merger represents a premium of
approximately 30.5% over the closing price per share of the Arguss shares
on January 4, 2002, the last trading day prior to the public announcement
of the merger agreement.
Allen & Company Analysis. The financial presentations to the Arguss
board in connection with the Arguss board's consideration of the merger
transactions, including the oral opinion of Allen & Company delivered to
the Arguss board at its January 4, 2002 meeting, and subsequently confirmed
in writing, that the consideration to be received by the holders of Arguss
shares was fair, from a financial point of view, to such holders. The
analyses performed by Allen & Company are described under "The
Offer -- Opinion of Financial Advisor to Arguss" on page 44. The entire
text of the written opinion dated January 7, 2002, regarding the offer and
the merger, setting forth the assumptions made, matters considered and
limitations in connection with such opinion, is included herewith as Annex
C to this prospectus and is incorporated herein by reference. STOCKHOLDERS
ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. In considering
Allen & Company's fairness opinion, the Arguss board took into account the
fact that Arguss had agreed to pay Allen & Company certain fees for its
services as described below.
Dycom Operating and Financial Condition. The business reputation and
current and historical financial condition and results of operations of
Dycom in light of industry conditions over time, which the Arguss board
believed supported its conclusion that the transaction would be beneficial
to the long-term interests of the holders of Arguss shares, as well as the
results of financial due diligence on Dycom performed by senior management
of Arguss and Arguss' financial advisors.
Arguss Operating and Financial Condition. The Arguss board's
knowledge of Arguss' business, current and historical financial condition
and results of operations, current business strategy, the nature of the
markets in which Arguss operates and its position in such markets, the
consolidation occurring in the industry and Arguss' future growth prospects
on a stand-alone basis, as well as the risks and uncertainties associated
with such opportunities and Arguss' ability to take advantage of such
opportunities given its size and capitalization.
Benefits of Combination. The fact that the merger of the businesses
of Dycom and Arguss is expected to lead to potential cost savings and other
synergies. Synergies that the Arguss board believes will result from the
combination include (a) cost savings from the closing of Arguss' Rockville,
Maryland office, from the consolidation of certain administrative functions
and from Arguss no longer operating as a public company, (b) benefits from
increased design and engineering capabilities and from complementary
physical support facilities and (c) improved ability to serve the largest
customers in the industry.
Form of Consideration. The liquidity of the Dycom shares, which will
give the holders of Arguss shares the flexibility to either sell Dycom
shares or continue to hold such stock and receive the benefits of retaining
such stock without having to pay taxes upon the acquisition of such stock
as a result of the tax-free nature of the share exchange with Dycom.
Strategic Alternatives. Other possible alternatives to the offer and
the merger, the value to Arguss stockholders of such alternatives and the
timing and likelihood of achieving superior value from these alternatives,
as well as the possibility that equally suitable partners for an
acquisition or a business combination transaction would be available. In
this regard, the Arguss board considered the fact that, despite Arguss' and
Allen & Company's efforts to identify other alternative acquisition
candidates, no other parties had approached Arguss with an offer for an
acquisition or a business combination. The Arguss board also considered the
possibility of remaining an independent company.
25
The Arguss board concluded that the transactions contemplated by the merger
agreement, including the offer and the merger, were superior to any other
alternatives.
Alternative Transactions. The fact that under the terms of the merger
agreement, while Arguss is prohibited from soliciting acquisition proposals
from third parties, Arguss may, after providing proper notice to Dycom,
furnish information to and participate in negotiations with third parties
in response to an unsolicited written acquisition proposal if the Arguss
board (a) determines in its good faith judgment, after consultation with
its financial advisors, that such proposal is reasonably likely to
constitute a superior proposal, and (b) determines in its good faith
judgment, after receiving the advice of outside legal counsel, that it is
necessary to furnish information to, and participate in negotiations with,
such third party in order to comply with its fiduciary duties under
applicable law. Further, the Arguss board noted that it would be permitted,
subject to the payment to Dycom of a $2.5 million termination fee and
reimbursement of Dycom's expenses up to $1.5 million, to terminate the
merger agreement if, prior to consummation of the offer, a superior
proposal is received by Arguss and the Arguss board reasonably determines
in good faith, after receiving the advice of outside legal counsel, that it
is necessary to terminate the merger agreement and enter into a new
agreement to effect the superior proposal in order to comply with its
fiduciary duties under applicable law.
Terms of the Merger Agreement. The terms and conditions of the offer,
the merger and the merger agreement, including the structure of the
transaction as an exchange offer for all of the Arguss shares followed by a
merger where all stockholders of Arguss would receive the same
consideration per Arguss share as was received by the stockholders of
Arguss who validly tendered into the offer. The Arguss board also
considered the fact that the merger agreement provides for the first-step
offer, thereby enabling holders of Arguss shares who tender their shares to
receive the merger consideration promptly following the offer's acceptance
by Dycom.
The Arguss board also considered certain countervailing factors in its
deliberations concerning the merger agreement, the offer and the merger,
including the requirement under the merger agreement that Arguss pay a
termination fee of $2.5 million in cash and Dycom's transaction expenses up to
$1.5 million if the merger agreement is terminated under certain circumstances
specified in the merger agreement, including, among others, if the Arguss board
exercised its right to terminate the merger agreement and enter into a superior
proposal, as discussed in "-- Alternative Transactions" above. Although the
Arguss board recognized that this requirement could result in significant fees
being borne by Arguss, it accepted this provision as a means to obtain other
terms favorable to Arguss, in particular, the right to negotiate or exchange
information with potential bidders and to terminate the merger agreement under
the limited circumstances discussed in "-- Alternative Transactions" above, as
well as reimbursement of Arguss' expenses up to $1 million if the merger
agreement is terminated under certain other limited circumstances set forth in
the merger agreement. During the Arguss board's discussion, James W. Quinn, a
member of Arguss' board, reminded the other Arguss board members of his interest
in Allen & Company as a Vice President and Director of Allen & Company and that
Allen & Company would be entitled to a significant fee in the event the
transaction was successful. The Arguss board considered Mr. Quinn's interest in
its deliberations. Mr. Quinn abstained from voting on any issues relating to
approval of the transactions and the recommendation to Arguss stockholders.
The foregoing discussion of factors considered by the Arguss board is not
meant to be all inclusive, but includes the material factors considered by the
Arguss board in approving the merger agreement and the transactions contemplated
thereby and in recommending that stockholders of Arguss tender their Arguss
shares pursuant to the offer. The Arguss board did not find it practicable to,
and did not, quantify or otherwise assign relative weights to the specific
factors considered. In addition, individual members of the Arguss board may have
given different weights to different factors. After weighing all these
considerations, the Arguss board has determined that the merger agreement and
the transactions contemplated thereby, including the offer and the merger, are
fair to and in the best interests of Arguss and Arguss stockholders, has
approved, adopted and declared the advisability of the merger agreement and the
transactions contemplated thereby, including the offer and the merger, and
recommends that Arguss stockholders accept the offer and tender their shares
pursuant to the offer.
26
BACKGROUND OF THE OFFER
Prior to entering into discussions with Arguss, Dycom had carefully
followed the developments in the telecommunications infrastructure industry. In
response, Dycom has, from time to time, consulted with its financial advisors,
and reviewed various strategic alternatives, including the possibility of
acquiring or merging with other companies involved in its industry and has, over
the past several years, consummated several acquisitions.
Similarly, from time to time, Arguss has reviewed its strategic
alternatives, including remaining as an independent public company, the
possibility of acquiring or merging with other companies and other transactions.
Arguss' consideration of strategic alternatives intensified during 2001 in light
of developments in the telecommunications and telecommunications infrastructure
industries. On December 3, 2001, following the commencement by certain
stockholders of a consent solicitation for control of the Arguss board of
directors, Arguss retained Allen & Company as its financial advisor to assist in
its review of strategic alternatives.
On November 30, 2001, following the announcement of the commencement of the
consent solicitation, a representative of Banc of America Securities LLC, one of
Dycom's financial advisors, contacted Steven E. Nielsen, Dycom's Chairman,
President and Chief Executive Officer, by telephone to ask if Mr. Nielsen was
interested in meeting Rainer H. Bosselmann, Arguss' Chairman and Chief Executive
Officer, to discuss possible strategic opportunities.
On December 4, 2001, Mr. Nielsen discussed with his management team the
possibility of a strategic transaction with Arguss. On the same day, a
representative of Banc of America Securities contacted Mr. Nielsen again to ask
if he would be available to meet with Mr. Bosselmann. Mr. Nielsen suggested a
meeting date of December 11, 2001.
On December 5, 2001, a representative of Banc of America Securities
contacted Mr. Bosselmann to suggest a meeting between Mr. Nielsen and Mr.
Bosselmann. Mr. Bosselmann discussed the merits of such a meeting with James W.
Quinn, a representative of Allen & Company and a member of the board of
directors of Arguss, and asked Mr. Quinn to contact Mr. Nielsen to arrange the
details of the December 11, 2001 meeting.
On December 11, 2001, Mr. Nielsen and Mr. Bosselmann, along with members of
Arguss' senior management, representatives of Allen & Company and a
representative from Banc of America Securities, met in Rockville, Maryland and
discussed the industry in general and Mr. Bosselmann provided Mr. Nielsen with
information about Arguss. The parties also discussed, on a preliminary basis,
the merits of a possible transaction between Dycom and Arguss, including the
potential value and strategic benefits that would be realized by the
stockholders of Dycom and Arguss. Mr. Bosselmann suggested an acquisition of
Arguss by Dycom could be an attractive opportunity for both companies and that
Arguss would consider a transaction of this nature if structured as a
share-for-share exchange. At this meeting, they also discussed the ongoing
consent solicitation for control of Arguss' board. In addition, they negotiated
and executed a confidentiality agreement to facilitate the exchange of
information between the parties. Mr. Nielsen informed Mr. Bosselmann that he
would consider the merits of a possible transaction and would wait for a
representative of Allen & Company to contact him with further information.
Following this meeting, Mr. Nielsen and Mr. Bosselmann briefed the members of
their respective senior management teams and each management team began a more
detailed review of a possible combination based on publicly available
information.
On December 12, 2001, Mr. Quinn contacted Mr. Nielsen by telephone to
discuss, generally, the terms of a possible transaction, including the form of
consideration, structure of the transaction and the transaction process. Mr.
Nielsen informed him that Dycom would respond the following day.
During December 2001, Dycom retained Merrill Lynch & Co. and Banc of
America Securities as financial advisors and outside legal counsel to advise on
the possible transaction with Arguss. Arguss, having already retained Allen &
Company as their financial advisor, retained legal counsel for this purpose.
27
During this period, Allen & Company solicited indications of interest from other
companies in connection with possible transactions with Arguss.
On December 13, 2001, Mr. Nielsen, along with a representative of Merrill
Lynch, contacted Mr. Quinn and other representatives of Allen & Company and
indicated that Dycom was interested in continuing discussions with Arguss in
connection with a transaction between the companies and that Dycom was
interested in beginning a more detailed due diligence review of Arguss. At that
time, Mr. Nielsen indicated to representatives of Allen & Company that Dycom
might consider an exchange ratio within a range of 0.2976 to 0.3133 Dycom shares
for each Arguss share. Representatives of Allen & Company reviewed this range
with members of Arguss' management and discussed the other strategic
alternatives available to Arguss. As a result of these discussions, Arguss'
senior management decided to continue discussions with Dycom and, after further
analysis by Allen & Company, respond to Dycom's proposal.
On December 14, 2001, Mr. Bosselmann contacted Allen & Company by telephone
to further discuss the proposed transaction with Dycom and possible exchange
ratios. Following that discussion, Mr. Bosselmann contacted Mr. Nielsen by
telephone to discuss the terms and structure of the proposed transaction. At
that time, Mr. Bosselmann proposed an exchange ratio of one Dycom share for
three Arguss shares. Later that same day, after discussions with members of
senior management of Dycom and representatives of Merrill Lynch, Mr. Nielsen
contacted Mr. Bosselmann by telephone and indicated that an exchange ratio of
0.3333 Dycom shares for each Arguss share would be considered by Dycom, subject
to satisfactory completion of due diligence by Dycom and its advisors and by
Arguss and its advisors.
On December 17, 2001, Arguss and Allen & Company, along with
representatives of Merrill Lynch and Dycom's outside legal counsel, participated
in a conference call to discuss the types of information that would be required
by senior management and financial and legal advisors in order to prepare
operational, financial and legal analyses necessary for, and the process and
conduct with respect to, due diligence review.
On December 18, 2001, representatives of Dycom and Arguss met in Rockville,
Maryland to, on a preliminary basis, discuss financial, business and operational
information about both companies. Representatives of Dycom and representatives
of Arguss each made presentations about their respective businesses. These
meetings continued on December 19, 2001 with representatives of Merrill Lynch
and Banc of America Securities and representatives of Allen & Company also
present.
During the period from December 20, 2001 through January 4, 2002,
representatives of Dycom and Arguss continued to meet in both Rockville,
Maryland and Epsom, New Hampshire to discuss financial and operational
information about both companies and to continue their respective due diligence
examinations. As part of the due diligence process, Dycom management provided
Arguss with certain forward-looking information used in Dycom's internal
budgeting process. This information had originally been prepared more than six
months prior to its delivery to Arguss, had not been updated to reflect the
changes in the business environment since its preparation and had not been
reviewed by Dycom's senior management. As a result, Dycom informed Arguss that
Dycom viewed such information as highly unreliable and not management's current
best estimate of Dycom's expected future performance and that it should not be
relied upon by Arguss in any respect. After reviewing the information provided
to Arguss, Dycom retracted this information to make absolutely clear to Arguss
that Dycom considered the information to be inaccurate and potentially
misleading, and indicated to Arguss that neither it nor Allen & Company should
utilize the information in considering the merger. Dycom indicated that, at that
time, Arguss and Allen & Company should review certain analyst estimates as a
more accurate measure of Dycom's 2002 performance. These estimates indicated
that for the second, third and fourth fiscal quarters of Dycom in 2002, Dycom's
total revenue would be $143.0 million, $162.2 million and $177.5 million,
respectively, Dycom's net income would be $5.1 million, $8.4 million and $10.9
million, respectively, Dycom's income before taxes would be $8.7 million, $14.3
million and $18.6 million, respectively, and Dycom's earnings per share would be
$0.12, $0.19 and $0.25, respectively. In addition, such estimates (which were
not referenced by Dycom's management) indicated that for Dycom's 2003 fiscal
year,
28
Dycom's total revenue would be $683.4 million, Dycom's net income would be $44.2
million, Dycom's income before taxes would be $75.1 million and Dycom's earnings
per share would be $1.01. Representatives of Merrill Lynch and Banc of America
Securities and Dycom's outside legal counsel and representatives of Allen &
Company and Arguss' outside legal counsel were frequently present at these
meetings. At these meetings, Mr. Bosselmann, other senior members of Arguss
management and Arguss' outside legal counsel provided current information about
the consent solicitation.
During the period from December 21, 2001 to January 4, 2002,
representatives from Dycom, Arguss, and their respective legal counsel
negotiated specific terms of the merger agreement and the stockholders
agreement, including the conditions to the offer, the circumstances under which
termination fees would be payable, the non-solicitation provisions, the
circumstances under which the parties could terminate the merger agreement and
fees and expenses payable in connection with termination of the merger
agreement.
On December 21, 2001, Mr. Nielsen informed by telephone individual members
of the Dycom board as to his discussions with Arguss and Allen & Company, the
status of Dycom's due diligence examination of Arguss and the status of
negotiations.
During the period between December 5, 2001 and January 4, 2002, Mr.
Bosselmann informed by telephone individual members of the Arguss board as to
the discussions with Dycom, the status of Arguss' due diligence examination of
Dycom, the status of negotiations and the status of the consent solicitation.
On January 4, 2002, Mr. Nielsen and Mr. Bosselmann discussed terms of the
transaction and, based upon discussions with their respective senior management,
agreed to the exchange ratio of 0.3333 Dycom shares for each Arguss share,
subject to satisfactory resolution of all other outstanding issues.
On January 4, 2002, Arguss held a special meeting of the Arguss board to
consider the proposed transaction with Dycom. At that meeting, Arguss management
and representatives of Allen & Company and Arguss' outside legal counsel updated
the Arguss board regarding the financial and legal aspects of the proposed
transaction. Allen & Company made a presentation to the Arguss board and
delivered its oral opinion to the effect that as of that date the consideration
to be received by holders of Arguss shares pursuant to the offer and the merger
was fair from a financial point of view.
On January 5, 2002, Dycom held a special telephonic meeting of its board of
directors. After discussion, which included updates regarding the financial and
legal aspects of the proposed transaction from Dycom management and
representatives of Dycom's outside legal and financial advisors, the Dycom board
of directors unanimously approved the offer and the merger and unanimously
approved and adopted the merger agreement and the stockholders' agreement.
On January 7, 2002, Arguss held a special telephonic meeting of the Arguss
board to further consider the proposed transaction with Dycom. After discussion,
which included further updates regarding the financial and legal aspects of the
proposed transaction from Allen & Company and Arguss' outside legal counsel,
Allen & Company delivered its written opinion to the effect that as of that date
the consideration to be received by holders of Arguss shares pursuant to the
offer and the merger was fair from a financial point of view to those holders,
and the Arguss board of directors approved the transaction and approved and
adopted the merger agreement and the stockholders' agreement.
Later on January 7, 2002, Dycom and Arguss executed the merger agreement
and the stockholders' agreement and prior to the opening of the New York Stock
Exchange on that day, Dycom and Arguss issued joint press releases announcing
the transaction.
29
THE OFFER
BASIC TERMS
Exchange of Shares and Exchange Ratio. We are offering to exchange 0.3333
Dycom shares, including the associated preferred share purchase right, subject
to the limitation described below, for each outstanding Arguss share, including
the associated preferred stock purchase right, validly tendered and not properly
withdrawn in accordance with the procedures described in this prospectus and the
related letter of transmittal.
You will not receive any fractional Dycom shares. Instead, you will receive
cash in an amount equal to the market value of any fractional shares you would
otherwise have been entitled to receive.
The expiration date is 12:00 midnight, New York City time, on Wednesday,
February 20, 2002, unless we (subject to the terms and conditions of the offer
and the merger agreement, as described below) extend the period during which the
offer is open, in which case the expiration date will be the latest time and
date at which the offer, as so extended, will expire.
Preferred Stock Purchase Rights. Our offer to acquire Arguss shares is
also an offer to acquire the Arguss preferred stock purchase right and, when we
refer to the Arguss shares, we are also referring to the associated Arguss
preferred stock purchase right. In addition, all references to the Arguss rights
include the benefits to holders of those rights pursuant to the Arguss rights
agreement, as amended. The number of Dycom shares receivable by holders of
Arguss shares in the offer and the merger includes payment for the associated
Arguss rights, and under no circumstances will additional consideration be paid
for the Arguss rights. Also, the Dycom shares to be issued in the offer and the
merger include the associated Dycom preferred share purchase right. When we
refer to Dycom shares, we are also referring to the associated right, unless we
indicate otherwise.
Transfer Charges. If you are the record holder of your shares and you
tender your shares directly to the exchange agent, you will not be obligated to
pay any charges or expenses of the exchange agent or any brokerage commissions.
If you own your shares through a broker or other nominee, and your broker
tenders the shares on your behalf, your broker may charge you a fee for doing
so. You should consult your broker or nominee to determine whether any charges
will apply. Except as set forth in the instructions to the letter of
transmittal, transfer taxes on the exchange of Arguss common stock pursuant to
our offer will be paid by Arguss.
Conditions to the Offer. Our obligation to exchange Dycom shares for
Arguss shares pursuant to the offer is subject to several conditions referred to
below under "-- Conditions to the Offer" beginning on page 39, including the
minimum tender condition and regulatory approvals.
We are making this offer in order to acquire at least a majority of the
total number of outstanding Arguss shares. We intend, as soon as possible after
completion of the offer, to have Purchaser merge with and into Arguss. The
purpose of the merger is to acquire all Arguss shares not tendered and exchanged
pursuant to the offer. In the merger, each then outstanding Arguss share, except
for, if applicable, Arguss shares held in Arguss' treasury or by us or by
stockholders exercising appraisal rights, would be converted into the same
number of Dycom shares per Arguss share as is paid in the offer.
EXTENSION, TERMINATION AND AMENDMENT
We expressly reserve the right, in our sole discretion (subject to the
provisions of the merger agreement), at any time or from time to time, to extend
the period of time during which our offer remains open (a) beyond the initial
scheduled expiration date or extension of the offer if, at the scheduled or
extended expiration date of the offer, any of the conditions to the offer have
not been satisfied or waived, until the conditions to the offer are satisfied or
waived, (b) for any period required by any rule, regulation, interpretation or
position of the SEC applicable to the offer or (c) for an aggregate period of
not more than ten business days beyond the latest applicable date that would
otherwise be permitted under clause (a) or (b) above, if, as of the expiration
date, all of the conditions to the offer have been satisfied
30
or waived but the number of Arguss shares validly tendered and not withdrawn
equals more than 50%, but less than 90%, of the outstanding Arguss shares on a
fully diluted basis. We can extend our offer by giving oral or written notice of
such extension to the exchange agent. If we decide to extend our offer, we will
make an announcement to that effect no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled expiration date. We are
not making any assurances that we will exercise our right to extend our offer.
However, we have agreed, pursuant to the merger agreement, to extend the offer
if the minimum tender condition is not met, until the minimum tender condition
has been satisfied, for up to 15 business days after the initial scheduled
expiration date.
During any such extension, all Arguss shares previously tendered and not
properly withdrawn will remain subject to the offer, subject to your right to
withdraw your Arguss shares. You should read the discussion below under the
caption "-- Withdrawal Rights" for more details.
Subject to the SEC's applicable rules and regulations and the terms of the
merger agreement, we also reserve the right in our sole discretion (a) at any
time and from time to time, to delay acceptance for exchange of, or, regardless
of whether we previously accepted Arguss shares, exchange any Arguss shares
pursuant to our offer or to terminate our offer and not accept for exchange, or
exchange, any Arguss shares not previously accepted for exchange, or exchanged,
upon the failure of any of the conditions of the offer to be satisfied on or
before February 20, 2002 and (b) at any time prior to the expiration of the
offer, to waive any of the conditions to the offer and to make any change in the
terms of or conditions to the offer, provided that we will not make any change
in the form of consideration to be paid, decrease the consideration payable in
the offer, reduce the maximum number of Arguss shares to be purchased in the
offer, impose conditions to the offer in addition to those set forth in the
merger agreement, or make any other change that is adverse to the holders of
Arguss shares. We will give oral or written notice of any such delay,
termination or amendment to the exchange agent and by making a public
announcement. Prior to the expiration of the offer, all conditions to the offer,
other than those subject to government approval, will be satisfied or waived.
We will make a public announcement of any extension, termination, amendment
or delay as promptly as practicable. In the case of an extension, any
announcement will be issued no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date. Subject to
applicable law (including Rules 14d-4(d), 14d-6(c) and 14e-1 under the Exchange
Act, which require that any material change in the information published, sent
or given to Arguss stockholders in connection with the offer be promptly sent to
stockholders in a manner reasonably designed to inform stockholders of the
change) and without limiting the manner in which we may choose to make any
public announcement, we assume no obligation to publish, advertise or otherwise
communicate any such public announcement other than by making a release to the
Dow Jones News Service or the PR Newswire Association, Inc.
If we make a material change in the terms of our offer or the information
concerning the offer, or if we waive a material condition of the offer, we will
extend the offer for at least five business days, as required under the Exchange
Act. If, prior to the expiration date, subject to the terms of the merger
agreement, we change the percentage of Arguss shares being sought or the
consideration we are offering, that change will apply to all holders whose
Arguss shares are accepted for exchange pursuant to our offer. If at the time
notice of that change is first published, sent or given to you, the offer is
scheduled to expire at any time earlier than the tenth business day from and
including the date that the notice is first so published, sent or given, we will
extend the offer until the expiration of that ten business day period.
For purposes of our offer, a "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
SUBSEQUENT OFFERING PERIOD
We may, although we do not currently intend to, elect to provide a
subsequent offering period of three to 20 business days after the acceptance of
Arguss shares in the offer if, among other things, on the expiration date of the
offer all of the conditions to our obligations to accept for exchange, and to
exchange, the Arguss shares are satisfied or waived and we immediately accept
for exchange, and promptly exchange,
31
all Arguss shares validly tendered and not withdrawn prior to the expiration
date. If we elect to provide a subsequent offering period, we may do so by
giving oral or written notice of the subsequent offering period to the exchange
agent and we will make a public announcement of the results of the exchange
offer, including the approximate number and percentage of Arguss shares
deposited, no later than 9:00 a.m., New York City time, on the next business day
after the expiration date of the initial offering period and immediately begin
the subsequent offering period. YOU WILL NOT HAVE THE RIGHT TO WITHDRAW ARGUSS
SHARES THAT YOU TENDER IN THE SUBSEQUENT OFFERING PERIOD, IF ANY.
EXCHANGE OF ARGUSS SHARES; DELIVERY OF DYCOM SHARES
Upon the terms and subject to the conditions of our offer, including, if
the offer is extended or amended, the terms and conditions of the extension or
amendment, we will accept for exchange, and will exchange, Arguss shares validly
tendered, and not properly withdrawn prior to the expiration date, as promptly
as practicable after the expiration date. Notwithstanding the immediately
preceding sentence, subject to applicable rules of the SEC and the terms of the
merger agreement, we expressly reserve the right to delay acceptance for
exchange, or the exchange of, Arguss shares in order to obtain any governmental
or regulatory approvals.
If we decide to include a subsequent offering period, we will accept for
exchange, and promptly exchange, all validly tendered Arguss shares as they are
received during the subsequent offering period. See "-- Extension, Termination
and Amendment."
In all cases (including during any subsequent offering period), exchange of
Arguss shares tendered and accepted for exchange pursuant to the offer will be
made only after timely receipt by the exchange agent of (a) certificates for
those Arguss shares, or a confirmation of a book-entry transfer of those Arguss
shares in the exchange agent's account at The Depository Trust Company, or DTC,
pursuant to the procedures outlined in the section below entitled "-- Procedure
for Tendering," (b) a properly completed and duly executed letter of transmittal
(or a manually signed facsimile of that document), with any required signature
guarantees or an agent's message, in the case of a book-entry transfer, as
described below under "-- Procedure for Tendering" and (c) any other required
documents.
For purposes of the offer, including during any subsequent offering period,
we will be deemed to have accepted for exchange, and thereby exchanged, Arguss
shares validly tendered and not properly withdrawn as of, if and when we notify
the exchange agent of our acceptance of the tenders of those Arguss shares
pursuant to the offer. The exchange agent will deliver Dycom shares in exchange
for Arguss shares pursuant to the offer and cash instead of fractional Dycom
shares as soon as practicable after receipt of our notice (which we expect to be
within three business days after the date of acceptance). The exchange agent
will act as agent for tendering stockholders for the purpose of receiving Dycom
shares and any cash to be paid instead of fractional Dycom shares and
transmitting the stock and cash, if any, to you. YOU WILL NOT RECEIVE ANY
INTEREST ON ANY CASH THAT WE PAY YOU, EVEN IF THERE IS A DELAY IN MAKING THE
EXCHANGE.
If we do not accept any tendered Arguss shares for exchange pursuant to the
terms and conditions of the offer for any reason, or if certificates are
submitted for more Arguss shares than are tendered, we will return certificates
for the unexchanged Arguss shares, without expense, to the tendering stockholder
or, in the case of Arguss shares tendered by book-entry transfer of unexchanged
Arguss shares into the exchange agent's account at DTC pursuant to the
procedures outlined under the section below entitled "-- Procedure for
Tendering," those Arguss shares will be credited to an account maintained within
DTC, as soon as practicable following expiration or termination of the offer.
We reserve the right to transfer or assign, from time to time, in whole or
in part, to one or more of our affiliates, the right to purchase all or any of
the Arguss shares tendered pursuant to the offer, but any such transfer or
assignment will not relieve us of our obligations under the offer and will not
prejudice your rights to receive Dycom shares and cash instead of fractional
Dycom shares for Arguss shares validly tendered and accepted for exchange
pursuant to the offer.
32
CASH INSTEAD OF FRACTIONAL DYCOM SHARES
We will not issue certificates representing fractional shares pursuant to
the offer. Instead, each tendering stockholder who would otherwise be entitled
to a fractional Dycom share will receive cash in an amount equal to that
fraction multiplied by the average of the per share closing prices of our shares
on the New York Stock Exchange on the first date on which we accept shares for
exchange in the offer. A stockholder who receives cash instead of fractional
Dycom shares will recognize gain or loss on the receipt of the cash to the
extent that the cash received exceeds the tax basis that would have been
allocated to that stockholder's fractional shares. You are urged to carefully
read the discussion under "The Offer -- Material United States Federal Income
Tax Consequences" beginning on page 36, and to consult your tax advisor on the
consequences to you of the offer and/or merger.
WITHDRAWAL RIGHTS
Arguss shares tendered pursuant to the offer may be withdrawn at any time
prior to the acceptance date, and, unless we have previously accepted them
pursuant to the offer, may also be withdrawn at any time after March 23, 2002.
Once we accept Arguss shares for exchange pursuant to the offer, your tender is
irrevocable. IF WE ELECT TO PROVIDE A SUBSEQUENT OFFERING PERIOD UNDER EXCHANGE
ACT RULE 14D-11, YOU WILL NOT HAVE THE RIGHT TO WITHDRAW ARGUSS SHARES THAT YOU
TENDER IN THE SUBSEQUENT OFFERING PERIOD.
For your withdrawal to be effective, the exchange agent must receive from
you a written, telex or facsimile transmission notice of withdrawal at one of
its addresses set forth on the back cover of this prospectus, and your notice
must include your name, address, social security number, the certificate number
or numbers and the number of Arguss shares to be withdrawn as well as the name
of the registered holder, if it is different from that of the person who
tendered those Arguss shares.
A financial institution must guarantee all signatures on the notice of
withdrawal, unless those Arguss shares have been tendered for the account of an
eligible institution. If physical certificates have been delivered or otherwise
identified to the exchange agent, the name of the registered holder and the
serial numbers of the particular certificates evidencing the Arguss shares
withdrawn must also be furnished to the exchange agent, as stated above, prior
to the physical release of the certificates. If Arguss shares have been tendered
pursuant to the procedures for book-entry tender discussed under the section
entitled "-- Procedure for Tendering," any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn Arguss
shares and must otherwise comply with DTC's procedures.
WE WILL DECIDE ALL QUESTIONS AS TO THE FORM AND VALIDITY (INCLUDING TIME OF
RECEIPT) OF ANY NOTICE OF WITHDRAWAL, IN OUR SOLE DISCRETION, AND OUR DECISION
WILL BE FINAL AND BINDING. NEITHER WE, THE EXCHANGE AGENT, THE INFORMATION
AGENT, THE DEALER MANAGER NOR ANY OTHER PERSON WILL BE UNDER ANY DUTY TO GIVE
NOTIFICATION OF ANY DEFECTS OR IRREGULARITIES IN ANY NOTICE OF WITHDRAWAL OR
WILL INCUR ANY LIABILITY FOR FAILURE TO GIVE ANY NOTIFICATION.
Any Arguss shares properly withdrawn will be deemed not to have been
validly tendered for purposes of our offer. However, you may retender withdrawn
Arguss shares by following one of the procedures discussed under the caption
below entitled "-- Procedure for Tendering" at any time prior to the expiration
date.
PROCEDURE FOR TENDERING
Arguss has provided us with its stockholder list and security positions
listing, including the most recent list of names, addresses and security
positions of non-objecting beneficial owners in the possession of Arguss shares,
for the purpose of disseminating the offer to Arguss' stockholders. We will mail
this offer and the related letter of transmittal to record holders of Arguss'
shares whose names appear on this stockholder list and we will furnish this
offer and the related letter of transmittal for subsequent transmittal to
beneficial owners of Arguss shares, to brokers, dealers, commercial banks, trust
companies and similar
33
persons whose names, or the names of whose nominees, appear on the stockholder
list or, if applicable, who are listed on or are participants in a clearing
agency's security position listing.
For you to validly tender Arguss shares pursuant to the offer you must
either (a) properly complete and duly execute a letter of transmittal (or a
manually executed facsimile of that document), along with any required signature
guarantees or an agent's message in connection with a book-entry transfer, and
any other required documents, all of which must be transmitted to and received
by the exchange agent at one of its addresses set forth on the back cover of
this prospectus, and certificates for tendered Arguss shares must be received by
the exchange agent at such address or those Arguss shares must be tendered
pursuant to the procedures for book-entry transfer set forth below (a tender by
book-entry transfer will be completed upon receipt by the exchange agent of a
confirmation, which we refer to as a book-entry confirmation) or (b) if your
certificates are not immediately available or you cannot complete the procedure
for book-entry transfer on a timely basis, comply with the guaranteed delivery
procedures outlined below in the section entitled "-- Guaranteed Delivery."
The term "agent's message" means a message, transmitted by DTC to, and
received by, the exchange agent and forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgment from the
participant in DTC tendering the Arguss shares which are the subject of the
book-entry confirmation, that the participant has received and agrees to be
bound by the terms of the letter of transmittal and that we may enforce that
agreement against the participant.
Book-Entry Transfer. The exchange agent will establish accounts with
respect to the Arguss shares at DTC for purposes of the offer within two
business days after the date of this prospectus, and any financial institution
that is a participant in DTC may make book-entry delivery of the Arguss shares
by causing DTC to transfer such Arguss shares into the exchange agent's account
at DTC in accordance with DTC's procedure for the transfer. However, although
delivery of Arguss shares may be effected through book-entry at DTC, you must
transmit to the exchange agent at one of its addresses set forth on the back
cover page of this prospectus, the letter of transmittal (or a manually signed
facsimile thereof), with any required signature guarantees, or an agent's
message, and any other required documents, or you must follow the guaranteed
delivery procedures described below. A tender by book-entry transfer will be
completed upon receipt by the exchange agent prior to the expiration date or the
expiration of the subsequent offering period, if any, of all such documents and
of a book-entry confirmation from DTC. DELIVERY OF DOCUMENTS TO DTC DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees. Signatures on all letters of transmittal must be
guaranteed by an eligible institution, except in cases in which Arguss shares
are tendered either by a registered holder of Arguss shares who has not
completed the box entitled "Special Issuance Instructions" on the letter of
transmittal, or for the account of an eligible institution.
If the certificates for Arguss shares are registered in the name of a
person other than the person who signs the letter of transmittal, or if
certificates for unexchanged Arguss shares are to be issued to a person other
than the registered holder or holders, the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificates, with
the signature or signatures on the certificates or stock powers guaranteed by an
eligible institution.
The method of delivery of Arguss share certificates and all other required
documents, including delivery through DTC, is at your option and risk, and the
delivery will be deemed made only when actually received by the exchange agent.
If delivery is by mail, we recommend registered mail with return receipt
requested, properly insured. In all cases, you should allow sufficient time to
ensure timely delivery.
IN ORDER TO PREVENT UNITED STATES FEDERAL INCOME TAX BACKUP WITHHOLDING
WITH RESPECT TO CASH RECEIVED PURSUANT TO OUR OFFER IN LIEU OF FRACTIONAL
SHARES, YOU MUST PROVIDE THE EXCHANGE AGENT WITH YOUR CORRECT TAXPAYER
IDENTIFICATION NUMBER AND CERTIFY THAT YOU ARE NOT SUBJECT TO BACKUP WITHHOLDING
OF UNITED STATES FEDERAL INCOME TAX BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF TRANSMITTAL. SOME ARGUSS STOCKHOLDERS (INCLUDING,
AMONG OTHERS, ALL CORPORATIONS AND SOME FOREIGN
34
INDIVIDUALS) ARE EXEMPT FROM THESE BACKUP WITHHOLDING REQUIREMENTS. IN ORDER FOR
A FOREIGN INDIVIDUAL STOCKHOLDER TO QUALIFY AS AN EXEMPT RECIPIENT, THE
STOCKHOLDER MUST SUBMIT AN APPLICABLE INTERNAL REVENUE SERVICE FORM W-8, SIGNED
UNDER PENALTIES OF PERJURY, ATTESTING TO THAT INDIVIDUAL'S EXEMPT STATUS.
Guaranteed Delivery. If you wish to tender your Arguss shares pursuant to
our offer and your certificates are not immediately available or you cannot
deliver the certificates and all other required documents to the exchange agent
prior to the expiration date, or cannot complete the procedure for book-entry
transfer on a timely basis, you may still tender your Arguss shares so long as
all of the following conditions are satisfied:
- you make your tender by or through an eligible institution,
- a properly completed and duly executed notice of guaranteed delivery,
substantially in the form made available by us, is received by the
exchange agent as provided below on or prior to the expiration date or
the expiration of the subsequent offering period, and
- the certificates for all tendered Arguss shares (or a confirmation of a
book-entry transfer of such shares into the exchange agent's account at
DTC as described above), in proper form for transfer, together with a
properly completed and duly executed letter of transmittal (or a manually
signed facsimile thereof), with any required signature guarantees (or, in
the case of a book-entry transfer, an agent's message) and all other
documents required by the letter of transmittal are received by the
exchange agent within three New York Stock Exchange trading days after
the date of execution of such notice of guaranteed delivery.
You may deliver the notice of guaranteed delivery by hand or transmit it by
facsimile transmission or mail to the exchange agent and you must include a
signature guarantee by an eligible institution in the form outlined in that
notice.
In all cases (including during any subsequent offering period), we will
exchange Arguss shares tendered and accepted for exchange pursuant to our offer
only after timely receipt by the exchange agent of (a) certificates for Arguss
shares (or timely confirmation of a book-entry transfer of such securities into
the exchange agent's account at DTC as described above), (b) properly completed
and duly executed letter or letters of transmittal (or a manually signed
facsimile thereof), along with any required signature guarantees or an agent's
message in connection with a book-entry transfer and (c) any other required
documents.
A tender of Arguss shares pursuant to any of the procedures described above
will constitute your acceptance of the terms and conditions of our offer as well
as your representation and warranty to us that:
- you have the full power and authority to tender, sell, assign and
transfer the tendered shares (and any and all other Arguss shares or
other securities issued or issuable in respect of such shares) and
- when the same are accepted for exchange, we will acquire good and
unencumbered title to such shares, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse
claims.
Appointment of Attorneys-In-Fact and Proxies. By executing a letter of
transmittal, you irrevocably appoint our designees as your attorneys-in-fact and
proxies, each with full power of substitution, to the full extent of your rights
with respect to your Arguss shares tendered and accepted for exchange by us and
with respect to any and all other Arguss shares and other securities issued or
issuable in respect of those Arguss shares on or after January 7, 2002. That
appointment is effective, and voting rights will be affected, when and only to
the extent that we deposit the Dycom shares payable as consideration for the
Arguss shares that you have tendered with the exchange agent. All such proxies
will be considered coupled with an interest in the tendered Arguss shares and
therefore will not be revocable. Upon the effectiveness of such appointment, all
prior proxies that you have given will be revoked, and you may not give any
subsequent proxies (and, if given, they will not be deemed effective). Our
designees will, with respect to the Arguss shares for which the appointment is
effective, be empowered, among other things, to exercise
35
all of your voting and other rights as they, in their sole discretion, deem
proper at any annual, special or adjourned meeting of Arguss' stockholders or
otherwise. We reserve the right to require that, in order for Arguss shares to
be deemed validly tendered, immediately upon our exchange of those Arguss
shares, we be able to exercise full voting rights with respect to such Arguss
shares.
We will determine questions as to the validity, form, eligibility
(including time of receipt) and acceptance for exchange of any tender of Arguss
shares, in our sole discretion, and our determination will be final and binding.
We reserve the absolute right to reject any and all tenders of Arguss shares
that we determine are not in proper form or the acceptance of or exchange for
which may, in the opinion of our counsel, be unlawful. We also reserve the
absolute right to waive any of the conditions of our offer and to make any
change in the terms of or conditions to the offer, provided that we will not
make any change in the form of consideration to be paid, decrease the
consideration payable in the offer, reduce the maximum number of Arguss shares
to be purchased in the offer, impose conditions to the offer in addition to
those set forth in the merger agreement, or make any other change that is
adverse to the holders of Arguss shares. We will give oral or written notice of
any such delay, termination or amendment to the exchange agent and by making a
public announcement. No tender of Arguss shares will be deemed to have been
validly made until all defects and irregularities in tenders of Arguss shares
have been cured or waived. Neither we, the exchange agent, the information
agent, the dealer manager nor any other person will be under any duty to give
notification of any defects or irregularities in the tender of any Arguss shares
or will incur any liability for failure to give any such notification. Our
interpretation of the terms and conditions of our offer (including the letter of
transmittal and instructions thereto) will be final and binding.
The tender of Arguss shares pursuant to any of the procedures described
above will constitute a binding agreement between us and you upon the terms and
subject to the conditions of the offer.
THE METHOD OF DELIVERY OF ARGUSS SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH DTC, IS AT YOUR OPTION AND RISK, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IF DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
ENSURE TIMELY DELIVERY.
Any applicable stock transfer taxes, if any, in connection with the offer,
the merger and the merger agreement will be paid by Arguss and will not be a
liability of any holder of Arguss shares.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the opinions of Shearman & Sterling,
counsel to Dycom, and Gibson, Dunn & Crutcher LLP, special counsel to Arguss, as
to the material United States federal income tax consequences to Arguss
stockholders that exchange Arguss shares for Dycom shares pursuant to the offer
and the merger. This discussion is based on provisions of the Code, Treasury
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect as of the date of this prospectus and
all of which are subject to change, possibly with retroactive effect. This
discussion does not address all aspects of United States federal income taxation
that may be applicable to Arguss stockholders in light of their particular
circumstances or to Arguss stockholders subject to special treatment under
United States federal income tax law (including, without limitation, individuals
who are neither United States citizens nor residents, certain financial
institutions, insurance companies, tax-exempt entities, dealers in securities,
traders in securities that elect to apply a mark-to-market method of accounting,
certain United States expatriates, persons that hold Arguss shares as part of a
straddle, hedge, conversion transaction or other integrated investment, Arguss
stockholders whose functional currency is not the United States dollar and
Arguss stockholders who acquired Arguss shares through the exercise of employee
stock options or otherwise as compensation). This discussion is limited to
Arguss stockholders that hold their Arguss shares, and will hold their Dycom
shares, as capital assets (generally, property held for investment), and it does
not consider the United States federal income tax treatment of Arguss
stockholders that hold Arguss shares through a partnership or other pass-through
entity. Furthermore, this summary does not discuss any aspect of United States
federal tax law other than income taxation, and does not discuss any state,
local or foreign tax consequences of the offer and the merger.
36
Dycom has received the opinion of Shearman & Sterling, and Arguss has
received the opinion of Gibson, Dunn & Crutcher LLP, (collectively, the "Tax
Opinions") to the effect that, based upon the assumptions, limitations and
conditions set forth therein, under current United States federal income tax
law, (a) the combination of the offer and the merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code and (b) each of
Dycom, Purchaser and Arguss will be a party to that reorganization within the
meaning of Section 368(b) of the Code. Consummation of the merger is conditioned
upon Dycom and Arguss receiving substantially similar opinions from Shearman &
Sterling and Gibson, Dunn & Crutcher LLP, respectively at the effective time of
the merger. Currently, Dycom and Arguss have no reason to believe that either
Shearman & Sterling or Gibson, Dunn & Crutcher LLP would be unable to deliver
the required opinions at closing. However, if the opinions cannot be delivered
upon the consummation of the merger, Dycom and Arguss expect to waive the
condition requiring the delivery thereof and will thereafter complete the
merger. The Tax Opinions have been based on and are subject to certain
assumptions and limitations as well as factual representations made by Dycom,
Purchaser and Arguss. No ruling will be sought from the Internal Revenue Service
as to the United States federal income tax consequences of the offer and the
merger, and the opinions of counsel will not be binding upon the Internal
Revenue Service or any court. Accordingly, there can be no assurances that the
Internal Revenue Service will not contest the conclusions expressed in the Tax
Opinions or that a court will not sustain any contest.
Subject to the assumptions, limitations and conditions included in the Tax
Opinions, the principal United States federal income tax consequences of the
combination of the offer and the merger as a reorganization can be summarized as
follows:
- A holder of Arguss shares will not recognize any gain or loss upon
exchange of its Arguss shares solely for Dycom shares in the offer or the
merger.
- If a holder of Arguss shares receives cash instead of a fractional Dycom
share, the holder will be required to recognize gain or loss, measured by
the difference between the amount of cash received instead of that
fractional Dycom share and the portion of the tax basis of that holder's
Arguss shares allocable to that fractional share. Such gain or loss will
be capital gain or loss, and will be long-term capital gain or loss if
the Arguss shares that would otherwise have been exchanged for that
fractional Dycom share were held for more than one year.
- A holder of Arguss shares will have a tax basis in the Dycom shares
received in the offer and the merger equal to (a) the tax basis of the
Arguss shares surrendered by that holder pursuant to the offer or in the
merger, less (b) any tax basis of the Arguss shares surrendered that is
allocable to any fractional Dycom share for which cash is received.
- The holding period for Dycom shares received in exchange for Arguss
shares in the offer and the merger will include the holding period for
Arguss shares surrendered in the offer and the merger.
- If an Arguss stockholder, pursuant to the exercise of its right to seek
an appraisal, exchanges all of its Arguss shares solely for cash, such
holder generally will recognize capital gain or loss equal to the
difference between the amount of cash received and its adjusted tax basis
in the Arguss shares surrendered. Such gain or loss generally will be
long-term capital gain or loss if the holder held the Arguss shares
surrendered for more than one year as of the date of the exchange.
Non-corporate holders may be eligible for preferential rates of United
States federal income taxation in respect of long-term capital gains. The
deduction of capital losses is subject to limitations under the Code.
The Tax Opinions are subject to the truth and accuracy of certain
representations made by Dycom, Purchaser, and Arguss, as well as certain
assumptions relating to, among other things, the minimum tender condition for
the offer being satisfied, and the consummation of the merger promptly after the
offer, in accordance with the current terms of the merger agreement and
applicable state law. There can be no assurance that the merger will be
completed or that other factual conditions will be satisfied. If such conditions
are not satisfied, an Arguss stockholder's exchange of Arguss shares for Dycom
shares in the offer or the merger could be a taxable transaction, depending on
the surrounding facts. In such a taxable
37
transaction, a holder of Arguss shares generally would recognize capital gain or
loss equal to the difference between (i) the sum of the fair market value of the
Dycom shares received in the exchange, plus the amount, if any, of cash received
in lieu of a fractional Dycom share, and (ii) the tax basis of the Arguss shares
surrendered in the exchange. Such capital gain or loss would be long-term
capital gain or loss if the Arguss shares had been held for more than one year
as of the date of the exchange. Non-corporate holders may be eligible for
preferential rates of United States federal income taxation in respect of
long-term capital gains. The deduction of capital losses is subject to
limitations under the Code. If the exchange of Arguss shares for Dycom shares
ultimately is determined to be a taxable transaction, an Arguss stockholder
could be taxed on any recognized gain, but would not receive cash in the offer
or the merger from which to pay any resulting tax liability (other than any cash
received in lieu of fractional Dycom shares).
The foregoing discussion is intended only as a summary and does not purport
to be a complete analysis or listing of all potential United States federal
income tax consequences of the offer and the merger. Arguss stockholders are
urged to consult their tax advisors concerning the United States federal, state,
local and foreign tax consequences of participation in the offer and/or the
merger to them.
PURPOSE OF THE OFFER
We are making the offer in order to acquire at least a majority of the
total outstanding Arguss shares. We intend, as soon as practicable after
completion of the offer, to have Purchaser merge with Arguss. The purpose of the
merger is to acquire all Arguss shares not tendered and exchanged pursuant to
the offer. In the merger, each then outstanding Arguss share (except for Arguss
shares tendered, held by Arguss as treasury shares or Arguss shares owned by
Dycom, Purchaser or any of Dycom's or Purchaser's subsidiaries or by
stockholders of Arguss who perfect their appraisal rights, if any) would be
converted into the right to receive the same number of Dycom shares as is paid
per Arguss share in the offer subject to appraisal rights, if any, as may be
exercised under the Delaware General Corporation Law, or DGCL.
THE MERGER
Approval of the Merger. Under Section 251 of the DGCL, the approval of the
board of directors of a company and the affirmative vote of the holders of a
majority of its outstanding shares are required to approve and adopt a merger
agreement. The Arguss board of directors has previously approved the merger. If
we complete the offer and the minimum tender condition has been satisfied, we
would have a sufficient number of Arguss shares to approve the merger without
the affirmative vote of any other holder of Arguss shares. Therefore, unless the
merger is consummated in accordance with the short-form merger provisions under
the DGCL (described below), the only remaining required corporate action of
Arguss will be the approval and adoption of the merger agreement by the
affirmative vote of a majority of the outstanding Arguss shares, which will
require a longer period of time to effect than would be the case with a short-
form merger. This is referred to as a long-form merger.
Possible Short-Form Merger. Section 253 of the DGCL would permit the
merger to occur without a vote of Arguss' stockholders in a short-form merger if
Dycom were to acquire at least 90% of the outstanding Arguss shares in the offer
or otherwise (including as a result of purchases by Dycom during any subsequent
offering period). No action by the stockholders of Arguss, other than by Dycom
acting as the 90% stockholder, will be required to consummate the merger.
Arguss has advised Purchaser that as of February 11, 2002, 14,544,944
Arguss shares were issued and outstanding, and 3,401,767 shares were reserved
for issuance pursuant to outstanding employee stock options (5,000 of which have
been exercised, but for which the Arguss shares have not yet been issued) and no
shares were held in Arguss' treasury. As a result, as of that date, the minimum
tender condition would be satisfied if Purchaser acquired 8,973,356 Arguss
shares. Also, as of such date, Purchaser could cause the merger to become
effective in accordance with Delaware Law, without a meeting of Arguss'
stockholders, if Purchaser acquired 13,090,450 Arguss shares.
38
APPRAISAL RIGHTS
Arguss stockholders do not have appraisal rights in connection with the
offer. If we complete the offer but less than 90% of the outstanding Arguss
shares are validly tendered and not properly withdrawn in the offer, we intend
to effect a long-form merger (as described above) as permitted under Section 251
of the DGCL. Arguss stockholders who have not exchanged their Arguss shares in
the offer will not have appraisal rights in connection with a long-form merger.
However, if at least 90% of the outstanding Arguss shares are validly
tendered and not properly withdrawn in the offer, we intend to effect a
short-form merger, and Arguss stockholders at the time of a short-form merger
will have the right under Section 262 of the DGCL to dissent and demand
appraisal of their Arguss shares. Under Section 262 of the DGCL, dissenting
stockholders who comply with the applicable statutory procedures will be
entitled to receive a judicial determination of the fair value of their Arguss
shares, exclusive of any element of value arising from the accomplishment or
expectation of the merger, and to receive payment of this fair value in cash,
together with a fair rate of interest, if any. We cannot assure you as to the
methodology a court would use to determine fair value or how a court would
select which of the elements of value are to be included in such a
determination.
The foregoing discussion is not a complete statement of the law relating to
appraisal rights and is qualified in its entirety by the summary of procedures
for seeking appraisal rights, which is set out in Annex D to this prospectus and
incorporated herein by reference, and the full text of Section 262 of the DGCL,
which is reprinted in its entirety after the summary in Annex D to this
prospectus and incorporated herein by reference.
CONDITIONS TO THE OFFER
The offer is subject to a number of conditions, which are described below:
Minimum Tender Condition. There must be validly tendered and not
properly withdrawn prior to the expiration of the offer the number of
Arguss shares that, together with the Arguss shares then owned by Dycom and
Purchaser, will constitute at least a majority of the total number of
outstanding Arguss shares on a fully diluted basis (as though all options
exercisable for Arguss shares had been converted, exercised or exchanged)
as of the date that we accept the Arguss shares pursuant to our offer.
Based on information supplied by Arguss, the number of Arguss shares needed
to satisfy the minimum tender condition would have been 8,973,356 as of
February 11, 2002.
Antitrust Approvals. All applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or HSR
Act, must have expired or been terminated and any required consents and
clearances must have been obtained. On January 28, 2002, we and Arguss
received notification of early termination of all applicable waiting
periods under the HSR Act.
Registration Statement Effectiveness. The registration statement on
Form S-4, of which this prospectus is a part, must have been declared
effective under the Securities Act of 1933 and must not be the subject of
any stop order or proceedings seeking a stop order.
New York Stock Exchange Listing. The Dycom shares issuable to Arguss
stockholders in the offer and the merger must have been approved for
listing on the New York Stock Exchange, subject to official notice of
issuance.
Other Conditions of the Offer. The offer is also subject to the
condition that, prior to the expiration of the offer, there will not be
existing and continuing any of the following events or circumstances:
(1) there will have been instituted or pending any litigation,
suit, claim, action or proceeding before any federal or state court of
the United States (other than (a) any such action in which a motion for
a temporary restraining order, a preliminary injunction or a permanent
injunction will have been denied or will have expired, or a judicial
order granting any such temporary restraining order, preliminary
injunction or permanent injunction will have been
39
reversed on appeal and not reinstated, (b) any such action or proceeding
in which the United States Department of Justice, or the Federal Trade
Commission or any applicable state authority does not file within 10
business days after commencement of such action a motion seeking
injunctive relief of the type referred to in clauses (i) through (iii)
of this paragraph (1), or (c) an action filed with consent of Purchaser)
by any United States federal government or governmental authority or
agency or any of the several states of the United States or any attorney
general thereof (i) challenging or seeking to make illegal, materially
delay, or otherwise, directly or indirectly, restrain or prohibit or
make materially more costly, the making of the offer, the acceptance for
exchange of any Arguss shares by Dycom, Purchaser or any other affiliate
of Dycom, or the consummation of any other transaction contemplated by
the merger agreement; (ii) seeking an order of divestiture that, if
complied with, would, in Dycom's reasonable judgment, be expected to
have a material adverse effect on the business, results of operations or
financial condition of Dycom, Arguss and their subsidiaries, taken as a
whole, after giving effect to the offer and the merger; or (iii) seeking
to impose or confirm any limitation on the ability of Dycom, Purchaser
or any other subsidiary of Dycom to exercise effectively full rights of
ownership of any Arguss shares on all matters properly presented to the
Arguss' stockholders, including, without limitation, the approval and
adoption of the merger agreement and the transactions contemplated by
the merger agreement;
(2) there will have been (a) any law enacted, promulgated, amended,
issued or deemed applicable to (i) Dycom, Arguss or any of their
respective subsidiaries or (ii) any transaction contemplated by the
merger agreement or (b) entered, promulgated or enforced by any court or
governmental authority, any order of any kind which prohibits,
restrains, restricts or enjoins the consummation of the offer or has the
effect of making the offer illegal, in each case, by any legislative
body or governmental authority that would result, directly or
indirectly, in any of the consequences referred to in clauses (i)
through (iii) of paragraph (1) above;
(3) there will have occurred and be continuing (a) any general
suspension of trading in, or limitation on prices for, securities on the
New York Stock Exchange (other than a shortening of trading hours or any
coordinated trading halt triggered solely as a result of a specified
increase or decrease in a market index), (b) a decline, measured from
the date hereof, in the Standard & Poor's 500 Index in excess of 25%,
(c) a declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States, (d) any new and material
limitation (whether or not mandatory) by any United States government or
governmental authority (as defined in the merger agreement), on the
extension of credit by United States banks or other lending
institutions, (e) a commencement of a war or armed hostilities or other
national or international calamity directly or indirectly involving the
United States not existing on the date of the merger agreement (the
announced "War on Terrorism" resulting from the September 11, 2001
terrorist attacks will be deemed existing on the date of the merger
agreement) or (f) in the case of any of the foregoing existing on the
date of the merger agreement, including, without limitation, the
announced War on Terrorism, a material acceleration or worsening
thereof, it being understood that any air strike against, or special
operations involving a limited number of ground troops in, the countries
of Somalia or Yemen will not be considered a material acceleration or
worsening of the War on Terrorism;
(4) other than with respect to any order that is the subject of
paragraph (1) or (2) above, there will have been enacted, entered,
promulgated or enforced by any court or governmental authority any order
which prohibits, restrains, restricts or enjoins the consummation of the
offer or has the effect of making the offer illegal;
(5) (a) Arguss will have breached or failed to perform in any
material respect its obligations, covenants or agreements under the
merger agreement, (b) the representations and warranties of Arguss
contained in the merger agreement that are qualified by reference to
materiality or an Arguss material adverse effect (as defined in the
merger agreement) will not have been true and correct in all respects
when made or at any time prior to the consummation
40
of the offer as if made at and as of such time (other than
representations and warranties which by their terms address matters only
as of another specified date, which will be true and correct in all
respects only as of such date), or (c) the representations and
warranties of Arguss contained in the merger agreement that are not so
qualified will not have been true and correct when made or at any time
prior to the consummation of the offer as if made at and as of such time
(other than representations and warranties which by their terms address
matters only as of another specified date, which will be true and
correct only as of such date), except, in the case of clause (c) only,
for such failures to be true and correct as are not reasonably likely
to, individually or in the aggregate, result in a material adverse
effect (as defined in the merger agreement) on Arguss;
(6)(a) it will have been publicly disclosed, or Dycom will have
otherwise learned, that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 of the Exchange
Act) of 20% or more of the then-outstanding Arguss shares have been
acquired by any person, other than Dycom or any of its affiliates, or
(b) (i) the Arguss board of directors, or any committee thereof, will
have withdrawn or modified, in a manner adverse to Dycom or Purchaser
including by amending the Schedule 14D-9, the approval or recommendation
of the offer, the merger, the merger agreement, or approved or
recommended any superior proposal or any other acquisition of Arguss
common stock other than the offer and the merger or (ii) the Arguss
board, or any committee thereof, will have resolved to do any of the
foregoing;
(7) the merger agreement will have been terminated in accordance
with its terms (see "The Merger Agreement -- Termination of the Merger
Agreement"); and
(8) the Amendment to Forbearance and Modification Agreement and
Waiver, dated as of December 26, 2001, among Arguss and certain of its
lenders will not have been amended to extend the forbearance period
until the earlier of the effective time of the merger or the termination
of the merger agreement;
which, in the reasonable judgment of Dycom in any such case, and regardless
of the circumstances (including any action or inaction by Dycom or any of
its affiliates) giving rise to any such condition, makes it inadvisable to
proceed with such acceptance for payment.
The foregoing conditions are for the sole benefit of Purchaser and Dycom
and may be asserted by Purchaser or Dycom regardless of the circumstances giving
rise to any such condition or may be waived by Purchaser or Dycom in whole or in
part at any time and from time to time in their sole discretion. The failure by
Dycom or Purchaser at any time to exercise any of the foregoing rights will not
be deemed a waiver of any such right; the waiver of any such right with respect
to particular facts and circumstances will not be deemed a waiver with respect
to any other facts and circumstances; and each such right may be asserted until
the time that the offer expires.
REGULATORY APPROVALS
Based upon our examination of publicly available information with respect
to Arguss and review of certain information furnished by Arguss, and discussions
between our representatives and representatives of Arguss during our
investigation of Arguss, see "Background of the Offer" beginning on page 27,
except as included in this prospectus, we are not aware of any licenses or
regulatory permits that appear to be material to the business of Arguss and its
subsidiaries, taken as a whole, and that might be adversely affected by our
acquisition of Arguss shares in the offer. In addition, except as outlined in
this prospectus, we are not aware of any filings, approvals or other actions by
or with any governmental authority or administrative or regulatory agency that
would be required for our acquisition or ownership of Arguss shares. Should any
such approval or other action be required, we expect to seek such approval or
action, except as described under "-- State Takeover Laws." Should any such
approval or other action be required, we cannot be certain that we would be able
to obtain any such approval or action without substantial conditions or that
adverse consequences might not result to Arguss' or its subsidiaries'
businesses, or that certain parts of Arguss', Dycom's or any of their respective
subsidiaries' businesses
41
might not have to be disposed of or held separate in order to obtain such
approval or action. In that event, we may not be required to purchase any Arguss
shares in the offer.
State Takeover Laws. Arguss is incorporated under the laws of the State of
Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder", generally a person, or an affiliate or associate of the person,
who owns or has the right to acquire 15% or more of a corporation's outstanding
voting stock, from engaging in a business combination, which includes mergers
and certain other transactions, with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to such date the board of directors of the
corporation approved either the business combination or the transaction in which
the interested stockholder became an interested stockholder. On January 7, 2002,
prior to the execution of the merger agreement and the stockholders' agreement,
the Arguss board approved the merger agreement and the stockholders' agreement
and determined that each of the offer and the merger is fair to, and in the best
interests of, the stockholders of Arguss. Accordingly, Section 203 is
inapplicable to the offer and the merger.
A number of states have adopted takeover laws and regulations that purport
to apply to attempts to acquire securities of corporations that are incorporated
in those states or that have substantial assets, shareholders, principal
executive offices or principal places of business in those states. To the extent
that these state takeover statutes purport to apply to the offer or the merger,
we believe that those laws conflict with U.S. federal law and are an
unconstitutional burden on interstate commerce. In 1982, the Supreme Court of
the United States, in Edgar v. Mite Corp., invalidated on constitutional grounds
the Illinois Business Takeovers Statute, which, as a matter of state securities
law, made takeovers of corporations meeting certain requirements more difficult.
The reasoning in that decision is likely to apply to certain other state
takeover statutes. In 1987, however, in CTS Corp. v. Dynamics Corp. of America,
the Supreme Court of the United States held that the State of Indiana could as a
matter of corporate law and, in particular, those aspects of corporate law
concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without the prior
approval of the remaining shareholders, as long as those laws were applicable
only under certain conditions. Subsequently, in TLX Acquisition Corp. v. Telex
Corp., a federal district court in Oklahoma ruled that the Oklahoma statutes
were unconstitutional insofar as they apply to corporations incorporated outside
Oklahoma, because they would subject those corporations to inconsistent
regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee. This
decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a federal district court in Florida held, in Grand
Metropolitan Plc v. Butterworth, that the provisions of the Florida Affiliated
Transactions Act and Florida Control Share Acquisition Act were unconstitutional
as applied to corporations incorporated outside of Florida.
Arguss, directly or through its subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. Dycom and Purchaser do not know whether any of these laws will, by their
terms, apply to the offer or the merger and have not complied with any such
laws. Should any person seek to apply any state takeover law, Purchaser will
take such action as then appears desirable, which may include challenging the
validity or applicability of any such statute in appropriate court proceedings.
In the event it is asserted that one or more state takeover laws is applicable
to the offer or the merger, and an appropriate court does not determine that it
is inapplicable or invalid as applied to the offer, Purchaser might be required
to file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, Purchaser might be unable to accept for
exchange any Arguss shares tendered pursuant to the offer, or be delayed in
continuing or consummating the offer and the merger. In such case, Purchaser may
not be obligated to accept for payment any Arguss shares tendered. See
"-- Conditions to the Offer."
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission, or FTC, certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice, referred to
herein
42
as the Antitrust Division and the FTC and certain waiting period requirements
have been satisfied. The exchange of Arguss shares for Dycom shares pursuant to
the offer is subject to such requirements.
Pursuant to the requirements of the HSR Act, Dycom filed a Premerger
Notification and Report Form with respect to the offer with the Antitrust
Division and the FTC on January 16, 2002. The HSR filing on behalf of Arguss was
made on January 17, 2002.
Under the provisions of the HSR Act applicable to our offer, we may not
accept for exchange Arguss shares until the expiration of a 30 calendar day
waiting period following the filing by Dycom. Pursuant to the HSR Act, Dycom and
Arguss requested early termination of the waiting period applicable to the
offer.
On January 28, 2002, we and Arguss were notified by the FTC that we had
received early termination of all applicable waiting periods under the HSR Act.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as our proposed acquisition of Arguss
shares pursuant to the offer. At any time before or after the exchange of Arguss
shares pursuant to the offer, the FTC or the Antitrust Division could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Arguss shares pursuant to
the offer or seeking the divestiture of Arguss shares purchased by Dycom or the
divestiture of substantial assets of Dycom, Arguss or their respective
subsidiaries. Private parties and state attorneys general may also bring legal
action under federal or state antitrust laws under certain circumstances. Based
upon an examination of information available to us relating to the businesses in
which Dycom, Arguss and their respective subsidiaries are engaged, we believe
that the offer will not violate the antitrust laws. Nevertheless, there can be
no assurance that a challenge to the offer on antitrust grounds will not be made
or, if such a challenge is made, what the result would be. See "-- Conditions to
the Offer" for certain conditions to the offer, including conditions with
respect to litigation.
CERTAIN EFFECTS OF THE OFFER
Reduced Liquidity; New York Stock Exchange Listing; Possible
Delisting. The tender of Arguss shares pursuant to the offer will reduce the
number of holders of Arguss shares, and the number of Arguss shares that might
otherwise trade publicly, and could adversely affect the liquidity and market
value of the remaining Arguss shares held by the public. Shares of Arguss common
stock are listed and principally traded on the New York Stock Exchange.
Depending upon the number of Arguss shares purchased pursuant to the offer, the
Arguss shares may no longer meet the requirements of the New York Stock Exchange
for continued listing and may be delisted from the New York Stock Exchange.
According to the New York Stock Exchange's published guidelines, the New York
Stock Exchange would consider delisting the Arguss shares if, among other
things, the number of record holders of at least 100 Arguss shares should fall
below 1,200, the number of publicly held Arguss shares (exclusive of holdings of
officers, directors and their families and other concentrated holdings of 10% or
more) should fall below 600,000 or the aggregate market value of publicly held
Arguss shares should fall below $5 million.
If the New York Stock Exchange were to delist the Arguss shares, including
after the exchange of shares in the offer but prior to the merger, the market
for them could be adversely affected. It is possible that the Arguss shares
would continue to trade on another securities exchange or in the
over-the-counter market and that price or other quotations would be reported by
such exchange or through the Nasdaq National Market or other sources. The extent
of the public market and the availability of such quotations would depend,
however, upon such factors as the number of stockholders and/or the aggregate
market value of the stock remaining at such time, the interest in maintaining a
market in the Arguss common stock on the part of securities firms, the possible
termination of registration under the Exchange Act as described below, and other
factors. We cannot predict whether the reduction in the number of Arguss shares
that might otherwise trade publicly would have an adverse or beneficial effect
on the market price for, or marketability of, the Arguss common stock.
43
Dycom intends to cause the delisting of Arguss common stock from the New
York Stock Exchange following consummation of the offer and the merger.
Arguss has advised us that, as of February 11, 2002, there were 14,544,944
Arguss shares outstanding, held by approximately 107 holders of record.
Status as "Margin Securities." The Arguss shares are presently "margin
securities" under the regulations of the Federal Reserve System, which, among
other things, allows brokers to extend credit on the collateral of Arguss
shares. Depending on the factors similar to those described above with respect
to listing and market quotations, following consummation of the offer, the
Arguss shares may no longer constitute "margin securities" for the purposes of
the Federal Reserve Board's margin regulations, in which event the Arguss shares
would be ineligible as collateral for margin loans made by brokers.
Going Private Transactions. The SEC has adopted Rule 13e-3 under the
Exchange Act which is applicable to certain "going private" transactions and
which may under certain circumstances apply to the merger or another business
combination following the purchase of Arguss shares pursuant to the offer, in
which we seek to acquire the remaining Arguss shares not held by us. We believe
that Rule 13e-3 will not apply to the merger. Rule 13e-3 would require, among
other things, that certain financial information concerning Arguss and certain
information relating to the fairness of the proposed transaction and the
consideration offered to minority shareholders in such transaction be filed with
the SEC and disclosed to shareholders prior to consummation of the merger or
other business combination.
Registration Under the Exchange Act. Arguss shares are currently
registered under the Exchange Act. Arguss can terminate that registration upon
application to the SEC if the outstanding shares are not listed on a national
securities exchange and if there are fewer than 300 holders of record of Arguss
shares. Termination of registration of the Arguss shares under the Exchange Act
would reduce the information that Arguss must furnish to its stockholders and to
the SEC and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement in connection with stockholder meetings pursuant to
Section 14(a), and the related requirement of furnishing an annual report to
stockholders, no longer applicable with respect to all Arguss shares. In
addition, if Arguss shares are no longer registered under the Exchange Act, the
requirements of Rule 13e-3 under the Exchange Act with respect to
"going-private" transactions would no longer be applicable to Arguss.
Furthermore, the ability of "affiliates" of Arguss and persons holding
"restricted securities" of Arguss to dispose of such securities pursuant to Rule
144 under the Securities Act of 1933 may be impaired or eliminated. If
registration of the Arguss shares under the Exchange Act were terminated, they
would no longer be eligible for New York Stock Exchange listing or for continued
inclusion on the Federal Reserve Board's list of "margin securities."
OPINION OF FINANCIAL ADVISOR TO ARGUSS
Arguss engaged Allen & Company to act as its exclusive financial advisor in
connection with the offer and the merger. In connection with this engagement,
Arguss requested that Allen & Company evaluate the fairness, from a financial
point of view, to the holders of Arguss shares of the consideration to be
received in the offer and the merger. On January 4, 2002, at a meeting of the
Arguss board held to consider the offer and the merger, in accordance with the
Arguss board's instructions, Allen & Company rendered an oral opinion, which
opinion was confirmed by delivery to the Arguss board of a written opinion dated
January 7, 2002, to the effect that, as of that date and based on and subject to
the matters described in its opinion, the consideration to be received was fair,
from a financial point of view, to holders of Arguss shares. James W. Quinn, a
member of the Arguss board, is also a Vice President and Director of Allen &
Company.
The full text of Allen & Company's written opinion dated January 7, 2002,
which describes the assumptions made, matters considered and limitations on the
review undertaken, is attached to this prospectus as Annex C. Allen & Company's
opinion is addressed to the Arguss board and relates only to the fairness, from
a financial point of view, of the consideration to be received as provided for
in the offer and the merger. The opinion does not address any other aspect of
the offer or the merger or any related
44
transaction and does not constitute a recommendation to any holder of Arguss
shares as to whether such stockholder should exchange Arguss shares in the offer
or how such stockholder should vote or act with respect to any matters relating
to the offer or the merger. THE SUMMARY OF THE MATERIAL TERMS OF ALLEN &
COMPANY'S OPINION DESCRIBED BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF THE OPINION. YOU ARE ENCOURAGED TO READ THE OPINION, WHICH IS
ATTACHED TO THIS PROSPECTUS AS ANNEX C, CAREFULLY IN ITS ENTIRETY. In arriving
at its opinion, Allen & Company:
- reviewed and analyzed a draft of the merger agreement and drafts of the
agreements ancillary thereto;
- reviewed and analyzed historical publicly available business information
and financial results of Arguss and Dycom, including SEC filings of each
of Arguss and Dycom;
- reviewed and analyzed non-public historical operating and financial
information of Arguss and Dycom provided by the managements of Arguss and
Dycom;
- reviewed and analyzed information regarding the past and current
operations and financial conditions and the business prospects of Arguss
and Dycom (such information regarding the business prospects of Dycom did
not include non-public forward-looking financial information);
- held discussions with senior executives of Arguss and Dycom relating to
strategic, financial and operational benefits anticipated from the
merger;
- reviewed and analyzed historical market prices and trading volumes for
the Arguss shares and the Dycom shares;
- reviewed and analyzed projections as to the future operating and
financial performance of Arguss as provided by the management of Arguss;
- reviewed and analyzed financial and operating data for selected publicly
traded companies Allen & Company deemed comparable to Arguss and Dycom;
- reviewed and analyzed publicly available financial information relating
to selected comparable merger and acquisition transactions;
- reviewed and analyzed publicly available transaction information for
selected comparable exchange offers and tender offers;
- reviewed and analyzed research reports relating to each of Arguss and
Dycom and companies that Allen & Company deemed comparable to Arguss and
Dycom;
- performed discounted cash flow analyses of Arguss, Dycom and a combined
entity consisting of Arguss and Dycom;
- reviewed and analyzed certain other information concerning the
infrastructure services industry and the telecommunications industry;
- considered possible strategic alternatives for Arguss; and
- performed such other analyses and reviewed such other information as
Allen & Company deemed appropriate, including trends prevailing in
relevant industries and financial markets.
In rendering its opinion, Allen & Company relied upon and assumed, without
independent verification or investigation, the accuracy and completeness of all
of the financial and other information that Arguss, Dycom and their respective
employees, representatives and affiliates provided to, or discussed with, Allen
& Company. With respect to the financial projections provided to it, Allen &
Company assumed, at the direction of the management of Arguss, without
independent verification or investigation, that the forecasts were reasonably
prepared in good faith reflecting the best currently available estimates and
judgments of Arguss as to the future operating and financial performance of
Arguss. Allen & Company assumed, with Arguss' consent, that the offer and the
merger would be treated as an integrated transaction and as a tax-free
reorganization for federal income tax purposes. Allen & Company also assumed,
with
45
Arguss' consent, that the offer and the merger would be consummated in all
material respects in accordance with their terms, without waiver, modification
or amendment of any material term, condition or agreement and that, in the
course of obtaining the necessary regulatory or third party consents and
approvals for the offer and the merger, no limitations, restrictions or
conditions would be imposed that would have a material adverse effect on Arguss,
Dycom or the contemplated benefits of the offer and the merger. Allen & Company
relied, at the direction of the senior management of Arguss and Dycom, without
independent verification or investigation, upon the assessments of the
management of Dycom as to the anticipated financial and operational benefits of
the offer and the merger and the risks associated therewith.
Allen & Company did not (i) make or obtain any independent evaluations or
appraisals of the assets or liabilities, contingent or otherwise, of Arguss or
Dycom, (ii) perform due diligence on Arguss' or Dycom's physical properties and
facilities, sales, marketing or service organizations, or (iii) express any
opinion as to the underlying valuation, future performance or long-term
viability of Arguss or Dycom, the price at which Arguss shares would trade after
announcement or upon consummation of the Offer or the Merger, or the price at
which Dycom shares would trade at any time in the future. Allen & Company
expressed no view as to, and Allen & Company's opinion does not address, the
underlying business decision of Arguss to effect the offer or the merger, and
the opinion does not constitute a recommendation of the offer and the merger
over any alternative business strategy that may be available to Arguss. Allen &
Company's opinion was necessarily based on the information available to Allen &
Company and general economic, financial and stock market conditions and
circumstances as they existed and could be evaluated by Allen & Company as of
the date of its opinion. Although subsequent developments may affect its
opinion, Allen & Company does not have any obligation to update, revise or
reaffirm its opinion. Arguss imposed no other instructions or limitations on
Allen & Company with respect to the investigations made or the procedures
followed by Allen & Company in rendering its opinion.
This summary is not a complete description of Allen & Company's opinion to
the Arguss board or the financial analyses performed and factors considered by
Allen & Company in connection with its opinion. The preparation of a fairness
opinion is a complex analytical process involving various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore, a
fairness opinion is not readily susceptible to summary description. Allen &
Company believes that its analyses and this summary must be considered as a
whole and that selecting portions of its analyses and factors or focusing on
information presented in tabular format, without considering all analyses and
factors or the narrative description of the analyses, could create a misleading
or incomplete view of the processes underlying Allen & Company's analyses and
opinion.
In performing its analyses, Allen & Company considered industry
performance, general business, economic, market and financial conditions and
other matters existing as of the date of its opinion, many of which are beyond
the control of Arguss and Dycom. No company or business used in the analyses as
a comparison is identical to Arguss or Dycom, and an evaluation of the results
of those analyses is not entirely mathematical. Rather, the analyses involve
complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the companies or business segments analyzed.
The estimates contained in Allen & Company's analysis and the ranges of
valuations resulting from any particular analysis are not necessarily indicative
of actual values or future results, which may be significantly more or less
favorable than those suggested by its analyses. In addition, analyses relating
to the value of businesses or securities do not necessarily purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, Allen & Company's analyses and estimates are
inherently subject to substantial uncertainty.
The type and amount of consideration payable in the offer and the merger
was determined through negotiation between Arguss and Dycom and the decision to
enter into the offer and the merger was solely that of the Arguss board. Allen &
Company's opinion and financial analyses were only one of many factors
46
considered by the Arguss board in its evaluation of the offer and the merger and
should not be viewed as determinative of the views of the Arguss board or
Arguss' management with respect to the offer and the merger or the consideration
to be received by the holders of Arguss shares as provided for in the offer and
the merger.
Each of the analyses conducted by Allen & Company was carried out to
provide a different perspective on the offer and the merger and to enhance the
total mix of information. Allen & Company did not form a conclusion as to
whether any individual analysis, considered in isolation, supported or failed to
support an opinion as to the fairness to holders of Arguss shares, from a
financial point of view, of the consideration to be received. Allen & Company
did not place any specific reliance or weight on any individual analysis, but
instead concluded that its analyses, taken as a whole, supported its
determination.
Selected Companies Analysis. Allen & Company reviewed and compared certain
financial, operating and stock market information related to Arguss with
publicly held companies in the telecommunications infrastructure services
industry (the "Comparable Companies"), including Dycom, International Fibercom,
Inc., Mastec, Inc., Quanta Services, Inc. and Lexent, Inc.
Allen & Company analyzed enterprise values, calculated as equity value,
plus debt, less cash, as a multiple of latest 12 months, or LTM, and of
estimated calendar year 2002 sales and earnings before interest, taxes,
depreciation and amortization or EBITDA. All multiples were based on closing
stock prices on January 4, 2002. Estimated financial data for the Comparable
Companies was based on publicly available research analysts' estimates.
Estimated financial data for Arguss were based on (i) information received from
the senior management of Arguss ("Case A"), and (ii) publicly available research
analysts' estimates ("Case B"). This analysis indicated the following multiples:
MULTIPLES MULTIPLES
LOW HIGH MEDIAN OF OFFER* OF OFFER**
---- ---- ------ ----------- ------------
Enterprise Value as a Multiple of:
LTM Revenues............................... 0.36 0.79 0.60 0.71 0.71
Projected 2002 Revenues.................... 0.36 1.30 0.66 0.82 0.83
LTM EBITDA................................. 4.4 12.7 5.2 7.0 7.0
Projected 2002 EBITDA...................... 5.0 9.7 7.2 5.1 7.4
---------------
* Case A
** Case B
Based on the median multiples for the above ratios in Case A, this analysis
indicated an equity value range for Arguss shares between $3.01 and $10.11 per
share. Based on the median multiples for the above ratios in Case B, this
analysis indicated an equity value range for Arguss shares between $3.01 and
$5.48 per share. The equity value of Arguss shares at the agreed upon exchange
ratio of 0.3333 Dycom shares for each Arguss share (based on the Dycom share
price of $17.30 per share on January 4, 2002) is $5.77 per share, which is above
the equity value range according to the Comparable Companies in Case B and
within the equity value range according to the Comparable Companies in Case A.
Mergers and Acquisitions by Comparable Companies Analysis. Using publicly
available information, Allen & Company reviewed and compared the purchase prices
(including net debt) and implied transaction value multiples paid in the
following ten selected transactions in the telecommunications
47
infrastructure industry, as well as other engineering service and infrastructure
transactions deemed appropriate by Allen & Company. The transactions were:
TARGET ACQUIROR
------ --------
Northern Line Layers............................. Quanta Services, Inc.
The Ryan Company................................. Quanta Services, Inc.
Ervin Cable Construction......................... Dycom Industries, Inc.
AmeriLink Corporation............................ Tandy Corporation
Dames & Moore Group.............................. URS Corporation
MYR Group, Inc................................... GPU Inc.
Niels Fugal Sons Company......................... Dycom Industries, Inc.
U.S. Communications.............................. Arguss Communications, Inc.
UTILX Corporation................................ Infrastrux Group, Inc.
Able Telecom Holding............................. Bracknell Corporation
Allen & Company compared the transaction values implied by the purchase
prices in these selected transactions as multiples of LTM sales and EBITDA, and
operating earnings before interest and taxes or EBIT, as well as the equity
value of the purchase price (excluding net debt) multiple of net income. All
multiples were based on financial information available at the closing date of
the relevant transaction. The analysis indicated the following multiples:
LOW HIGH MEDIAN MULTIPLES OF OFFER
---- ---- ------ ------------------
Transaction Value as a Multiple of:
LTM Revenues..................................... 0.44 1.92 0.78 0.70
LTM EBITDA....................................... 4.6 11.1 8.2 6.8
LTM EBIT......................................... 5.1 21.9 10.8 NM
Equity Value as a Multiple of:
LTM Net Income................................... 6.8 28.5 15.2 NM
Based on the range of multiples for LTM revenues and LTM EBITDA, this
analysis indicated an equity value range for Arguss shares between $1.76 and
$23.82 per share, with a median range for Arguss shares between $6.81 and $7.56
per share. The equity value of Arguss shares at the agreed upon exchange ratio
(based on the Dycom share price of $17.30 per share on January 4, 2002) is $5.77
per share, which is within the equity value range and below the medians
according to comparable mergers and acquisition transactions.
Since LTM EBIT was only marginally positive and LTM Net Income was negative
for Arguss, a comparison based on these multiples was not meaningful.
Transaction Premiums Analysis. Allen & Company analyzed over 100 tender
offers and exchange offers involving target companies in industry sectors
including construction firms, electric, gas and water distribution firms, and
telecommunication service firms, from January 1999 to date. Allen & Company did
this analysis to determine premiums paid in these transactions over the
applicable stock price of the target company one day, one week and four weeks
prior to announcement of the acquisition offer. The premiums one day prior to
announcement averaged 25.5%; the premiums one week prior to announcement
averaged 30.2%; and the premiums four weeks prior to announcement averaged
38.3%. Based on closing stock prices on January 4, 2002, the premium one day
before the announcement of the offer and merger was 30.5%; the premium one week
before announcement was 47.7%; and the premium four weeks prior to announcement
was 64.8%.
Based on the range of premiums, this analysis produced equity values of
Arguss shares ranging from $4.84 to $5.55 per share. The equity value of Arguss
shares at the agreed upon exchange ratio (based on the Dycom share price of
$17.30 per share on January 4, 2002) is $5.77 per share, which is above the
range of values according to the transaction premiums analysis.
48
Historical Stock Price and Exchange Ratios. Allen & Company compared the
ratio of the Arguss shares closing prices to the Dycom shares closing prices,
and the exchange ratio of 3:1 for the offer and the merger, for time periods
ranging from January 4, 2002, to two years prior to that date. The following
table summarizes the results of this analysis:
AVERAGE MARKET MERGER EXCHANGE
EXCHANGE RATIO RATIO PREMIUM
-------------- ---------------
As of January 4, 2002.................................. 3.91 30.3%
One Week Ended January 4, 2002......................... 4.17 39.0%
One Month Ended January 4, 2002........................ 4.57 52.3%
Three Months Ended January 4, 2002..................... 5.07 69.0%
Six Months Ended January 4, 2002....................... 4.87 62.3%
One Year Ended January 4, 2002......................... 3.82 27.3%
Two Years Ended January 4, 2002........................ 3.27 9.0%
---- ----
Averages: 4.24 41.3%
Based on the range of market exchange ratios, this analysis produced values
of Arguss shares ranging from $3.50 to $5.43 per share. The equity value of
Arguss shares at the agreed upon exchange ratio of 0.3333 Dycom shares for each
Arguss share (based on the Dycom share price of $17.30 per share on January 4,
2002) is $5.77 per share, which is above the range of values according to the
historical stock price and exchange ratios analysis.
Discounted Cash Flow Analysis. Allen & Company performed a discounted cash
flow analysis on the projected financial information of Arguss and a combined
entity consisting of Arguss and Dycom on a pro forma basis (the "Combined
Entity") for the calendar years 2002 through 2006. This analysis was based upon
(i) operating and financial assumptions that were determined to be reasonable by
the managements of Arguss and Dycom, (ii) other information, including potential
synergies and financial benefits of the merger, provided to Allen & Company by
the managements of Dycom and Arguss, and (iii) research analyst estimates for
future financial performance of Dycom, as well as two cases for Arguss: (a)
using Arguss management's projections through 2003 in conjunction with research
analysts' projections for future periods ("Case A"); and (b) using research
analysts' projections ("Case B"). Using this information, Allen & Company
discounted to present value the projected stream of after-tax free cash flows
(net income plus depreciation and amortization less capital expenditures and
working capital changes). To estimate the residual value of Arguss and the
Combined Entity at the end of the forecast period (the "Terminal Value"), Allen
& Company applied a multiple of 5.2x to projected fiscal 2006 EBITDA. Allen &
Company used discount rates ranging from 15% to 25% for Arguss and 10% to 20%
for the Combined Entity. As discount rates are intended as a measure of an
entity's expected cost of capital, the lower discount rates utilized for the
Combined Entity as compared to Arguss on a stand-alone basis reflect Allen &
Company's expectation that the Combined Entity would have a lower cost of
capital as a result of the Combined Entity being larger, better capitalized and
less leveraged than Arguss on a stand-alone basis. In addition, Allen & Company
utilized a range of discount rates in part to consider a broad range of
possibilities and to reflect the reasonable expectation that access to capital
may fluctuate over time as a result of the volatility of market conditions in
the future.
Based on these discount rates, Allen & Company calculated that the implied
equity value per share of Arguss shares ranges from $4.31 to $8.08 per share in
Case A and from $3.18 to $6.34 per share in Case B. Based on the agreed upon
exchange ratio and Case A, Allen & Company calculated that the implied equity
value per share of Arguss shares in the Combined Entity ranges from $6.05 per
share to $8.58 per share, resulting in a range of premiums above Arguss
stand-alone from 6.3% to 40.3%. Based on the agreed upon exchange ratio and Case
B, Allen & Company calculated that the implied equity value per share of Arguss
shares in the Combined Entity ranges from $5.91 per share to $8.35 per share,
resulting in a range of premiums above Arguss stand-alone from 31.8% to 85.5%.
49
Pro Forma Accretion/(Dilution) Analysis. Allen & Company reviewed and
analyzed the potential pro forma effect of the merger on the future earnings per
share, or EPS, of Dycom. For purposes of this analysis, Allen & Company analyzed
information from 2002 through 2006 based upon research analyst estimates for
future financial performance of Dycom, as well as two cases for Arguss: (a)
using Arguss management's projections through 2003 in conjunction with research
analysts' projections for later periods ("Case A"); and (b) using research
analysts' projections ("Case B"). Further, based on information received from
the senior management of Arguss and Dycom, Allen & Company assumed certain
synergies, including cost savings and additional revenue growth potential from
the Combined Entity ranging from 0% to 2% in 2002 and 2% to 4% from 2003 to
2006. The transaction was assumed to have closed on December 31, 2001 and the
pro forma analysis excluded any one-time charges relating to transaction
expenses incurred as a result of the consummation of the merger as well as any
potential expenses associated with a revaluation of amortization amounts
unrelated to the merger. Allen & Company's analysis of the pro forma results of
the combination of Arguss and Dycom would, in considering operating cash flow
and operating earnings, have been unaffected by such charges. This analysis
resulted in the following impact on the future EPS of Dycom:
PRO FORMA EPS ACCRETION/(DILUTION)
FOR DYCOM
-----------------------------------
YEAR CASE A CASE B
---- -------------- ---------------
2002................................................... 18% to 45% (9%) to 31%
2003................................................... 41% to 63% 20% to 53%
2004................................................... 38% to 57% 20% to 49%
2005................................................... 35% to 53% 20% to 47%
2006................................................... 34% to 50% 20% to 45%
The financial forecasts that underlie this analysis are subject to
substantial uncertainty, and accordingly, actual results may be substantially
different.
Miscellaneous. Arguss selected Allen & Company as its exclusive financial
advisor in connection with the offer and the merger based on Allen & Company's
reputation, expertise and familiarity with Arguss and its business. Allen &
Company is an internationally recognized investment banking firm and, as part of
its investment banking business, is regularly engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
private placements and related financings, bankruptcy reorganizations and
similar recapitalizations, negotiated underwritings, secondary distributions of
listed and unlisted securities, and valuations for corporate and other purposes.
Pursuant to an engagement letter dated December 3, 2001, as supplemented
and amended on January 3, 2002, Allen & Company provided financial advisory
services and an opinion as to the fairness of the consideration to be received
by the stockholders of Arguss in connection with the offer and the merger. The
terms of this engagement include payment to Allen & Company of (i) a retainer
fee of $100,000, (ii) a fee upon successful completion of a transaction equal to
1% of the aggregate transaction value of the offer and the merger up to $100
million and 1.5% of any excess over $100 million of the aggregate transaction
value of the offer and the merger, and (iii) a fee for the fairness opinion of
$250,000. The retainer fee and $150,000 of the opinion fee are creditable
against the success fee. Arguss has also agreed to reimburse Allen & Company for
its expenses incurred in performing its services. In addition, Arguss has agreed
to indemnify Allen & Company and its affiliates, controlling persons, officers,
agents and employees against certain liabilities and expenses, related to or
arising out of Allen & Company's engagements and any related transactions.
Except as disclosed above, Allen & Company and its affiliates have not received
any compensation from Arguss during the last two years.
CERTAIN INFORMATION PROVIDED TO DYCOM
Prior to entering into the merger agreement, Dycom conducted a due
diligence review of Arguss and was provided with certain forward-looking
information with respect to Arguss' future operating performance. Arguss does
not, in the ordinary course, publicly disclose such information and such
50
information was not prepared with a view toward public disclosure. Arguss has
advised Dycom and Purchaser that such information was prepared by Arguss'
management based on numerous assumptions including, among others, the sale of
Arguss' Conceptronic subsidiary and projections of revenues, operating income,
benefits and other expenses, depreciation and amortization and capital
expenditures. The forward-looking information provided by Arguss, which does not
give effect to the offer or the potential combined operations of Dycom and
Arguss or any alterations Dycom may make to Arguss' operations or strategy after
the consummation of the offer, indicated the following:
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2002 2003
------------ ------------
(IN MILLIONS, EXCEPT
PER SHARE DATA)
Total Revenues.............................................. $187.4 $ 217
Income Before Taxes......................................... $ 14.3 $19.3
Net Income.................................................. $ 8.8 $11.9
Earnings Per Share.......................................... $ 0.20 --
THE FOREGOING FORWARD-LOOKING INFORMATION WAS NOT PREPARED BY ARGUSS IN THE
ORDINARY COURSE AND IS BASED UPON A VARIETY OF ESTIMATES AND ASSUMPTIONS THAT
MAY NOT BE ACCURATE OR REALIZED AND THAT ARE SUBJECT TO SIGNIFICANT BUSINESS,
ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, EACH OF WHICH IS
DIFFICULT TO PREDICT, AND ARE, IN MOST INSTANCES, BEYOND THE CONTROL OF ARGUSS.
ACCORDINGLY, ACTUAL RESULTS FOR THE YEARS ENDING DECEMBER 31, 2002 AND 2003 MAY
VARY MATERIALLY FROM THOSE SET FORTH ABOVE.
The foregoing forward-looking information was prepared with a limited
degree of precision, and was not prepared in compliance with generally accepted
accounting principles or the guidelines published by the SEC or established by
the American Institute of Certified Public Accountants regarding projections,
which would require a more complete presentation of data than as shown above.
THE INCLUSION OF THE FOREGOING FORWARD-LOOKING INFORMATION HEREIN SHOULD
NOT BE REGARDED AS A REPRESENTATION BY EITHER DYCOM, ARGUSS OR PURCHASER OR ANY
OTHER PERSON THAT SUCH RESULTS WILL BE ACHIEVED. NONE OF DYCOM, ARGUSS,
PURCHASER OR ANY OTHER PERSON MAKES ANY REPRESENTATION WITH RESPECT TO THE
FOREGOING FORWARD-LOOKING INFORMATION.
ACCOUNTING TREATMENT OF THE MERGER
Dycom will account for the merger as a "purchase," as this term is used
under generally accepted accounting principles, commonly referred to as GAAP,
for accounting and financial reporting purposes. Therefore, the total merger
consideration paid by Dycom in connection with the merger, together with the
direct costs of the merger, will be allocated to Arguss' assets and liabilities
based on their fair market values, with any excess being treated as goodwill, or
an intangible asset. During the first quarter of fiscal 2002, Dycom adopted
Statement of Financial Accounting Standards No. 142, which eliminates
amortization of goodwill and instead sets forth methods to periodically evaluate
goodwill for impairment.
Dycom has prepared the unaudited pro forma financial information contained
in this prospectus using the purchase accounting method to account for the offer
and the merger. See "Unaudited Pro Forma Condensed Combined Financial
Statements" beginning on page 69.
FEES AND EXPENSES
Dycom has retained Merrill Lynch to act as dealer manager in connection
with the offer and to provide financial advisory services to Dycom in connection
with the offer and the merger. Merrill Lynch
51
will receive customary compensation for these services, a significant portion of
which is contingent upon the consummation of the offer and the merger, and will
be reimbursed for out-of-pocket expenses, including reasonable expenses of
counsel and other advisors. We have agreed to indemnify Merrill Lynch and
related persons against certain liabilities and expenses in connection with
their services, including certain liabilities and expenses under the federal
securities laws. Merrill Lynch is currently engaged by Dycom and has in the past
provided, and may in the future provide, financial advisory or financing
services to Dycom and has received, and may receive, fees for rendering these
services. In the ordinary course of Merrill Lynch's business, Merrill Lynch and
its affiliates may actively trade securities of Dycom and Arguss for their own
account and for the accounts of their customers and, accordingly, may at any
time hold a long or short position in these securities.
We have retained Georgeson Shareholder Communications Inc. as information
agent in connection with the offer. The information agent may contact holders of
Arguss shares by mail, telephone, telex, telegraph and personal interview and
may request brokers, dealers and other nominee stockholders to forward material
relating to the offer to beneficial owners of Arguss shares. We will pay the
information agent reasonable and customary compensation for these services in
addition to reimbursing the information agent for its reasonable out-of-pocket
expenses. We have agreed to indemnify the information agent against certain
liabilities and expenses in connection with the offer, including certain
liabilities under the U.S. federal securities laws.
In addition, we have retained First Union National Bank as the exchange
agent. We will pay the exchange agent reasonable and customary compensation for
its services in connection with the offer, will reimburse the exchange agent for
its reasonable out-of-pocket expenses and will indemnify the exchange agent
against certain liabilities and expenses, including certain liabilities under
the U.S. federal securities laws.
Except as set forth above, we will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of Arguss shares pursuant
to the offer. We will reimburse brokers, dealers, commercial banks and trust
companies and other nominees, upon request, for customary clerical and mailing
expenses incurred by them in forwarding offering materials to their customers.
STOCK EXCHANGE LISTING
Our common stock is listed on the New York Stock Exchange under the symbol
"DY." We will make an application to list on the New York Stock Exchange the
Dycom shares that we will issue pursuant to the offer and the merger.
52
THE MERGER AGREEMENT
The following is a summary description of the material provisions of the
merger agreement. This summary is qualified in its entirety by reference to the
complete text of the merger agreement, which is attached as Annex A to this
prospectus and incorporated herein by reference. All Arguss stockholders are
urged to read the merger agreement in its entirety because it is the legal
document that governs the offer and the merger.
THE OFFER
Terms of the Offer. The merger agreement provides for the commencement by
Purchaser of this offer as soon as practicable after the initial public
announcement of the execution of the merger agreement. The obligation of
Purchaser and Dycom to exchange 0.3333 Dycom shares, subject to the limitations
described below, for each outstanding share of Arguss common stock that is
validly tendered and not properly withdrawn is subject to the satisfaction of
the minimum tender condition and certain other conditions that are described in
"The Offer -- Conditions to the Offer" beginning on page 39. The merger
agreement prohibits Purchaser from amending the offer to change the form of
consideration to be paid, decreasing the consideration payable per Arguss share
or the number of Arguss shares sought in the offer, imposing additional
conditions to the offer or making any other change which is adverse to the
holders of the Arguss shares.
Mandatory Extensions to the Offer. If a majority of the outstanding Arguss
shares on a fully diluted basis has not been tendered by the initial expiration
date, Purchaser must extend the offer on one or more occasions until a majority
of the Arguss shares has been tendered, except that Purchaser will not be
required to extend the offer for more than 15 business days after the initial
expiration date.
Optional Extensions to the Offer. Purchaser will have the right to extend
the offer (a) beyond the initial scheduled expiration date or any extension of
the expiration date if, at the scheduled or extended expiration date of the
offer, any of the conditions to the offer have not been satisfied or waived,
until the conditions to the offer are satisfied or waived, (b) for any period
required by any rule, regulation, interpretation or position of the SEC or its
staff applicable to the offer or any period required by applicable law or (c)
for an aggregate period of not more than ten business days beyond the latest
applicable date that would otherwise be permitted under clause (a) or (b) above,
if, as of the expiration date, all of the conditions to the offer have been
satisfied or waived but the number of Arguss shares validly tendered and not
withdrawn equals more than 50%, but less than 90%, of the outstanding Arguss
shares on a fully diluted basis.
Prompt Exchange of Arguss Shares After the Closing of the Offer. Subject
to the conditions of the offer, Purchaser will accept for exchange and exchange,
as promptly as practicable after the expiration of the offer, all Arguss shares
validly tendered and not properly withdrawn pursuant to the offer.
THE MERGER
Terms of the Merger. The merger agreement provides that Purchaser will be
merged with and into Arguss as soon as practicable following the satisfaction or
waiver of the conditions to the merger set forth in the merger agreement. Under
the terms of the merger agreement, at the effective time of the merger, each
Arguss share not tendered in the offer will be canceled and converted into the
right to receive from Purchaser the same per share consideration received by
holders of Arguss shares who exchanged their Arguss shares in the offer and each
share of Purchaser common stock will be converted into and exchanged for one
share of common stock of the surviving corporation. Notwithstanding the
foregoing, the merger consideration will not be payable in respect of Arguss
shares held by Arguss as treasury shares or by Dycom, Purchaser or any of
Dycom's or Purchaser's subsidiaries or by stockholders of Arguss who perfect
their appraisal rights, if any.
Effective Time of the Merger. The merger will become effective upon the
filing of a certificate of merger or certificate of ownership and merger with
the Secretary of State of the State of Delaware or such
53
later time as is agreed by Arguss and Dycom and specified in the certificate of
merger or certificate of ownership and merger. The filing of the certificate of
merger or certificate of ownership and merger will take place as soon as
practicable after satisfaction or waiver of the conditions described below under
"-- Conditions to the Merger."
Certificate of Incorporation; By-Laws; Directors and Officers. The
certificate of incorporation of Purchaser in effect at the effective time will
be the certificate of incorporation of the surviving corporation until
thereafter amended in accordance with the provisions of the certificate of
incorporation and as provided under Delaware law, except that the certificate of
incorporation will be amended to provide that the name of the surviving
corporation will be the name of Arguss. The by-laws of Purchaser in effect at
the effective time will be the by-laws of the surviving corporation until
thereafter amended in accordance with the provisions of the by-laws, the
certificate of incorporation of the surviving corporation and applicable
Delaware law.
From and after the effective time and until their respective successors are
duly elected or appointed and qualified, or until their earlier death,
resignation or removal in accordance with the surviving corporation's
certificate of incorporation and by-laws, the directors of Purchaser at the
effective time will be the directors of the surviving corporation and the
officers of Arguss at the effective time will be the officers of the surviving
corporation.
ARGUSS BOARD OF DIRECTORS
Upon the acceptance for exchange of Arguss shares pursuant to the offer,
Dycom will be entitled to designate a number of directors (rounded up to the
next whole number) on Arguss' board of directors that equals the product of (a)
the total number of directors on Arguss' board of directors (giving effect to
the election of any additional directors pursuant to this provision) and (b) the
percentage that the number of shares beneficially owned by Dycom and Purchaser
(including Arguss shares accepted for exchange) bears to the total number of
outstanding Arguss shares. Arguss will take all action necessary to cause
Dycom's designees to be elected or appointed to the Arguss board of directors,
including increasing the number of directors and seeking and accepting
resignations of incumbent directors. At the same time, Arguss will use its best
efforts to cause individuals designated by Dycom to constitute the number of
members (rounded up to the next whole number) on each committee of Arguss' board
of directors as well as on each board of directors (and each committee thereof)
of each subsidiary of Arguss identified by Dycom that represents the same
percentage as such individuals represent on the Arguss board, in each case, only
to the extent permitted by applicable law. Until the merger has become
effective, Arguss and Dycom will use their best efforts to cause Arguss' board
of directors to consist of at least two members who were directors of Arguss on
January 7, 2002. The merger agreement provides that, prior to the effective time
of the merger, the affirmative vote of a majority of those directors not
designated by Dycom will be required to:
- terminate the merger agreement on behalf of Arguss,
- amend the merger agreement when the amendment requires approval of
Arguss' board of directors,
- extend the time for performance of Dycom's or Purchaser's obligations
under the merger agreement,
- waive compliance with any agreement or condition contained in the merger
agreement for the benefit of Arguss, or
- approve any other action of Arguss which adversely affects the holders
(other than Dycom or Purchaser) of Arguss shares.
TREATMENT OF ARGUSS STOCK OPTIONS
The merger agreement provides that each outstanding option to purchase
Arguss shares, whether or not vested or exercisable, that is not exercised prior
to the effective time of the merger, will be converted into an option to
purchase that whole number of Dycom shares (rounded to the nearest whole share)
54
equal to the number of shares subject to the Arguss stock option immediately
prior to the effective time multiplied by 0.3333, the exchange ratio in the
offer, at a price per Dycom share (rounded down to the nearest whole cent) equal
to the option price per share subject to such Arguss stock option in effect
immediately prior to the effective time divided by the exchange ratio. Each
Arguss stock option converted into a Dycom stock option will be exercisable upon
the same terms and conditions as those under the applicable Arguss stock option
plan.
Dycom will, at or prior to the effective time, reserve for issuance a
sufficient number of Dycom shares for delivery upon exercise of the options to
purchase Dycom shares and agrees to file a registration statement on Form S-8
relating to such options and shares with the SEC.
COVENANTS AND REPRESENTATIONS AND WARRANTIES
Access to Information. Until the effective time of the merger, each of
Arguss and Dycom and each of their respective subsidiaries will, upon prior
notice, afford the other and its representatives access at reasonable times to
its and its subsidiaries' employees, properties, books and records in order that
Arguss or Dycom may have an opportunity to make reasonable investigations.
Conduct of Business of Arguss Pending Merger. The merger agreement
obligates Arguss and its subsidiaries, among other things, until the effective
time of the merger, unless Dycom otherwise consents, to conduct their business
in the ordinary course of business and in a manner consistent with past
practice. The merger agreement also expressly restricts the ability of Arguss to
engage in certain material transactions, such as certain purchases and sales of
assets or the sale or redemption of outstanding securities of Arguss, without
the prior written consent of Dycom.
Conduct of Business of Dycom Pending Merger. The merger agreement
obligates Dycom, until the effective time of the merger, not to take any action,
without the consent of Arguss, which would cause its representations and
warranties to be untrue in any material respect. The merger agreement also
expressly restricts the ability of Dycom to take any action that would
reasonably be likely to materially delay the consummation of the offer or the
merger.
No Solicitation of Alternative Transactions. The merger agreement provides
that, except in the circumstances described below, Arguss will not and will
instruct its representatives not to directly or indirectly solicit, initiate or
encourage, or take any other action to facilitate, any inquiries or the making
of any proposal or offer that constitutes, or may reasonably be expected to lead
to, any competing transaction (as defined below), or enter into or maintain or
continue discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain a competing transaction, or agree to or endorse any
competing transaction, or authorize or permit any of its representatives to take
such action.
However, the merger agreement provides that the Arguss board of directors
may furnish information to, enter into discussion or negotiations with, and
maintain or continue such discussions or negotiations with, a person who has
made an unsolicited, written, bona fide proposal or offer regarding a competing
transaction if the Arguss board has (a) determined, in its good faith judgment
(after advice from its financial advisor), that such proposal or offer is
reasonably likely to constitute a superior proposal (as defined below), (b)
determined, in its good faith judgment after consultation with independent legal
counsel, that it is necessary to take such actions in order to comply with its
fiduciary duties under applicable law and (c) provided written notice to Dycom
of its intent to furnish information or to hold discussions or negotiations with
such person at least two business days prior to taking any such action.
Obligation to Recommend the Offer and the Merger. The merger agreement
provides that, unless the Arguss board of directors otherwise determines (based
upon a majority vote thereof in its good faith judgment) that such other action
is necessary to comply with its fiduciary duty to stockholders under applicable
law after receiving advice from outside legal counsel, prior to approval by the
stockholders of Arguss, (a) the Arguss board of directors will recommend
approval of the merger agreement by Arguss' stockholders, (b) neither the Arguss
board of directors nor any of its committees will amend, modify or withdraw such
recommendation in a manner adverse to Dycom or take any action or make any
statement
55
inconsistent with such recommendation and (c) Arguss will take all lawful action
reasonably necessary to secure any required Arguss stockholder approval of the
merger agreement. In the event that the Arguss board has recommended that Arguss
stockholders approve the merger agreement but, before approval by the Arguss
stockholders, subsequently determines (based on a majority vote of the Arguss
board) in good faith that some other action is necessary to comply with its
fiduciary duties to its stockholders under applicable law after receiving advice
from outside counsel, Dycom and Purchaser will cooperate with Arguss in making
modifications to the disclosure regarding the Arguss board's recommendation in
the proxy statement/prospectus relating to the stockholder vote to accurately
reflect that determination. The merger agreement also provides that prior to the
closing of the offer Arguss may take any of such actions in connection with the
termination of the merger agreement as described below under "-- Termination of
the Merger Agreement -- Termination by Arguss" if a third party makes a superior
proposal.
"Competing transaction" means any of the following transactions (except to
the extent the transaction involves Conceptronic, Arguss' wholly owned
subsidiary): (a) any merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or other similar
transaction involving Arguss or any material subsidiaries, (b) any sale, lease,
exchange, transfer or other disposition of all or substantially all of the
assets of Arguss or any material subsidiaries, (c) any sale, exchange, transfer
or other disposition of 20% or more of any class of equity securities of Arguss
or any material subsidiaries, (d) any tender offer or exchange offer that, if
consummated, would result in any person beneficially owning 20% or more of any
class of equity securities of Arguss or any material subsidiaries, (e) any
solicitation in opposition to approval and adoption of the merger agreement by
the Arguss stockholders, or (f) any other transaction the consummation of which
would reasonably be expected to impede, interfere with, prevent or materially
delay any of the transactions contemplated by the merger agreement or the
stockholders' agreement.
"Superior proposal" means an unsolicited written bona fide offer made by a
third party to consummate any of the following transactions: (a) a merger,
consolidation, share exchange, business combination or other similar transaction
involving Arguss pursuant to which the stockholders of Arguss immediately
preceding such transaction would hold less than 50% of the equity interest in
the surviving or resulting entity of such transaction, (b) any sale, lease,
exchange, transfer or other disposition of all or a substantial part of the
assets of Arguss, (c) the acquisition by any person or group, directly or
indirectly, of ownership of 100% of the then outstanding shares of stock of
Arguss or (d) any substantially equivalent transaction, on terms that the Arguss
board determines, in its good faith judgment (after having received the advice
of a financial advisor of internationally recognized reputation), to be more
favorable to Arguss stockholders than the merger, is reasonably capable of being
consummated and for which financing, to the extent required, is likely to be
obtained on a timely basis.
Further Action; Reasonable Best Efforts. Dycom and Arguss will promptly
after the execution of the merger agreement (a) make their respective filings,
and thereafter make any other required submissions, under the HSR Act with
respect to the transactions and (b) use their reasonable best efforts to take,
or cause to be taken, all appropriate action, and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws or otherwise to
consummate and make effective the transactions, including, without limitation,
using their reasonable best efforts to obtain all permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts with Arguss and its subsidiaries as are necessary for the
consummation of the transactions and to fulfill the conditions to the merger.
However, neither Purchaser nor Dycom will be required to take any action,
including entering into any consent decree, hold separate orders or other
arrangements, that (1) requires the divestiture of any assets of any of
Purchaser, Dycom, Arguss or any of their respective subsidiaries or (2) limits
Dycom's freedom of action with respect to, or its ability to retain, Arguss and
its subsidiaries or any portion thereof or any of Dycom's or its affiliates'
other assets or businesses. In case, at any time after the effective time, any
further action is necessary or desirable to carry out the purposes of the merger
agreement, the proper officers and directors of each party to the merger
agreement will use their reasonable best efforts to take all such action.
56
Directors' and Officers' Indemnification and Insurance. See "Interests of
Certain Persons" beginning on page 64.
Employee Benefits. The merger agreement provides that, from and after the
effective time, Dycom will cause the surviving corporation and its subsidiaries
to honor, in accordance with their terms, all contracts, agreements,
arrangements, policies, plans and commitments as in effect immediately prior to
the effective time that are applicable to any current or former employees or
directors of Arguss or any of its subsidiaries. Employees of Arguss and its
subsidiaries will receive credit for purposes of eligibility to participate and
vesting (but not for benefit accruals) under any employee benefit plan, program
or arrangement established or maintained by the surviving corporation or any of
its subsidiaries for service accrued or deemed accrued prior to the effective
time with Arguss or its subsidiaries. However, the crediting of service may not
duplicate any benefit or the funding of any benefit. In addition, Dycom will
waive, or cause to be waived, any limitations on benefits relating to any
pre-existing conditions to the same extent such limitations are waived under any
comparable plan of Dycom or its subsidiaries and recognize, for purposes of
annual deductible and out-of-pocket limits under its medical and dental plans,
deductible and out-of-pocket expenses paid by employees of Arguss and its
subsidiaries in the calendar year in which the effective time occurs.
Representations and Warranties. The merger agreement contains a number of
customary representations and warranties relating to each of the parties and
their ability to consummate the offer and the merger. Among others, Arguss makes
representations and warranties to Dycom and Purchaser regarding:
- organization and qualification to do business;
- subsidiaries;
- capitalization;
- corporate authority to enter into the merger agreement and the
stockholders' agreement;
- SEC filings and financial statements;
- absence of certain changes or events;
- absence of litigation;
- employee benefit plans;
- labor and employment matters;
- intellectual property;
- taxes;
- environmental matters;
- material contracts;
- board approval and required vote;
- opinion of Arguss' financial advisor; and
- brokers.
Among others, Dycom and Purchaser make representations and warranties to
Arguss regarding:
- corporate organization;
- capitalization;
- corporate authority to enter into the merger agreement and the
stockholders' agreement;
- SEC filings and financial statements;
- absence of certain changes or events;
57
- absence of litigation;
- operations of Purchaser;
- taxes; and
- brokers.
All representations and warranties of each party expire at the effective
time of the merger.
CONDITIONS TO THE OFFER
See "The Offer -- Conditions to the Offer" beginning on page 39.
CONDITIONS TO THE MERGER
The obligations of Dycom, Purchaser and Arguss to consummate the merger are
subject to the satisfaction of the following conditions:
- the registration statement on Form S-4 relating to the merger will have
been declared effective by the SEC under the Securities Act of 1933 and
not be the subject of any stop order or proceedings seeking a stop order,
- to the extent required by the DGCL, the merger agreement will have been
approved and adopted by the Arguss stockholders,
- no provision of any applicable law or regulation and no order, judgment
or decree will prohibit the consummation of the merger,
- any waiting period (and any extension thereof) applicable to the
consummation of the merger under the HSR Act will have expired or been
terminated,
- Dycom shares to be issued in the merger will have been authorized for
listing on the New York Stock Exchange, subject to official notice of
issuance, and
- Purchaser will have accepted for exchange and exchanged all Arguss shares
tendered pursuant to the offer.
The obligations of Dycom and Purchaser to consummate the merger are subject
to the satisfaction or waiver (when permissible) of the following additional
conditions:
- the representations and warranties of Arguss set forth in the merger
agreement will be true and correct unless the failure of the
representations and warranties to be true and correct would not
reasonably be expected to result in a material adverse effect (as defined
in the merger agreement) on Arguss;
- Arguss will have performed or complied in all material respects with all
agreements and covenants that the merger agreement requires Arguss to
perform or comply with on or prior to the effective time of the merger;
- Arguss will have delivered to Dycom at the closing a certificate
certifying as to the satisfaction of the two preceding conditions;
- all consents and approvals required to consummate the merger will have
been obtained;
- there will not have been a material adverse effect on Arguss since the
date of the merger agreement; and
- Dycom will have received an opinion from its counsel to the effect that,
for United States federal income tax purposes, the merger will qualify as
a reorganization within the meaning of Section 368(a) of the Code and
that each of Dycom, Purchaser and Arguss will be a party to the
58
reorganization within the meaning of Section 368(b) of the Code, and the
opinion will not have been withdrawn or modified in any material respect.
The obligations of Arguss to consummate the merger are subject to the
satisfaction or waiver (when permissible) of the following additional
conditions:
- the representations and warranties of Dycom set forth in the merger
agreement will be true and correct unless the failure of the
representations and warranties to be true and correct would not
reasonably be expected to result in a material adverse effect (as defined
in the merger agreement) on Dycom;
- Dycom and Purchaser will have performed or complied in all material
respects with all agreements and covenants that the merger agreement
requires them to perform or comply with on or prior to the effective time
of the merger;
- Dycom will have delivered to Arguss at the closing a certificate
certifying as to the satisfaction of the two preceding conditions;
- there will not have been a material adverse effect on Dycom since the
date of the merger agreement; and
- Arguss will have received an opinion from its counsel to the effect that,
for United States federal income tax purposes, the merger will qualify as
a reorganization within the meaning of Section 368(a) of the Code and
that each of Arguss, Purchaser and Dycom will be a party to the
reorganization within the meaning of Section 368(b) of the Code, and the
opinion will not have been withdrawn or modified in any material respect.
TERMINATION OF THE MERGER AGREEMENT
Termination by Mutual Agreement. The merger agreement may be terminated at
any time prior to the effective time of the merger by the mutual written consent
of Dycom and Arguss.
Termination by Either Dycom or Arguss. The merger agreement may be
terminated at any time prior to the effective time of the merger by either Dycom
or Arguss if:
(1) the offer has not been consummated on or before July 31, 2002
unless the failure to consummate the offer is the result of a material
breach or failure to fulfill a material obligation of the merger agreement
by the party seeking termination, or
(2) if any court of competent jurisdiction or any governmental
authority has issued an order, judgment or decree or taken any other action
permanently restricting, enjoining, restraining or otherwise prohibiting
acceptance for payment of, and exchange of, Arguss shares pursuant to the
offer or consummation of the merger, and such order, judgment or decree or
other action has become final and nonappealable.
Termination by Dycom. The merger agreement may be terminated at any time
prior to the effective time of the merger by Dycom if:
(1) at any time prior to the date Purchaser accepts Arguss shares in
the offer, referred to as the acceptance date, Arguss breaches or fails to
perform in any material respect any of its obligations, covenants or
agreements or its representations and warranties are not true and correct
unless the failure of the representations and warranties to be true and
correct would not reasonably be expected to result in a material adverse
effect (as defined in the merger agreement) on Arguss which cannot be or
has not been cured prior to the earlier of 30 days following receipt by
Arguss of written notice from Dycom of such breach or misrepresentation and
July 31, 2002 and which has not been waived by Dycom pursuant to the
provisions of the merger agreement, or
(2) at any time prior to the acceptance date, (a) Arguss, or its board
of directors, as the case may be, has (i) entered into any agreement with
respect to any competing transaction other than the
59
offer or the merger and other than a confidentiality agreement, (ii) failed
to make, withdrawn or modified, in a manner adverse to Dycom or Purchaser,
its approval and recommendation of the offer, the merger and the merger
agreement, or (iii) approved or recommended any competing transaction other
than the offer or the merger, or (b) Arguss or Arguss' board of directors
or any of its committees has resolved to do any of the foregoing, or
(3) at any time prior to the acceptance date Arguss breaches in any
material respect any of its obligations under "-- Covenants and
Representations and Warranties -- No Solicitation of Alternative
Transactions" or under paragraph (2) of "-- Termination by Arguss", below,
or
(4) the offer has been extended on at least three occasions for an
aggregate period of at least 15 business days beyond the initial expiration
date, and on such extended date of expiration, the minimum tender condition
has not been satisfied.
Termination by Arguss. The merger agreement may be terminated at any time
prior to the effective time of the merger by Arguss if:
(1) at any time prior to the acceptance date, Dycom breaches or fails to
perform in any material respect any of its obligations, covenants or agreements
or its representations and warranties are not true and correct unless the
failure of the representations and warranties to be true and correct would not
reasonably be expected to result in a material adverse effect (as defined in the
merger agreement) on Dycom which cannot be or has not been cured prior to the
earlier of 30 days following receipt by Dycom of written notice from Arguss of
such breach or failure to perform and July 31, 2002, and which has not been
waived by Arguss pursuant to the provisions of the merger agreement, or
(2) at any time prior to the effective time Dycom has not acquired at least
a majority of the outstanding Arguss shares pursuant to the offer or otherwise,
a superior proposal is received by Arguss and the board of directors of Arguss
reasonably determines in good faith (after receiving the advice of outside legal
counsel) that it is necessary to terminate the merger agreement and enter into
an agreement to effect the superior proposal to comply with its fiduciary duties
under applicable law; provided that Arguss may not terminate the merger
agreement pursuant to the rights described in this paragraph unless and until
(a) two business days have elapsed following delivery to Dycom of a written
notice of such determination by the Arguss board and during such two business
day period Arguss has fully cooperated with Dycom, including, without
limitation, informing Dycom of the terms and conditions of such superior
proposal, and the identity of the person making such superior proposal, with the
intent of enabling the parties to the merger agreement to agree to a
modification of the terms and conditions of the merger agreement so that the
transactions contemplated by the merger agreement may be effected; (b) at the
end of such two business day period the competing transaction continues in the
judgment of the Arguss board to constitute a superior proposal and the Arguss
board confirms its determination (after receiving the advice of outside legal
counsel) that it is necessary to terminate the merger agreement and enter into
an agreement to effect the superior proposal to comply with its fiduciary duties
under applicable law; and (c) (x) at or prior to such termination, Dycom has
received all amounts due under the merger agreement by wire transfer in same day
funds and (y) promptly following such termination Arguss enters into a
definitive acquisition, merger or similar agreement to effect the superior
proposal.
TERMINATION FEES
Termination Fees Payable by Arguss to Dycom. In the event that the merger
agreement is terminated by (a) Dycom as described under paragraph (2) under
"-- Termination of the Merger Agreement -- Termination by Dycom" above or (b)
Arguss as described under paragraph (2) under "-- Termination of the Merger
Agreement -- Termination by Arguss" above, then Arguss is required to pay to
Dycom in immediately available funds a termination fee in an amount equal to
$2,500,000 and all of Dycom's expenses, up to a maximum of $1,500,000.
60
If the merger agreement is terminated by Dycom as described under paragraph
(1) or paragraph (3) under "-- Termination by Dycom" then Arguss is required to
pay Dycom within five days after submission of statements, all of Dycom's
expenses up to a maximum of $1,500,000.
If the merger agreement is terminated by Dycom or Arguss as described under
paragraphs (1) or (3) under "-- Termination by Dycom" or paragraph (1) under
"-- Termination by Either Dycom or Arguss" (unless the reason the offer has not
been consummated on or prior to July 31, 2002 is the result of a material breach
of the merger agreement by Dycom or Purchaser) and a proposal or offer for a
competing transaction has been made and publicly announced or communicated to
Arguss' stockholders after the date of the merger agreement and prior to the
termination date, and concurrently with or within 12 months of the date of such
termination a third party acquisition event (as defined below) occurs, then
Arguss is required to pay Dycom within five business days of the occurrence of
such event, a termination fee in the amount of $2,500,000 and, if the
termination is because the offer has not been consummated by July 31, 2002,
Arguss is required to pay Dycom its expenses, up to a maximum of $1,500,000.
"Third party acquisition event" means the earlier of the consummation of a
competing transaction involving the purchase of a majority of either the equity
securities of Arguss or of the consolidated assets of Arguss and its
subsidiaries, taken as a whole, or any such transaction that, taken as a whole,
if it had been proposed prior to the termination of the merger agreement, would
have constituted a competing transaction, or the entering into by Arguss or any
of its subsidiaries of a definitive agreement with respect to any such
transaction.
If the merger agreement is terminated by Dycom under paragraph (4) under
"-- Termination by Dycom" and a proposal or offer for a competing transaction
has been made and publicly announced or communicated to Arguss' stockholders
after the date of the merger agreement and prior to the date of such
termination, and concurrently with or within twelve months of the date of such
termination a third party acquisition event occurs, then Arguss is required to
pay Dycom, within five business days of the occurrence of such third party
acquisition event, all of its expenses up to a maximum of $1,500,000, and a
termination fee of $2,500,000.
Termination Fees Payable by Dycom to Arguss. If the merger agreement is
terminated by Arguss under paragraph (1) under "-- Termination by Arguss", Dycom
is required to pay Arguss, within five business days, Arguss' expenses up to
$1,000,000.
61
THE STOCKHOLDERS' AGREEMENT
The following is a summary description of the material provisions of the
stockholders' agreement. This summary is qualified in its entirety by reference
to the complete text of the stockholders' agreement, which is attached as Annex
B to this prospectus and incorporated by reference into this prospectus. All
Arguss stockholders are urged to read the stockholders' agreement in its
entirety.
Concurrently with the execution of the merger agreement, in order to induce
Dycom to enter into the merger agreement, the current directors and certain
executive officers of Arguss entered into a stockholders' agreement with Dycom,
Purchaser and Arguss.
Covenants. The stockholders' agreement provides, among other things, that
all of the persons that are subject to the terms of the stockholders' agreement
will:
- tender all of their outstanding Arguss shares into the offer promptly
after commencement of the offer and will not withdraw such shares from
the offer;
- vote all of their outstanding Arguss shares at any meeting of Arguss
stockholders and in any action by written consent in favor of the merger
agreement and any other matter that could reasonably be expected to
facilitate the consummation of the merger and any other transactions
contemplated by the merger agreement;
- vote all of their outstanding Arguss shares at any meeting of Arguss
stockholders and in any action by written consent against any competing
transaction or any merger, consolidation, sale of assets,
recapitalization or other business combination or any other action or
agreement that could reasonably be expected to cause Arguss not to be
able to meet the conditions to the merger or fulfill its obligations
under the merger agreement;
- grant an irrevocable proxy to Dycom to vote all of their Arguss shares at
any meeting of Arguss stockholders and in any action by written consent,
allowing Dycom to vote to approve the merger agreement and any other
matter that could reasonably be expected to facilitate the consummation
of the merger and any other transactions contemplated by the merger
agreement and against any competing transaction;
- covenant that all written information relating to such stockholder, and
such stockholder's affiliates, provided by or on behalf of such
stockholder for inclusion in this prospectus or any other document that
is filed with the SEC in connection with the offer and the merger will
not contain any untrue statements of material fact or omit to state a
material fact;
- agree to not, directly or indirectly, sell, assign, transfer (including
by operation of law), pledge, dispose of or otherwise encumber any Arguss
shares, grant a proxy or enter into a voting agreement inconsistent with
the stockholders' agreement with respect to Arguss shares, enter into any
contract with respect to the disposition of any Arguss shares or take any
action that would make any representation or warranty of such stockholder
materially untrue or incorrect or that would prevent the stockholder from
performing his obligations under the stockholders' agreement unless the
merger agreement is terminated in accordance with its terms;
- not instruct his representatives, which include officers, directors,
employees, subsidiaries, agents, investment bankers, attorneys,
accountants or any other representatives, to solicit, initiate or
encourage (which includes furnishing nonpublic information) or take any
other action to facilitate any inquiries or the making of any proposal or
offer that constitutes, or may reasonably be expected to lead to, a
competing transaction unless required by such stockholder's fiduciary
duties as directors or executive officers of Arguss;
- not enter into or maintain or continue discussions or negotiate with any
person or entity that makes inquiries regarding a competing transaction
or to obtain a competing transaction, unless required by such
stockholders' fiduciary duties as a director or executive officer of
Arguss;
62
- not endorse any competing transaction unless required by such
stockholder's fiduciary duties as a director or executive officer of
Arguss; and
- promptly notify Dycom if any person makes a proposal or inquiry or
contacts the stockholder relating to a competing transaction.
Dycom agreed to use its reasonable best efforts to have declared effective
a "shelf" registration statement that registers the resale by all of the Arguss
directors and/or officers subject to the stockholders' agreement (and any other
Arguss stockholder agreed to by Dycom), on a continuous basis for a six-month
period, of all the Dycom shares received by such persons pursuant to the offer
and the merger, including any securities issued as a dividend or distribution on
such shares. As promptly as reasonably practicable, Dycom and each director
and/or officer subject to the stockholders' agreement will enter into a
registration rights agreement providing for the foregoing and containing other
customary provisions.
Representations and Warranties. The stockholders' agreement contains a
number of customary representations of the stockholders relating to each
stockholder's ability to enter into the stockholders' agreement and the
ownership of each stockholder's Arguss shares, including:
- authorization,
- no conflict and required filings and consents,
- litigation, and
- ownership of shares.
Termination. The obligations of the stockholders under the stockholders'
agreement terminate upon the earlier of the effective date of the merger or 12
months following the termination of the merger agreement.
On January 7, 2002, the stockholders subject to the stockholders' agreement
owned (either beneficially or of record) 972,839 Arguss shares, constituting
approximately 6.7% of the outstanding shares of Arguss as of February 11, 2002
(or approximately 5.4% of the outstanding shares of Arguss on a fully diluted
basis).
63
INTERESTS OF CERTAIN PERSONS
Some directors and executive officers of Arguss may have interests in the
offer and the merger that are different from or in addition to your interests.
Information about these interests is more fully set forth in Arguss'
Solicitation/Recommendation Statement on Schedule 14D-9, including the
Information Statement attached as Annex A to the Schedule 14D-9, dated January
23, 2002, which is being mailed to Arguss stockholders with this preliminary
prospectus and which is incorporated into this prospectus by reference. Each
material agreement, arrangement or understanding and any actual or potential
conflict of interest between Arguss or its affiliates and Arguss, its executive
officers, directors or affiliates, or between Arguss or its affiliates and Dycom
or Purchaser or their respective executive officers, directors or affiliates, is
incorporated into this prospectus by reference as a result of the previous
sentence.
Furthermore, except as outlined in this prospectus, neither we nor, to the
best of our knowledge, any of our directors, executive officers or other
affiliates has any contract, arrangement, understanding or relationship with any
other person with respect to any securities of Arguss, including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any such securities, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties against loss
or the giving or withholding of proxies. Except as described in this prospectus,
there have been no contacts, negotiations or transactions since January 1, 1999,
between us or, to the best of our knowledge, any of our directors, executive
officers or other affiliates on the one hand, and Arguss or its affiliates, on
the other hand, concerning a merger, consolidation or acquisition, a tender
offer or other acquisition of securities, an election of directors, or a sale or
other transfer of a material amount of assets. Neither we, nor, to the best of
our knowledge, any of our directors, executive officers or other affiliates has
since January 1, 1999 had any transaction with Arguss or any of its executive
officers, directors or affiliates that would require disclosure under the rules
and regulations of the SEC applicable to the offer.
Neither we nor, to the best of our knowledge, any of our directors,
executive officers or other affiliates beneficially owns or has any right to
acquire, directly or indirectly, any Arguss shares and neither we nor, to the
best of our knowledge, any of our directors, executive officers or other
affiliates, has effected any transaction in the Arguss shares during the past 60
days.
During each of our current fiscal year and our last fiscal year, Joseph M.
Schell, one of our directors, was employed as the Chairman of Global Technology,
Investment Banking, of Merrill Lynch & Co., one of our financial advisors in
connection with the merger. Mr. Schell resigned his position with Merrill Lynch,
effective as of November 30, 2001. However, pursuant to the terms of his
employment agreement with Merrill Lynch, Mr. Schell may continue to be
considered an employee of Merrill Lynch until February 22, 2002. During our last
fiscal year, Merrill Lynch was engaged as one of our financial advisors in
connection with other matters, including the adoption of our shareholders'
rights plan. During the current fiscal year, we may engage Merrill Lynch as one
of our financial advisors to perform services in addition to those performed in
connection with the offer and the merger.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL PROVISIONS
On November 7, 2001, Arguss entered into written employment agreements with
each of: Rainer H. Bosselmann, the Chairman, President and Chief Executive
Officer of Arguss; H. Haywood Miller III, Executive Vice President and Secretary
of Arguss; and Arthur F. Trudel, Vice President, Chief Financial Officer and
Treasurer of Arguss. Messrs. Bosselmann, Trudel and Miller did not have
employment agreements with Arguss prior to November 7, 2001. The employment
agreements provide for an initial term of one year, beginning on November 1,
2001 and ending on November 1, 2002, and will be renewed automatically for
additional one-year terms upon expiration of the initial term, unless either
party to an employment agreement provides written notice to the other party of
that party's intention not to renew the employment agreement at least 90 days
prior to the expiration of the then-current term. Under these agreements, Mr.
Bosselmann will be paid an annual salary of $180,000 and each of Messrs. Miller
and Trudel will receive annual salaries of $150,000, which are the same salaries
they were being paid
64
immediately prior to the execution of these agreements. Bonuses are payable in
the reasonable discretion of the Arguss board of directors subject to the
satisfaction of reasonable performance criteria.
The employment agreements also provide for payments to each of Messrs.
Bosselmann, Miller and Trudel in the event of a change in control of Arguss.
Under the terms of the employment agreements, a change in control will occur
upon consummation of the offer. If Messrs. Bosselmann, Miller and Trudel do not
agree to separate employment agreements with Arguss within 90 days following a
change in control, each is entitled to receive a lump-sum payment, in an amount
equal to two times his annual salary at the time the change in control occurs,
to be paid within the greater of 30 days after the change in control or ten days
after notification to Arguss of the intention to decline further employment with
Arguss. Each of Messrs. Bosselmann, Miller and Trudel is also entitled to the
continuation of all benefits, including executive fringe benefits, medical and
health coverage, and life insurance and long term disability coverage, for a
period of 12 months from the date of the change in control.
ARGUSS STOCK OPTIONS
Arguss established a stock option plan in July 1991 pursuant to which the
board of directors of Arguss may grant stock options to officers and key
employees. The plan, as amended, authorizes the grant of options to purchase up
to 5,000,000 shares of Arguss common stock. Stock options granted under the plan
may be "incentive stock options", or ISOs, or "non-qualified stock options", or
NSOs. ISOs may be granted only to employees of Arguss, while NSOs may be issued
to non-employee directors, consultants and others, as well as to employees of
Arguss.
At or immediately prior to the effective time of the merger, each option to
purchase Arguss shares whether or not vested or exercisable, that has not been
exercised prior to the effective time will, by virtue of the merger and without
any further action on the part of the holder, be assumed by Dycom and deemed to
constitute an option to acquire, on the same terms and conditions applicable to
Arguss' options, the same number of Dycom shares as the holder of Arguss'
options would have been entitled to receive under the merger agreement had such
options to purchase Arguss shares been exercised in full immediately prior to
the effective time (rounded to the nearest whole number), at a price per share
(rounded down to the nearest whole cent) equal to (1) the aggregate exercise
price for the Arguss shares otherwise purchasable pursuant to any options
granted by Arguss divided by (2) the number of whole Dycom shares purchasable
pursuant to each option to purchase Dycom shares in accordance with the
foregoing. The other terms of Arguss' stock options, and the plan, will continue
to apply in accordance with their terms. As of February 11, 2002, there were
options outstanding to purchase an aggregate of 3,401,767 Arguss shares (5,000
of which have been exercised, but for which Arguss shares have not yet been
issued).
In the event of a sale or acquisition of substantially all of Arguss' stock
or assets, Arguss must give 30 days notice of the proposed transaction to all
holders of NSOs so that such holders may exercise up to 100% of their options
before the transaction takes place. In addition, in connection with the offer
and the merger, the Arguss board has accelerated, effective upon the date Dycom
accepts the Arguss shares tendered for exchange, NSOs to purchase 50,000 Arguss
shares granted in the year ended December 31, 2001 to each of Messrs.
Bosselmann, Miller and Trudel, executive officers of Arguss. Therefore, upon
Dycom accepting for exchange the Arguss shares tendered pursuant to the offer,
otherwise unvested and unexercisable NSOs granted to Messrs. Bosselmann, Miller
and Trudel will become exercisable and, upon the effectiveness of the merger,
will become options to purchase Dycom shares. Except as specifically approved by
the Arguss board of directors with respect to ISOs to purchase an aggregate of
15,000 Arguss shares held by two employees who are not executive officers, the
vesting of ISOs granted by Arguss under the plan will not accelerate as a result
of the merger.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to the merger agreement, the certificate of incorporation of the
surviving corporation of the merger will contain provisions with respect to
indemnification that are no less favorable than those set forth in Arguss'
certificate of incorporation and bylaws on January 7, 2002. These provisions
will not be
65
amended, repealed or otherwise modified for a period of six years from the
effective time in any manner that would adversely affect the rights of
individuals who were directors, officers, employees, fiduciaries or agents of
Arguss at or prior to the effective time, unless the modification is required by
law. From and after the effective time, Dycom will, and will cause the surviving
corporation to, fulfill and honor Arguss' obligations under any indemnification
agreements that Arguss has with its directors and officers as of the effective
time and any indemnification provisions under Arguss' certificate of
incorporation and bylaws as in effect on January 7, 2002.
The surviving corporation will use its reasonable best efforts to maintain
in effect for six years from the effective time, the current directors' and
officers' liability insurance policies maintained by Arguss with respect to
matters occurring prior to the effective time, unless Dycom, in its sole
discretion, includes the current directors and officers of Arguss under its
existing directors and officers liability insurance policies for not less than
six years from the effective time or causes the surviving corporation to
substitute liability insurance policies of at least the same coverage and
containing terms and conditions that are not materially less favorable than the
current directors' and officers' liability insurance policies maintained by
Arguss. However, in no event will the surviving corporation be required to
expend an annual premium for this coverage in excess of 225% of the current
annual premiums paid by Arguss for its insurance. We have been advised by Arguss
that its current annual premiums are approximately $113,166.
66
COMPARATIVE STOCK PRICES AND DIVIDEND INFORMATION
Dycom shares are listed and traded on the New York Stock Exchange under the
symbol "DY." Arguss shares are listed and traded on the New York Stock Exchange
under the symbol "ACX."
The following tables outline, for the periods indicated, the intraday high
and low sales prices per Dycom share and Arguss share. As Dycom reports its
financial results based on a fiscal year ended on the last Saturday in July and
Arguss reports its financial results based on a year ended on December 31, we
have presented stock prices for Dycom shares and Arguss shares for each of the
fiscal quarters in 2000, 2001 and 2002, based on both Dycom's and Arguss'
quarterly fiscal periods.
DYCOM ARGUSS
----------------- -----------------
DYCOM'S FISCAL YEAR HIGH LOW HIGH LOW
------------------- ------ ------ ------ ------
2000
Quarter ended October 30, 1999............... $31.63 $19.96 $17.08 $11.50
Quarter ended January 29, 2000............... 36.00 20.67 15.00 11.63
Quarter ended April 29, 2000................. 59.25 26.04 23.88 11.88
Quarter ended July 29, 2000.................. 57.88 40.06 22.13 16.00
2001
Quarter ended October 28, 2000............... 56.00 36.75 21.94 12.25
Quarter ended January 27, 2001............... 49.38 20.50 15.44 8.25
Quarter ended April 28, 2001................. 23.37 10.50 10.88 5.10
Quarter ended July 28, 2001.................. 23.57 15.90 6.03 4.52
2002
Quarter ended October 27, 2001............... 22.25 10.52 4.65 1.92
Quarter ended January 26, 2002............... 17.78 10.75 5.74 2.16
Quarter ended April 27, 2002 (through
February 11, 2002)......................... 16.65 15.02 5.53 5.00
DYCOM ARGUSS
----------------- -----------------
ARGUSS' FISCAL YEAR HIGH LOW HIGH LOW
------------------- ------ ------ ------ ------
2000
Quarter ended March 31....................... $52.50 $26.04 $23.88 $11.75
Quarter ended June 30........................ 59.25 41.75 23.00 15.44
Quarter ended September 30................... 56.00 40.06 21.94 15.50
Quarter ended December 31.................... 49.38 31.44 20.88 8.56
2001
Quarter ended March 31....................... 37.56 12.50 11.63 5.40
Quarter ended June 30........................ 23.00 10.50 6.03 4.52
Quarter ended September 30................... 23.57 10.52 5.15 2.30
Quarter ended December 31.................... 17.50 10.75 4.08 1.92
2002
Quarter ended March 31 (through February
11)........................................ 17.78 14.90 5.74 3.95
On January 4, 2002, the last trading day prior to the announcement of the
execution of the merger agreement and of our intention to commence the offer,
the closing price of Arguss common stock was $4.42 per share and the closing
price of Dycom common stock was $17.30 per share. On February 11, 2002, the last
full trading day prior to the printing of this prospectus, the closing price of
Arguss shares was $5.17 per share and the closing price of Dycom shares was
$15.66 per share.
The market prices of Arguss shares and Dycom shares are subject to
fluctuation. As a result, Arguss and Dycom shareholders are urged to obtain
current market quotations.
67
According to Arguss, on February 11, 2002, there were approximately
14,544,944 Arguss shares outstanding, held by 107 holders of record.
As of February 11, 2002, approximately 42,939,885 Dycom shares were
outstanding (not including 81,700 Dycom treasury shares held by Deutsche Bank),
held by 676 holders of record.
DYCOM DIVIDEND POLICY
The holders of Dycom shares have not received cash dividends since 1982.
Our dividend policy after completion of the merger will depend upon our board's
consideration of business conditions, operating results, capital and reserve
requirements and other relevant factors; however we expect to continue not to
pay dividends for the foreseeable future.
ARGUSS DIVIDEND POLICY
Arguss has never paid dividends to its stockholders.
68
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
present the effect of the pending acquisition of Arguss by Dycom, which is to be
accounted for as a purchase. The unaudited pro forma condensed combined balance
sheet presents the combined financial position of Dycom and Arguss as of October
27, 2001 assuming that the acquisition had occurred as of that date. Such pro
forma information is based upon the historical consolidated balance sheet data
of Dycom as of October 27, 2001 and Arguss as of September 30, 2001. The
unaudited pro forma condensed combined statements of operations for the year
ended July 28, 2001 and three month period ended October 27, 2001 give effect to
the acquisition of Arguss by Dycom as if such acquisition had occurred on July
30, 2000, the first day of Dycom's fiscal year 2001. Pro forma operations for
the year-end and three-month periods for Dycom consist of its results of
operations for the year ended July 28, 2001 and three months ended October 27,
2001, respectively. Pro forma operations for the twelve-month and three-month
periods for Arguss consist of its results of operations for the twelve months
ended June 30, 2001 and three months ended September 30, 2001, respectively. The
use of different closing dates is necessary as each entity has different fiscal
year ends.
The unaudited pro forma condensed combined financial statements are based
on the estimates and assumptions set forth in the notes to such statements. The
pro forma adjustments are preliminary and have been made solely for purposes of
developing such pro forma statements. The unaudited pro forma condensed combined
financial statements are not necessarily an indication of the results that would
have been achieved had the transaction been consummated as of the dates
indicated or that may be achieved in the future.
69
DYCOM AND ARGUSS
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 28, 2001
HISTORICAL FISCAL YEAR
ENDED
-----------------------
DYCOM ARGUSS
JULY 28, JUNE 30, PRO FORMA PRO FORMA
2001 2001(1) ADJUSTMENTS COMBINED
---------- ---------- ----------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUES..................................... $826,746 $245,456 $ (969)a $ 1,071,233
-------- -------- ------- --------------
EXPENSES:
Costs of earned revenues, excluding
depreciation............................ 615,239 188,620 (737)a 803,122
General and administrative................. 73,576 25,229 98,805
Depreciation and amortization.............. 40,117 19,715 (7,178)b 52,654
-------- -------- ------- --------------
Total...................................... 728,932 233,564 (7,915) 954,581
Interest income (expense), net............. 4,496 (6,836) (2,340)
Other income, net.......................... 2,673 2,673
-------- -------- ------- --------------
INCOME BEFORE INCOME TAXES................... 104,983 5,056 6,946 116,985
-------- -------- ------- --------------
PROVISION FOR INCOME TAXES................... 43,573 4,822 (93)c 48,302
-------- -------- ------- --------------
NET INCOME................................... $ 61,410 $ 234 $ 7,039 $ 68,683
======== ======== ======= ==============
EARNINGS PER COMMON SHARE:
Basic...................................... $ 1.45 $ 0.02 $ 1.45d
======== ======== ==============
Diluted.................................... $ 1.44 $ 0.02 $ 1.44d
======== ======== ==============
SHARES USED IN COMPUTING EARNINGS PER COMMON
SHARE:
Basic...................................... 42,445 14,374 47,285d
======== ======== ==============
Diluted.................................... 42,770 14,676 47,710d
======== ======== ==============
---------------
(1) The Arguss per share amounts for the year ended June 30, 2001 were derived
from the historical financial statements of Arguss as of and for the
twelve-month period ended June 30, 2001.
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements
70
DYCOM AND ARGUSS
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED OCTOBER 27, 2001
HISTORICAL THREE MONTHS
ENDED
---------------------------
DYCOM ARGUSS
OCTOBER 27, SEPTEMBER 30, PRO FORMA PRO FORMA
2001 2001 ADJUSTMENTS COMBINED
----------- ------------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUES....................................... $167,815 $49,251 $ (325)a $216,741
-------- ------- ------- --------
EXPENSES:
Costs of earned revenues, excluding
depreciation.............................. 130,224 36,972 (216)a 166,980
General and administrative................... 16,081 5,861 21,942
Depreciation and amortization................ 9,041 4,883 (1,798)b 12,126
-------- ------- ------- --------
Total........................................ 155,346 47,716 (2,014) 201,048
Interest income (expense), net............... 926 (1,398) (472)
Other income, net............................ 347 347
-------- ------- ------- --------
INCOME BEFORE INCOME TAXES..................... 13,742 137 1,689 15,568
PROVISION FOR INCOME TAXES..................... 5,716 740 (44)c 6,412
-------- ------- ------- --------
NET INCOME (LOSS).............................. $ 8,026 $ (603) $ 1,733 $ 9,156
======== ======= ======= ========
EARNINGS (LOSS) PER COMMON SHARE:
Basic........................................ $ 0.19 $ (0.04) $ 0.19d
======== ======= ========
Diluted...................................... $ 0.19 $ (0.04) $ 0.19d
======== ======= ========
SHARES USED IN COMPUTING EARNINGS PER COMMON
SHARE:
Basic........................................ 42,947 14,489 47,786d
======== ======= ========
Diluted...................................... 43,014 14,489 47,861d
======== ======= ========
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements
71
DYCOM AND ARGUSS
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF OCTOBER 27, 2001
HISTORICAL HISTORICAL
DYCOM ARGUSS
OCTOBER 27, SEPTEMBER 30, PRO FORMA PRO FORMA
2001 2001 ADJUSTMENTS COMBINED
----------- ------------- ----------- ---------
(IN THOUSANDS)
ASSETS
Current Assets
Cash and equivalents................... $ 147,924 $ 4,340 $ (500)a $152,264
Accounts receivable, net............... 106,695 45,811 (137)b 151,869
Costs and estimated earnings in excess
of billings......................... 40,246 11,773 52,019
Other current assets................... 19,708 5,900 (2,685)a 23,197
274c
---------- -------- --------- --------
Total current assets................... 314,573 67,824 (3,048) 379,349
---------- -------- --------- --------
PROPERTY AND EQUIPMENT, NET.............. 102,348 40,703 (7,400)d 135,651
---------- -------- --------- --------
OTHER ASSETS:
Goodwill, net.......................... 154,614 121,999 (121,999)e 249,443
94,829f
Intangible assets, net................. 263 263
Other.................................. 2,085 2,085
---------- -------- --------- --------
Total other assets..................... 156,962 121,999 (27,170) 251,791
---------- -------- --------- --------
TOTAL.................................... $ 573,883 $230,526 $ (37,618) $766,791
========== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable.................... $ 25,286 $ 11,051 $ (137)b $ 36,200
Current portion of long term debt
and notes payable................. 2,216 72,970 75,186
Other current liabilities........... 48,214 12,710 3,683g 64,876
1,060h
(791)c
---------- -------- --------- --------
Total current liabilities........... 75,716 96,731 3,815 176,262
---------- -------- --------- --------
NOTES PAYABLE............................ 5,781 1,497 7,278
OTHER LIABILITIES........................ 16,295 4,488 (2,960)c 17,823
---------- -------- --------- --------
TOTAL LIABILITIES........................ 97,792 102,716 855 201,363
---------- -------- --------- --------
STOCKHOLDERS' EQUITY:
Common stock and additional paid-in-
capital, net........................ 265,387 114,378 (114,378)i 354,841
86,018j
3,436k
Retained earnings...................... 211,854 13,942 (13,942)i 211,854
Deferred compensation.................. (117)l (117)
Common stock subscribed................ (279) 279m
Accumulated comprehensive loss......... (231) 231n
Treasury stock, at cost: 81,700
shares.............................. (1,150) (1,150)
---------- -------- --------- --------
TOTAL STOCKHOLDERS' EQUITY............... 476,091 127,810 (38,473) 565,428
---------- -------- --------- --------
TOTAL.................................... $ 573,883 $230,526 $ (37,618) $766,791
========== ======== ========= ========
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements
72
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
On January 7, 2002, Dycom entered into the merger agreement to acquire all
the outstanding Arguss shares. The acquisition of Arguss is to be accounted for
under the purchase method of accounting. Accordingly, the purchase price will be
allocated to the tangible and intangible assets acquired and the liabilities
assumed on the basis of their respective fair values on the acquisition date. As
of February 11, 2002, there were 14,544,944 Arguss shares outstanding and
3,401,767 shares issuable upon exercise of outstanding options (5,000 of which
have been exercised, but for which the Arguss shares have not yet been issued)
and warrants. Based on this and the exchange ratio of 0.3333 Dycom shares for
each Arguss share, Arguss' stockholders will receive a total of 4,839,497 Dycom
shares and holders of Arguss options will have the right to receive 1,142,141
Dycom shares. The purchase price of the Arguss acquisition is approximately
$89.5 million, including the value of the Dycom shares to be issued for Arguss
shares, the estimated value of the Arguss options (reduced by the intrinsic
value component of the unvested options, which is recorded as deferred
compensation) and estimated transaction costs. These estimates are preliminary
and the actual number of Dycom shares issued will depend on the actual number of
Arguss shares outstanding as of the date of consummation of the merger. The fair
value of the Dycom shares used in determining the purchase price was $17.26 per
share, based on the average closing market price of Dycom's shares for the five
trading days ended on January 9, 2002. The fair value of Arguss common stock
options to be assumed was estimated using the Black-Scholes option pricing model
with the following weighted assumptions: risk free return from 1.72% to 5.09%,
expected life equal to the lesser of the remaining term of the option grant or
six years, expected dividend rate of 0% and volatility of 42.5% for months one
through six, 37% for month seven through year five and 32% for over five years.
Estimated direct transaction costs of Dycom consist primarily of fees for
investment bankers, attorneys, accountants, SEC filing fees, and printing.
The purchase consideration is estimated as follows (in thousands):
Dycom common stock to be issued............................. $83,530
Assumption of Arguss' options............................... 2,488
Estimated transaction costs of Dycom........................ 3,436
-------
$89,454
=======
The allocation of the purchase price as of October 27, 2001 is summarized
below (in thousands):
ASSETS
Cash and marketable securities.............................. $ 4,340
Accounts receivable......................................... 45,174
Costs and estimated earnings in excess of billings.......... 11,773
Other current assets........................................ 3,489
Property and equipment...................................... 33,303
Deferred compensation....................................... 117
Goodwill.................................................... 94,829
--------
Total assets........................................... $193,025
--------
73
LIABILITIES
Accounts payable............................................ $ 10,914
Current portion of long term debt and notes payable......... 72,970
Other current liabilities................................... 16,662
Notes payable............................................... 1,497
Other liabilities........................................... 1,528
--------
Total liabilities...................................... 103,571
--------
Net assets acquired......................................... $ 89,454
========
The above purchase price allocation is based on Dycom management's best
estimate of the fair values of the acquired assets and assumed liabilities at
this early stage of the merger process. However, this allocation is preliminary.
The final determination of the allocation of purchase price will be determined
based on the fair value of assets acquired and the fair value of liabilities
assumed as of the date that the acquisition is consummated. At this time no
intangible assets have been identified which would be valued apart from
goodwill. The purchase price allocation will remain preliminary until Dycom is
able to (a) complete a third party valuation of property, plant and equipment
acquired, (b) conduct a detailed review of the value of deferred tax assets and
liabilities of Arguss, and (c) evaluate the fair value of other assets,
including intangibles and liabilities acquired. The final determination of the
purchase price is expected to be completed shortly after the consummation of the
merger. Although Dycom does not believe that it is likely that the actual
amounts allocated to assets and liabilities will differ materially from the
preliminary allocation presented in the unaudited pro forma condensed combined
financial statements there can be no assurances that such actual amounts will
not be materially different.
NOTE 2 -- PRO FORMA ADJUSTMENTS:
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
The following adjustments are reflected in the pro forma condensed combined
statements of operations to reflect the estimated impact of the merger on the
historical combined results of Dycom and Arguss. No adjustment has been made to
Arguss' historical interest expense as no decision has been reached regarding
the future refinancing of Arguss' debt.
(a) To eliminate revenue and cost of sales for transactions between Dycom
and Arguss.
(b) To remove amortization of historical goodwill previously reported by
Arguss. The historical earnings of Arguss include the amortization of
goodwill. Statement of the Financial Accounting Standards Board
Statement No. 142, Goodwill and Other Intangible Assets, requires that
goodwill acquired in a business combination after June 30, 2001 should
not be amortized, but is to be reviewed for impairment at least
annually. As a result of this change in accounting rules, the unaudited
pro forma condensed combined statements of operations exclude $7.2
million and $1.8 million related to Arguss' historical goodwill
amortization for the year ended July 28, 2001 and the three months
ended October 27, 2001, respectively.
(c) To adjust historical income tax expense for the impact of certain
pro-forma adjustments. This adjustment was calculated based on an
estimated statutory tax rate of 40%.
(d) Pro forma basic and diluted earnings per common share are computed by
dividing the pro forma net income attributable to common shareholders
by the pro forma weighted-average number of common shares outstanding.
Potentially dilutive securities are not taken into account when their
effects would be anti-dilutive. A reconciliation of shares used to
compute historical basic and
74
diluted earnings per common share to shares used to compute pro forma
basic and diluted earnings per common share is as follows:
THREE MONTHS ENDED YEAR ENDED
OCTOBER 27, 2001 JULY 28, 2001
------------------ -------------
Shares used to compute Dycom historical basic earnings
per common share.................................... 42,946,969 42,445,242
Shares issued in acquisition.......................... 4,839,497 4,839,497
---------- ----------
Shares used to compute pro forma basic earnings per
common share........................................ 47,786,466 47,284,739
========== ==========
THREE MONTHS ENDED YEAR ENDED
OCTOBER 27, 2001 JULY 28, 2001
------------------ -------------
Shares used to compute Dycom historical diluted
earnings per common share........................... 43,014,474 42,770,042
Shares issued in acquisition.......................... 4,839,497 4,839,497
Effect of Dycom options issued in exchange for
outstanding Arguss options.......................... 6,642 100,671
---------- ----------
Shares used to compute pro forma diluted earnings per
common share........................................ 47,860,613 47,710,210
========== ==========
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
The following adjustments reflected in the unaudited pro forma condensed
combined balance sheet reflect the estimated impact of events that are directly
attributable to the merger of Dycom and Arguss.
(a) To adjust the value of assets held for sale.
(b) To eliminate accounts receivable and accounts payable balances between
Dycom and Arguss.
(c) To record current and deferred taxes attributable to the tax effect of
pro forma adjustments.
(d) To adjust certain tangible assets to their estimated fair market
value.
(e) To eliminate Arguss' historical goodwill, as the unaudited pro forma
condensed combined balance sheet, which assumes the merger of Dycom
and Arguss had taken place October 27, 2001, should reflect the
re-valued goodwill and identifiable intangible assets resulting from
the acquisition of Arguss by Dycom.
(f) To record goodwill arising from the transaction.
(g) To record the liability for Arguss' estimated transaction costs of
$3.7 million consisting primarily of fees for investment bankers,
attorneys, and accountants.
(h) To record severance payments of $1.1 million to be paid immediately
prior to or on the effective date of the merger pursuant to certain
Arguss employment agreements. These employment agreements provide for
payment to each of Rainer H. Bosselmann, Chairman, President and Chief
Executive Officer of Arguss; H. Haywood Miller III, Executive Vice
President and Secretary of Arguss; and Arthur F. Trudel, Vice
President, Chief Financial Officer and Treasurer of Arguss an amount
equal to two times their annual salary at the time the change in
control occurs. Each is also entitled to continuation of all benefits,
including health coverage, life insurance and long-term disability
coverage for a period of 12 months from the date of the change in
control. Additionally, these amounts include payments aggregating less
than $100,000 to two other Arguss employees in accordance with their
employment agreements, which provide for the payment of the unpaid
portion of their annual salary in the event of termination.
75
(i) To eliminate Arguss' historical common stock, additional
paid-in-capital and retained earnings.
(j) To record the issuance of Dycom common stock, and the assumption of
options as part of the purchase price.
(k) To record Dycom's estimated transaction costs of $3.4 million,
consisting primarily of fees for investment bankers, attorneys,
accountants, SEC filing fees, and printing.
(l) To record the deferred compensation associated with the purchase of
Arguss. Deferred compensation represents a portion of the estimated
intrinsic value of unvested Argus stock options assumed by Dycom in
the merger to the extent that service is required after the closing
date of the merger. No adjustment has been made to the pro forma
results of operations as the calculated amount of $117,000 is deemed
to be immaterial.
(m) To eliminate Arguss' historical common stock subscribed.
(n) To eliminate Arguss' historical accumulated comprehensive loss.
76
DESCRIPTION OF DYCOM CAPITAL STOCK
Outlined below is a description of Dycom's capital stock. The following
statements are summaries of, and are subject to, Dycom's articles of
incorporation and by-laws and the relevant provisions of the Florida Business
Corporation Act, or the FBCA.
Dycom is currently authorized to issue up to 150,000,000 shares of common
stock, par value $0.33 1/3 per share. Dycom is also authorized to issue up to
1,000,000 shares of preferred stock, par value $1.00 per share, 100,000 of which
are designated Series A Preferred Stock. Dycom has not issued any of this
preferred stock. If preferred stock is issued, Dycom's board of directors may
fix the designations, relative rights, preferences and limitations of the shares
of each series.
Dividends may be paid on Dycom shares out of funds legally available for
the dividends, when and if declared by Dycom's board of directors.
Holders of Dycom shares are entitled to share ratably in any dividends and
in any assets available for distribution on liquidation, dissolution or
winding-up, subject, if preferred stock of Dycom is then outstanding, to any
preferential rights of such preferred stock. Each Dycom share entitles the
holder thereof to one vote at all meetings of shareholders, and the votes are
noncumulative. The Dycom common stock is not redeemable, has no subscription or
conversion rights and does not entitle the holder thereof to any preemptive
rights. Each Dycom share has a preferred share purchase right associated with
it.
TRANSFER AGENT AND REGISTRAR
First Union National Bank is the transfer agent and registrar for the Dycom
common stock.
77
COMPARISON OF STOCKHOLDER RIGHTS
Dycom is incorporated under the laws of the State of Florida, whereas
Arguss is incorporated under the laws of the State of Delaware. If the offer is
completed, Arguss stockholders exchanging their shares in the offer, whose
rights are currently governed by the laws of the State of Delaware, the
certificate of incorporation of Arguss, as amended, and the bylaws of Arguss, as
amended, will, upon completion of the offer, become shareholders of Dycom, and
their rights as such will be governed by Florida law, Dycom's articles of
incorporation, as amended, and Dycom's by-laws, as amended. The material
differences between the rights of holders of Arguss shares and the rights of
holders of Dycom shares, resulting from the differences in their governing
documents, are summarized below.
The following summary does not purport to be a complete statement of the
rights of holders of Dycom shares under the applicable provisions of Florida
law, Dycom's articles of incorporation, as amended, and Dycom's by-laws, as
amended, or the rights of the holders of Arguss shares under the applicable
provisions of the laws of the state of Delaware, Arguss' certificate of
incorporation, as amended, and Arguss' bylaws, as amended, or a complete
description of the specific provisions referred to herein. This summary contains
a list of the material differences but is not meant to be relied upon as an
exhaustive list or a detailed description of the provisions discussed, and is
qualified in its entirety by reference to the Delaware and Florida laws and the
governing documents of Dycom and Arguss, to which the holders of Arguss shares
are referred. Copies of these governing documents are available, without charge,
to any person, including any beneficial owner to whom this prospectus is
delivered, by following the instructions listed under "Where You Can Find More
Information About Dycom and Arguss" beginning on page 5.
SUMMARY OF MATERIAL DIFFERENCES BETWEEN THE RIGHTS OF ARGUSS STOCKHOLDERS
AND THE RIGHTS OF DYCOM SHAREHOLDERS
ARGUSS DYCOM
STOCKHOLDER RIGHTS SHAREHOLDER RIGHTS
AUTHORIZED The authorized capital stock of The authorized capital stock of
CAPITAL STOCK: Arguss consists of 30,000,000 Dycom consists of 150,000,000
shares of common stock, $.01 par shares of common stock, $0.33 1/3
value per share, of which par value per share, of which
14,544,944 were outstanding at 42,939,885 were outstanding at
the close of business on February the close of business on February
11, 2002, and 1,000,000 shares of 11, 2002, and 1,000,000 shares of
preferred stock, $.01 par value preferred stock, $1.00 par value
per share, none of which was per share (100,000 of which have
outstanding at the close of been designated as Series A
business on February 11, 2002. Preferred Stock), none of which
was outstanding at the close of
business on February 11, 2002.
VOTING RIGHTS: The holders of Arguss shares are The holders of Dycom shares are
entitled to one vote per share of entitled to one vote per share of
common stock. common stock.
DIVIDENDS: Under sec.170(a) of the DGCL, Under sec.607.06401 of the FBCA,
Arguss may declare and pay Dycom may, subject to limitations
dividends, subject to limitations in its articles of incorporation,
in its certificate of as amended, make distributions to
incorporation, either out of its its shareholders unless, after
surplus or if there is no giving effect to such
surplus, out of its net profits distributions, Dycom would not be
for the fiscal year in which the able to pay its debts as they
dividend is declared and/or the become due in the usual course of
preceding year. If the capital of business, or Dycom's total assets
Arguss has been diminished to an
78
ARGUSS DYCOM
STOCKHOLDER RIGHTS SHAREHOLDER RIGHTS
amount less than the aggregate would be less than the sum of its
amount of the capital represented total liabilities plus (unless
by the issued and outstanding the articles of incorporation
stock of all classes having a permits otherwise) the amount
preference upon the distribution that would be needed, if Dycom
of assets, the directors may not were to be dissolved at the time
declare and pay any dividend out of the distribution, to satisfy
of net profits until the the preferential rights upon
deficiency in Arguss' capital as dissolution of shareholders whose
to classes of stock having a preferential rights are superior
preference upon distribution of to those receiving the
assets has been repaired. distribution.
NUMBER OF DIRECTORS: Delaware law requires that a Florida law requires that a board
board of directors consist of one of directors consist of one or
or more members, with the number more individuals, with the number
fixed by or in the manner specified in or fixed in
provided in the bylaws, unless accordance with the articles of
the certificate of incorporation incorporation or the by- laws.
fixes the number of directors. Dycom's by-laws, as amended,
Arguss' bylaws provide that the provide that the number of
number of directors will be directors will be determined from
determined by the board of time to time by the board of
directors. The Arguss board of directors. Dycom's board is
directors currently consists of divided into three classes, each
six directors, with each director of which will be as nearly equal
elected to a one-year term. in number as possible. The Dycom
board of directors currently
consists of five directors,
divided into three classes with
three-year terms.
REMOVAL OF DIRECTORS: Arguss directors may be removed Dycom's directors may be removed
with or without cause by a by its shareholders only for
majority of the votes of cause. Cause for removal will be
stockholders entitled to vote for construed to exist only if the
removal. director whose removal is
proposed has been convicted of a
felony by a court of competent
jurisdiction and such conviction
is no longer subject to direct
appeal, or has been adjudged by a
court of competent jurisdiction
to be liable for negligence or
misconduct in the performance of
his duty to Dycom in a matter of
substantial importance to Dycom,
and such adjudication is no
longer subject to direct appeal.
VACANCIES: If any vacancies occur on Arguss' Any vacancy occurring on Dycom's
board, or if any new board, including any vacancy
directorships are created, they created by reason of an increase
may be filled by a majority vote in the number of directors, may
of the directors then in office, be filled by the affirmative vote
although less than a quorum, or of a majority of the remaining
by a sole remaining director. directors, though less than a
Each director so chosen will hold quorum, and any director so
office until the next annual chosen will hold office until the
meeting of stockholders and until next annual election and until
his successor is his successor
79
ARGUSS DYCOM
STOCKHOLDER RIGHTS SHAREHOLDER RIGHTS
duly elected and will qualify. has been duly elected and has
qualified.
ANNUAL MEETING: The annual meeting of Arguss' The annual meeting of Dycom's
stockholders will be held on the shareholders will be held on the
third Wednesday in May if not a third Thursday of November, if
legal holiday, or, if a legal not a legal holiday, and if a
holiday, then on the next secular legal holiday, then on the next
day following, at 10:00 a.m., or secular day following, at 10:00
at such other date and time as a.m., or at such other date and
will be designated from time to hour as will be designated from
time by the board of directors time to time by the board of
and stated in the notice of the directors, in the City of Palm
meeting. Beach Gardens, State of Florida,
or at such place as may be fixed
from time to time by the board of
directors.
CALLING A SPECIAL Special meetings of Arguss' Special meetings of Dycom's
MEETING OF SHAREHOLDERS: stockholders may be called by the shareholders may be called at any
Chairman, the President, or at time by the chairman of the board
the request, in writing, of a and will be called by the
majority of the board of chairman of the board or the
directors or of the holders of at secretary at the request in
least 50% of the shares of writing of a majority of the
outstanding capital stock board of directors or the holders
entitled to vote. Any such of not less than one-tenth of all
request will state the purpose of the shares entitled to vote at
the meeting. the meeting. Any such request
will state the purpose or
purposes of the proposed meeting.
Only such business will be
conducted as will have been
brought before the meeting by or
at the direction of the presiding
officer.
SHAREHOLDER ACTION BY Arguss' stockholders may take Dycom's shareholders may take
WRITTEN CONSENT: action without a meeting by action without a meeting by
written consent, setting forth written consent, setting forth
the action taken, with the the action taken, with the
minimum number of votes that minimum number of votes that
would be necessary to authorize would be necessary to authorize
the action at a meeting the action at a meeting
represented by proxy and voted. represented by proxy and voted.
SHAREHOLDER RIGHTS PLAN: Arguss has a stockholder rights On April 4, 2001, Dycom adopted a
agreement. Arguss' stockholder new shareholders' rights plan.
rights agreement, was amended on The rights plan is designed to
January 7, 2002, to provide that deter coercive takeover tactics
it does not apply to the offer and to prevent an acquiror from
and the merger. gaining control of Dycom without
offering fair value to its
shareholders.
AMENDMENT OF CHARTER: Under the DGCL, Arguss' board Amendments to Dycom's articles of
must declare the advisability of incorporation, as amended, are
an amendment to the certificate governed by Florida law, which
of incorporation and the generally requires approval by a
amendment must be approved by the majority of directors and by
holders of a majority of the holders of a majority of the
outstanding stock shares entitled to
80
ARGUSS DYCOM
STOCKHOLDER RIGHTS SHAREHOLDER RIGHTS
entitled to vote upon the vote on the amendment. In
proposed amendment, unless a addition to the vote required by
higher vote is required by law, except with respect to
Arguss' certificate of amendments to Dycom's articles of
incorporation. incorporation, as amended,
related to the provisions
governing preferred stock or the
number of votes required to amend
those provisions (which require
approval by at least a majority
of such preferred stock, voting
separately as a class), any
proposal to amend the provisions
of the articles of incorporation
concerning (i) the number of
board members, (ii) voting
requirements for board members,
(iii) removal of board members,
(iv) business combinations and
(v) written consent of
shareholders requires the
affirmative vote of at least 80%
of the voting power of all the
shares of capital stock entitled
to vote in the election of
directors, voting together as a
single class.
AMENDMENT OF BYLAWS: Under sec.109 of the DGCL, Arguss Under FBCA sec.607.1020,
stockholders have the power to shareholders may amend or repeal
amend or repeal bylaws, even Dycom's by-laws even though the
though the board may also be by-laws may also be amended or
delegated the power. repealed by its board of
directors.
Arguss' bylaws may be altered,
amended or repealed, or new Dycom's by-laws, as amended, may
bylaws may be adopted by an be altered, amended or repealed
affirmative vote of a majority of or new by-laws may be adopted, by
the whole board, provided that the affirmative vote of a
the notice of the proposal to majority of the board at any
alter or repeal the bylaws or to regular or special meeting of the
adopt new bylaws must be included board.
in the notice of the meeting of
the board at which such action
takes place.
LIMITATION OF PERSONAL Section 102(b)(7) of the DGCL Under FBCA sec.607.0831, a
LIABILITY OF DIRECTORS provides that a corporation may director is not personally liable
AND OFFICERS: include in its certificate of for monetary damages to the
incorporation a provision corporation or any other person
limiting or eliminating the for any statement, vote,
liability of its directors to the decision, or failure to act,
corporation and its stockholders regarding corporate management or
for monetary damages arising from policy, by a director, unless:
a breach of fiduciary duty, (1) the director breached or
except for: (1) a breach of the failed to perform his duties as
duty of loyalty to the director and such breach or
corporation or its stockholders; failure to perform constitutes:
(2) acts or omissions not in good (A) a violation of criminal law,
faith unless the
81
ARGUSS DYCOM
STOCKHOLDER RIGHTS SHAREHOLDER RIGHTS
or which involve intentional director had reasonable cause to
misconduct or a knowing violation believe his or her conduct was
or law; (3) payment of a dividend lawful or had no reasonable cause
or the repurchase or redemption to believe his or her conduct was
of stock in violation of Delaware unlawful; (B) a transaction in
law; (4) or any transaction from which he or she derived improper
which the director derived an personal benefit; (C) an unlawful
improper personal benefit. distribution; (D) in a derivative
suit, conscious disregard for the
Arguss' certificate of best interests of the
incorporation limits the personal corporation, or willful
liability of its directors and misconduct; or (E) in a suit
officers to the full extent other than a derivative suit,
allowed under Delaware law. recklessness or an act or
omission which was committed in
bad faith with malicious purpose
or in a manner exhibiting wanton
and willful disregard of human
rights, safety, or property.
Dycom's articles of
incorporation, as amended, and
by-laws, as amended, are silent
with respect to limitation of
personal liability of directors
and officers.
INDEMNIFICATION OF Under sec.145 of the DGCL, a Under FBCA sec.607.0850, a
DIRECTORS AND OFFICERS: corporation may indemnify corporation has the power to
directors and officers (1) for indemnify directors and officers
actions taken in good faith and (1) for actions taken in good
in a manner they reasonably faith and in a manner they
believed to be in, or not opposed reasonably believed to be in, or
to, the best interest of the not opposed to, the best interest
corporation; and (2) with respect of the corporation; and (2) with
to any criminal proceeding where respect to any criminal
they had no reasonable cause to proceeding where they had no
believe that their conduct was reasonable cause to believe that
unlawful. their conduct was unlawful.
In addition, sec.145 of the DGCL In addition, FBCA sec. 607.0850
provides that a corporation may provides that a corporation may
advance to a director or officer advance to a director or officer
expenses incurred in defending expenses incurred in defending
any action upon receipt of an any action upon receipt of an
undertaking by the director or undertaking by or on behalf of
officer to repay the amount such director or officer to repay
advanced if it is ultimately such amount if he or she is
determined that he or she is not ultimately found not to be
entitled to indemnification. entitled to indemnification.
Arguss' bylaws provide for Dycom's by-laws, as amended,
indemnification of its directors provide for indemnification of
and officers to the full extent its directors, officers,
permitted by the DGCL. employees and agents to the full
extent permitted by the FBCA.
SUPER-MAJORITY VOTING Except as provided by its In addition to provisions in its
REQUIREMENTS: stockholder rights agreement, shareholder rights plan, Dycom
Arguss does not have any requires an affirmative vote of
super-majority voting at least
requirements.
82
ARGUSS DYCOM
STOCKHOLDER RIGHTS SHAREHOLDER RIGHTS
80% of the voting power of all
the shares of capital stock in
order to amend the provisions of
the articles of incorporation, as
amended, concerning the number of
board members, voting
requirements for board members,
removal of board members,
business combinations and written
consents of shareholders.
BUSINESS COMBINATIONS: Under sec.203 of the DGCL, the Under sec.607.0901 of the FBCA,
business combination statute of certain transactions, including,
the DGCL, a corporation is without limitation, a merger,
prohibited from engaging in any consolidation, certain sales of
business combination with an assets, certain sales of shares,
interested stockholder who, a liquidation or a dissolution,
together with affiliates or involving a corporation and a 10%
associates, owns, or who became shareholder (an interested
an affiliate or associate of the shareholder) generally must be
corporation and within a three approved by two-thirds of the
year period did own, 15% or more outstanding shares other than
of the corporation's voting stock those shares owned by the 10%
for a three year period following shareholder. These requirements
the time the stockholder became do not apply if: (a) the business
an interested stockholder, except combination has been approved by
under specified circumstances. a majority of the disinterested
directors; or (b) the 10%
The provisions of sec.203 of the shareholder has been the
DGCL do not apply to a beneficial owner of at least 80%
corporation if, subject to of the outstanding shares for at
specified requirements, the least five years before the
certificate of incorporation or announcement date; or (c) the 10%
bylaws of the corporation contain shareholder is the owner of at
a provision expressly electing least 90% of the voting shares,
not to be governed by the excluding any acquired through a
provisions of the statute or the transaction not approved by a
corporation does not have voting majority of the disinterested
stock listed on a national directors; or (d) the
securities exchange, authorized consideration paid to the holders
for quotation on an inter-dealer of acquired shares is at least
quotation system of a registered equal to certain fair price
national securities association criteria.
or held of record by more than
2,000 stockholders. A corporation may opt out of
these provisions through a
Arguss has not opted out of this charter amendment adopted before
Delaware law provision in its January 1, 1989, or a charter or
certificate of incorporation or bylaw amendment approved by a
bylaws. majority of the outstanding
shares not owned by the 10%
shareholder. A shareholder-
approved amendment will not be
effective for 18 months after its
passage. If a corporation has
opted out, it may opt back in
with the approval of two-thirds
of the outstanding shares not
held by the
83
ARGUSS DYCOM
STOCKHOLDER RIGHTS SHAREHOLDER RIGHTS
10% shareholder.
Dycom has not opted out of this
provision.
APPRAISAL RIGHTS: Section 262 of the DGCL provides Section 607.1302 of the FBCA
for appraisal rights under provides for dissenters' rights,
certain circumstances, as with certain exceptions, in the
outlined in Annex D of this event of certain extraordinary
prospectus. transactions. Florida law
specifically provides that,
unless a corporation's articles
of incorporation otherwise
provide, which Dycom's articles
of incorporation, as amended, do
not, a shareholder shall not have
dissenters' rights if the shares
held by the shareholder are
registered on a national
securities exchange. Dycom's
shares are registered on the New
York Stock Exchange and,
accordingly, dissenters' rights
are not currently available under
Florida law.
84
LEGAL MATTERS
The validity of the Dycom shares offered by this prospectus will be passed
upon for Dycom by Marc R. Tiller, Esq., the General Counsel and Corporate
Secretary of Dycom. Shearman & Sterling, counsel to Dycom, and Gibson, Dunn &
Crutcher LLP, special counsel to Arguss, will each deliver an opinion concerning
the material United States federal income tax consequences of the offer and the
merger.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from Dycom's Annual Report on Form 10-K for its fiscal year ended July
28, 2001 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements and schedule of Arguss as of December
31, 2000 and 1999, and for each of the years in the three-year period ended
December 31, 2000, have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
FORWARD-LOOKING STATEMENTS
This prospectus, including information included or incorporated by
reference in this document, contains certain forward-looking statements
concerning the financial condition, results of operations and business of Dycom
following the consummation of its proposed acquisition of Arguss, the
anticipated financial and other benefits of the proposed acquisition and Dycom's
plans and objectives following the proposed acquisition, including, without
limitation, statements relating to the cost savings expected to result from the
proposed acquisition, anticipated results of operations of the combined company
following the proposed acquisition, projected earnings per share of the combined
company following the proposed acquisition and the restructuring charges
estimated to be incurred in connection with the proposed acquisition. Generally,
the words "will," "may," "should," "continue," "believes," "expects," "intends,"
"anticipates" or similar expressions identify forward-looking statements.
These forward-looking statements involve certain risks and uncertainties.
Factors that could cause actual results to differ materially from those
contemplated by the forward-looking statements include, among others, the
following factors:
- costs or difficulties related to the integration of the technologies,
businesses and employees of Dycom and Arguss may be greater than
expected,
- operating results following the proposed acquisition may be lower than
expected,
- changing relationships with customers, suppliers or strategic partners,
- competition among companies in our industry may increase significantly,
- general economic conditions, whether nationally or in the market areas in
which Dycom and Arguss conduct business, may be less favorable than
expected,
- legislation or regulatory changes may adversely affect the businesses in
which Dycom and Arguss are engaged,
- adverse changes may occur in the securities markets,
- unanticipated expenditures, or
- cost savings expected to result from the proposed acquisition may not be
fully realized or realized within the expected time frame.
See "Where You Can Find More Information About Dycom and Arguss" beginning
on page 5.
85
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
DYCOM AND PURCHASER
DIRECTORS AND EXECUTIVE OFFICERS OF DYCOM INDUSTRIES, INC.
Listed in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the directors and
executive officers of Dycom. Each person identified below is a United States
citizen. The principal business address of Dycom and the business address of
each person identified below is Dycom Industries, Inc., Suite 500, 4440 PGA
Boulevard, Palm Beach Gardens, Florida 33410.
DYCOM INDUSTRIES, INC. DIRECTORS: PRESENT PRINCIPAL OCCUPATION OR
NAME AGE EMPLOYMENT; MATERIAL POSITION HELD DURING THE PAST FIVE YEARS
---- --- -----------------------------------------------------------------
Steven E. Nielsen........... 38 Director of Dycom since 1996. Chairman of Dycom since November
27, 2000. President and Chief Executive Officer of Dycom since
March 1999 and Vice President from February 26, 1996 to August
26, 1996. Director of SBA Communications Corporation (operator of
wireless communications infrastructure) since November 2001.
Joseph M. Schell............ 55 Director of Dycom since April 1999. Independent business
consultant since December 17, 2001. Chairman of Global
Technology, Investment Banking, Merrill Lynch & Co. (financial
management and advisory company) from February 3, 2000 to
November 30, 2001 (although he may be considered an employee
until February 2002). Consultant to Banc of America Securities
LLC (formerly Nationsbanc Montgomery Securities LLC) (full
service investment bank and brokerage firm with principal offices
in San Francisco, New York and Charlotte) from March 1999 to
January 2000 and Senior Managing Director and Director of
Investment Banking from May 1985 to March 1999. Director of Good
Guys, Inc. (specialty retailer of consumer entertainment
electronics), July 1999 to September 2001. Director of
Sanmina-SCI Corporation (contract manufacturer serving a segment
of the electronic manufacturing services market), October 1999 to
present.
Anthony G. Werner........... 45 Director of Dycom since January 2001. Senior Vice President and
Chief Technology Officer, Liberty Media Corporation (corporation
that provides, acquires, and distributes entertainment and
informational programming services, as well as electronic
retailing services, through subsidiaries and affiliates) since
September 2001. Executive Vice President, Strategic Technologies
of Qwest Services Corporation (internet-based data, voice, image
and multimedia communications corporation) from June 2001 to
September 2001. Director and Chief Executive Officer, Aurora
Networks (manufacturer of advanced, next-generation optical
transport systems for broadband networks that support the
convergence of digital broadband, voice, video, and data
applications) from October 2000 to June 2001. Executive Vice
President and Chief Technical Officer, AT&T Broadband (formerly
TCI) (provider of broadband services and deliverer of high speed
cable, internet digital cable and digital phone services) from
July 1994 to October 2000. Director of Navic Networks (technology
service provider of data collection and distribution services to
network operators) since December 2000. Director of Net2phone
(internet protocol (IP) telephony company that develops and
markets technology and services for IP voice and e-commerce
solutions for IP networks) since December 2000. Director of
Pacific Broadband Communications, Inc. (developer of cable-modem
termination systems and chips for such termination systems) from
December 2000 to January 1, 2002. Director of Diversinet
(security software product company that develops, markets and
distributes PKI security solutions that provide for the secure
transmission of data over wireless networks and devices) since
November 1998.
DYCOM INDUSTRIES, INC. DIRECTORS: PRESENT PRINCIPAL OCCUPATION OR
NAME AGE EMPLOYMENT; MATERIAL POSITION HELD DURING THE PAST FIVE YEARS
---- --- -----------------------------------------------------------------
Ronald P. Younkin........... 59 Director of Dycom since November 1975. President and Chief
Executive Officer of Greenlawn Mobile Home Sales, Inc. (company
engaged in sales and service of manufactured homes) since July
1959.
Kristina J. Johnson......... 44 Director of Dycom since November 2001. Dean and Professor, School
of Engineering, Department of Electrical and Computer
Engineering, Duke University since July 1999. Chief Technical
Officer and Founder, ColorLink, Incorporated (privately held
company based in Boulder, Colorado that develops and markets
color modulation and color control optical technology for high
resolution electronic projection systems) from April 1995 to July
1999. Professor, Electrical and Computer Engineering Department,
University of Colorado, Boulder from May 1994 to June 1999.
Director of Mineral Technologies (resource and technology based
organization that develops and provides performance enhancing
minerals for the paper, steel, polymer, health care, and other
manufacturing industries on a worldwide basis) since May 2000.
Director, ColorLink, Incorporated since April 1995.
DYCOM INDUSTRIES, INC. EXECUTIVE OFFICERS: PRESENT PRINCIPAL OCCUPATION OR
NAME AGE EMPLOYMENT; MATERIAL POSITION HELD DURING THE PAST FIVE YEARS
---- --- --------------------------------------------------------------------------
Richard L. Dunn............. 52 Senior Vice President and Chief Financial Officer of Dycom since January
2000. Vice President of Finance and Chief Financial Officer of Avborne,
Inc. (privately held company engaged in commercial aviation maintenance),
from April 1994 to April 1998. Vice President of Finance and Chief
Financial Officer, Perry Ellis International (international marketer of
apparel) from April 1994 to April 1998.
Timothy R. Estes............ 47 Executive Vice President and Chief Operations Officer of Dycom since
November 2001. President, Ansco & Associates, Inc., a wholly owned
subsidiary of Dycom, from August 1997 to November 2001 and continuously
employed by Ansco & Associates from 1993 to 2001.
Dennis P. O'Brien........... 43 Vice President and Director of Corporate Development of Dycom since
December 2000. Senior Director of Finance and Corporate Controller,
Henkels & McCoy (a privately held telecommunications contractor), from
1988 to 2000.
Marc R. Tiller.............. 32 General Counsel and Corporate Secretary of Dycom since August 1998.
Attended law school from June 1995 to May 1998 and served as a Claims
Representative for Florida Farm Bureau Insurance Company during the four
prior years.
I-2
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
Listed in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the directors and
executive officers of Purchaser. Each person identified below is a United States
citizen. The principal business address of Purchaser and the business address of
each person identified below is Troy Acquisition Corp. c/o Dycom Industries,
Inc., Suite 500, 4440 PGA Boulevard, Palm Beach Gardens, Florida 33410.
PURCHASER'S DIRECTORS AND EXECUTIVE OFFICERS: PRESENT PRINCIPAL OCCUPATION
NAME AGE OR EMPLOYMENT; MATERIAL POSITION HELD DURING THE PAST FIVE YEARS
---- --- --------------------------------------------------------------------------
Steven E. Nielsen........... 38 President and Chief Executive Officer since January 4, 2002. Director of
Dycom since 1996. Chairman of Dycom since November 27, 2000. President and
Chief Executive Officer of Dycom since March 1999 and Vice President from
February 26, 1996 to August 26, 1996. Director of SBA Communications
Corporation (operator of wireless communications infrastructure) since
November 2001.
Richard L. Dunn............. 52 Vice President, Treasurer and Assistant Secretary since January 4, 2002.
Senior Vice President and Chief Financial Officer of Dycom since January
2000. Vice President of Finance and Chief Financial Officer of Avborne,
Inc. (privately held company in commercial aviation maintenance), from
April 1994 to April 1998. Vice President of Finance and Chief Financial
Officer, Perry Ellis International (international marketer of apparel)
from April 1994 to April 1998.
Marc R. Tiller.............. 32 Vice President, Assistant Treasurer and Secretary since January 4, 2002.
General Counsel and Corporate Secretary of Dycom since August 1998.
Attended law school from June 1995 to May 1998 and served as a Claims
Representative for Florida Farm Bureau Insurance Company during the four
prior years.
I-3
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
DYCOM INDUSTRIES, INC.,
TROY ACQUISITION CORP.
AND
ARGUSS COMMUNICATIONS, INC.
DATED AS OF
JANUARY 7, 2002
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions.................................... A-5
ARTICLE II
THE OFFER
SECTION 2.01 The Offer...................................... A-9
SECTION 2.02 Company Action................................. A-10
SECTION 2.03 Directors...................................... A-11
ARTICLE III
THE MERGER
SECTION 3.01 The Merger..................................... A-12
SECTION 3.02 Effective Time; Closing........................ A-12
SECTION 3.03 Effect of the Merger........................... A-13
SECTION 3.04 Certificate of Incorporation; By-Laws.......... A-13
SECTION 3.05 Directors and Officers......................... A-13
ARTICLE IV
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 4.01 Conversion of Securities....................... A-13
SECTION 4.02 Exchange of Certificates....................... A-14
SECTION 4.03 Stock Transfer Books........................... A-16
SECTION 4.04 Company Stock Options.......................... A-16
SECTION 4.05 No Appraisal Rights............................ A-16
SECTION 4.06 Parent Rights Plan............................. A-17
SECTION 4.07 Affiliates..................................... A-17
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 5.01 Organization and Qualification; Subsidiaries... A-17
SECTION 5.02 Certificate of Incorporation and By-Laws....... A-17
SECTION 5.03 Capitalization................................. A-18
SECTION 5.04 Authority Relative to This Agreement and the
Stockholders' Agreement................................... A-18
SECTION 5.05 No Conflict; Required Filings and Consents..... A-19
SECTION 5.06 Permits; Compliance............................ A-19
SECTION 5.07 SEC Filings; Financial Statements.............. A-20
SECTION 5.08 Information to Be Supplied..................... A-21
SECTION 5.09 Absence of Certain Changes or Events........... A-21
SECTION 5.10 Absence of Litigation.......................... A-21
SECTION 5.11 Employee Benefit Plans......................... A-21
SECTION 5.12 Labor and Employment Matters................... A-23
SECTION 5.13 Property and Leases............................ A-24
A-2
PAGE
----
SECTION 5.14 Intellectual Property.......................... A-24
SECTION 5.15 Taxes.......................................... A-25
SECTION 5.16 Environmental Matters.......................... A-26
SECTION 5.17 Company Rights Agreement....................... A-26
SECTION 5.18 Material Contracts............................. A-26
SECTION 5.19 Insurance...................................... A-27
SECTION 5.20 Board Approval; Vote Required.................. A-28
SECTION 5.21 Opinion of Advisor............................. A-28
SECTION 5.22 Brokers........................................ A-28
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 6.01 Corporate Organization......................... A-28
SECTION 6.02 Certificate of Incorporation and By-Laws....... A-28
SECTION 6.03 Capitalization................................. A-29
SECTION 6.04 Authority Relative to This Agreement and the
Stockholders' Agreement................................... A-29
SECTION 6.05 No Conflict; Required Filings and Consents..... A-29
SECTION 6.06 SEC Filings; Financial Statements.............. A-30
SECTION 6.07 Information to Be Supplied..................... A-31
SECTION 6.08 Absence of Litigation.......................... A-31
SECTION 6.09 Absence of Certain Changes or Events........... A-31
SECTION 6.10 No Vote Required............................... A-31
SECTION 6.11 Operations of Merger Sub....................... A-31
SECTION 6.12 Tax Matters.................................... A-31
SECTION 6.13 Brokers........................................ A-32
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 7.01 Conduct of Business by the Company Pending the
Merger.................................................... A-32
SECTION 7.02 Conduct of Business by Parent Pending the
Merger.................................................... A-33
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.01 Company Stockholder Meeting.................... A-34
SECTION 8.02 Preparation of Merger Registration Statement
and Proxy Statement/Prospectus............................ A-34
SECTION 8.03 Access to Information; Confidentiality......... A-36
SECTION 8.04 No Solicitation of Transactions................ A-36
SECTION 8.05 Employee Benefits Matters...................... A-37
SECTION 8.06 Directors' and Officers' Indemnification and
Insurance................................................. A-37
SECTION 8.07 Notification of Certain Matters................ A-38
SECTION 8.08 Company Affiliates............................. A-38
SECTION 8.09 Further Action; Reasonable Best Efforts........ A-38
SECTION 8.10 Plan of Reorganization......................... A-39
SECTION 8.11 Merger Sub..................................... A-39
SECTION 8.12 Letters of Accountants......................... A-39
A-3
PAGE
----
SECTION 8.13 NYSE Listing................................... A-40
SECTION 8.14 Public Announcements........................... A-40
SECTION 8.15 Transfer Tax................................... A-40
SECTION 8.16 The Company Rights Agreement................... A-40
SECTION 8.17 Employment Agreements.......................... A-40
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01 Conditions to the Obligations of Each Party.... A-40
SECTION 9.02 Conditions to the Obligations of Parent and
Merger Sub................................................ A-41
SECTION 9.03 Conditions to the Obligations of the Company... A-42
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01 Termination................................... A-42
SECTION 10.02 Effect of Termination......................... A-44
SECTION 10.03 Payment of Certain Fees....................... A-44
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01 Non-Survival of Representations and
Warranties................................................ A-46
SECTION 11.02 Notices....................................... A-46
SECTION 11.03 Severability.................................. A-46
SECTION 11.04 Entire Agreement; Assignment.................. A-47
SECTION 11.05 Parties in Interest........................... A-47
SECTION 11.06 Specific Performance.......................... A-47
SECTION 11.07 Governing Law................................. A-47
SECTION 11.08 Waiver of Jury Trial.......................... A-47
SECTION 11.09 Headings...................................... A-47
SECTION 11.10 Counterparts.................................. A-47
Annex I -- Conditions of the Offer
Exhibit A -- Form of Affiliate Letter
A-4
AGREEMENT AND PLAN OF MERGER, dated as of January 7, 2002 (this
"Agreement"), among DYCOM INDUSTRIES, INC., a Florida corporation ("Parent"),
TROY ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and ARGUSS COMMUNICATIONS, INC., a Delaware corporation
(the "Company").
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), Parent and the Company will enter into a business combination
transaction pursuant to which Merger Sub will merge with and into the Company
(the "Merger");
WHEREAS, in furtherance of such transaction and as part of an integrated
plan it is proposed that Merger Sub shall make an offer (the "Offer") to
exchange shares of Parent Common Stock (as defined below) for all issued and
outstanding shares of Company Common Stock (as defined below), including the
associated Company Rights (as defined below), in accordance with the terms and
conditions set forth in this Agreement;
WHEREAS, the Board of Directors of the Company (the "Company Board") has
(i) determined that the Merger is consistent with and in furtherance of the
long-term business strategy of the Company and fair to, and in the best
interests of, the Company and its stockholders and has approved and adopted this
Agreement and declared its advisability and approved the Merger and the other
transactions contemplated by this Agreement and (ii) has recommended the
approval and adoption of this Agreement by the stockholders of the Company;
WHEREAS, the Board of Directors of Parent (the "Parent Board") has
determined that the Merger is consistent with and in furtherance of the
long-term business strategy of Parent and fair to, and in the best interests of,
Parent and its stockholders and has approved and adopted this Agreement and
approved the Merger and the other transactions contemplated by this Agreement;
WHEREAS, as a condition and as an inducement to Parent's willingness to
enter into this Agreement, Parent, Merger Sub, the Company and certain
stockholders of the Company (the "Stockholders") have entered into a
Stockholders' Agreement, dated as of the date hereof (the "Stockholders'
Agreement"), that sets forth certain obligations of the Stockholders;
WHEREAS, for federal income tax purposes, the Merger is intended to qualify
as a reorganization under the provisions of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and that this Agreement
shall constitute a plan of reorganization;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows.
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. (a) For purposes of this Agreement:
"Acceptance Date" means the date on which Merger Sub accepts for exchange
all shares of Company Common Stock validly tendered and not withdrawn pursuant
to the Offer.
"affiliate" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified person.
"beneficial owner", with respect to any Company Common Stock, has the
meaning ascribed to such term under Rule 13d-3(a) of the Exchange Act.
"business day" means any day on which the principal offices of the SEC in
Washington, D.C. are open to accept filings, or, in the case of determining a
date when any payment is due, any day on which banks are not required or
authorized to close in The City of New York.
A-5
"Company Common Stock" means the Company's common stock, par value $.01 per
share, including the Company Rights associated therewith.
"Company Material Adverse Effect" means any event, circumstance, change,
occurrence, fact or effect that, individually or in the aggregate with all other
events, circumstances, changes, occurrences, facts and effects, is or is
reasonably likely to be materially adverse to (i) the business, condition
(financial or otherwise), assets, liabilities or results of operations of the
Company and the Subsidiaries taken as a whole or (ii) the ability of the Company
to consummate the transactions contemplated by this Agreement; provided,
however, that the foregoing clause (i) shall not include any event,
circumstance, occurrence, fact, change or effect resulting from (x) changes in
general economic conditions or changes in securities markets in general, (y)
general changes in the industries in which the Company and the Subsidiaries
operate, except those events, circumstances, changes, occurrences, facts or
effects that adversely affect the Company and its subsidiaries to a greater
extent than they affect other entities operating in such industries or (z) the
public announcement or pendency of the transactions contemplated hereby.
"Company Rights" means the right associated with each share of Company
Common Stock to purchase one one-hundredth of a share of the Company's
Cumulative Participating Preferred Stock, par value $.01 per share.
"Company Stockholder Approval" means the approval of this Agreement at the
Company Stockholder Meeting by a majority of all votes entitled to be cast at
the Company Stockholder Meeting in accordance with the DGCL and Company's
Certificate of Incorporation.
"Company Stock Options" means the options, whether or not exercisable and
whether or not vested, outstanding at the Effective Time under the Company Stock
Option Plan.
"Company Stock Option Plan" means the Company's 1991 Stock Option Plan, as
amended.
"control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, or as trustee or executor,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, as trustee or
executor, by contract or credit arrangement or otherwise.
"Environmental Laws" means any United States federal, state, local or
non-United States law, regulation, ordinance, rule, code, order or other
requirement or rule of law now in effect, relating to (i) releases or threatened
releases of Hazardous Substances or materials containing Hazardous Substances;
(ii) the manufacture, handling, transport, use, treatment, storage or disposal
of Hazardous Substances or materials containing Hazardous Substances; or (iii)
pollution or protection of the environment or natural resources.
"Fully Diluted Basis" means after taking into account all currently
outstanding shares of Company Common Stock and assuming the exercise of all
options, warrants, convertible securities and similar rights (other than, unless
exercisable, the Company Rights) and the issuance of all shares of Company
Common Stock that the Company is obligated to issue thereunder.
"Hazardous Substances" means (i) those substances defined in or regulated
under the following United States federal statutes and their state counterparts
and all regulations thereunder: the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking
Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and
Rodenticide Act and the Clean Air Act; (ii) petroleum and petroleum products,
including crude oil and any fractions thereof; (iii) polychlorinated biphenyls,
asbestos and radon; and (iv) any substance, material or waste defined or
regulated as toxic or hazardous or as a pollutant, contaminant or waste pursuant
to any Environmental Law.
"Intellectual Property" means (i) United States, non-United States, and
international patents, patent applications and statutory invention
registrations, (ii) trademarks, service marks, trade dress, logos, trade names,
corporate names and other source identifiers, and registrations and applications
for registration
A-6
thereof, (iii) copyrightable works, copyrights, and registrations and
applications for registration thereof, and (iv) confidential and proprietary
information, including trade secrets and know-how.
"Parent Common Stock" means Parent's common stock, par value $.33 1/3 per
share, including Parent Rights associated therewith.
"Parent Material Adverse Effect" means any event, circumstance, change,
occurrence, fact or effect that, individually or in the aggregate with all other
events, circumstances, changes, occurrences, facts and effects, is or is
reasonably likely to be materially adverse to (i) the business, condition
(financial or otherwise), assets, liabilities or results of operations of Parent
and its subsidiaries taken as a whole or (ii) the ability of Parent to
consummate the transactions contemplated by this Agreement; provided, however,
that the foregoing clause (i) shall not include any event, circumstance, change,
occurrence, fact or effect resulting from (x) changes in general economic
conditions or changes in securities markets in general, (y) general changes in
the industries in which Parent and its subsidiaries operate, except those
events, circumstances, changes, occurrences, facts or effects that adversely
affect Parent and its subsidiaries to a materially greater extent than they
affect other entities operating in such industries or (z) the public
announcement or pendency of the transactions contemplated hereby.
"Parent Rights" means the right associated with each share of Parent Common
Stock to purchase one ten-thousandth of a share of Parent's Series A Preferred
Stock, par value $1.00 per share.
"person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association or entity or government, political subdivision, agency or
instrumentality of a government.
"Proxy Statement/Prospectus" means the proxy statement/prospectus included
in the Merger Registration Statement relating to the Company Stockholder
Meeting.
"Significant Employee" means Rainer H. Bosselmann, H. Haywood Miller, III,
Arthur F. Trudel, Jr., Kim Reid, Mike Fitzpatrick, Mike Herbel, Randy Pierce,
Phil Amos, Jamie Fitzgerald, Matt Alldredge, Kevin Schenck, Steve Burrows, Terry
Klein, Mike Rakoz, Dan Appelquist and William Almond.
"subsidiary" or "subsidiaries" of the Company, the Surviving Corporation,
Parent or any other person means an affiliate controlled by such person,
directly or indirectly, through one or more intermediaries.
"Taxes" means any and all taxes, fees, levies, duties, tariffs, imposts and
other charges of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any Governmental Authority or taxing authority, including, without limitation:
taxes or other charges on or with respect to income, franchise, windfall or
other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation or
net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value-added or gains taxes; license, registration and
documentation fees; and customers' duties, tariffs and similar charges.
"Trading Day" means any day on which securities are traded on the NYSE.
(b) The following terms have the meanings set forth in the Sections set
forth below:
DEFINED TERM LOCATION OF DEFINITION
------------ ----------------------
Action...................................................... ss. 5.10
Advisor..................................................... ss. 2.02(a)
Agreement................................................... Preamble
Blue Sky Laws............................................... ss. 5.05(b)
Certificate of Merger....................................... ss. 3.02
Certificates................................................ ss. 4.01(a)
Closing..................................................... ss. 3.02
A-7
DEFINED TERM LOCATION OF DEFINITION
------------ ----------------------
Code........................................................ Recitals
Company..................................................... Preamble
Company Affiliate........................................... ss. 8.08
Company Balance Sheet....................................... ss. 5.07(c)
Company Board............................................... Recitals
Company Disclosure Schedule................................. Article V
Company Licensed Intellectual Property...................... ss. 5.14(c)
Company Owned Intellectual Property......................... ss. 5.14(b)
Company Permits............................................. ss. 5.06
Company Preferred Stock..................................... ss. 5.03
Company Recommendation...................................... ss. 8.01
Company Rights Agreement.................................... ss. 5.03
Company SEC Reports......................................... ss. 5.07(a)
Company Stockholder Meeting................................. ss. 8.01
Competing Transaction....................................... ss. 8.04(c)
Confidentiality Agreement................................... ss. 8.03(b)
Continuing Directors........................................ ss. 2.03(a)
DGCL........................................................ Recitals
Effective Time.............................................. ss. 3.02
Environmental Permits....................................... ss. 5.16
ERISA....................................................... ss. 5.11(a)
Exchange Act................................................ ss. 5.07(a)
Exchange Agent.............................................. ss. 4.02(a)
Exchange Fund............................................... ss. 4.02(a)
Exchange Ratio.............................................. ss. 2.01(a)
Expenses.................................................... ss. 10.03(e)
GAAP........................................................ ss. 5.07(b)
Governmental Authority...................................... ss. 5.05(b)
HSR Act..................................................... ss. 5.05(b)
Initial Expiration Date..................................... ss. 2.01(a)
IRS......................................................... ss. 5.11(a)
Law......................................................... ss. 5.05(a)
Liens....................................................... ss. 5.13(b)
Material Contracts.......................................... ss. 5.18(a)
Material Subsidiary......................................... ss. 5.01(c)
Merger...................................................... Recitals
Merger Registration Statement............................... ss. 6.07(a)
Merger Sub.................................................. Preamble
Merger Sub Common Stock..................................... ss. 4.01(c)
Minimum Condition........................................... ss. 2.01(a)
Multiemployer Plan.......................................... ss. 5.11(b)
Multiple Employer Plan...................................... ss. 5.11(b)
NYSE........................................................ ss. 4.02(e)
Offer....................................................... Recitals
A-8
DEFINED TERM LOCATION OF DEFINITION
------------ ----------------------
Offer Documents............................................. ss. 2.01(b)
Offer Registration Statement................................ ss. 2.01(b)
Order....................................................... ss. 9.01(c)
Parent...................................................... Preamble
Parent Balance Sheet........................................ ss. 6.06(c)
Parent Board................................................ Recitals
Parent Disclosure Schedule.................................. Article VI
Parent Preferred Stock...................................... ss. 6.03(a)
Parent SEC Reports.......................................... ss. 6.06(a)
Parent Stock Option Plans................................... ss. 6.03(a)
Permitted Liens............................................. ss. 5.13(b)
Representatives............................................. ss. 8.03(a)
Schedule 14D-9.............................................. ss. 2.02(b)
Schedule TO................................................. ss. 2.01(b)
SEC......................................................... ss. 5.07(a)
Securities Act.............................................. ss. 5.07(a)
Stockholders................................................ Recitals
Stockholders' Agreement..................................... Recitals
Subsidiary.................................................. ss. 5.01(a)
Superior Proposal........................................... ss. 8.04(d)
Surviving Corporation....................................... ss. 3.01
Termination Date............................................ ss. 10.01(d)
Termination Fee............................................. ss. 10.03(a)
Third Party Acquisition Event............................... ss. 10.03(c)
Transactions................................................ ss. 5.01(a)
Transfer Taxes.............................................. ss. 8.15
ARTICLE II
THE OFFER
SECTION 2.01 The Offer. (a) Provided that this Agreement shall not have
been terminated in accordance with Article IX and provided that none of the
events set forth in Annex I hereto shall have occurred or be continuing, unless
otherwise agreed by Parent and the Company, as soon as practicable after the
public announcement of the execution of this Agreement, Parent shall cause
Merger Sub to commence the Offer to exchange all of the outstanding shares of
Company Common Stock for the right to receive from Merger Sub pursuant to the
Offer 0.3333 fully paid and nonassessable shares of Parent Common Stock for each
share of Company Common Stock (the "Exchange Ratio"). The Offer shall be subject
only to (1) the condition that there shall be validly tendered in accordance
with the terms of the Offer, prior to the expiration of the Offer, and not
withdrawn, at least a number of shares of Company Common Stock that represents a
majority of the shares of Company Common Stock outstanding on a Fully Diluted
Basis (the "Minimum Condition") and (2) the other conditions set forth in Annex
I hereto. Merger Sub expressly reserves the right to waive any of the conditions
to the Offer and to make any change in the terms of or conditions to the Offer;
provided that no change may be made that changes the form of consideration
payable in the Offer, decreases the consideration payable in the Offer, reduces
the maximum number of shares of Company Common Stock to be purchased in the
Offer, imposes conditions to the Offer in addition to those set forth in Annex I
or makes any other change which is adverse to the
A-9
holders of Company Common Stock. Notwithstanding the foregoing, and subject to
Section 10.01(d), without the consent of the Company, Merger Sub shall have the
right to extend the Offer (i) beyond the scheduled expiration date, which shall
initially be 20 business days following the commencement of the Offer (the
"Initial Expiration Date"), if, at the Initial Expiration Date or any extension
thereof, any of the conditions to the Offer shall not have been satisfied or
waived, until such conditions are satisfied or waived, (ii) for any period
required by any rule, regulation, interpretation or position of the SEC or the
staff thereof applicable to the Offer or any period required by applicable law
or (iii) for an aggregate period of not more than 10 business days beyond the
latest applicable date that would otherwise be permitted under clause (i) or
(ii) of this sentence, if, as of such date, all of the conditions to the Offer
have been satisfied or waived, but the number of shares of Company Common Stock
validly tendered and not withdrawn pursuant to the Offer equals more than 50%,
but less than 90%, of the outstanding shares of Company Common Stock on a Fully
Diluted Basis. In the event that Merger Sub is unable to consummate the Offer on
the Initial Expiration Date due to the failure of the Minimum Condition to be
satisfied, Parent shall cause Merger Sub to, unless this Agreement is terminated
pursuant to Article X, extend the Offer on one or more occasions and set
subsequent scheduled expiration dates until the Minimum Condition has been
satisfied; provided, however, that nothing contained herein shall require Parent
to cause Merger Sub to extend the Offer for more than, in the aggregate, 15
business days after the Initial Expiration Date. Subject to the foregoing and
upon the terms and subject to the conditions of the Offer, Parent shall cause
Merger Sub to accept for payment and pay for, as promptly as practicable after
the expiration of the Offer, all shares of Company Common Stock validly tendered
and not withdrawn pursuant to the Offer.
(b) As soon as reasonably practicable on the date of commencement of the
Offer, Parent shall, and Parent shall cause Merger Sub to, file with the SEC (i)
a Tender Offer Statement on Schedule TO (together with any amendments or
supplements thereto, the "Schedule TO") relating to the Offer and (ii) a
registration statement on Form S-4 to register the offer and sale of Parent
Common Stock pursuant to the Offer (the "Offer Registration Statement"). The
Offer Registration Statement will include a prospectus containing the
information required under Rule 14d-4(b) under the Exchange Act (together, the
Schedule TO, the Offer Registration Statement and such documents included
therein pursuant to which the Offer will be made, together with any amendments
and supplements thereto, the "Offer Documents"). Each of the Company and Parent
shall use their reasonable efforts to have the Offer Registration Statement
declared effective under the Securities Act as promptly as practicable after the
filing thereof with the SEC and to keep the Offer Registration Statement
effective as long as necessary to complete the Offer. Each of Parent, Merger Sub
and the Company agree promptly to correct any information provided by it for use
in the Offer Documents if and to the extent that such information shall have
become false or misleading in any material respect and to supplement the Offer
Documents to include any information that shall become necessary to include in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Parent shall, and Parent shall cause Merger Sub
to, take all steps necessary to cause the Schedule TO and the Offer Registration
Statement as so corrected to be filed with the SEC and the other Offer Documents
as so corrected to be, at such time as reasonably agreed by Parent and the
Company, disseminated to holders of shares of Company Common Stock, in each case
as and to the extent required by applicable federal securities laws. The Company
and its counsel shall be given an opportunity to review and comment on the Offer
Documents prior to their being filed with the SEC or disseminated to the holders
of shares of Company Common Stock. Parent shall, and Parent shall cause Merger
Sub to, provide the Company and its counsel with any comments Parent and Merger
Sub or their counsel may receive from the SEC or its staff with respect to the
Offer Documents promptly after the receipt of such comments and shall provide
the Company and its counsel an opportunity to participate in the response of
Parent or Merger Sub to such comments.
SECTION 2.02 Company Action. (a) The Company hereby approves of and
consents to the Offer and represents that the Company Board, at a meeting duly
called and held, has (i) determined that this Agreement, the Stockholders'
Agreement and the transactions contemplated hereby and thereby, including the
Offer and the Merger, are fair to and in the best interests of the Company and
its stockholders, (ii) approved, adopted and declared advisable this Agreement,
the Stockholders' Agreement and the
A-10
transactions contemplated hereby and thereby, including the Offer and the
Merger, in accordance with the DGCL, including, without limitation, Section 203
thereof, and (iii) resolved to recommend acceptance of the Offer and approval
and adoption of this Agreement by the Company's stockholders. The Company
further represents that Allen & Company Incorporated ("Advisor") has delivered
to the Company Board its written opinion as of the date hereof that the
consideration to be received by the holders of shares of Company Common Stock
pursuant to the terms of the Offer and the Merger is fair from a financial point
of view to such holders. The Company hereby consents to the inclusion in the
Offer Documents of the recommendation of the Company Board and the Company shall
not withdraw or modify such recommendation in any manner adverse to the Parent
or Merger Sub, unless the Company Board otherwise determines (based on a
majority vote of the Company Board in its good faith judgment) that such
withdrawal or modification is necessary to comply with its fiduciary duties to
stockholders under applicable law after receiving advice from outside counsel
(who may be the Company's regularly engaged independent legal counsel).
(b) The Company hereby agrees to file with the SEC as soon as practicable
on the day that the Offer is commenced and disseminate to holders of shares of
Company Common Stock, in each case as and to the extent required by applicable
federal securities laws, a Solicitation/Recommendation Statement on Schedule
14D-9 (together with any amendments or supplements thereto, the "Schedule
14D-9") that, subject to Section 8.04, shall reflect the recommendations of the
Company Board referred to in Section 2.02(a) above. Parent and its counsel shall
be given an opportunity to review and comment on the Schedule 14D-9 prior to its
being filed with the SEC or disseminated to holders of shares of Company Common
Stock. The Company agrees to provide Parent and its counsel with any comments
that the Company or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments and
shall provide Parent and its counsel with an opportunity to participate in the
response of the Company to such comments. Each of the Company and Parent agrees
promptly to correct any information provided by it for use in the Schedule 14D-9
if and to the extent that it shall have become false or misleading in any
material respect and to supplement the Schedule 14D-9 to include any information
that shall become necessary to include in order to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Company agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and to be, at such time as reasonably agreed
by Parent and the Company, disseminated to holders of shares of Company Common
Stock, in each case as and to the extent required by applicable federal
securities laws.
(c) The Company shall promptly furnish Parent with mailing labels
containing the names and addresses of all record holders of shares of Company
Common Stock and with security position listings of shares of Company Common
Stock held in stock depositories, each as of a recent date, together with all
other available listings and computer files containing names, addresses and
security position listings of record holders and beneficial owners of shares of
Company Common Stock as Parent may reasonably request. The Company shall
promptly furnish Parent with such additional information, including, without
limitation, updated listings and computer files of stockholders, mailing labels
and security position listings, and such other assistance in disseminating the
Offer Documents to holders of shares of Company Common Stock as Parent may
reasonably request. Subject to the requirements of applicable law, and except
for such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, Parent shall hold in
confidence the information contained in such labels, listings and files, shall
use such information only in connection with the Transactions, and, if this
Agreement shall be terminated in accordance with Section 10.01, shall deliver to
the Company all copies of such information then in their possession.
SECTION 2.03 Directors. (a) Effective upon the acceptance for payment of
any shares of Company Common Stock pursuant to the Offer, Parent shall be
entitled to designate the number of directors, rounded up to the next whole
number, on the Company Board that equals the product of (i) the total number of
directors on the Company Board (giving effect to the election of any additional
directors pursuant to this Section 2.03) and (ii) the percentage that the number
of shares of Company Common Stock beneficially owned by Parent and/or Merger Sub
(including shares of Company Common Stock
A-11
accepted for payment) bears to the total number of shares of Company Common
Stock outstanding, and the Company shall take all action necessary to cause
Parent's designees to be elected or appointed to the Company Board, including
increasing the number of directors, and seeking and accepting resignations of
incumbent directors. At such time, the Company will also use its best efforts to
cause individuals designated by Parent to constitute the number of members,
rounded up to the next whole number, on (i) each committee of the Company Board
and (ii) each board of directors of each Subsidiary of the Company identified by
Parent (and each committee thereof) that represents the same percentage as such
individuals represent on the Company Board, in each case only to the extent
permitted by applicable law. Notwithstanding the provisions of this Section
2.03, the parties hereto shall use their respective best efforts to ensure that
at least two of the members of the Company Board shall, at all times prior to
the Effective Time, be directors of the Company who were directors of the
Company on the date hereof (the "Continuing Directors"); provided that if there
shall be in office fewer than two Continuing Directors for any reason, the
Company Board shall cause a person designated by the remaining Continuing
Director to fill such vacancy who shall be deemed to be a Continuing Director
for all purposes of this Agreement, or if no Continuing Directors then remain,
the other directors of the Company then in office shall designate two persons to
fill such vacancies who will not be officers or employees or affiliates of the
Company, Parent or Merger Sub or any of their respective Subsidiaries and such
persons shall be deemed to be Continuing Directors for all purposes of this
Agreement.
(b) The Company's obligations to appoint Parent's designees to the Company
Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all actions, and shall
include in the Schedule 14D-9 such information with respect to the Company and
its officers and directors, as Section 14(f) and Rule 14f-1 require in order to
fulfill its obligations under this Section, so long as Parent shall have
provided to the Company on a timely basis in writing and be solely responsible
for any information with respect to itself, Merger Sub and their respective
nominees, officers, directors and affiliates required by Section 14(f) and Rule
14f-1.
(c) Following the election or appointment of Parent's designees pursuant to
Section 2.03(a) and until the Effective Time, the approval of a majority of the
Continuing Directors shall be required to authorize any termination of this
Agreement by the Company, any amendment of this Agreement requiring action by
the Company Board, any extension of time for performance of any obligation or
action hereunder by Parent or Merger Sub, any waiver of compliance with any of
the agreements or conditions contained herein for the benefit of the Company and
any other action of the Company hereunder which adversely affects the holders of
shares of Company Common Stock (other than Parent or Merger Sub) in any respect.
ARTICLE III
THE MERGER
SECTION 3.01 The Merger. At the Effective Time, upon the terms and
subject to the conditions of this Agreement and in accordance with the DGCL,
Merger Sub shall be merged with and into the Company. As a result of the Merger,
the separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation").
SECTION 3.02 Effective Time; Closing. As promptly as practicable after
the satisfaction or, if permissible, waiver of the conditions set forth in
Article IX, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger or certificate of ownership and merger (the
"Certificate of Merger"), with the Secretary of State of the State of Delaware,
in such form as is required by, and executed in accordance with, the relevant
provisions of the DGCL (the date and time of such filing of the Certificate of
Merger (or such later time as may be agreed by each of the parties hereto and
specified in the Certificate of Merger) being the "Effective Time"). Immediately
prior to such filing of the Certificate of Merger, a closing of the Merger (the
"Closing") shall be held at the offices of Shearman & Sterling, 599 Lexington
Avenue, New York, New York 10022, or such other place as the parties shall
agree, for the
A-12
purpose of confirming the satisfaction or waiver, as the case may be, of the
conditions set forth in Article IX.
SECTION 3.03 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all of the property, rights, privileges, powers and franchises
of the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of each
of the Company and Merger Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 3.04 Certificate of Incorporation; By-Laws. (a) At the Effective
Time and subject to Section 8.06(a) hereof, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation; provided,
however, that, at the Effective Time, Article I of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read as follows:
"The name of the corporation is Arguss Communications, Inc.".
(b) Unless otherwise determined by Parent prior to the Effective Time, and
subject to Section 8.06(a) hereof, at the Effective Time, the By-Laws of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the By-Laws
of the Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such By-Laws.
SECTION 3.05 Directors and Officers. At the Effective Time, the directors
of Merger Sub immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, each such director to hold office in
accordance with the DGCL, the Certificate of Incorporation and By-Laws of the
Surviving Corporation, and the officers of the Company immediately prior to the
Effective Time shall, subject to the applicable provisions of the Certificate of
Incorporation and By-Laws of the Surviving Corporation, be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified or until their earlier death,
resignation or approval.
ARTICLE IV
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 4.01 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Merger Sub, the
Company or the holders of any of the following securities:
(a) Conversion of Company Common Stock. Except as provided in clause
(b) of this Section 4.01, each share of Company Common Stock outstanding
immediately prior to the Effective Time shall be converted into and shall
be canceled in exchange for the right to receive from Parent the same
number of shares of Parent Common Stock as exchanged for each share of
Company Common Stock in the Offer. At the Effective Time, all Company
Common Stock shall no longer be outstanding, shall be canceled and retired
and shall cease to exist, and each certificate (a "Certificate") that
formerly represented such shares of Company Common Stock shall thereafter
represent only the right to receive the number of whole shares of Parent
Common Stock into which the Company Common Stock represented by such
Certificate is converted pursuant to this Section 4.01(a) and the right, if
any, to receive pursuant to Section 4.02(e) cash in lieu of a fractional
share of Parent Common Stock and any dividend or distribution pursuant to
Section 4.02(c), in each case without interest.
(b) Cancellation of Treasury Stock and Stock Owned by Parent and
Merger Sub. All shares of Company Common Stock owned by the Company as
treasury stock and any shares of Company Common Stock owned by Parent,
Merger Sub or any direct or indirect wholly owned subsidiary of Parent or
Merger Sub immediately prior to the Effective Time shall, by virtue of the
Merger, and
A-13
without any action on the part of the holder thereof, no longer be
outstanding, shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
(c) Capital Stock of Merger Sub. Each share of common stock, par value
$.01 per share, of Merger Sub ("Merger Sub Common Stock") outstanding
immediately prior to the Effective Time shall be converted into and become
one validly issued, fully paid and nonassessable share of common stock, par
value $.01 per share, of the Surviving Corporation.
SECTION 4.02 Exchange of Certificates. (a) Exchange Agent. Parent shall
deposit, or shall cause to be deposited, with a bank or trust company that may
be designated by Parent and is reasonably satisfactory to the Company (the
"Exchange Agent"), for the benefit of the holders of Company Common Stock, for
exchange in accordance with this Article IV through the Exchange Agent,
certificates representing the shares of Parent Common Stock issuable pursuant to
Section 4.01 as of the Effective Time, and cash, from time to time as required
to make payments in lieu of any fractional shares pursuant to Section 4.02(e)
(such cash and certificates for shares of Parent Common Stock, together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the shares of Parent Common Stock contemplated to be
issued pursuant to Section 4.01 out of the Exchange Fund. Except as contemplated
by Section 4.02(g) hereof, the Exchange Fund shall not be used for any other
purpose.
(b) Exchange Procedures. As promptly as practicable after the Effective
Time, Parent shall instruct the Exchange Agent to mail to each person who was,
at the Effective Time, a holder of record of Company Common Stock entitled to
receive Parent Common Stock pursuant to Section 4.01(a): (i) a letter of
transmittal (which shall be in customary form and shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent) and (ii)
instructions for use in effecting the surrender of the Certificates pursuant to
such letter of transmittal. Upon surrender to the Exchange Agent of a
Certificate for cancellation, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, and
such other documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock
which such holder has the right to receive in respect of the Company Common
Stock formerly represented by such Certificate (after taking into account all
Company Common Stock then held by such holder), cash in lieu of any fractional
shares of Parent Common Stock to which such holder is entitled pursuant to
Section 4.02(e) and any dividends or other distributions to which such holder is
entitled pursuant to Section 4.02(c), and the Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of Company
Common Stock that is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Parent Common Stock,
cash in lieu of any fractional shares of Parent Common Stock to which such
holder is entitled pursuant to Section 4.02(e) and any dividends or other
distributions to which such holder is entitled pursuant to Section 4.02(c) may
be issued to a transferee if the Certificate representing such Company Common
Stock is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
4.02, each Certificate shall be deemed at all times after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing shares of Parent Common Stock, cash in lieu of any fractional
shares of Parent Common Stock to which such holder is entitled pursuant to
Section 4.02(e) and any dividends or other distributions to which such holder is
entitled pursuant to Section 4.02(c).
(c) Distributions with Respect to Unexchanged Shares of Parent Common
Stock. No dividends or other distributions declared or made after the Effective
Time with respect to the Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional shares shall be paid to any such holder
pursuant to Section 4.02(e), until the holder of such Certificate shall
surrender such Certificate. Subject to the effect of escheat, tax or other
applicable Laws, following surrender of any such Certificate, there shall be
paid to the holder of the Certificates
A-14
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) promptly, the amount of any cash payable with respect to a
fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 4.02(e) and the amount of dividends or other distributions
with a record date after the Effective Time and theretofore paid with respect to
such whole shares of Parent Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions, with a record date after
the Effective Time but prior to surrender and a payment date occurring after
surrender, payable with respect to such whole shares of Parent Common Stock.
(d) No Further Rights in Company Common Stock. All shares of Parent Common
Stock issued upon the surrender for exchange of Certificates in accordance with
the terms hereof (including any cash paid pursuant to Section 4.02(c) or (e))
shall be deemed to have been issued at the Effective Time in full satisfaction
of all rights pertaining to such Company Common Stock.
(e) No Fractional Shares. No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any other rights of a stockholder of Parent. Each holder
of a fractional share interest shall be paid an amount in cash (without
interest) equal to the product obtained by multiplying (i) such fractional share
interest to which such holder (after taking into account all fractional share
interests then held by such holder) would otherwise be entitled by (ii) the
average of the per share closing prices on the New York Stock Exchange ("NYSE")
of shares of Parent Common Stock during the ten consecutive trading days ending
on (and including) the third trading day immediately preceding the date of the
Effective Time. As promptly as practicable after the determination of the amount
of cash, if any, to be paid to holders of fractional share interests, the
Exchange Agent shall so notify Parent, and Parent shall deposit such amount with
the Exchange Agent and shall cause the Exchange Agent to forward payments to
such holders of fractional share interests subject to and in accordance with the
terms of Sections 4.02(b) and (c).
(f) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted to
reflect appropriately the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Common Stock), extraordinary cash dividends,
reorganization, recapitalization, reclassification, combination, exchange of
shares or other like change with respect to Parent Common Stock or Company
Common Stock occurring on or after the date hereof and prior to the Effective
Time.
(g) Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of the Company Common Stock for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of the Company Common Stock who have not theretofore complied with this
Article IV shall thereafter look only to Parent for the shares of Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock to which
they are entitled pursuant to Section 4.02(e) and any dividends or other
distributions with respect to the Parent Common Stock to which they are entitled
pursuant to Section 4.02(c). Any portion of the Exchange Fund remaining
unclaimed by holders of Company Common Stock five years after the Effective Time
(or such earlier date which is immediately prior to such time as such amounts
would otherwise escheat to or become property of any government entity) shall,
to the extent permitted by applicable law, become the property of Parent free
and clear of any claims or interest of any person previously entitled thereto.
(h) No Liability. Neither Parent nor the Surviving Corporation shall be
liable to any holder of Company Common Stock for any such Company Common Stock
(or dividends or distributions with respect thereto), or cash delivered to a
public official pursuant to any abandoned property, escheat or similar Law.
(i) Withholding Rights. Each of the Surviving Corporation and Parent shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Company Common Stock such amounts as
it is required to deduct and withhold with respect to the making of such payment
under the Code, or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by the Surviving Corporation or Parent, as
the case may be, such withheld
A-15
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the Company Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or Parent, as the case may be.
(j) 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 Parent or the Surviving Corporation, the posting by such person of a
bond, in such reasonable amount as Parent or the Surviving Corporation may
direct, as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the whole number of shares of Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock to which the
holders thereof are entitled pursuant to Section 4.02(e) and any dividends or
other distributions to which the holders thereof are entitled pursuant to
Section 4.02(c).
SECTION 4.03 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. From and after the Effective Time, the holders of
Certificates representing Company Common Stock outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Company
Common Stock, except as otherwise provided in this Agreement or by Law. On or
after the Effective Time, any Certificates properly presented to the Exchange
Agent or Parent for any reason shall be converted into shares of Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock to which the
holders thereof are entitled pursuant to Section 4.02(e) and any dividends or
other distributions to which the holders thereof are entitled pursuant to
Section 4.02(c).
SECTION 4.04 Company Stock Options. (a) At or immediately prior to the
Effective Time, each Company Stock Option, whether or not vested or exercisable,
that is not exercised prior to the Effective Time shall, by virtue of the Merger
and without any further action on the part of any holder thereof, be assumed by
Parent and deemed to constitute an option (each, a "Parent Option") to acquire,
on the same terms and conditions as were applicable under such Company Stock
Option (subject to Section 3.04(b)), the same number of shares of Parent Common
Stock as the holder of such Company Stock Option would have been entitled to
receive pursuant to Section 4.01 of this Agreement had such holder exercised
such Company Stock Option in full immediately prior to the Effective Time
(rounded to the nearest whole number), at a price per share (rounded down to the
nearest whole cent) equal to (x) the aggregate exercise price for the shares of
Company Common Stock otherwise purchasable pursuant to such Company Stock Option
divided by (y) the number of whole shares of Parent Common Stock purchasable
pursuant to the Parent Option in accordance with the foregoing. The other terms
of each such Company Stock Option, and the Company Stock Option Plan, shall
continue to apply in accordance with their terms.
(b) At or prior to the Effective Time, Parent shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of the Parent Options. As soon as
practicable after the Effective Time, Parent shall file a registration statement
on Form S-8, with respect to the shares of Parent Common Stock subject to such
Parent Options and shall use commercially reasonable efforts to maintain the
effectiveness of such registration statement (and maintain the current status of
the prospectus or prospectuses contained therein) for so long as such Parent
Options remaining outstanding. With respect to those individuals who subsequent
to the Merger will be subject to the reporting requirements under Section 16(a)
of the Exchange Act, Parent shall administer the Company Stock Option Plan in a
manner consistent with the exemptions provided by Rule 16(b)(3) promulgated
under the Exchange Act.
SECTION 4.05 No Appraisal Rights. In accordance with Section 262 of the
DGCL, no appraisal rights shall be available to holders of shares of Company
Common Stock in connection with the Offer or, other than pursuant to Section
262(b)(3) of the DGCL, the Merger.
A-16
SECTION 4.06 Parent Rights Plan. Each person entitled to receive shares
of Parent Common Stock pursuant to this Article shall receive together with such
shares of Parent Common Stock the number of Parent Rights per share of Parent
Common Stock equal to the number of Parent Rights associated with one share of
Parent Common Stock at the Effective Time.
SECTION 4.07 Affiliates. Notwithstanding anything to the contrary herein,
no Parent Common Stock shall be delivered to a person who may be deemed an
"affiliate" of the Company in accordance with Section 8.08 hereof for purposes
of Rule 145 under the Securities Act until such person has executed and
delivered to Parent an executed copy of the affiliate letter contemplated in
Section 8.08 hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Parent and Merger Sub to enter into this Agreement, the
Company, except as disclosed in the Company's disclosure schedule delivered
concurrently with the delivery of this Agreement (the "Company Disclosure
Schedule"), hereby represents and warrants to Parent and Merger Sub as follows:
SECTION 5.01 Organization and Qualification; Subsidiaries. (a) Each of
the Company and each subsidiary of the Company (each a "Subsidiary") is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite corporate power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals are not reasonably likely to
prevent or materially delay consummation of the Merger or any of the
transactions contemplated by this Agreement or the Stockholders' Agreement
(collectively, the "Transactions") or otherwise prevent or materially delay the
Company from performing its material obligations under this Agreement or the
Stockholders' Agreement and are not reasonably likely to have, individually or
in the aggregate, a Company Material Adverse Effect. The Company and each
Subsidiary is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing as are not reasonably likely to
prevent or materially delay consummation of the Merger or otherwise prevent or
materially delay the Company from performing its material obligations under this
Agreement or the Stockholders' Agreement and are not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
(b) A true and complete list of all the Subsidiaries, together with the
jurisdiction of organization of each Subsidiary and the percentage of the
outstanding capital stock or other equity interests of each Subsidiary owned by
the Company and each other Subsidiary, is set forth in Section 5.01(b) of the
Company Disclosure Schedule. The Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity, other than
the equity interest that it owns in each Subsidiary.
(c) Each Subsidiary that is material to the business, financial condition
or results of operations of the Company and the Subsidiaries taken as a whole is
so identified in Section 5.01(c) of the Company Disclosure Schedule and is
referred to herein as a "Material Subsidiary".
SECTION 5.02 Certificate of Incorporation and By-Laws. The Company has
heretofore furnished or made available to Parent a complete and correct copy of
the Certificate of Incorporation and the By-Laws or equivalent organizational
documents, each as amended to date, of the Company and each Material Subsidiary.
Such Certificates of Incorporation, By-Laws or equivalent organizational
documents are in full force and effect. Neither the Company nor any Subsidiary
is in violation of any of the provisions of its Certificate of Incorporation,
By-Laws or equivalent organizational documents.
A-17
SECTION 5.03 Capitalization. (a) The authorized capital stock of the
Company consists of (i) 30,000,000 shares of Company Common Stock and (ii)
1,000,000 shares of preferred stock, par value $.01 per share ("Company
Preferred Stock"). As of December 21, 2001, (i) 14,519,944 shares of Company
Common Stock are issued and outstanding, all of which are validly issued, fully
paid and nonassessable, (ii) no shares of Company Common Stock are held in the
treasury of the Company, (iii) no shares of Company Common Stock are held by the
Subsidiaries and (iv) 3,426,767 shares of Company Common Stock are reserved for
future issuance pursuant to outstanding employee stock options granted pursuant
to the Company Stock Option Plan. As of December 21, 2001, no shares of Company
Preferred Stock are issued and outstanding. Except as set forth in this Section
5.03 or the Stockholders' Agreement, and except for the Company Rights issued
pursuant to the rights agreement, dated as of November 7, 2001 (the "Company
Rights Agreement"), between the Company and Continental Stock Transfer and Trust
Company, as rights agent, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of the Company or any Subsidiary or obligating the
Company or any Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any Subsidiary. Section 5.03(a) of the
Company Disclosure Schedule sets forth the following information with respect to
each Company Stock Option outstanding as of the date of this Agreement: (i) the
name and employment division of the optionee; (ii) the number of shares of
Company Common Stock subject to such Company Stock Option; (iii) the exercise
price of such Company Stock Option; (iv) the date on which such Company Stock
Option was granted; (v) the applicable vesting schedule; (vi) the date on which
such Company Stock Option expires; and (vii) whether the exercisability of such
option will be accelerated in any way by the transactions contemplated by this
Agreement, and indicates the extent of acceleration. All shares of Company
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. There are
no outstanding contractual obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
any capital stock of any Subsidiary or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
Subsidiary or any other person. There are no commitments or agreements of any
character to which the Company is bound obligating the Company to accelerate the
vesting of any Company Stock Option as a result of the Merger. All outstanding
shares of Company Common Stock, all outstanding Company Stock Options, and all
outstanding shares of capital stock of each subsidiary of the Company have been
issued and granted in compliance with (i) all applicable securities laws and
other applicable Laws (as defined below) and (ii) all requirements set forth in
applicable contracts.
(b) Each outstanding share of capital stock of each Subsidiary is duly
authorized, validly issued, fully paid and nonassessable, and, except as set
forth in Section 5.03(b) of the Company Disclosure Schedule, each such share is
owned by the Company or another Subsidiary free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Company's or any Subsidiary's voting rights, charges and
other encumbrances of any nature whatsoever.
SECTION 5.04 Authority Relative to This Agreement and the Stockholders'
Agreement. The Company has all necessary corporate power and authority to
execute and deliver this Agreement and the Stockholders' Agreement, subject to
any required approval and adoption of this Agreement by a majority of the
outstanding shares of Company Common Stock, to perform its obligations hereunder
and thereunder and to consummate the Transactions. The execution and delivery of
this Agreement and the Stockholders' Agreement by the Company and the
consummation by the Company of the Transactions have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement and the
Stockholders' Agreement or to consummate the Transactions (other than, with
respect to the Merger, the approval and adoption of this Agreement by the
holders of a majority of the then-outstanding shares of Company Common Stock, if
and to the extent required by applicable law, and the filing and recordation of
appropriate merger documents as required by the DGCL). Each of this Agreement
and the Stockholders' Agreement has been duly and validly executed and delivered
by the Company and, assuming the due authorization, execution and
A-18
delivery by Parent and Merger Sub, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles. The Company Board has approved this Agreement, the
Stockholders' Agreement and the Transactions and such approvals are sufficient
so that the restrictions on business combinations set forth in Section 203(a) of
the DGCL shall not apply to the Merger or any of the Transactions. To the
knowledge of the Company, no other state takeover statute is applicable to the
Merger or the other transactions contemplated by this Agreement.
SECTION 5.05 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement and the Stockholders' Agreement by the Company
will not, (i) conflict with or violate the Certificate of Incorporation or By-
Laws or any equivalent organizational documents of the Company or any
Subsidiary, (ii) assuming that all consents, approvals, authorizations and other
actions described in Section 5.05(b) have been obtained and all filings and
obligations described in Section 5.05(b) have been made, conflict with or
violate any United States or non-United States statute, law, ordinance,
regulation, rule, code, executive order, injunction, judgment, decree or other
order ("Law") applicable to the Company or any Subsidiary or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) except as set forth in Section 5.05(a) of the Company Disclosure Schedule,
result in any breach of or constitute a default (or an event which, with notice
or lapse of time or both, would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of the
Company or any Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which are not
reasonably likely to prevent or materially delay consummation of the Merger or
otherwise prevent or materially delay the Company from performing its material
obligations under this Agreement and the Stockholders' Agreement and are not
reasonably likely, individually or in the aggregate, to have a Company Material
Adverse Effect.
(b) Except as set forth in Section 5.05(b) of the Company Disclosure
Schedule, the execution and delivery of this Agreement and the Stockholders'
Agreement by the Company do not, and the performance of this Agreement and the
Stockholders' Agreement by the Company will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any United States
federal, state, county, local or non-United States government, governmental,
regulatory or administrative authority, agency, instrumentality or commission or
any court, tribunal, judicial or arbitral body or supranational authority (a
"Governmental Authority"), except (i) for applicable requirements, if any, of
the Exchange Act, state securities or "blue sky" laws ("Blue Sky Laws") and
state takeover laws, the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and filing and recordation of appropriate merger documents as required by
the DGCL, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, are not
reasonably likely to prevent or materially delay consummation of the Merger, or
otherwise prevent or materially delay the Company from performing its material
obligations under this Agreement and the Stockholders' Agreement, and are not
reasonably likely, individually or in the aggregate, to have a Company Material
Adverse Effect.
SECTION 5.06 Permits; Compliance. Each of the Company and the
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Authority necessary for each of the
Company or the Subsidiaries to own, lease and operate its properties or to carry
on its business as it is now being conducted, except franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Authority the failure of
which to have, or the suspension or cancellation of which are not reasonably
likely to prevent or materially delay consummation of the Merger or otherwise
prevent or materially delay the Company from performing its material obligations
under this Agreement and the Stockholders' Agreement and are not reasonably
likely,
A-19
individually or in the aggregate, to have a Company Material Adverse Effect (the
"Company Permits"). As of the date of this Agreement, no suspension or
cancellation of any of the Company Permits is pending or, to the knowledge of
the Company, threatened. Except as set forth in Section 5.06 of the Company
Disclosure Schedule, neither the Company nor any Subsidiary is in conflict with,
or in default, breach or violation of, (a) any Law applicable to the Company or
any Subsidiary or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (b) any note, bond, mortgage, indenture,
contract, agreement, lease, license, Company Permit, franchise or other
instrument or obligation to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or any property or asset of the Company or
any Subsidiary is bound, except for any such conflicts, defaults, breaches or
violations that are not reasonably likely to prevent or materially delay
consummation of the Merger or otherwise prevent or materially delay the Company
from performing its material obligations under this Agreement and the
Stockholders' Agreement and are not reasonably likely, individually or in the
aggregate, to have a Company Material Adverse Effect.
SECTION 5.07 SEC Filings; Financial Statements. (a) The Company has filed
all forms, reports and documents required to be filed by it with the Securities
and Exchange Commission (the "SEC") since December 31, 1998, and has heretofore
delivered or made available to Parent, in the form filed with the SEC, (i) its
Annual Reports on Form 10-K for the fiscal years ended December 31, 1998, 1999
and 2000, respectively, (ii) its Quarterly Reports on Form 10-Q for the periods
ended March 31, 2001, June, 30, 2001 and September 30, 2001, (iii) all proxy
statements relating to the Company's meetings of stockholders (whether annual or
special) held since December 31, 1997 and (iv) all other forms, reports and
other registration statements (other than Quarterly Reports on Form 10-Q not
referred to in clause (ii) above filed by the Company with the SEC since
September 30, 2001 (the forms, reports and other documents referred to in
clauses (i), (ii), (iii) and (iv) above being, collectively, the "Company SEC
Reports"). The Company SEC Reports (i) complied in all material respects as to
form with either the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and the rules and regulations promulgated
thereunder, and (ii) did not, at the time they were filed, or, if amended, as of
the date of such amendment, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No Subsidiary is required to file
any periodic reports with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Company SEC Reports was prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) and each fairly presents, in all material
respects, the consolidated financial position, results of operations and cash
flows of the Company and its consolidated Subsidiaries as at the respective
dates thereof and for the respective periods indicated therein, except as
otherwise noted therein (subject, in the case of unaudited statements, to normal
and recurring year-end adjustments which have not had, and are not reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect).
(c) Except as and to the extent set forth on the consolidated balance sheet
of the Company and the consolidated Subsidiaries as at December 31, 2000,
including the notes thereto (the "Company Balance Sheet") and the Company SEC
Reports filed prior to the date hereof and except as set forth in Section
5.07(c) of the Company Disclosure Schedule, neither the Company nor any
Subsidiary has any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), except for liabilities and obligations,
incurred in the ordinary course of business consistent with past practice since
December 31, 2000, which are not reasonably likely to prevent or materially
delay consummation of the Transactions or otherwise prevent or materially delay
the Company from performing its material obligations under this Agreement or the
Stockholders' Agreement and are not reasonably likely, individually or in the
aggregate, to have a Company Material Adverse Effect.
A-20
(d) The Company has heretofore furnished or made available to Parent
complete and correct copies of all amendments and modifications that have not
been filed by the Company with the SEC to all agreements, documents and other
instruments that previously had been filed by the Company with the SEC and are
currently in effect.
SECTION 5.08 Information to Be Supplied. (a) Each of the Schedule 14D-9
and the Proxy Statement/Prospectus and the other documents required to be filed
by the Company with the SEC in connection with the Offer, the Merger and the
other transactions contemplated hereby will comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act, as
the case may be. Each of the Schedule 14D-9 and the Proxy Statement/Prospectus
and the other documents required to be filed by the Company with the SEC in
connection with the Offer, the Merger and the other transactions contemplated
hereby and any of the information supplied or to be supplied by the Company or
its Subsidiaries or their representatives for inclusion or incorporation by
reference in the Merger Registration Statement and the Offer Documents, will
not, on the date of its filing or mailing or, in the case of the Proxy
Statement/Prospectus, at the time of the Company Stockholder Meeting or, in the
case of the Offer Documents, at the time the Offer is commenced or at the
Acceptance Date, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
(b) Notwithstanding the foregoing provisions of this Section 5.08, no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference in the Offer Documents, Merger Registration
Statement, the Proxy Statement/Prospectus or the Schedule 14D-9 based on
information supplied by or on behalf of Parent or Merger Sub for inclusion or
incorporation by reference therein or based on information which is not made in
or incorporated by reference in such documents but which should have been
disclosed pursuant to Section 6.07.
SECTION 5.09 Absence of Certain Changes or Events. Since December 31,
2000, except as set forth in Section 5.09 of the Company Disclosure Schedule or
the Company SEC Reports filed prior to the date hereof, or as expressly
contemplated by this Agreement (a) the Company and the Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice, (b) there has not been any Company Material
Adverse Effect, and (c) none of the Company or any Subsidiary has taken any
action that, if taken after the date of this Agreement, would constitute a
breach of any of the covenants set forth in Section 7.01.
SECTION 5.10 Absence of Litigation. Except as set forth in Section 5.10
of the Company Disclosure Schedule, there is no litigation, suit, claim, action,
proceeding or investigation (an "Action") pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary, or any property or
asset of the Company or any Subsidiary, before any Governmental Authority that
(a) individually or in the aggregate, has had or is reasonably likely to have a
Company Material Adverse Effect or (b) seeks to materially delay or prevent the
consummation of the Merger. Neither the Company nor any Subsidiary nor any
material property or asset of the Company or any Subsidiary is subject to any
continuing order of, consent decree, settlement agreement or other similar
written agreement with, or, to the knowledge of the Company, continuing
investigation by, any Governmental Authority, or any order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority that
would prevent or materially delay consummation of the Merger or otherwise
prevent or materially delay the Company from performing its material obligations
under this Agreement or the Stockholders' Agreement or is reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect.
SECTION 5.11 Employee Benefit Plans. (a) Section 5.11(a) of the Company
Disclosure Schedule lists (i) all employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements to which the Company or any Subsidiary is a party, with respect to
which
A-21
the Company or any Subsidiary has any obligation or which are maintained,
contributed to or sponsored by the Company or any Subsidiary for the benefit of
any current or former employee, officer or director of the Company or any
Subsidiary, (ii) each employee benefit plan for which the Company or any
Subsidiary could incur liability under Section 4069 of ERISA in the event such
plan has been or were to be terminated, (iii) any plan in respect of which the
Company or any Subsidiary could incur liability under Section 4212(c) of ERISA,
and (iv) any contracts, arrangements or understandings between the Company or
any Subsidiary and any employee of the Company or any Subsidiary including,
without limitation, any contracts, arrangements or understandings relating in
any way to a sale of the Company or any Subsidiary (collectively, the "Plans").
Each Plan is in writing and the Company has furnished or made available to
Parent a true and complete copy of each Plan and has delivered to Parent a true
and complete copy of each material document, if any, prepared in connection with
each such Plan, including, without limitation, (i) a copy of each trust or other
funding arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the most recently filed Internal Revenue Service ("IRS")
Form 5500, (iv) the most recently received IRS determination letter for each
such Plan, and (v) the most recently prepared actuarial report and financial
statement in connection with each such Plan. Neither the Company nor any
Subsidiary has any express or implied commitment (i) to create, incur liability
with respect to or cause to exist any other employee benefit plan, program or
arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual, or (iii) to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Code.
(b) Except as provided in Section 5.11(b) of the Company Disclosure
Schedule, none of the Plans is a multiemployer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a single
employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for
which the Company or any Subsidiary could incur liability under Section 4063 or
4064 of ERISA (a "Multiple Employer Plan"). Except as otherwise set forth in
Section 5.11(b) of the Company Disclosure Schedule, none of the Plans (i)
provides for the payment of separation, severance, termination or similar-type
benefits to any person, (ii) obligates the Company or any Subsidiary to pay
separation, severance, termination or similar-type benefits solely or partially
as a result of any transaction contemplated by this Agreement, or (iii)
obligates the Company or any Subsidiary to make any payment or provide any
benefit as a result of a "change in control", within the meaning of such term
under Section 280G of the Code. None of the Plans provides for or promises
retiree medical, disability or life insurance benefits to any current or former
employee, officer or director of the Company or any Subsidiary.
(c) Each Plan is now and always has been operated in all material respects
in accordance with its terms and the requirements of all applicable Laws
including, without limitation, ERISA and the Code. The Company and the
Subsidiaries have performed all obligations required to be performed by them
under, are not in any respect in default under or in violation of, and have no
knowledge of any default or violation by any party to, any Plan. No Action is
pending or, to the knowledge of the Company, threatened with respect to any Plan
(other than claims for benefits in the ordinary course) and no fact or event
exists that could reasonably be expected to give rise to any such Action.
(d) Each Plan that is intended to be qualified under Section 401(a) of the
Code or Section 401(k) of the Code has timely received a favorable determination
letter from the IRS covering all of the provisions applicable to the Plan for
which determination letters are currently available that the Plan is so
qualified and each trust established in connection with any Plan which is
intended to be exempt from federal income taxation under Section 501(a) of the
Code has received a determination letter from the IRS that it is so exempt, and,
to the Company's knowledge, no fact or event has occurred since the date of such
determination letter or letters from the IRS to adversely affect the qualified
status of any such Plan or the exempt status of any such trust.
(e) There has not been any prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan that
could subject the Company or a Subsidiary to any material liability. Neither the
Company nor any Subsidiary has incurred any liability under, arising out of or
by operation of Title IV of ERISA (other than liability for premiums to the
Pension Benefit
A-22
Guaranty Corporation arising in the ordinary course), including, without
limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA, or
(ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and,
to the Company's knowledge, no fact or event exists which could reasonably be
expected to give rise to any such liability.
(f) All contributions, premiums or payments required to be made with
respect to any Plan have been made on or before their due dates. All such
contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any Governmental Authority and no
fact or event exists which could reasonably be expected to give rise to any such
challenge or disallowance.
SECTION 5.12 Labor and Employment Matters. (a) Except as set forth in
Section 5.12(a) of the Company Disclosure Schedule, (i) there are no
controversies pending or, to the knowledge of the Company, threatened between
the Company or any Subsidiary and any of their respective employees, which
controversies are reasonably likely to prevent or materially delay consummation
of the Merger or otherwise prevent or materially delay the Company from
performing its material obligations under this Agreement or are reasonably
likely, individually or in the aggregate, to have a Company Material Adverse
Effect; (ii) neither the Company nor any Subsidiary is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or any Subsidiary, nor, to the knowledge of the Company,
are there any activities or proceedings of any labor union to organize any such
employees; (iii) neither the Company nor any Subsidiary has materially breached
or otherwise materially failed to comply with any provision of any such
agreement or contract, and, to the knowledge of the Company, there are no
material grievances outstanding against the Company or any Subsidiary under any
such agreement or contract; (iv) to the knowledge of the Company, there are no
unfair labor practice complaints pending against the Company or any Subsidiary
before the National Labor Relations Board or any current union representation
questions involving employees of the Company or any Subsidiary; and (v) there is
no strike, slowdown, work stoppage or lockout, or, to the knowledge of the
Company, threat thereof, by or with respect to any employees of the Company or
any Subsidiary. The consent of the labor unions which are a party to the
collective bargaining agreements listed in Section 5.12 of the Company
Disclosure Schedule is not required to consummate the Transactions.
(b) The Company and the Subsidiaries are in compliance in all material
respects with all applicable laws relating to the employment of labor, including
those related to wages, hours, collective bargaining and the payment and
withholding of taxes and other sums as required by the appropriate Governmental
Authority and have withheld and paid to the appropriate Governmental Authority
or are holding for payment not yet due to such Governmental Authority all
material amounts required to be withheld from employees of the Company or any
Subsidiary and are not liable for any material arrears of wages, taxes,
penalties or other sums for failure to comply with any of the foregoing. Except
as set forth in Section 5.12(b) of the Company Disclosure Schedule, the Company
and the Subsidiaries have paid in full to all employees or adequately accrued
for in accordance with GAAP consistently applied all material wages, salaries,
commissions, bonuses, benefits and other compensation due to or on behalf of
such employees and there is no material claim with respect to payment of wages,
salary or overtime pay that has been asserted or is now pending or threatened
before any Governmental Authority with respect to any persons currently or
formerly employed by the Company or any Subsidiary. Neither the Company nor any
Subsidiary is a party to, or, to its knowledge, otherwise bound by, any material
consent decree with, or citation by, any Governmental Authority relating to
employees or employment practices. Except as set forth in Section 5.12(b) of the
Company Disclosure Schedule, there is no material charge or proceeding with
respect to a violation of any occupational safety or health standards that has
been asserted or is now pending or threatened with respect to the Company.
Except as set forth in Section 5.12(b) of the Company Disclosure Schedule, there
is no material charge of discrimination in employment or employment practices,
for any reason, including, without limitation, age, gender, race, religion or
other legally protected category, which has been asserted or is now pending or
threatened before the United States Equal Employment Opportunity Commission, or
any other Governmental Authority in any jurisdiction in which the Company or any
Subsidiary has employed or employ any person.
A-23
(c) All individuals who are performing or have performed consulting or
other services for the Company or any Subsidiary, whether as consultants,
independent contractors, agents or otherwise, are or were correctly classified
by the Company and each Subsidiary as either "independent contractors" or
"employees" as the case may be, and, at the Closing, will qualify for such
classification under all applicable laws; there are no pending or, to the
Company's knowledge, threatened material claims against the Company or any
Subsidiary by or on behalf of any such individual related to the classification
of such individual, or investigation, audit or other proceeding relating to such
an individual or individuals, by any Governmental Authority with respect to the
classification of such individuals; and there is no labor union representing any
such individuals or, to the Company's knowledge, any organizational effort
currently being made by or on behalf of any labor organization to organize any
such individuals. The Company is not aware that any Significant Employee of the
Company or Subsidiary is obligated under any contract or other agreement, or
subject to any judgment, decree, or order of any court or administrative agency,
that would materially conflict with the obligation of such employee to use best
efforts to promote the interests of the Company or the Subsidiary, and to the
Company's knowledge, no Significant Employee has: (i) violated or is violating
any of the material terms or conditions of any employment, non-competition, or
non-disclosure agreement between such employee and any former employee or other
third party, (ii) disclosed or may be disclosing, or utilized or may be
utilizing, any material trade secret or proprietary information or documentation
of such third party in material violation of any nondisclosure obligations
applicable to such employee, or (iii) materially interfered or may be
interfering in the employment relationship between such third party and any
employee or any former employee, and no third party has notified the Company in
writing that any claim set forth in any of the foregoing might be contemplated.
SECTION 5.13 Property and Leases. (a) Except as set forth in Section
5.13(a) of the Company Disclosure Schedule, the Company and the Subsidiaries
have good, valid and marketable title to or, in the case of leased properties
and assets, valid leasehold interest in, all their properties and assets that
are necessary to conduct their respective businesses as currently conducted,
with only such exceptions as are not reasonably likely, individually or in the
aggregate, to have a Company Material Adverse Effect.
(b) Except as set forth in Section 5.13(b) of the Company Disclosure
Schedule, each parcel of the real property owned or leased by the Company or any
Subsidiary (i) is owned or leased free and clear of all mortgages, pledges,
liens, security interests, conditional and installment sale agreements,
encumbrances, charges or other claims of third parties of any kind, including,
without limitation, any easement, right of way or other encumbrance to title, or
any option, right of first refusal, or right of first offer (collectively,
"Liens"), other than (A) Liens for current taxes and assessments not yet due,
(B) inchoate mechanics' and materialmen's Liens for construction in progress,
(C) workmen's, repairmen's, warehousemen's and carriers' Liens arising in the
ordinary course of business of the Company or such Subsidiary consistent with
past practice and (D) all Liens and other imperfections of title and
encumbrances that, individually or in the aggregate, are not reasonably likely
to have a Company Material Adverse Effect (collectively, "Permitted Liens"), and
(ii) is neither subject to any governmental decree or order to be sold nor is
being condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor, to the knowledge of the Company,
has any such condemnation, expropriation or taking been proposed.
(c) All leases of the real property leased for the use or benefit of the
Company or any Subsidiary to which the Company or any Subsidiary is a party, and
all amendments and modifications thereto, are in full force and effect and have
not been modified or amended, and there exists no default under any such lease
by the Company or any Subsidiary, nor any event which, with notice or lapse of
time or both, would constitute a default thereunder by the Company or any
Subsidiary, except as are not reasonably likely to prevent or materially delay
consummation of the Merger or otherwise prevent or materially delay the Company
from performing its material obligations under this Agreement and are not
reasonably likely, individually or in the aggregate, to have a Company Material
Adverse Effect.
SECTION 5.14 Intellectual Property. Except as are not reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect or
as listed in Section 5.14 of the Company Disclosure Schedule, (a) the conduct of
the business of the Company and the Subsidiaries as currently
A-24
conducted does not infringe upon or misappropriate the Intellectual Property
Rights of any third party, and, to the Company's knowledge, no claim has been
asserted to the Company that the conduct of the business of the Company and the
Subsidiaries as currently conducted infringes upon or may infringe upon or
misappropriates the Intellectual Property Rights of any third party; (b) with
respect to each item of Intellectual Property owned by the Company or a
Subsidiary and material to the business, financial condition or results of
operations of the Company and the Subsidiaries taken as a whole ("Company Owned
Intellectual Property"), the Company or a Subsidiary is the owner of the entire
right, title and interest in and to such Company Owned Intellectual Property and
is entitled to use such Company Owned Intellectual Property in the continued
operation of its respective business; (c) with respect to each item of
Intellectual Property licensed to the Company or a Subsidiary that is material
to the business of the Company and the Subsidiaries as currently conducted
("Company Licensed Intellectual Property"), the Company or a Subsidiary has the
right to use such Company Licensed Intellectual Property in the continued
operation of its respective business in accordance with the terms of the license
agreement governing such Company Licensed Intellectual Property; (d) to the
knowledge of the Company, the Company Owned Intellectual Property is valid and
enforceable, and has not been adjudged invalid or unenforceable in whole or in
part; (e) to the knowledge of the Company, no person is engaging in any activity
that infringes upon the Company Owned Intellectual Property; (f) to the
knowledge of the Company, each license of the Company Licensed Intellectual
Property is valid and enforceable, is binding on all parties to such license,
and is in full force and effect; (g) to the knowledge of the Company, no party
to any license of the Company Licensed Intellectual Property is in breach
thereof or default thereunder; and (h) neither the execution of this Agreement
nor the consummation of any Transaction shall adversely affect any of the
Company's rights with respect to the Company Owned Intellectual Property or the
Company Licensed Intellectual Property.
SECTION 5.15 Taxes. The Company and each of its Subsidiaries have timely
filed (or have had filed on their behalf) all United States federal, state,
local and non-United States Tax returns and reports required to be filed by each
of them and each has, within the time and in the manner prescribed by law, paid
and discharged all Taxes that have become due and payable, other than (a) such
payments as are being contested in good faith by appropriate proceedings and for
which adequate reserves have been taken and (b) such filings, payments or other
occurrences that are not reasonably likely, individually or in the aggregate, to
have a Company Material Adverse Effect. All such Tax returns and reports are
true, accurate and complete in all material respects. Neither the IRS nor any
other United States or non-United States taxing authority or agency is now
asserting or, to the knowledge of the Company, threatening to assert against the
Company or any Subsidiary any deficiency or claim for any Taxes or interest
thereon or penalties in connection therewith. Neither the Company nor any
Subsidiary has granted any waiver of any statute of limitations that is
currently in effect with respect to, or any extension of a period for the
assessment of, any Tax. The accruals and reserves for Taxes reflected in the
Company Balance Sheet are adequate to cover all Taxes accruable through such
date in accordance with GAAP. Neither the Company nor any Subsidiary has made an
election under Section 341(f) of the Code. There are no Tax liens upon any
property or assets of the Company or any of the Subsidiaries except liens for
current Taxes not yet due. Neither the Company nor any of the Subsidiaries is a
party to any agreement, understanding, or arrangement (with any person other
than the Company and/or any of the Subsidiaries) relating to allocating or
sharing of any amount of Taxes that would have a Company Material Adverse
Effect. Neither the Company nor any of the Subsidiaries has any liability for
any amount of Taxes of any person other than the Company and its Subsidiaries
under Treasury Regulation section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, or by contract that would
have a Company Material Adverse Effect. Neither the Company nor any of the
Subsidiaries has been required to include in income any adjustment pursuant to
Section 481 of the Code by reason of a voluntary change in accounting method
initiated by the Company or any of the Subsidiaries, and the IRS has not
initiated or proposed any such adjustment or change in accounting method, in
either case which adjustment or change would have a Company Material Adverse
Effect. Neither the Company nor any Subsidiary has been a "distributing
corporation" or a "controlled corporation" in a distribution intended to qualify
under Section 355(e) of the Code within the past five years. To the knowledge of
the Company, neither the
A-25
Company nor any of its affiliates has taken or agreed to take any action that
would prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code. The Company is not aware of any agreement, plan
or other circumstance that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code. This Section
5.15 is subject in its entirety to the exceptions set forth in Section 5.15 of
the Company Disclosure Schedule.
SECTION 5.16 Environmental Matters. Except as described in Section 5.16
of the Company Disclosure Schedule or as are not reasonably likely to prevent or
materially delay consummation of the Merger or otherwise prevent or materially
delay the Company from performing its material obligations under this Agreement
and are not reasonably likely, individually or in the aggregate, to have a
Company Material Adverse Effect, (a) the Company is not in violation of any
Environmental Law and has not received any written notice, demand, letter,
claim, request for information or other written communication alleging that the
Company may be in violation of, or liable under, any Environmental Law; (b) none
of the properties currently or formerly owned, leased or operated by the Company
(including, without limitation, soils and surface and ground waters) are
contaminated with any Hazardous Substance at concentrations requiring
remediation under any Environmental Law and the Company is not aware of any
facts or circumstances that could reasonably be expected to result in the
contamination by Hazardous Substances of Company properties, including, but not
limited to, migration of contaminants; (c) to the knowledge of the Company, the
Company is not liable for any off-site contamination by Hazardous Substances at
concentrations requiring remediation under any Environmental Law including,
without limitation, the offsite migration of any Hazardous Substances and the
disposal of Hazardous Substances at third-party disposal sites; (d) to the
knowledge of the Company, the Company is not actually, potentially or allegedly
liable under any Environmental Law (including, without limitation, pending or
threatened liens) and to the Company's knowledge, there are no facts or
circumstances that would reasonably be expected to give rise to any liability
under any Environmental Law; (e) the Company has all permits, licenses and other
authorizations required under any Environmental Law ("Environmental Permits")
and the Company is in compliance with its Environmental Permits; (f) none of the
properties owned or leased by the Company is listed, or to the knowledge of the
Company, proposed for listing on the "National Priorities List" or the
Comprehensive Environmental Response, Compensation and Liability Information
System under the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, or any similar state or foreign list of sites
requiring investigation or cleanup; (g) during the past three years, the Company
has not entered into or agreed to any consent decree or order and the Company is
not subject to any judgment, decree or judicial order relating to compliance
with Environmental Laws or the investigation, sampling, monitoring, treatment,
remediation, removal or cleanup of Hazardous Substances and, to the knowledge of
the Company, no investigation, litigation or other proceeding is pending or
threatened with respect thereto; (h) the Company is not an indemnitor in
connection with any claim asserted in writing to the Company by any third-party
indemnitee for any liability under any Environmental Law or relating to any
Hazardous Substances; (i) neither the execution of this Agreement nor the
consummation of the Transactions will require any investigation, remediation or
other action with respect to Hazardous Substances, or any notice to or consent
of Governmental Authorities or third parties, pursuant to any applicable
Environmental Law or Environmental Permit.
SECTION 5.17 Company Rights Agreement. The copy of the Company Rights
Agreement, including all amendments and exhibits thereto, that is set forth as
an exhibit to the Company's Form 8-K, dated as of November 7, 2001, is a
complete and correct copy thereof. The Company Board has approved an amendment
to the Company Rights Agreement, a copy of such amendment will be promptly
provided to Parent, so that neither the execution of this Agreement nor the
consummation or announcement of the Offer or the Merger will (a) cause the
Company Rights issued pursuant to the Company Rights Agreement to become
exercisable, (b) cause Parent or Merger Sub to become an Acquiring Person (as
such term is defined in the Company Rights Agreement) or (c) give rise to a
Distribution Date (as such term is defined in the Rights Agreement).
SECTION 5.18 Material Contracts. (a) Subsections (i) through (ix) of
Section 5.18 of the Company Disclosure Schedule contain a list of the following
contracts and agreements to which the
A-26
Company or any Subsidiary is a party (such contracts, agreements and
arrangements as are required to be set forth in Section 5.18(a) of the Company
Disclosure Schedule being the "Material Contracts"):
(i) each contract and agreement which is likely to involve
consideration of more than $2,000,000, in the aggregate, over the remaining
term of such contract or agreement;
(ii) all broker, distributor, dealer, manufacturer's representative,
franchise, agency, sales promotion, market research, marketing consulting
and advertising contracts and agreements to which the Company or any
Subsidiary is a party, other than sales representation agreements to which
Conceptronic, Inc. is a party that are in accordance with standard industry
practice and not material to the Company and Subsidiaries, taken as a
whole;
(iii) all management contracts (excluding contracts for employment)
and contracts with other consultants, including any contracts involving the
payment of royalties or other amounts calculated based upon the revenues or
income of the Company or any Subsidiary or income or revenues related to
any product of the Company or any Subsidiary to which the Company or any
Subsidiary is a party;
(iv) all contracts and agreements evidencing indebtedness in excess of
$1,000,000;
(v) all contracts and agreements with any Governmental Authority to
which the Company or any Subsidiary is a party and which is likely to
involve consideration of more than $500,000, in the aggregate, over the
remaining term of such contract or agreement;
(vi) all contracts and agreements that limit, or purport to limit, the
ability of the Company or any Subsidiary to compete in any line of business
or with any person or entity or in any geographic area or during any period
of time;
(vii) all contracts and agreements providing for benefits under any
Plan;
(viii) all contracts for employment required to be listed in Section
5.11 of the Company Disclosure Schedule; and
(ix) all other contracts and agreements, whether or not made in the
ordinary course of business, which are material to the Company or any
Subsidiary, the conduct of their respective businesses, or the absence of
which would prevent or materially delay consummation of the Merger or
otherwise prevent or materially delay the Company from performing its
material obligations under this Agreement or would, individually or in the
aggregate, have a Company Material Adverse Effect.
(b) Except as disclosed in Section 5.18(b) of the Company Disclosure
Schedule, or except as is not reasonably likely to prevent or materially delay
consummation of the Merger or otherwise prevent or materially delay the Company
from performing its material obligations under this Agreement or the
Stockholders' Agreement and is not reasonably likely, individually or in the
aggregate, to have a Company Material Adverse Effect, (i) each Material Contract
is a legal, valid and binding agreement, and none of the Material Contracts is
in default by its terms or has been canceled by the other party; (ii) to the
Company's knowledge, no other party is in breach or violation of, or default
under, any Material Contract; (iii) the Company and the Subsidiaries are not in
receipt of any claim of default under any such agreement; and (iv) neither the
execution of this Agreement nor the consummation of any Transaction shall
constitute a default, give rise to cancellation rights, or otherwise adversely
affect any of the Company's rights under any Material Contract. The Company has
furnished or made available to Parent true and complete copies of all Material
Contracts, including any amendments thereto.
SECTION 5.19 Insurance. (a) All material insurable risks of the Company
and the Subsidiaries in respect of the businesses of each are covered by
insurance policies to the extent set forth in Section 5.19(a) of the Company
Disclosure Schedule.
(b) Except as set forth in Section 5.19(b) of the Company Disclosure
Schedules, at no time subsequent to December 31, 1998 has the Company or any
Subsidiary (i) been denied any material insurance or indemnity bond coverage
which it has requested, (ii) made any material reduction in the scope or amount
of its insurance coverage, or (iii) received notice from any of its insurance
carriers that
A-27
any material current insurance coverage will not be available in the future
substantially on the same terms as are now in effect.
SECTION 5.20 Board Approval; Vote Required. (a) The Company Board, by
resolutions duly adopted by majority vote of those voting at a meeting duly
called and held, has duly (i) determined that this Agreement, the Stockholders'
Agreement and the transactions contemplated hereby and thereby, including the
Offer and the Merger, are fair to and in the best interests of the Company and
its stockholders, (ii) approved, adopted and declared advisable this Agreement,
the Stockholders' Agreement and the transactions contemplated hereby and
thereby, including the Offer and the Merger and in accordance with the DGCL,
including without limitation, Section 203 thereof, (iii) resolved to recommend
acceptance of the Offer and the approval and adoption of this Agreement by the
Company's stockholders at the Company Stockholder Meeting (as defined below) and
(iv) confirmed that, except for as set forth in Section 5.03(a) of the Company
Disclosure Schedule, the vesting of the incentive stock options granted by the
Company under the 1991 Stock Option Plan will not accelerate as a result of the
Merger.
(b) The only vote of the holders of any class or series of capital stock of
the Company necessary to approve this Agreement, the Merger and the other
Transactions is the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock in favor of the approval and adoption
of this Agreement.
SECTION 5.21 Opinion of Advisor. The Company has received the written
opinion of Advisor, dated the date of this Agreement, to the effect that, as of
the date of this Agreement, the consideration to be received by holders of
shares of Company Common Stock in the Offer and the Merger is fair, from a
financial point of view, to the Company's stockholders, a copy of which opinion
will be delivered to Parent promptly after the date of this Agreement.
SECTION 5.22 Brokers. No broker, finder or investment banker (other than
Advisor) is entitled to any brokerage, finder's or other fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
the Company. The Company has heretofore furnished or made available to Parent a
complete and correct copy of all agreements between the Company and Advisor
pursuant to which such firm would be entitled to any payment relating to the
Transactions.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As an inducement to the Company to enter into this Agreement, Parent and
Merger Sub, except as disclosed in the Parent's disclosure schedule delivered
concurrently with the delivery of this Agreement (the "Parent Disclosure
Schedule"), hereby, jointly and severally, represent and warrant to the Company
as follows:
SECTION 6.01 Corporate Organization. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite corporate power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals are not reasonably likely to
prevent or materially delay consummation of the Merger, or otherwise prevent or
materially delay Parent or Merger Sub from performing their material obligations
under this Agreement or the Stockholders' Agreement and are not reasonably
likely, individually or in the aggregate, to have a Parent Material Adverse
Effect.
SECTION 6.02 Certificate of Incorporation and By-Laws. Parent has
heretofore furnished to the Company a complete and correct copy of the
Certificate of Incorporation and the By-Laws of Parent and the Certificate of
Incorporation and By-Laws of Merger Sub, each as amended to date. Such
Certificates of Incorporation and By-Laws are in full force and effect. Neither
Parent nor Merger Sub is in violation of any of the provisions of its
Certificate of Incorporation or By-Laws.
A-28
SECTION 6.03 Capitalization. (a) The authorized capital stock of Parent
consists of (i) 150,000,000 shares of Parent Common Stock and (ii) 1,000,000
shares of preferred stock, par value $1.00 per share ("Parent Preferred Stock").
As of December 21, 2001, 42,926,137 shares of Parent Common Stock are issued and
outstanding, all of which are validly issued, fully paid and non-assessable and
2,427,982 shares of Parent Common Stock are reserved for future issuance
pursuant to stock options. As of the date of this Agreement, no shares of Parent
Preferred Stock are issued and outstanding. Except as set forth in this Section
6.03, the Parent Rights and stock options granted pursuant to the stock option
plans of Parent (the "Parent Stock Option Plans"), there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of Parent or Merger
Sub or obligating Parent or Merger Sub to issue or sell any shares of capital
stock of, or other equity interests in, Parent or Merger Sub. As of the date of
this Agreement, there are 2,427,982 shares of Parent Common Stock subject to
options granted pursuant to the Parent Stock Option Plans. All shares of Parent
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and non-assessable. There
are no outstanding contractual obligations of Parent or Merger Sub to
repurchase, redeem or otherwise acquire any shares of Parent Common Stock or any
capital stock of Merger Sub.
(b) The authorized capital stock of Merger Sub consists of 100 shares of
Merger Sub Common Stock, all of which are duly authorized, validly issued, fully
paid and non-assessable and free of any preemptive rights in respect thereof and
all of which are owned by Parent. Each outstanding share of capital stock of
Merger Sub is duly authorized, validly issued, fully paid and non-assessable and
each such share is owned by Parent or Merger Sub free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on Parent's or Merger Sub's voting rights, charges and other
encumbrances of any nature whatsoever, except where failure to own such shares
free and clear would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
(c) The shares of Parent Common Stock to be issued pursuant to the Merger
in accordance with Section 2.01 will, when issued, (i) be duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights created by statute, the Parent's Certificate of Incorporation or By-Laws
or any agreement to which the Parent is a party or is bound and (ii) be
registered under the Securities Act and the Exchange Act and registered or
exempt from registration under applicable Blue Sky Laws.
SECTION 6.04 Authority Relative to This Agreement and the Stockholders'
Agreement. Each of Parent and Merger Sub has all necessary corporate power and
authority to execute and deliver this Agreement and the Stockholders' Agreement,
to perform its obligations hereunder and thereunder and to consummate the
Transactions. The execution and delivery of this Agreement and the Stockholders'
Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub
of the Transactions have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of Parent or
Merger Sub are necessary to authorize this Agreement and the Stockholders'
Agreement or to consummate the Transactions (other than, with respect to the
Merger, the filing and recordation of appropriate merger documents as required
by the DGCL). Each of this Agreement and the Stockholders' Agreement has been
duly and validly executed and delivered by Parent and Merger Sub and, assuming
due authorization, execution and delivery by the Company, constitutes a legal,
valid and binding obligation of each of Parent and Merger Sub, enforceable
against each of Parent and Merger Sub in accordance with its terms, except to
the extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
SECTION 6.05 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement and the Stockholders' Agreement by
Parent and Merger Sub do not, and the performance of this Agreement and the
Stockholders' Agreement by Parent and Merger Sub will not, (i) conflict with or
violate the Certificate of Incorporation or By-Laws of either Parent or Merger
Sub, (ii) assuming that all consents, approvals, authorizations and other
actions described in Section 6.05(b) have been obtained and all filings and
obligations described in Section 6.05(b) have been made, conflict with or
violate any Law
A-29
applicable to Parent or Merger Sub or by which any property or asset of either
of them is bound or affected, or (iii) except as set forth in Section 6.05(a) of
the Parent Disclosure Schedule, result in any breach of, or constitute a default
(or an event which, with notice or lapse of time or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Parent or Merger Sub pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or Merger Sub is a
party or by which Parent or Merger Sub or any property or asset of either of
them is bound or affected, except, with respect to clauses (ii) and (iii), for
any such conflicts, violations, breaches, defaults or other occurrences which
are not reasonably likely to prevent or materially delay consummation of the
Transactions or otherwise prevent or materially delay Parent and Merger Sub from
performing their material obligations under this Agreement and the Stockholders'
Agreement and are not reasonably likely, individually or in the aggregate, to
have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement and the Stockholders'
Agreement by Parent and Merger Sub do not, and the performance of this Agreement
and the Stockholders' Agreement by Parent and Merger Sub will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except (i) for applicable requirements, if any,
of the Securities Act, the Exchange Act, Blue Sky Laws and state takeover laws,
the HSR Act, and filing and recordation of appropriate merger documents as
required by the DGCL, and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
are not reasonably likely to prevent or materially delay consummation of the
Transactions, or otherwise prevent Parent or Merger Sub from performing their
material obligations under this Agreement and the Stockholders' Agreement and
are not reasonably likely, individually or in the aggregate, to have a Parent
Material Adverse Effect.
SECTION 6.06 SEC Filings; Financial Statements. (a) Parent has filed all
forms, reports and documents required to be filed by it with the SEC since July
28, 1999 (the "Parent SEC Reports"). The Parent SEC Reports (i) complied in all
material respects as to form with either the requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and regulations
promulgated thereunder, and (ii) did not, at the time they were filed, or, if
amended, as of the date of such amendment, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Parent SEC Reports was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) and each fairly
presents, in all material respects, the consolidated financial position, results
of operations and cash flows of Parent and its consolidated subsidiaries as at
the respective dates thereof and for the respective periods indicated therein,
except as otherwise noted therein (subject, in the case of unaudited statements,
to normal and recurring year-end adjustments which have not had, and are not
reasonably likely to have, individually or in the aggregate, a Parent Material
Adverse Effect).
(c) Except as and to the extent set forth on the consolidated balance sheet
of the Parent and its consolidated subsidiaries as at July 28, 2001, including
the notes thereto (the "Parent Balance Sheet") and the Parent SEC Reports filed
prior to the date hereof and except as set forth in Section 6.06(c) of the
Parent Disclosure Schedule, neither Parent nor any of its subsidiaries has any
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise), except for liabilities and obligations, incurred in the ordinary
course of business consistent with past practice since July 28, 2001, which are
not reasonably likely to prevent or materially delay consummation of the
Transactions or otherwise prevent or materially delay Parent or the Merger Sub
from performing their respective material obligations under this Agreement or
the Stockholders' Agreement and are not reasonably likely, individually or in
the aggregate, to have a Parent Material Adverse Effect.
A-30
SECTION 6.07 Information to Be Supplied. (a) Each of the registration
statement on Form S-4 to be filed with the SEC by Parent in connection with the
issuance of Parent Common Stock in the Merger, as amended or supplemented from
time to time (as so amended and supplemented, the "Merger Registration
Statement"), the Offer Documents and the other documents required to be filed by
Parent with the SEC in connection with the Offer, the Merger and the other
transactions contemplated hereby will comply as to form, in all material
respects, with the requirements of the Exchange Act and the Securities Act, as
the case may be. Each of the Merger Registration Statement, the Offer Documents
and the other documents required to be filed by the Company with the SEC in
connection with the Offer, the Merger and the other transactions contemplated
hereby and any information supplied or to be supplied by Parent or its
subsidiaries or representations for inclusion or incorporation by reference in
the Schedule 14D-9 or the Proxy Statement/Prospectus will not, on the date of
its filing or mailing or at the time they become effective under the Securities
Act or, in the case of the Offer Registration Statement, on the dates the Offer
Registration Statement is mailed to stockholders of the Company and on the
Acceptance Date and, in the case of the Merger Registration Statement, at the
time of the Company Stockholder 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.
(b) Notwithstanding the foregoing provisions of this Section 6.07, no
representation or warranty is made by Parent with respect to statements made or
incorporated by reference in the Merger Registration Statement or the Offer
Documents based on information supplied by or on behalf of the Company and its
Subsidiaries for inclusion or incorporation by reference therein or based on
information which is not made in or incorporated by reference in such documents
but which should have been disclosed pursuant to Section 5.08.
SECTION 6.08 Absence of Litigation. Except as specifically disclosed in
any Parent SEC Report filed prior to the date of this Agreement or set forth in
Section 6.10 of the Parent Disclosure Schedule, there is no Action pending or,
to the knowledge of Parent, threatened against Parent or Merger Sub, or any
property or asset of Parent or Merger Sub, before any Governmental Authority
that (a) individually or in the aggregate, has had or is reasonably likely to
have a Parent Material Adverse Effect or (b) seeks to materially delay or
prevent the consummation of the Merger. Neither Parent nor Merger Sub nor any
material property or asset of Parent or Merger Sub is subject to any continuing
order of, consent decree, settlement agreement or other similar written
agreement with, or, to the knowledge of Parent, continuing investigation by any
Governmental Authority, or any order, writ, judgment, injunction, decree,
determination or award of, any Governmental Authority that would prevent or
materially delay consummation of the Merger or otherwise prevent or materially
delay Parent from performing its material obligations under this Agreement or
the Stockholders' Agreement or is reasonably likely, individually or in the
aggregate, to have a Parent Material Adverse Effect.
SECTION 6.09 Absence of Certain Changes or Events. (a) Since July 28,
2001, except as set forth in Section 6.09 of the Parent Disclosure Schedule or
the Parent SEC Documents filed prior to the date hereof, or as expressly
contemplated by this Agreement, Parent and its subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice, (b) there has not been any Parent Material Adverse Effect.
SECTION 6.10 No Vote Required. No vote of the stockholders of Parent is
required by Law, Parent's Certificate of Incorporation or By-Laws or otherwise
in order for Parent and Merger Sub to consummate the Transactions.
SECTION 6.11 Operations of Merger Sub. Merger Sub is a direct, wholly
owned subsidiary of Parent, was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement, has engaged in no other business
activities and has conducted its operations only as contemplated by this
Agreement.
SECTION 6.12 Tax Matters. To the knowledge of Parent, neither Parent nor
any of its affiliates has taken or agreed to take any action that would prevent
the Merger from qualifying as a reorganization
A-31
within the meaning of Section 368(a) of the Code. Parent is not aware of any
agreement, plan or other circumstance that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
SECTION 6.13 Brokers. No broker, finder or investment banker (other than
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Banc of America
Securities LLC) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of Parent or Merger Sub.
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 7.01 Conduct of Business by the Company Pending the Merger. (a)
The Company agrees that, between the date of this Agreement and the Effective
Time, except as expressly contemplated by any other provision of this Agreement
or the Stockholders' Agreement or as set forth in Section 7.01 of the Company
Disclosure Schedule, unless Parent shall otherwise consent in writing:
(i) the businesses of the Company and the Subsidiaries shall be
conducted only in, and the Company and the Subsidiaries shall not take any
action except in, the ordinary course of business and in a manner
consistent with past practice; and
(ii) the Company shall use its reasonable best efforts to preserve
substantially intact the business organization of the Company and the
Subsidiaries, to keep available the services of the current officers,
employees and consultants of the Company and the Subsidiaries and to
preserve the current relationships of the Company and the Subsidiaries with
customers, suppliers and other persons with which the Company or any
Subsidiary has significant business relations.
(b) By way of amplification and not limitation, except as expressly
contemplated by any other provision of this Agreement or the Stockholders'
Agreement or as set forth in Section 7.01 of the Company Disclosure Schedule,
neither the Company nor any Subsidiary shall, between the date of this Agreement
and the Effective Time, directly or indirectly, do, or propose to do, any of the
following without the prior written consent of Parent:
(i) amend or otherwise change its Certificate of Incorporation or
By-Laws or equivalent organizational documents;
(ii) issue, sell, pledge, dispose of, grant or encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of, (A) any
assets of the Company or any Subsidiary, except in the ordinary course of
business and in a manner consistent with past practice or (B) any shares of
any class of capital stock of the Company or any Subsidiary, or any
options, warrants, convertible securities or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest), of the Company or
any Subsidiary (except for the issuance of up to a maximum of 3,426,767
shares of Company Common Stock issuable pursuant to employee stock options
outstanding on the date hereof);
(iii) waive any stock repurchase rights, accelerate, amend or change
the period of exercisability of options or restricted stock, reprice
options granted under any stock option plan or authorize cash payments in
exchange for any options granted under any of such plans;
(iv) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except for dividends payable by a Subsidiary
of the Company to the Company or any other Subsidiary;
(v) reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any of its capital stock or
other securities;
A-32
(vi) (A) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets or any other business
combination) any corporation, partnership, other business organization or
any division thereof or any material amount of assets; (B) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise become responsible for, the obligations
of any person, or make any loans or advances, or grant any security
interest in any of its assets except in the ordinary course of business and
consistent with past practice; (C) enter into any contract or agreement
other than in the ordinary course of business and consistent with past
practice; (D) authorize, or make any commitment with respect to, any single
capital expenditure which is in excess of $1,000,000 or capital
expenditures which are, in the aggregate, in excess of $5,000,000 for the
Company and the Subsidiaries taken as a whole; or (E) enter into or amend
any contract, agreement, commitment or arrangement with respect to any
matter set forth in this Section 7.01(e);
(vii) sell, lease, license, mortgage, pledge, encumber or dispose of
in any manner of any properties or assets which are material, individually
or in the aggregate, to the Company, other than in the ordinary course of
the Company's business;
(viii) increase the compensation payable or to become payable or the
benefits provided to its directors, officers or employees, except for
increases in the ordinary course of business and consistent with past
practice in salaries or wages of employees of the Company or any Subsidiary
who are not directors or officers of the Company or any Material
Subsidiary, or grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other
employee of the Company or of any Subsidiary, or establish, adopt, enter
into or amend any collective bargaining, bonus, profit-sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer
or employee;
(ix) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect
to accounting policies or procedures;
(x) make or rescind any material Tax election, settle or compromise
any liability for Taxes or change or revoke any of its methods of Tax
accounting;
(xi) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise) in
excess of $2,000,000 in the aggregate, other than in the ordinary course of
business and consistent with past practice;
(xii) amend or modify in any material respect or consent to the
termination of any Material Contract, or amend, waive or modify in any
material respect or consent to the termination of the Company's or any
Subsidiary's rights thereunder;
(xiii) commence or settle any material Action;
(xiv) amend or modify, or propose to amend or modify, the Company
Rights Agreement, except as contemplated by this Agreement; or
(xv) announce an intention, enter into any formal or informal
agreement or otherwise make a commitment, to do any of the foregoing or
take any action that would materially delay the consummation of the
transactions contemplated hereby.
SECTION 7.02 Conduct of Business by Parent Pending the Merger. Except as
expressly contemplated by any other provision of this Agreement or the
Stockholders' Agreement, Parent agrees that from the date of this Agreement
until the earlier of the termination of this Agreement and the Effective Time,
Parent shall not, directly or indirectly, do, or propose to do, any of the
following without the prior written consent of the Company:
(a) take any action to cause Parent's representations and warranties
set forth in Article VI to be untrue in any material respect; or
A-33
(b) take any action that would reasonably be likely to materially
delay the consummation of the Offer or the Merger.
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.01 Company Stockholder Meeting. If required by applicable law,
the Company, acting through the Company Board, shall, in accordance with
applicable law, duly call, convene and hold a special meeting of the holders of
the Company Common Stock (the "Company Stockholder Meeting"), as soon as
reasonably practicable after the acceptance for payment of shares of Company
Common Stock pursuant to the Offer, for the purpose of voting upon this
Agreement and the Merger and the Company agrees that this Agreement shall be
submitted at such meeting; provided, however, that the Company Board shall not
be obligated to call, convene and hold the Company Stockholder Meeting if (i)
the Company has received a Superior Proposal, (ii) Merger Sub has not acquired
at least a majority of the outstanding shares of Company Common Stock pursuant
to the Offer or otherwise, (iii) the Company Board has withdrawn the Company
Recommendation pursuant to the third sentence of this Section 8.01 and (iv)
Parent has received all amounts due under Section 10.03. The Company shall take
all action necessary to secure the vote at any Company Stockholder Meeting of
holders of Company Common Stock required by applicable law and the Company's
Certificate of Incorporation or By-Laws to obtain the approval for this
Agreement. Unless the Company Board otherwise determines (based upon a majority
vote of the Company Board in its good faith judgment that such other action is
necessary to comply with its fiduciary duty to stockholders under applicable law
after receiving advice from outside legal counsel, who may be the Company's
regularly engaged independent legal counsel) prior to the approval by the
stockholders of the Company, (i) the Company Board shall recommend approval by
its stockholders of this Agreement (the "Company Recommendation"), (ii) neither
the Company Board nor any committee thereof shall amend, modify, withdraw,
condition or qualify the Company Recommendation in a manner adverse to Parent or
take any action or make any statement inconsistent with the Company
Recommendation and (iii) the Company shall take all lawful action reasonably
necessary to secure the Company Stockholder Approval. In the event the Company
Board has recommended approval by its stockholders of this Agreement but
subsequently determines (based upon a majority vote of the Company Board) in its
good faith judgment that some other action is necessary to comply with its
fiduciary duty to stockholders under applicable law after receiving advice from
outside legal counsel (who may be the Company's regularly engaged independent
legal counsel) prior to the approval by the stockholders of the Company, Parent
and Merger Sub agree to cooperate with the Company in making modifications to
the disclosure regarding the Company Board's recommendation in the Proxy
Statement/Prospectus to accurately reflect such determination.
SECTION 8.02 Preparation of Merger Registration Statement and Proxy
Statement/Prospectus. (a) If required by applicable law, promptly after the
acceptance for payment of shares of Company Common Stock pursuant to the Offer,
Parent and the Company shall prepare, and Parent shall file with the SEC, the
Merger Registration Statement, in which the Proxy Statement/Prospectus will be
included as Parent's prospectus. Each of the Company and Parent shall use all
reasonable efforts to have the Merger Registration Statement declared effective
under the Securities Act as promptly as practicable after the acceptance for
exchange of shares of Company Common Stock pursuant to the Offer and to keep the
Merger Registration Statement effective as long as is necessary to consummate
the Merger. The Company shall furnish all information concerning the Company as
Parent may reasonably request in connection with such action and preparation of
the Merger Registration Statement and Proxy Statement/Prospectus. The Company
shall mail the Proxy Statement/Prospectus to its stockholders as promptly as
practicable after the Merger Registration Statement is declared effective under
the Securities Act and, if necessary, after the Proxy Statement/Prospectus shall
have been so mailed, promptly circulate amended, supplemental or supplemented
proxy material, and, if required in connection therewith, resolicit proxies.
Parent shall take any action required to be taken under any applicable state
securities or blue sky laws in connection with the issuance of Parent Common
Stock in the Merger. No amendment or supplement to the Proxy
A-34
Statement/Prospectus will be made by the Company or Parent without the approval
of the other party, which will not be unreasonably withheld or delayed,
provided, however, that amendments or supplements to the Proxy
Statement/Prospectus reflecting actions taken by the Company Board to comply
with its fiduciary duties shall not require the approval of Parent. Each party
will advise the other party, promptly after it receives notice thereof, of the
time when the Merger Registration Statement has become effective or any
supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of Parent Common Stock issuable in connection
with the Merger for offering or sale in any jurisdiction, or any request by the
SEC for amendment of the Proxy Statement/Prospectus or comments thereon and
responses thereto or requests by the SEC for additional information. If, at any
time prior to the Effective Time, the Company or Parent discovers any
information relating to either party, or any of their respective Affiliates,
officers or directors, that should be set forth in an amendment or supplement to
the Proxy Statement/Prospectus, so that such document 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 and an appropriate amendment or supplement describing
such information shall be promptly filed with the SEC and, to the extent
required by law or regulation, disseminated to the stockholders of the Company.
(b) The information supplied by Parent for inclusion in the Merger
Registration Statement and the Proxy Statement/Prospectus shall not, at (i) the
time the Merger Registration Statement is declared effective, (ii) the time the
Proxy Statement/Prospectus (or any amendment thereof or supplement thereto) is
first mailed to the stockholders of the Company, (iii) the time of the Company
Stockholders Meeting and (iv) the Effective Time, contain any untrue statement
of a material fact or fail 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 were made, not misleading. If, at any time prior
to the Effective Time, any event or circumstance relating to Parent or Merger
Sub, or their respective officers or directors, should be discovered by Parent
which should be set forth in an amendment or a supplement to the Merger
Registration Statement or Proxy Statement/Prospectus, Parent shall promptly
inform the Company. All documents that Parent is responsible for filing with the
SEC in connection with the Merger or the other transactions contemplated by this
Agreement will comply as to form and substance in all material respects with the
applicable requirements of the Securities Act and the rules and regulations
thereunder and the Exchange Act and the rules and regulations thereunder.
(c) The information supplied by the Company for inclusion in the Merger
Registration Statement and the Proxy Statement/Prospectus shall not, at (i) the
time the Merger Registration Statement is declared effective, (ii) the time the
Proxy Statement/Prospectus (or any amendment thereof or supplement thereto) is
first mailed to the stockholders of the Company, (iii) the time of the Company
Stockholders Meeting and (iv) the Effective Time, contain any untrue statement
of a material fact or fail 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 were made, not misleading. If, at any time prior
to the Effective Time, any event or circumstance relating to the Company or any
Subsidiary, or their respective officers or directors, should be discovered by
the Company which should be set forth in an amendment or a supplement to the
Merger Registration Statement or Proxy Statement/Prospectus, the Company shall
promptly inform Parent. All documents that the Company is responsible for filing
with the SEC in connection with the Merger or the other transactions
contemplated by this Agreement will comply as to form and substance in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
(d) Notwithstanding the foregoing, if Parent or Merger Sub shall acquire at
least 90% of the outstanding shares of Company Common Stock pursuant to the
Offer or otherwise, the parties hereto agree, subject to the satisfaction or (to
the extent permitted hereunder) waiver of all conditions to the Merger, to take,
or cause to be taken, all necessary and appropriate action to cause the Merger
to be effective as soon as practicable after the acceptance for payment and
purchase of shares of Company Common Stock pursuant to the Offer without the
Company Stockholder Meeting.
A-35
SECTION 8.03 Access to Information; Confidentiality. (a) From the date of
this Agreement until the Effective Time, the Company and Parent shall and each
shall cause their respective subsidiaries to): (i) provide to the other party
and the other party's officers, directors, employees, accountants, consultants,
legal counsel, agents and other representatives (collectively,
"Representatives") access at reasonable times upon prior notice to the officers,
employees, agents, properties, offices and other facilities of such party and
its subsidiaries and to the books and records thereof; and (ii) furnish promptly
to the other party such information concerning the business, properties,
contracts, assets, liabilities, personnel and other aspects of such party and
its subsidiaries as the other party or its Representatives may reasonably
request.
(b) All information obtained by the parties pursuant to this Section 8.03
shall be kept confidential in accordance with the confidentiality agreement,
dated December 11, 2001 (the "Confidentiality Agreement"), between Parent and
the Company.
(c) No investigation pursuant to this Section 8.03 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
(d) The Company hereby waives the provisions of the Confidentiality
Agreement as and to the extent necessary to permit the consummation of each
Transaction.
SECTION 8.04 No Solicitation of Transactions. (a) Subject to Section
8.04(b), the Company will not, directly or indirectly, and will instruct its
officers, directors, employees, subsidiaries, agents or advisors or other
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it), not to, directly or indirectly, solicit, initiate
or encourage (including by way of furnishing nonpublic information), or take any
other action to facilitate, any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to its stockholders) that
constitutes, or may reasonably be expected to lead to, any Competing Transaction
(as defined below), or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain a Competing Transaction, or agree to or endorse any Competing
Transaction, or authorize or permit any of the officers, directors or employees
of such party or any of its subsidiaries, or any investment banker, financial
advisor, attorney, accountant or other representative retained by the Company or
any of its Subsidiaries, to take any such action. The Company shall notify
Parent promptly if any proposal or offer, or any inquiry or contact with any
person with respect thereto, regarding a Competing Transaction is made. The
Company immediately shall cease and cause to be terminated all existing
discussions or negotiations with any parties conducted heretofore with respect
to a Competing Transaction. The Company shall not release any third party from,
or waive any provision of, any confidentiality or standstill agreement to which
it is a party.
(b) Notwithstanding anything to the contrary in this Section 8.04, the
Company Board may furnish information to, enter into discussions or negotiations
with, and maintain or continue such discussions or negotiations with, a person
who has made an unsolicited, written, bona fide proposal or offer regarding a
Competing Transaction, and the Company Board has (i) determined, in its good
faith judgment (after having received the advice of a financial advisor of
internationally recognized reputation (which may be Advisor)), that such
proposal or offer is reasonably likely to constitute a Superior Proposal (as
defined below), (ii) determined, in its good faith judgment after consultation
with independent legal counsel (who may be the Company's regularly engaged
independent legal counsel), that, in light of such proposal or offer, the
furnishing of such information or the holding of discussions or negotiations is
required to comply with its fiduciary obligations to the Company and its
stockholders under applicable Law, and (iii) provided written notice to Parent
of its intent to furnish information or to hold discussions or negotiations with
such person at least two business days prior to taking any such action.
(c) A "Competing Transaction" means any of the following (other than the
Transactions or any sale, lease, exchange, transfer or other disposition of
(including by way of merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or other similar
transaction involving) Conceptronic, Inc.): (i) any merger, consolidation, share
exchange, business combination, recapitalization, liquidation, dissolution or
other similar transaction involving the Company (or any Subsidiaries which are
material, individually or in the aggregate, to the Company), (ii) any sale,
lease,
A-36
exchange, transfer or other disposition (including by way of merger,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or other similar transaction involving) of all or
substantially all of the assets of the Company (or any Subsidiaries which are
material, individually or in the aggregate, to the Company), (iii) any sale,
exchange, transfer or other disposition of 20% or more of any class of equity
securities of the Company (or any Subsidiaries which are material, individually
or in the aggregate, to the Company), (iv) any tender offer or exchange offer
that, if consummated, would result in any person beneficially owning 20% or more
of any class of equity securities of the Company (or any Subsidiaries which are
material, individually or in the aggregate, to the Company), (v) any
solicitation in opposition to approval and adoption of this Agreement by the
Company's stockholders, or (vi) any other transaction the consummation of which
would reasonably be expected to impede, interfere with, prevent or materially
delay any of the Transactions.
(d) A "Superior Proposal" means an unsolicited written bona fide offer made
by a third party to consummate any of the following transactions: (i) a merger,
consolidation, share exchange, business combination or other similar transaction
involving the Company pursuant to which the stockholders of the Company
immediately preceding such transaction would hold less than 50% of the equity
interest in the surviving or resulting entity of such transaction, (ii) any
sale, lease, exchange, transfer or other disposition of all or a substantial
part of the assets of the Company (iii) the acquisition by any person or group
(including by means of a tender offer or an exchange offer or a two-step
transaction involving a tender offer followed with reasonable promptness by a
cash-out merger involving the Company), directly or indirectly, of ownership of
100% of the then outstanding shares of stock of the Company or (iv) any
substantially equivalent transaction, on terms (including conditions to
consummation of the contemplated transaction) that the Company Board determines,
in its good faith judgment (after having received the advice of a financial
advisor of internationally recognized reputation (which may be Advisor)), to be
more favorable to the Company stockholders than the Merger, is reasonably
capable of being consummated and for which financing, to the extent required, is
then committed; provided, however, that any such offer shall not be deemed to be
a "Superior Proposal" if any financing required to consummate the transaction
contemplated by such offer is not likely in the good faith judgment of the
Company Board (after having received the advice of a financial advisor of
internationally recognized reputation (which may be Advisor)) to be obtained by
such third party on a timely basis.
SECTION 8.05 Employee Benefits Matters. From and after the Effective
Time, Parent shall cause the Surviving Corporation and its subsidiaries to honor
in accordance with their terms, all contracts, agreements, arrangements,
policies, plans and commitments of the Company and the Subsidiaries as in effect
immediately prior to the Effective Time that are applicable to any current or
former employees or directors of the Company or any Subsidiary. Employees of the
Company or any Subsidiary shall receive credit for purposes of eligibility to
participate and vesting (but not for benefit accruals) under any employee
benefit plan, program or arrangement established or maintained by the Surviving
Corporation or any of its subsidiaries for service accrued or deemed accrued
prior to the Effective Time with the Company or any Subsidiary; provided,
however, that such crediting of service shall not operate to duplicate any
benefit or the funding of any such benefit. In addition, Parent shall waive, or
cause to be waived, any limitations on benefits relating to any pre-existing
conditions to the same extent such limitations are waived under any comparable
plan of Parent or its subsidiaries and recognize, for purposes of annual
deductible and out-of-pocket limits under its medical and dental plans,
deductible and out-of-pocket expenses paid by employees of the Company and its
subsidiaries in the calendar year in which the Effective Time occurs.
SECTION 8.06 Directors' and Officers' Indemnification and Insurance. (a)
The Certificate of Incorporation of the Surviving Corporation shall contain
provisions no less favorable with respect to indemnification than are set forth
in the Certificate of Incorporation and By-Laws of the Company, as of the date
hereof, which provisions shall not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
affect adversely the rights thereunder of individuals who, at or prior to the
Effective Time, were directors, officers, employees, fiduciaries or agents of
the Company, unless such modification shall be required by law. From and after
the Effective Time,
A-37
Parent shall, and shall cause the Surviving Corporation to, fulfill and honor in
all respects the obligations of the Company pursuant to any indemnification
agreement between the Company and its directors and officers as of the Effective
Time and any indemnification provisions under the Certificate of Incorporation
or By-Laws of the Company as in effect on the date hereof.
(b) The Surviving Corporation shall use its reasonable best efforts to
maintain in effect for six years from the Effective Time, if available, the
current directors' and officers' liability insurance policies maintained by the
Company (unless Parent, in its sole discretion, includes the current directors
and officers of the Company under its existing directors' and officers'
liability policies for not less than six years from the Effective Time or causes
the Surviving Corporation to substitute policies of at least the same coverage
and containing terms and conditions that are not materially less favorable than
the current directors' and officers' liability insurance policies maintained by
the Company) with respect to matters occurring prior to the Effective Time;
provided, however, that in no event shall the Surviving Corporation be required
to expend pursuant to this Section 8.06(b) more than an amount per year equal to
225% of current annual premiums paid by the Company for such insurance (which
the Company represents to be approximately $113,166).
(c) In the event the Company or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers 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 the Company or the
Surviving Corporation, as the case may be, or at Parent's option, Parent, shall
assume the obligations set forth in this Section 8.06.
SECTION 8.07 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which could reasonably be expected to cause any
representation or warranty contained in this Agreement or the Stockholders'
Agreement to be untrue or inaccurate in any material respect and (b) any failure
of the Company, Parent or Merger Sub, as the case may be, to comply with or
satisfy any covenant or agreement to be complied with or satisfied by it
hereunder in any material respect; provided, however, that the delivery of any
notice pursuant to this Section 8.07 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 8.08 Company Affiliates. No later than five business days after
the date of this Agreement, the Company shall deliver to Parent a list of names
and addresses of those persons who were, in the Company's reasonable judgment,
on such date, affiliates (within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act (each such person being a
"Company Affiliate")) of the Company. The Company shall provide Parent with such
information and documents as Parent shall reasonably request for purposes of
reviewing such list. The Company shall use its reasonable best efforts to
deliver or cause to be delivered to Parent, prior to the initial expiration of
the Offer, an affiliate letter in the form attached hereto as Exhibit A,
executed by each of the Company Affiliates identified in the foregoing list and
any person who shall, to the knowledge of the Company, have become a Company
Affiliate subsequent to the delivery of such list.
SECTION 8.09 Further Action; Reasonable Best Efforts. Upon the terms and
subject to the conditions of this Agreement, each of the parties hereto shall
promptly after the date of this Agreement (i) make its respective filings, and
thereafter make any other required submissions, under the HSR Act with respect
to the Transactions and (ii) use its reasonable best efforts to take, or cause
to be taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws or otherwise to consummate
and make effective the Transactions, including, without limitation, using its
reasonable best efforts to obtain all permits, consents, approvals,
authorizations, qualifications and orders of Governmental Authorities and
parties to contracts with the Company and the Subsidiaries as are necessary for
the consummation of the Transactions and to fulfill the conditions to the
Merger; provided that neither Merger Sub nor Parent will be required by this
Section 8.09 to take any
A-38
action, including entering into any consent decree, hold separate orders or
other arrangements, that (A) requires the divestiture of any assets of any of
Merger Sub, Parent, the Company or any of their respective subsidiaries or (B)
limits Parent's freedom of action with respect to, or its ability to retain, the
Company and the Subsidiaries or any portion thereof or any of Parent's or its
affiliates' other assets or businesses. In case, at any time after the Effective
Time, any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall use their reasonable best efforts to take all such action.
SECTION 8.10 Plan of Reorganization. (a) This Agreement is intended to
constitute a "plan of reorganization" within the meaning of section 1.368-2(g)
of the income tax regulations promulgated under the Code. From and after the
date of this Agreement and until the Effective Time, each party hereto shall use
its reasonable best efforts to cause the Merger to qualify, and will not
knowingly take any action, cause any action to be taken, fail to take any action
or cause any action to fail to be taken which action or failure to act could
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code. Following the Effective Time, neither the Surviving
Corporation, Parent nor any of their affiliates knowingly shall take any action,
cause any action to be taken, fail to take any action or cause any action to
fail to be taken, which action or failure to act could cause the Merger to fail
to qualify as a reorganization within the meaning of Section 368(a) of the Code.
(b) As of the date hereof, the Company does not know of any reason (i) why
it would not be able to deliver to counsel to the Company and Parent, at the
date of the legal opinions referred to below, certificates substantially in
compliance with IRS published advance ruling guidelines, with reasonable or
customary exceptions and modifications thereto, to enable such firms to deliver
the legal opinions contemplated by Section 9.02(f) and Section 9.03(d), and the
Company hereby agrees to deliver such certificates effective as of the date of
such opinions or (ii) why counsel to the Company and Parent would not be able to
deliver the opinions required by Section 9.02(f) and Section 9.03(d). The
Company will deliver such certificates to counsel to the Company and Parent.
(c) As of the date hereof, Parent does not know of any reason (i) why it
would not be able to deliver to counsel to the Company and Parent, at the date
of the legal opinions referred to below, certificates substantially in
compliance with IRS published advance ruling guidelines, with reasonable or
customary exceptions and modifications thereto, to enable such firms to deliver
the legal opinions contemplated by Section 9.02(f) and Section 9.03(d), and
Parent hereby agrees to deliver such certificates effective as of the date of
such opinions or (ii) why counsel to the Company and Parent would not be able to
deliver the opinions required by Section 9.02(f) and Section 9.03(d). Parent
will deliver such certificates to counsel to the Company and Parent.
SECTION 8.11 Merger Sub. Parent shall take all action necessary to cause
Merger Sub to perform its material obligations under this Agreement and to
consummate the Merger on the terms and subject to the conditions set forth in
this Agreement.
SECTION 8.12 Letters of Accountants. (a) Parent shall use its reasonable
best efforts to cause to be delivered to the Company "comfort" letters of
Deloitte & Touche LLP, Parent's independent public accountants, dated and
delivered the date on which the Offer Registration Statement shall become
effective, the Acceptance Date, the date the Merger Registration Statement shall
become effective and as of the Effective Time, and addressed to the Company, in
form and substance reasonably satisfactory to the Company and reasonably
customary in scope and substance for letters delivered by independent public
accountants in connection with transactions such as those contemplated by this
Agreement.
(b) The Company shall use its reasonable best efforts to cause to be
delivered to Parent "comfort" letters of KPMG LLP, the Company's independent
public accountants, dated and delivered the date on which the Offer Registration
Statement shall become effective, the Acceptance Date, the date the Merger
Registration Statement shall become effective and as of the Effective Time, and
addressed to Parent, in form and substance reasonably satisfactory to Parent and
reasonably customary in scope and substance for letters delivered by independent
public accountants in connection with transactions such as those contemplated by
this Agreement.
A-39
SECTION 8.13 NYSE Listing. Parent shall promptly prepare and submit to
the NYSE a listing application covering the shares of Parent Common Stock to be
issued in the Merger and pursuant to Substitute Options, and shall use its
reasonable best efforts to obtain, prior to the Effective Time, approval for the
listing of such Parent Common Stock, subject to official notice of issuance to
the NYSE, and the Company shall cooperate with Parent with respect to such
listing.
SECTION 8.14 Public Announcements. The initial press release relating to
this Agreement shall be a joint press release the text of which has been agreed
to by each of Parent and the Company. Thereafter, unless otherwise required by
applicable Law or the requirements of the NYSE, each of Parent and the Company
shall each use its reasonable best efforts to consult with each other before
issuing any press release or otherwise making any public statements with respect
to this Agreement, the Merger or any of the other Transactions; provided,
however, that this Section 8.14 shall terminate in the event the Company Board
withdraws the Company Recommendation.
SECTION 8.15 Transfer Tax. The Company and Parent shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement (together with
any related interest, penalties or additions to tax, "Transfer Taxes"). All
Transfer Taxes shall be paid by the Company and expressly shall not be a
liability of any holder of the Company Common Stock.
SECTION 8.16 The Company Rights Agreement. Prior to the Effective Time,
the Company shall take all necessary action to amend the Company Rights
Agreement so that (a) neither the execution of this Agreement nor the
announcement or consummation of the Offer or the Merger will cause a
Distribution Date (as such term is defined in the Company Rights Agreement) or
cause the Company Rights to become exercisable, (b) neither Parent nor Merger
Sub will become an Acquiring Person (as such term is defined in the Company
Rights Agreement) and (c) neither Parent nor Merger Sub shall have any
obligations under the Company Rights or Company Rights Agreement.
SECTION 8.17 Employment Agreements. The Company agrees to cooperate with
Parent in any reasonable efforts initiated by Parent to negotiate employment
agreements with key employees identified by Parent between the date hereof and
the Effective Time.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01 Conditions to the Obligations of Each Party. The obligations
of the Company, Parent and Merger Sub to consummate the Merger are subject to
the satisfaction or waiver (where permissible) of the following conditions:
(a) Merger Registration Statement. If required, the Merger
Registration Statement shall have been declared effective by the SEC under
the Securities Act and no stop order suspending the effectiveness of the
Merger Registration Statement shall have been issued by the SEC and no
proceeding for that purpose shall have been initiated by the SEC and not
concluded or withdrawn.
(b) Company Stockholder Approval. If required under the DGCL, this
Agreement shall have received Company Stockholder Approval.
(c) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, judgment,
decree, executive order or award (an "Order") which is then in effect and
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
A-40
(d) U.S. Antitrust Approvals and Waiting Periods. Any waiting period
(and any extension thereof) applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(e) NYSE Listing. The shares of Parent Common Stock to be issued in
the Merger shall have been authorized for listing on the NYSE, subject to
official notice of issuance.
(f) Offer. Merger Sub shall have purchased shares of Company Common
Stock pursuant to the Offer.
SECTION 9.02 Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) Representations and Warranties. (i) The representations and
warranties of the Company contained in this Agreement that are qualified by
reference to materiality or a Company Material Adverse Effect shall be true
and correct in all respects as of the Effective Time as though made on and
as of the Effective Time (other than representations and warranties which
by their terms address matters only as of another specified date, which
shall be true and correct in all respects only as of such date), and (ii)
the representations and warranties of the Company contained in the
Agreement that are not so qualified shall be true and correct as of the
Effective Time, as though made on and as of the Effective Time (other than
representations and warranties which by their terms address matters only as
of another specified date, which shall be true and correct only as of such
date), except, in the case of clause (ii) only, for such failures to be
true and correct as are not reasonably likely to, individually or in the
aggregate, result in a Company Material Adverse Effect.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time.
(c) Officer Certificate. The Company shall have delivered to Parent a
certificate, dated the date of the Closing, signed by the President or
Chairman of the Board the Company, certifying as to the satisfaction of the
conditions specified in Sections 9.02(a) and 9.02(b).
(d) Consents. All consents, approvals and authorizations legally
required to be obtained to consummate the Merger shall have been obtained
from and made with all Governmental Authorities, and all consents from
third parties under any Material Contract or other material agreement,
contract, license, lease or other instrument to which the Company or any
Subsidiary is a party or by which it is bound required as a result of the
transactions contemplated by this Agreement shall have been obtained.
(e) Material Adverse Effect. No Company Material Adverse Effect shall
have occurred since the date of this Agreement.
(f) Tax Opinion. Parent shall have received the opinion of Shearman &
Sterling, counsel to Parent, based upon representations of Parent, Merger
Sub and the Company, and normal assumptions, to the effect that, for
federal income tax purposes, the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code and that each of Parent,
Merger Sub and the Company will be a party to the reorganization within the
meaning of Section 368(b) of the Code, which opinion shall not have been
withdrawn or modified in any material respect. The issuance of such opinion
shall be conditioned on receipt by Shearman & Sterling of representation
letters from each of Parent and Company as contemplated in Section 8.10 of
this Agreement. Each such representation letter shall be dated on or before
the date of such opinion and shall not have been withdrawn or modified in
any material respect as of the Effective Time.
A-41
SECTION 9.03 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) Representations and Warranties. (i) The representations and
warranties of Parent and Merger Sub contained in this Agreement that are
qualified by reference to materiality or a Parent Material Adverse Effect
shall be true and correct in all respects as of the Effective Time as
though made on and as of the Effective Time (other than representations and
warranties which by their terms address matters only as of another
specified date, which shall be true and correct only as of such date), and
(ii) the representations and warranties of Parent and Merger Sub contained
in the Agreement that are not so qualified shall be true and correct in all
respects as of the Effective Time, as though made on and as of the
Effective Time (other than representations and warranties which by their
terms address matters only as of another specified date, which shall be
true and correct only as of such date), except, in the case of clause (ii)
only, for such failures to be true and correct as are not reasonably likely
to, individually or in the aggregate, result in a Parent Material Adverse
Effect
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it
on or prior to the Effective Time.
(c) Officer Certificate. Parent shall have delivered to the Company a
certificate, dated the date of the Closing, signed by the President or
Chairman of the Board of Parent, certifying as to the satisfaction of the
conditions specified in Sections 9.03(a) and 9.03(b).
(d) Material Adverse Effect. No Parent Material Adverse Effect shall
have occurred since the date of this Agreement.
(e) Tax Opinion. The Company shall have received the opinion of
Gibson, Dunn & Crutcher LLP, counsel to the Company, based upon
representations of Parent, Merger Sub and the Company, and normal
assumptions, to the effect that, for federal income tax purposes, the
Merger will qualify as a reorganization within the meaning of Section
368(a) of the Code and that each of Parent, Merger Sub and the Company will
be a party to the reorganization within the meaning of section 368(b) of
the Code, which opinion shall not have been withdrawn or modified in any
material respect. The issuance of such opinion shall be conditioned on
receipt by Gibson, Dunn & Crutcher LLP of representation letters from each
of Parent and Company as contemplated in Section 8.10 of this Agreement.
Each such representation letter shall be dated on or before the date of
such opinion and shall not have been withdrawn or modified in any material
respect as of the Effective Time.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Company Stockholder
Approval:
(a) by mutual written consent of Parent and the Company; or
(b) by Parent:
(i) if at any time prior to the Acceptance Date, (A) the Company
has breached or failed to perform in any material respect its
obligations, covenants or agreements under this Agreement, (B) the
representations and warranties of the Company contained in this
Agreement that are qualified by reference to materiality or a Company
Material Adverse Effect shall not have been true and correct in all
respects when made or at any time prior to the Acceptance Date as if
made at or at and as of such time (other than representations and
warranties which by their terms address matters only as of another
specified date, which shall be true and correct in all respects only as
of such date), or (C) the representations and warranties of the Company
A-42
contained in the Agreement that are not so qualified shall not have been
true and correct when made or at any time prior to the Acceptance Date
as if made at and as of such time (other than representations and
warranties which by their terms address matters only as of another
specified date, which shall be true and correct only as of such date),
except, in the case of clause (C) only, for such failures to be true and
correct as are not reasonably likely to, individually or in the
aggregate, result in a Company Material Adverse Effect, and such breach
or misrepresentation (1) cannot be or has not been cured prior to the
earlier of (x) 30 days following receipt by the Company of written
notice from Parent of such breach or misrepresentation and (y) the
Termination Date and (2) has not been waived by Parent pursuant to the
provisions hereof;
(ii) if at any time prior to the Acceptance Date, (A) the Company,
or its Board of Directors, as the case may be, shall have (1) entered
into any agreement with respect to any Competing Transaction other than
the Offer or the Merger and other than a confidentiality agreement
contemplated by Section 8.04(b), (2) failed to make, withdrawn or
modified, in a manner adverse to Parent or Merger Sub, its approval and
recommendation of the Offer, the Merger and this Agreement, or (3)
approved or recommended any Competing Transaction other than the Offer
or the Merger, or (B) the Company or the Company's Board of Directors or
any committee thereof shall have resolved to do any of the foregoing;
(iii) if at any time prior to the Acceptance Date the Company
breaches in any material respect any of its obligations under Section
8.04 or Section 10.01(c)(ii) hereof; or
(iv) if (A) the Offer shall have been extended on at least three
occasions for an aggregate period of at least 15 business days beyond
the Initial Expiration Date, and (B) on such extended date of
expiration, the Minimum Condition shall not have been satisfied;
(c) by the Company:
(i) if at any time prior to the Acceptance Date, (A) Parent has
breached or failed to perform in any material respect its obligations,
covenants or agreements under this Agreement, (B) the representations
and warranties of Parent or the Merger Sub contained in this Agreement
that are qualified by reference to materiality or a Parent Material
Adverse Effect shall not have been true and correct in all respects when
made or at any time prior to the Acceptance Date as if made at or at and
as of such time (other than representations and warranties which by
their terms address matters only as of another specified date, which
shall be true and correct in all respects only as of such date), or (C)
the representations and warranties of Parent and the Merger Sub
contained in the Agreement that are not so qualified shall not have been
true and correct when made or at any time prior to the Acceptance Date
as if made at and as of such time (other than representations and
warranties which by their terms address matters only as of another
specified date, which shall be true and correct only as of such date),
except, in the case of clause (C) only, for such failures to be true and
correct as are not reasonably likely to, individually or in the
aggregate, result in a Parent Material Adverse Effect, and such breach
or misrepresentation (1) cannot be or has not been cured prior to the
earlier of (x) 30 days following receipt by Parent of written notice
from the Company of such breach or failure to perform and (y) the
Termination Date and (2) has not been waived by the Company pursuant to
the provisions hereof;
(ii) if at any time prior to the Effective Time Parent has not
acquired at least a majority of the outstanding shares of Company Common
Stock pursuant to the Offer or otherwise, a Superior Proposal is
received by the Company and the Board of Directors of the Company
reasonably determines in good faith (after receiving the advice of
outside legal counsel) that it is necessary to terminate this Agreement
and enter into an agreement to effect the Superior Proposal to comply
with its fiduciary duties under applicable law; provided that the
Company may not terminate this Agreement pursuant to this Section
10.01(c)(ii) unless and until (A) two business days have elapsed
following delivery to Parent of a written notice of such
A-43
determination by the Company Board and during such two business day
period the Company has fully cooperated with Parent, including, without
limitation, informing Parent of the terms and conditions of such
Superior Proposal, and the identity of the Person making such Superior
Proposal, with the intent of enabling the parties hereto to agree to a
modification of the terms and conditions of this Agreement so that the
transactions contemplated hereby may be effected; (B) at the end of such
two business day period the Competing Transaction continues in the
judgment of the Company Board to constitute a Superior Proposal and the
Company Board confirms its determination (after receiving the advice of
outside legal counsel) that it is necessary to terminate this Agreement
and enter into an agreement to effect the Superior Proposal to comply
with its fiduciary duties under applicable law; and (C) (x) at or prior
to such termination, Parent has received all amounts due under Section
10.03 hereof by wire transfer in same day funds and (y) promptly
following such termination the Company enters into a definitive
acquisition, merger or similar agreement to effect the Superior
Proposal;
(d) by either Parent or the Company:
(i) if the Offer has not been consummated on or before July 31,
2002 (the "Termination Date"); provided that the right to terminate this
Agreement pursuant to this clause shall not be available to any party
whose failure to fulfill any material obligation of this Agreement or
whose material breach of this Agreement has been the cause of, or
resulted in, the failure of the Offer to have been consummated on or
prior to the aforesaid date; or
(ii) if any court of competent jurisdiction or any Governmental
Authority shall have issued an Order or taken any other action
permanently restricting, enjoining, restraining or otherwise prohibiting
acceptance for payment of, and exchange of, shares of Company Common
Stock pursuant to the Offer or consummation of the Merger and such Order
or other action shall have become final and nonappealable.
SECTION 10.02 Effect of Termination. In the event of termination of this
Agreement by Parent or the Company, as provided in Section 10.01, this Agreement
shall forthwith become void and there shall be no liability hereunder on the
part of the Company, Parent or Merger Sub or their respective officers or
directors (except that Section 8.03 (access to information; Confidentiality),
this Section 10.02 and Sections 10.03 (Payment of Certain Fees), 11.02
(Notices), 11.04 (Entire Agreement; Assignment), 11.05 (Parties in Interest),
11.07 (Governing Law) and 11.08 (Waiver of Jury Trial) shall survive the
termination); provided, however, that nothing contained in this Section 10.02 or
in Section 10.03 shall relieve any party hereto from any liability for any
breach of this Agreement.
SECTION 10.03 Payment of Certain Fees. (a) If this Agreement is
terminated by Parent in accordance with Section 10.01(b)(ii), or by the Company
in accordance with Section 10.01(c)(ii), then the Company shall pay to Parent in
immediately available funds all of Parent's Expenses, up to a maximum of
$1,500,000, plus a termination fee in an amount equal to $2,500,000 (the
"Termination Fee").
(b) If this Agreement is terminated by Parent pursuant to Section
10.01(b)(i) or Section 10.01(b)(iii), then the Company shall pay to Parent,
within five business days after submission of statements therefor, all of
Parent's Expenses, up to a maximum of $1,500,000.
(c) If this Agreement is terminated by Parent or the Company pursuant to
Section 10.01(b)(i), 10.01(b)(iii) or 10.01(d)(i) (unless the failure of the
Offer to have been consummated on or prior to the Termination Date is the result
of a material breach of this Agreement by Parent or Merger Sub) and a proposal
or offer for a Competing Transaction has been made and publicly announced or
communicated to the Company's stockholders after the date of this Agreement and
prior to the termination date, and concurrently with or within twelve months of
the date of such termination a Third Party Acquisition Event occurs, then the
Company shall within five business days of the occurrence of such Third Party
Acquisition Event pay to Parent the Termination Fee, and, in the case of a
termination pursuant to this
A-44
Section 10.03(c) arising under Section 10.01(d)(i), all of Parent's Expenses, up
to a maximum of $1,500,000.
"Third Party Acquisition Event" shall mean the earlier of (i) the
consummation of a Competing Transaction involving the purchase of a majority of
either the equity securities of the Company or of the consolidated assets of the
Company and its Subsidiaries, taken as a whole, or any such transaction
involving the purchase of a majority of either the equity securities of the
Company or of the consolidated assets of the Company and its Subsidiaries, taken
as a whole that, if it had been proposed prior to the termination of this
Agreement would have constituted a Competing Transaction or (ii) the entering
into by the Company or any of its Subsidiaries of a definitive agreement with
respect to any such transaction.
(d) If this Agreement is terminated by Parent pursuant to Section
10.01(b)(iv) and a proposal or offer for a Competing Transaction has been made
and publicly announced or communicated to the Company's stockholders after the
date of this Agreement and prior to the date of such termination, and
concurrently with or within twelve months of the date of such termination a
Third Party Acquisition Event occurs, then the Company shall within five
business days of the occurrence of such Third Party Acquisition Event pay to
Parent all of Parent's Expenses, up to a maximum of $1,500,000 and the
Termination Fee.
(e) If this Agreement is terminated by the Company pursuant to Section
10.01(c)(i), then Parent shall pay to the Company, within five business days
after submission of statements therefor, all of the Company's Expenses, up to a
maximum of $1,000,000.
(f) Except as set forth in this Section 10.03, all Expenses (as defined
below) incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses, whether or not the Merger or any other transaction is consummated,
except that the Company and Parent shall each pay one-half of all Expenses
relating to (i) printing, filing and mailing of the Offer Documents, the
Schedule 14D-9 and the Proxy Statement/Prospectus and all SEC and other
regulatory filing fees incurred in connection therewith and (ii) the filing fee
for the Notification and Report Forms filed under the HSR Act. "Expenses", as
used in this Agreement, shall include all reasonable out-of-pocket expenses
(including, without limitation, all reasonable fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Offer Documents and the Merger Registration Statement, the solicitation of
stockholder approvals, the filing of any required notices under the HSR Act or
other similar regulations and all other matters related to the closing of the
Merger and the other transactions contemplated by this Agreement.
(g) Each party acknowledges that the agreements contained in this Section
10.03 are an integral part of the transactions contemplated by this Agreement
and without these agreements the other party would not enter into this
Agreement. In the event that the Company shall fail to pay any Termination Fee
or Expenses when due, such Termination Fee or Expenses shall be deemed to
include the costs and expenses actually incurred or accrued by Parent
(including, without limitation, reasonable fees and expenses of counsel) in
connection with the collection under and enforcement of this Section 10.03,
together with interest on such unpaid Termination Fee or Expenses, commencing on
the date that such Termination Fee or Expenses became due, at a rate equal to
the rate of interest publicly announced by Citibank, N.A., from time to time, in
The City of New York, as such bank's prime rate plus 3.00%. In the event that
Parent shall fail to pay any Expenses when due, such Expenses shall be deemed to
include the costs and expenses actually incurred or accrued by the Company
(including, without limitation, reasonable fees and expenses of counsel) in
connection with the collection under and enforcement of this Section 10.03,
together with interest on such unpaid Expenses, commencing on the date that such
Expenses became due, at a rate equal to the rate of interest publicly announced
by Citibank, N.A., from time to time, in The City of New York, as such bank's
prime rate plus 3.00%. Payment of the fees and expenses described in this
Section 10.03 shall not be in lieu of any damages incurred in the event of
willful or intentional breach of this Agreement.
A-45
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01 Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement and in any certificate or
instrument delivered pursuant hereto shall terminate at the Effective Time or
upon the termination of this Agreement pursuant to Section 10.01. This Section
shall not limit any covenant or other obligation of the parties hereto which
shall survive in accordance with their terms.
SECTION 11.02 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 11.02):
if to Parent or Merger Sub:
Dycom Industries, Inc.
4440 PGA Boulevard, Suite 500
Palm Beach Gardens, Florida 33410
Facsimile No: (561) 627-7709
Attention: Marc R. Tiller, Esq.
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022-6069
Facsimile No: (212) 848-7179
Attention: Spencer D. Klein, Esq.
if to the Company:
Arguss Communications, Inc.
One Church Street
Suite 302
Rockville, Maryland 20850
Attention: Rainer H. Bosselman
with a copy to:
Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue N.W.
Washington, D.C. 20036-5306
Facsimile No.: (202) 467-0539
Attention: Howard B. Adler, Esq.
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
SECTION 11.03 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. 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
A-46
as possible in a mutually acceptable manner in order that the Transactions be
consummated as originally contemplated to the fullest extent possible.
SECTION 11.04 Entire Agreement; Assignment. This Agreement, the
Stockholders' Agreement and the Confidentiality Agreement constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned (whether pursuant to a merger, by operation of
law or otherwise), except that Parent and Merger Sub may assign all or any of
their rights and obligations hereunder to any affiliate of Parent, provided that
no such assignment shall relieve the assigning party of its obligations
hereunder if such assignee does not perform such obligations.
SECTION 11.05 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 8.06 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
Section 11.06 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 11.07 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State (other than those
provisions set forth herein that are required to be governed by the DGCL). All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined exclusively in any New York state or federal court sitting
in the Borough of Manhattan of The City of New York. The parties hereto hereby
(a) submit to the exclusive jurisdiction of any state or federal court sitting
in the Borough of Manhattan of The City of New York for the purpose of any
Action arising out of or relating to this Agreement brought by any party hereto,
and (b) irrevocably waive, and agree not to assert by way of motion, defense, or
otherwise, in any such Action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the Action is brought in an
inconvenient forum, that the venue of the Action is improper, or that this
Agreement or the Transactions may not be enforced in or by any of the above-
named courts.
SECTION 11.08 Waiver of Jury Trial. Each of the parties hereto hereby
waives to the fullest extent permitted by applicable law any right it may have
to a trial by jury with respect to any litigation directly or indirectly arising
out of, under or in connection with this Agreement or the Transactions. Each of
the parties hereto (a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce that foregoing waiver and
(b) acknowledges that it and the other hereto have been induced to enter into
this Agreement and the Transactions, as applicable, by, among other things, the
mutual waivers and certifications in this Section 11.08.
SECTION 11.09 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 11.10 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
A-47
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
DYCOM INDUSTRIES, INC.
By: /s/ STEVEN E. NIELSEN
------------------------------------
Name: Steven E. Nielsen
Title: President and Chief
Executive Officer
TROY ACQUISITION CORP.
By: /s/ STEVEN E. NIELSEN
------------------------------------
Name: Steven E. Nielsen
Title: President and Chief
Executive Officer
ARGUSS COMMUNICATIONS, INC.
By: /s/ RAINER H. BOSSELMANN
------------------------------------
Name: Rainer H. Bosselmann
Title: President and Chief
Executive Officer
A-48
ANNEX I
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, but subject to compliance
with the terms of the Agreement and any applicable rules and regulations of the
SEC, including Rule 14e-1(c) relating to Merger Sub's obligation to exchange or
return tendered shares after the termination of the Offer, Merger Sub shall not
be required to accept for exchange or exchange any shares of Company Common
Stock tendered pursuant to the Offer, and may terminate, extend or amend the
Offer in accordance with the Agreement, if (i) the Minimum Condition shall not
have been satisfied; (ii) the applicable waiting period under the HSR Act shall
not have expired or been terminated; (iii) the Offer Registration Statement
shall not have become effective under the Securities Act or shall be the subject
of any stop order or proceedings seeking a stop order; (iv) the Parent Common
Stock to be issued in the Offer and the Merger shall not have been approved for
listing on the NYSE, subject to official notice of issuance; or (v) on or after
the date of the Agreement and at or prior to the Acceptance Date, any of the
following events or circumstances occurs or exists and is continuing:
(a) there shall have been instituted or pending any litigation, suit,
claim, action or proceeding before any federal or state court of the United
States of America (other than (i) any such action in which a motion for a
temporary restraining order, a preliminary injunction or a permanent
injunction shall have been denied or shall have expired, or a judicial
order granting any such temporary restraining order, preliminary injunction
or permanent injunction shall have been reversed on appeal and not
reinstated, (ii) any such action or proceeding in which the United States
Department of Justice, or the Federal Trade Commission or any applicable
state authority does not file within 10 business days after commencement of
such action a motion seeking injunctive relief of the type referred to in
clauses (1) through (3) of this paragraph (a), or (iii) an action filed
with consent of Merger Sub) by any United States federal government or
governmental authority or agency or any of the several states of the United
States or any attorney general thereof (1) challenging or seeking to make
illegal, materially delay, or otherwise, directly or indirectly, restrain
or prohibit or make materially more costly, the making of the Offer, the
acceptance for exchange of any shares of Company Common Stock by Parent,
Merger Sub or any other affiliate of Parent, or the consummation of any
other transaction contemplated by the Agreement; (2) seeking an order of
divestiture that, if complied with, would, in Parent's reasonable judgment,
be expected to have a material adverse effect on the business, results of
operations or financial condition of Parent, the Company and their
Subsidiaries, taken as a whole, after giving effect to the Offer and the
Merger; or (3) seeking to impose or confirm any limitation on the ability
of Parent, Merger Sub or any other Subsidiary of Parent to exercise
effectively full rights of ownership of any shares of Company Common Stock
on all matters properly presented to the Company's stockholders, including,
without limitation, the approval and adoption of the Agreement and the
transactions contemplated by the Agreement;
(b) there shall have been (i) any Law enacted, promulgated, amended,
issued or deemed applicable to (1) Parent, the Company or any of their
respective subsidiaries or (2) any transaction contemplated by the
Agreement or (ii) entered, promulgated or enforced by any court or
Governmental Authority, any Order of any kind which prohibits, restrains,
restricts or enjoins the consummation of the Offer or has the effect of
making the Offer illegal, in each case, by any legislative body or
Governmental Authority that would result, directly or indirectly, in any of
the consequences referred to in clauses (1) through (3) of paragraph (a)
above;
(c) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on the
NYSE (other than a shortening of trading hours or any coordinated trading
halt triggered solely as a result of a specified increase or decrease in a
market index), (ii) a decline, measured from the date hereof, in the
Standard & Poor's 500 Index in excess of 25%, (iii) a declaration of a
banking moratorium or any suspension of payments in respect of banks
A-49
in the United States, (iv) any new and material limitation (whether or not
mandatory) by any United States government or Governmental Authority, on
the extension of credit by United States banks or other lending
institutions, (v) a commencement of a war or armed hostilities or other
national or international calamity directly or indirectly involving the
United States not existing on the date hereof (the announced "War on
Terrorism" resulting from the September 11, 2001 terrorist attacks shall be
deemed existing on the date hereof) or (vi) in the case of any of the
foregoing existing on the date hereof, including, without limitation, the
announced War on Terrorism, a material acceleration or worsening thereof,
it being understood that any air strike against, or special operations
involving a limited number of ground troops in, the countries of Somalia or
Yemen shall not be considered a material acceleration or worsening of the
War on Terrorism;
(d) other than with respect to any Order that is the subject of
paragraph (a) or (b) above, there shall have been enacted, entered,
promulgated or enforced by any court or Governmental Authority any Order
which prohibits, restrains, restricts or enjoins the consummation of the
Offer or has the effect of making the Offer illegal;
(e) the Company shall have breached or failed to perform in any
material respect (i) its obligations, covenants or agreements under the
Agreement, (ii) the representations and warranties of the Company contained
in the Agreement that are qualified by reference to materiality or a
Company Material Adverse Effect shall not have been true and correct in all
respects when made or at any time prior to the consummation of the Offer as
if made at or at and as of such time (other than representations and
warranties which by their terms address matters only as of another
specified date, which shall be true and correct in all respects only as of
such date), or (iii) the representations and warranties of the Company
contained in the Agreement that are not so qualified shall not have been
true and correct when made or at any time prior to the consummation of the
Offer as if made at and as of such time (other than representations and
warranties which by their terms address matters only as of another
specified date, which shall be true and correct only as of such date),
except, in the case of clause (iii) only, for such failures to be true and
correct as are not reasonably likely to, individually or in the aggregate,
result in a Company Material Adverse Effect;
(f) (i) it shall have been publicly disclosed, or Parent shall have
otherwise learned, that beneficial ownership (determined for the purposes
of this paragraph as set forth in Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of the then-outstanding shares of Company Common Stock
have been acquired by any person, other than Parent or any of its
affiliates, or (ii) (A) the Company Board, or any committee thereof, shall
have withdrawn or modified, in a manner adverse to Parent or Merger Sub
including by amending the Schedule 14D-9, the approval or recommendation of
the Offer, the Merger, the Agreement, or approved or recommended any
Superior Proposal or any other acquisition of Company Common Stock other
than the Offer and the Merger or (B) the Company Board, or any committee
thereof, shall have resolved to do any of the foregoing;
(g) the Agreement shall have been terminated in accordance with its
terms;
(h) any agreement set forth on Section A-1 of the Company Disclosure
Schedule, concerning the registration rights of certain holders of Company
Common Stock that are the signatories to each such agreement, shall be, in
the reasonable judgment of Parent, different in a manner that is materially
more burdensome to the Company than the Registration Rights Agreement
contained in Section A-2 of the Company Disclosure Schedule; and
(i) the Amendment to Forbearance and Modification Agreement and
Waiver, dated as of December 26, 2001, among the Company, certain
guarantors set forth on the signature pages thereof and certain lenders set
forth on the signature pages thereof (the "Amended Forbearance Agreement"),
shall not have been amended to extend the Forbearance Period (as defined in
the Amended Forbearance Agreement) until the earlier of the Effective Time
or the termination of the Agreement pursuant to its terms;
A-50
which, in the reasonable judgment of Parent in any such case, and regardless of
the circumstances (including any action or inaction by Parent or any of its
affiliates) giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for payment.
The foregoing conditions are for the sole benefit of Merger Sub and Parent
and may be asserted by Merger Sub or Parent regardless of the circumstances
giving rise to any such condition or may be waived by Merger Sub or Parent in
whole or in part at any time and from time to time in their sole discretion. The
failure by Parent or Merger Sub at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right; the waiver of any such
right with respect to particular facts and other circumstances shall not be
deemed a waiver with respect to any other facts and circumstances; and each such
right shall be deemed an ongoing right that may be asserted at any time and from
time to time.
A-51
EXHIBIT A
FORM OF AFFILIATE LETTER FOR
AFFILIATES OF THE COMPANY
[ ], 2002
Dycom Industries, Inc.
-and-
Troy Acquisition Corp.
4440 PGA Boulevard, Suite 500
Palm Beach Gardens, Florida 33410
Attention: Marc R. Tiller, Esq.
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of ARGUSS COMMUNICATIONS, INC. (the "Company"), as the term
"affiliate" is defined for purposes of paragraphs (c) and (d) of Rule 145 of the
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"). Pursuant to the terms of the Agreement and Plan of Merger,
dated as of January 7, 2002 (the "Merger Agreement"), among DYCOM INDUSTRIES,
INC., a Florida corporation ("Parent"), TROY ACQUISITION CORP., a wholly owned
subsidiary of Parent and a Delaware corporation ("Merger Sub"), and the Company,
Merger Sub will be merged with and into the Company (the "Merger"). Capitalized
terms used in this letter agreement without definition shall have the meanings
assigned to them in the Merger Agreement.
As a result of the Offer and Merger, I may receive shares of common stock,
par value $.01 per share, of Parent (the "Parent Shares"). I would receive such
Parent Shares in exchange for shares (or upon exercise of options for shares)
owned by me of common stock, par value $.01 per share, of the Company (the
"Company Shares").
1. I represent, warrant and covenant to Parent that in the event I receive
any Parent Shares as a result of the Offer or Merger:
A. I shall not make any sale, transfer or other disposition of the
Parent Shares in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
Parent Shares, to the extent I felt necessary, with my counsel or counsel
for the Company.
C. I have been advised that the issuance of the Parent Shares to me
pursuant to the Offer or Merger has been registered with the Commission
under the Act on a Registration Statement on Form S-4. However, I have also
been advised that, because at the time of the Offer or at the time the
Merger is submitted for a vote of the stockholders of the Company, (a) I
may be deemed to be an affiliate of the Company and (b) the distribution by
me of the Parent Shares has not been registered under the Act, I may not
sell, transfer or otherwise dispose of the Parent Shares issued to me in
the Merger unless (i) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer or other disposition
has been registered under the Act or (iii) I deliver an opinion of counsel
reasonably acceptable to Parent, or a "no action" or interpretive letter of
the Commission is furnished to Parent, stating that such sale, transfer or
other disposition is otherwise exempt from registration under the Act.
D. I understand that Parent is under no obligation to register the
sale, transfer or other disposition of the Parent Shares by me or on my
behalf under the Act or, except as provided in
A-52
paragraph 2(A) below, to take any other action necessary in order to make
compliance with an exemption from such registration available.
E. I understand that Parent may give stop-transfer instructions to its
transfer agent with respect to the Parent Shares to enforce the
restrictions set forth herein and that there will be placed on the
certificates for the Parent Shares issued to me, or any substitutions
therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED [ ], 2002
BETWEEN THE REGISTERED HOLDER HEREOF AND DYCOM INDUSTRIES, INC., A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF DYCOM
INDUSTRIES, INC."
F. I understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
G. Execution of this letter should not be considered an admission on
my part that I am an "affiliate" of the Company as described in the first
paragraph of this letter, nor as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date of
this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
Parent Shares pursuant to Rule 145 and, to the extent applicable, Rule 144
under the Act, Parent shall (a) use its reasonable efforts to (i) file, on
a timely basis, all reports and data required to be filed with the
Commission by it pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and (ii) furnish to me upon request
a written statement as to whether Parent has complied with such reporting
requirements during the 12 months preceding any proposed sale of the Parent
Shares by me under Rule 145, and (b) otherwise use its reasonable efforts
to permit such sales pursuant to Rule 145 and Rule 144. Parent hereby
represents to me that it has filed all reports that are required to be
filed with the Commission under Section 13 of the Exchange Act during the
preceding 12 months.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs 1(E) and l(F) above will be substituted by delivery of
certificates without such legends if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Shares received in the Offer
or Merger, as applicable, and the provisions of Rule 145(d)(2) are then
available to the undersigned, (ii) two years shall have elapsed from the
date the undersigned acquired the Parent Shares received in the Offer or
Merger, as applicable, and the provisions of Rule 145(d)(3) are then
applicable to the undersigned, or (iii) Parent has received either an
opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to Parent, or a "no action" letter obtained by the undersigned
from the staff
A-53
of the Commission, to the effect that the restrictions imposed by Rule 145
under the Act no longer apply to the undersigned.
Very truly yours,
--------------------------------------
Name:
Agreed and accepted this [ ] day
of [ ], 2002, by
DYCOM INDUSTRIES, INC.
By:
----------------------------------------------------
Name:
Title:
A-54
ANNEX B
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, dated as of January 7, 2002 (this "Agreement"),
among DYCOM INDUSTRIES, INC., a Florida corporation ("Parent"), TROY ACQUISITION
CORP., a Delaware corporation and a wholly owned subsidiary of Parent
("Purchaser"), ARGUSS COMMUNICATION, INC., a Delaware corporation (the
"Company"), and each of the stockholders whose name appears on the signature
pages of this Agreement (each, a "Stockholder" and, collectively, the
"Stockholders").
WHEREAS, as of the date hereof, each Stockholder owns beneficially, and has
the sole power to vote or direct the vote of, the number of shares of common
stock, par value $.01 per share ("Company Common Stock"), of the Company as set
forth opposite such Stockholder's name on Exhibit A hereto (all such shares of
Company Common Stock and any shares of Company Common Stock hereafter acquired
by the Stockholders prior to the termination of this Agreement being referred to
herein as the "Shares");
WHEREAS, simultaneously herewith, Parent, Purchaser and the Company have
entered into an Agreement and Plan of Merger (the "Merger Agreement"; terms used
but not defined in this Agreement shall have the meanings ascribed to them in
the Merger Agreement), a copy of which has been made available to each
Stockholder, which provides, upon the terms and subject to the conditions
thereof, for the merger of Purchaser with and into the Company (the "Merger");
and
WHEREAS, as a condition to the willingness of Parent and Purchaser to enter
into the Merger Agreement, Parent and Purchaser have requested that the
Stockholders agree, and, in order to induce Parent and Purchaser to enter into
the Merger Agreement, the Stockholders have agreed, to enter into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein and in the Merger Agreement, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
1. Tender of Shares. Promptly following the commencement of the Offer,
each Stockholder hereby agrees that such Stockholder (a) shall tender, or cause
to be tendered, into the Offer, as promptly as practicable, all of his, her or
its Shares pursuant to the terms of the Offer and (b) shall not withdraw, or
cause to be withdrawn, such Shares from the Offer. The preceding sentence
notwithstanding, in the event that the Company terminates the Merger Agreement
pursuant to Section 10.01(c)(ii) thereof, then, as of the effective time of such
termination, the obligations of each Stockholder under this Section 1 shall
become null and void and have no further force or effect.
2. Vote in Favor of Merger. During the period commencing on the date
hereof and terminating at the earlier of (a) the Effective Time or (b) the
termination of this Agreement, each Stockholder shall vote, or cause to be
voted, all of his, her or its Shares at any meeting of the stockholders of the
Company (whether annual or special and whether or not adjourned or postponed),
however called, and in any action by written consent of the stockholders of the
Company (i) in favor of the approval and adoption of the Merger Agreement, (ii)
against any Competing Transaction, merger, consolidation, sale of assets,
recapitalization or other business combination involving the Company (other than
the Merger) or any other action or agreement that could reasonably be expected
to result in a breach of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or that could
reasonably be expected to result in any of the conditions to the Company's or
Parent's obligations under the Merger Agreement not being fulfilled, and (iii)
in favor of any other matter that could be reasonably expected to facilitate the
consummation of the Merger and the other transactions contemplated by the Merger
Agreement.
3. Grant of Proxy. Each Stockholder, by this Agreement, with respect to
his, her or its Shares, hereby grants an irrevocable proxy to Parent (and agrees
to execute such documents or certificates
evidencing such proxy as Parent may reasonably request) to vote, all of his, her
or its Shares at any meeting of the stockholders of the Company (whether annual
or special and whether or not adjourned or postponed), however called, and in
any action by written consent of the stockholders of the Company, during the
period commencing on the date hereof and terminating at the earlier of (a) the
Effective Time and (b) the termination of this Agreement, (i) in favor of the
approval and adoption of the Merger Agreement, (ii) against any Competing
Transaction, merger, consolidation, sale of assets, recapitalization or other
business combination involving the Company (other than the Merger) or any other
action or agreement that could reasonably be expected to result in a breach of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or that could reasonably be expected to
result in any of the conditions to the Company's or Parent's obligations under
the Merger Agreement not being fulfilled, and (iii) in favor of any other matter
that could be reasonably expected to facilitate the consummation of the Merger
and the other transactions contemplated by the Merger Agreement. THIS PROXY IS
IRREVOCABLE AND COUPLED WITH AN INTEREST AND SHALL SURVIVE ANY TRANSFER OF
SHARES UNTIL THE TERMINATION OF THIS AGREEMENT.
4. Representations and Warranties of Stockholders. Each Stockholder hereby
severally (and only as to itself) represents and warrants to Parent and
Purchaser as follows:
(a) Organization; Authorization. Such Stockholder has full legal
capacity and authority to enter into this Agreement and to carry out such
person's obligations hereunder. This Agreement has been duly executed and
delivered by such Stockholder, and (assuming due authorization, execution
and delivery by Parent, Purchaser and the Company and each other
Stockholder) this Agreement constitutes a legal, valid and binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms, except to the extent that its enforceability may
be subject to applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforceability of creditors' rights generally
and by general equitable principles.
(b) No Conflict; Required Filings and Consents. (i) The execution and
delivery of this Agreement by such Stockholder do not, and the performance
of this Agreement by such Stockholder will not, (1) conflict with or
violate any Law applicable to such Stockholder or by which any property or
asset of such Stockholder is bound or affected, or (2) result in any
material breach of or constitute a material default (or an event which with
notice or lapse of time or both would become a material default) under, or
give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of any encumbrance on any
property or asset of such Stockholder (including, without limitation, the
Shares) pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which such Stockholder is party or by which such Stockholder
is bound.
(ii) The execution and delivery of this Agreement by such Stockholder
do not, and the performance of this Agreement by such Stockholder will not,
require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign, except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not prevent or materially delay the performance by such Stockholder of such
Stockholder's obligations under this Agreement.
(c) Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of such
Stockholder or any of such Stockholder's affiliates, threatened against
such Stockholder or any of such Stockholder's affiliates or any of their
respective properties that, individually or in the aggregate, would
reasonably be expected to prevent or materially delay such Stockholder's
ability to perform its obligations under this Agreement. There is no
judgment, decree or order against such Stockholder or, to the knowledge of
such Stockholder, any of such Stockholder's affiliates, that would
reasonably be expected to prevent, enjoin, alter or materially delay the
performance by such Stockholder of its
B-2
obligations under this Agreement, or that would reasonably be expected to
have a material adverse effect on such Stockholder's ability to perform its
obligations under this Agreement.
(d) Ownership of Shares. The Shares are owned beneficially by the
Stockholder. Such Shares constitute all of the shares of Company Common
Stock of which such Stockholder is beneficial owner. All of such Shares are
issued and outstanding. The Stockholder has sole voting power and sole
power of disposition with respect to all of such Shares with no
restrictions, subject to applicable federal securities laws, on the
Stockholder's rights of disposition pertaining thereto.
5. Transfer of Shares. Each Stockholder agrees that he, she or it shall
not, directly or indirectly, (a) sell, assign, transfer (including by operation
of law), pledge, dispose of or otherwise encumber any of the Shares, (b) deposit
any Shares into a voting trust or enter into a voting agreement or arrangement
or grant any proxy or power of attorney with respect thereto that is
inconsistent with this Agreement, (c) enter into any contract, option or other
arrangement or undertaking with respect to the direct or indirect acquisition or
sale, assignment, transfer (including by operation of law) or other disposition
of any Shares, (d) take any action that would make any representation or
warranty of such Stockholder herein untrue or incorrect in any material respect
or have the effect of preventing or disabling the Stockholder from performing
his, her or its obligations hereunder or (e) otherwise agree to do any of the
foregoing. The preceding sentence notwithstanding, in the event that the Company
terminates the Merger Agreement pursuant to Section 10.01(c)(ii) thereof, then,
as of the effective time of such termination, the obligations of each
Stockholder under this Section 5 shall become null and void and have no further
force or effect.
6. No Solicitation of Transactions. None of the Stockholders shall,
directly or indirectly, instruct its officers, directors, employees,
subsidiaries, agents or advisors or other representatives (including, without
limitation, any investment banker, attorney or accountant retained by it), to,
directly or indirectly, solicit, initiate or encourage (including by way of
furnishing nonpublic information), or take any other action to facilitate, any
inquiries or the making of any proposal or offer (including, without limitation,
any proposal or offer to stockholders of the Company) that constitutes, or may
reasonably be expected to lead to, any Competing Transaction, or enter into or
maintain or continue discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain a Competing Transaction, or agree to
or endorse any Competing Transaction, or authorize or permit any of the
officers, directors or employees of such party or any of its subsidiaries, or
any investment banker, financial advisor, attorney, accountant or other
representative retained by such party or any of its subsidiaries, to take any
such action; provided, however, that nothing in this Section 6 shall prevent the
Stockholder, in his, her or its capacity as a director or executive officer of
the Company, from engaging in any activity permitted pursuant to Section 8.04(b)
of the Merger Agreement or otherwise required in the exercise of such
Stockholder's fiduciary duties in his or her capacity as a director or executive
officer of the Company. Each Stockholder shall, and shall direct or cause his,
her or its representatives and agents to, immediately cease and cause to be
terminated any discussions or negotiations with any parties that may be ongoing
with respect to any Competing Transaction. Each Stockholder shall notify Parent
promptly if any proposal or offer, or any inquiry or contact with any person
with respect thereto, regarding a Competing Transaction is made.
7. Information for Offer Documents and Proxy Statement/Prospectus;
Disclosure. Each Stockholder covenants and agrees that none of the information
relating to such Stockholder and his, her or its affiliates provided in writing
by or on behalf of such Stockholder or his, her or its affiliates for inclusion
in the Schedule 14D-9, the Offer Documents, the Proxy Statement/Prospectus or
Merger Registration Statement will, at (i) the time the Merger Registration
Statement is declared effective, (ii) the time the Schedule 14D-9 or the Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is first
filed with the SEC or mailed to the stockholders of the Company, (iii) the time
of the Company Stockholders Meeting and (iv) the Effective Time, contain any
untrue statement of 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 were made, not misleading. Each
Stockholder authorizes and agrees to permit Parent and Purchaser to publish and
disclose in the Offer Documents, the Proxy Statement/Prospectus and the Merger
Registration Statement and related filings under the securities laws such
Stockholder's identity and ownership of Shares and the nature of his, her or its
commitments,
B-3
arrangements and understandings under this Agreement and any other information
required by applicable Law.
8. Obligations of the Company. The Company hereby agrees to use its
reasonable best efforts to aid and cooperate with the other parties hereto in
effecting the terms of this Agreement.
9. Termination. Other than as expressly provided herein, the obligations
of the Stockholders under this Agreement shall terminate upon the earlier of (i)
the Effective Time or (ii) 12 months following termination of the Merger
Agreement. Nothing in this Section 9 shall relieve any party of liability for
any breach of this Agreement.
10. Registration Statement. As promptly as reasonably practicable after
the Effective Time, Parent shall file with the SEC, and use its reasonable best
efforts to have declared effective, a "shelf" registration statement that
registers the resale by all of the Stockholders, on a continuous basis for a six
month period, of all of the shares of Parent Common Stock received by the
Stockholders (and any other Stockholder of the Company agreed to by Parent)
pursuant to the Offer and the Merger, including any securities issued as a
dividend or distribution thereon or in exchange or replacement therefor. As
promptly as reasonably practicable after the execution of this Agreement, Parent
and each Stockholder shall enter into a registration rights agreement providing
for the foregoing and containing other customary terms, provisions, exceptions
and limitations.
11. Miscellaneous. (a) Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the transactions contemplated hereby are consummated.
(b) All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by telecopy or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at their addresses as specified on the signature page(s) of
this Agreement. A copy of any such notice, request, claim, demand and other
communication given to Parent or Purchaser shall also be given to Shearman &
Sterling, 599 Lexington Avenue, New York, New York, 10022-6069 (Facsimile
Number: 212-848-7179), Attention: Spencer D. Klein, Esq. and a copy of any such
notice, request, claim, demand and other communication given to the Company or
any Stockholder shall also be given to Gibson, Dunn & Crutcher LLP, 1050
Connecticut Avenue, N.W., Washington, D.C., 20036-5306 (Facsimile Number: 202-
467-0539), Attention: Howard B. Adler, Esq.
(c) If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. 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 in a mutually acceptable manner in order that the
transactions contemplated hereby shall be consummated as originally contemplated
to the fullest extent possible.
(d) This Agreement, the Confidentiality Agreement and the Merger Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and undertakings, both written
and oral, among the parties, or any of them, with respect to the subject matter
hereof.
(e) This Agreement shall not be assigned (whether pursuant to a merger, by
operation of law or otherwise), except that Parent and Purchaser may assign all
or any of their rights and obligations hereunder to any affiliate of Parent,
provided, however, that no such assignment shall relieve the assigning party of
its obligations hereunder if such assignee does not perform such obligations.
B-4
(f) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
(g) The parties hereto agree that irreparable damage would occur in the
event any provision of this Agreement was not performed in accordance with the
terms hereof and that the parties shall be entitled to specific performance of
the terms hereof, in addition to any other remedy at law or in equity.
(h) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York applicable to contracts executed in and to be
performed in that State. All actions and proceedings arising out of or relating
to this Agreement shall be heard and determined exclusively in any New York
state or federal court sitting in the Borough of Manhattan of The City of New
York. The parties hereto hereby (a) submit to the exclusive jurisdiction of any
state or federal court sitting in the Borough of Manhattan of The City of New
York for the purpose of any Action arising out of or relating to this Agreement
brought by any party hereto, and (b) irrevocably waive, and agree not to assert
by way of motion, defense, or otherwise, in any such Action, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that the Action
is brought in an inconvenient forum, that the venue of the Action is improper,
or that this Agreement or the Transactions may not be enforced in or by any of
the above-named courts.
(i) This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
(j) From time to time, at the request of Parent or Purchaser, in the case
of any Stockholder, or at the request of the Stockholders, in the case of Parent
and Purchaser, and without further consideration, each party shall execute and
deliver or cause to be executed and delivered such additional documents and
instruments and take all such further action as may be reasonably necessary or
desirable to consummate the transactions contemplated by this Agreement.
(k) Each of the parties hereto hereby waives to the fullest extent
permitted by applicable law any right it may have to a trial by jury with
respect to any litigation directly or indirectly arising out of, under or in
connection with this Agreement or the transactions contemplated hereby. Each of
the parties hereto (a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce that foregoing waiver and
(b) acknowledges that it and the others hereto have been induced to enter into
this Agreement and the transactions contemplated hereby, as applicable, by,
among other things, the mutual waivers and certifications in this Section 11(k).
[SIGNATURE PAGES FOLLOW]
B-5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
DYCOM INDUSTRIES, INC.
By: /s/ STEVEN E. NIELSEN
------------------------------------
Name: Steven E. Nielsen
Title: President and Chief
Executive Officer
Address:
TROY ACQUISITION CORP.
By: /s/ STEVEN E. NIELSEN
------------------------------------
Name: Steven E. Nielsen
Title: President and Chief
Executive Officer
Address:
ARGUSS COMMUNICATIONS, INC.
By: /s/ RAINER H. BOSSELMANN
------------------------------------
Name: Rainer H. Bosselmann
Title: President and Chief
Executive Officer
Address:
STOCKHOLDERS:
By: /s/ RAINER H. BOSSELMANN
------------------------------------
Name: Rainer H. Bosselmann
Address:
By: /s/ DESOTO S. JORDAN, JR.
------------------------------------
Name: DeSoto S. Jordan, Jr.
Address:
By: /s/ DANIEL A. LEVINSON
------------------------------------
Name: Daniel A. Levinson
Address:
By: /s/ RICHARD S. PERKINS, JR.
------------------------------------
Name: Richard S. Perkins, Jr.
Address:
B-6
By: /s/ JAMES W. QUINN
----------------------------------
Name: James W. Quinn
Address:
By: /s/ PETER L. WINSLOW
------------------------------------
Name: Peter L. Winslow
Address:
By: /s/ H. HAYWOOD MILLER, III
------------------------------------
Name: H. Haywood Miller, III
Address:
B-7
EXHIBIT A
LIST OF STOCKHOLDERS
NUMBER OF SHARES OF COMPANY
COMMON STOCK OWNED
NAME OF STOCKHOLDER BENEFICIALLY
------------------- ---------------------------
Rainer H. Bosselmann........................................ 744,970
DeSoto S. Jordan, Jr. ...................................... --
Daniel A. Levinson.......................................... 120,000
Richard S. Perkins, Jr. .................................... 14,000
James W. Quinn.............................................. 1,000
Peter L. Winslow............................................ 39,465
H. Haywood Miller, III...................................... 53,404
-------
TOTAL............................................. 972,839
B-8
ANNEX C
OPINION OF ALLEN & COMPANY INCORPORATED
January 7, 2002
The Board of Directors
Arguss Communications, Inc.
One Church Street, Suite 302
Rockville, Maryland 20850
Members of the Board of Directors:
We hereby confirm, as of the date hereof, our opinion as to the fairness,
from a financial point of view, of the Consideration (as defined below) to be
received in the Proposed Transaction (as defined below) by the stockholders of
Arguss Communications, Inc. ("Arguss" or the "Company") that we presented to the
Board of Directors of the Company (the "Board") at its meeting on January 4,
2002.
We understand that Dycom Industries, Inc. ("Dycom" or the "Parent"), Merger
Sub (the "Merger Sub") and the Company have entered into an Agreement and Plan
of Merger, dated as of January 7, 2002 (the "Agreement"), pursuant to which (i)
the Parent will cause the Merger Sub to commence a tender offer (the "Offer") to
exchange all of the outstanding shares of the Company's common stock, par value
$0.01 per share (the "Arguss Common Stock"), for the right to receive from
Merger Sub pursuant to the Agreement one fully paid and nonassessable share of
the Parent's common stock, par value $0.33 per share (the "Dycom Common Stock")
for every three shares of Arguss Common Stock (the "Consideration"), and (ii)
subsequent to the Offer, the Merger Sub will be merged with and into the Company
(the "Merger"), and the Company will continue as the surviving corporation. The
Offer and the Merger, taken together, are referred to as the "Proposed
Transaction." The terms of the Proposed Transaction are set forth in more detail
in the Agreement.
We have been requested by the Board to render our opinion as of the date
hereof (the "Opinion") with respect to the fairness, from a financial point of
view, to the Company's stockholders of the Consideration to be received by such
shareholders in the Proposed Transaction. We have not been requested to perform
an appraisal of the Company's business or assets or to opine as to, and our
Opinion does not in any manner address, the Company's underlying business
decision to enter into the Agreement or to proceed with or effect the Proposed
Transaction.
The Company has consented that, for purposes of formulating the Opinion,
Allen may assume (i) that the Proposed Transaction will be treated as an
integrated transaction and as a tax-free reorganization for federal income tax
purposes; (ii) the Proposed Transaction will be consummated in all material
respects in accordance with the terms of the draft Agreement provided for our
review, without waiver, modification or amendment of any material term,
condition or agreement and that, in the course of obtaining the necessary
regulatory or third party consents and approvals for the Proposed Transaction,
no limitations, restrictions or conditions will be imposed that will have a
material adverse effect on the Company, Dycom or the contemplated benefits of
the Proposed Transaction.
We, as part of our investment banking business, are regularly engaged in
the valuation of businesses and their securities in connection with tender
offers, mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. We will receive a fee in
connection with services provided in rendering our Opinion pursuant to our
engagement agreement with the Company. As of the date of this letter, we and
certain of our officers and affiliates are shareholders in Arguss, and James W.
Quinn, a Vice President of Allen, also serves as a director of Arguss. In
addition, in the ordinary course of our brokerage business, we or our affiliates
may have long or short positions, for our own account or for those of our
clients, in the securities of Arguss and/or Dycom.
The Board of Directors
Arguss Communications, Inc.
January 7, 2002
Page 2
In connection with delivering our Opinion, we:
(i) reviewed and analyzed a draft of the Agreement and drafts of the
agreements ancillary thereto;
(ii) reviewed and analyzed historical publicly available business
information and financial results of Arguss and Dycom, including Securities
and Exchange Commission filings of each of Arguss and Dycom;
(iii) reviewed and analyzed non-public historical operating and
financial information of Arguss and Dycom provided by the managements of
Arguss and Dycom;
(iv) reviewed and analyzed information regarding the past and current
operations and financial conditions and the business prospects of Arguss
and Dycom (such information regarding the business prospects of Dycom did
not include non-public forward-looking financial information);
(v) held discussions with senior executives of Arguss and Dycom
relating to strategic, financial and operational benefits anticipated from
the Proposed Transaction;
(vi) reviewed and analyzed historical market prices and trading
volumes for the Arguss Common Stock and the Dycom Common Stock;
(vii) reviewed and analyzed projections as to the future operating and
financial performance of Arguss as provided by the management of Arguss;
(viii) reviewed and analyzed financial and operating data for selected
publicly traded companies we deemed comparable to Arguss and Dycom;
(ix) reviewed and analyzed publicly available financial information
relating to selected comparable merger and acquisition transactions;
(x) reviewed and analyzed publicly available transaction information
for selected comparable exchange offers and tender offers;
(xi) reviewed and analyzed research reports relating to each of Arguss
and Dycom and companies which we deemed comparable to Arguss and Dycom;
(xii) performed discounted cash flow analyses of Arguss, Dycom and a
combined entity consisting of Arguss and Dycom;
(xiii) reviewed and analyzed certain other information concerning the
infrastructure services industry and the telecommunications industry;
(xiv) considered possible strategic alternatives for Arguss; and
(xv) performed such other analyses and reviewed such other information
as we deemed appropriate, including trends prevailing in relevant
industries and financial markets.
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our Opinion without
independent verification, and have further relied upon the assurances of
management of Arguss and Dycom that they are not aware of any facts that would
make such information inaccurate or misleading. In arriving at our Opinion, we
neither performed nor obtained any evaluations or appraisals of the assets or
liabilities of Arguss or Dycom, and we did not perform or obtain any evaluations
or appraisals of Arguss' or Dycom's physical properties and facilities, sales
marketing or service organizations. With respect to the financial projections
provided to us, we have assumed that they have been reasonably prepared in good
faith reflecting the best currently available
C-2
The Board of Directors
Arguss Communications, Inc.
January 7, 2002
Page 3
estimates and judgments of the management of Arguss as to the future operating
and financial performance of Arguss. In addition to our review and analyses of
the specific information set forth above, our opinion herein reflects and gives
effect to our assessment of general economic, monetary, market and industry
conditions existing as of the date hereof as they may affect the business and
prospects of Arguss and Dycom.
Our Opinion rendered herein does not constitute a recommendation of the
Proposed Transaction over any other alternative transaction which may be
available to Arguss. The Opinion contained herein relates to the fairness from a
financial point of view of the Consideration to be received in the Proposed
Transaction by the stockholders of Arguss and does not address any other aspect
of the Proposed Transaction or any related transaction and does not constitute a
recommendation to any stockholder of Arguss as to whether to accept the
Consideration in connection with the Proposed Transaction. We are not expressing
any opinion as to the prices at which the stock of Arguss or Dycom will actually
trade at any time. It is understood that this letter is for the information of
the Board and may not be used for any other purpose without our prior written
consent, except that this letter may be included in its entirety in any filing
made by Arguss with the Securities and Exchange Commission with respect to the
Proposed Transaction.
Based on the foregoing and subject to the qualifications stated herein, we
are of the Opinion that, as of the date hereof, the Consideration to be received
in the Proposed Transaction by the stockholders of Arguss is fair to the
stockholders of the Company from a financial point of view.
Very truly yours,
ALLEN & COMPANY INCORPORATED
By: /s/ JOHN SIMON
------------------------------------
John Simon
Managing Director
C-3
ANNEX D
APPRAISAL RIGHTS PROCEDURES RELATING TO ARGUSS COMMON STOCK
Under Delaware law, Arguss stockholders will not have appraisal rights in
connection with the offer. If the offer is successfully completed, holders of
Arguss shares who (a) do not tender their shares into the offer and hold Arguss
shares at the effective time of the subsequent merger, (b) do not wish to accept
the consideration provided for in that merger and (c) comply with the procedures
provided for in Section 262 of the DGCL, will be entitled to, other than in
connection with a long-form merger, have their Arguss shares appraised by the
Delaware Court of Chancery and to receive a payment in cash of the "fair value"
of those shares as determined by the court. The following summarizes the
provisions of Section 262 of the DGCL regarding appraisal rights that would be
applicable in connection with the subsequent merger, which will be effected as a
merger of a wholly owned subsidiary of Dycom with and into Arguss, with Arguss
as the surviving corporation in the merger. This discussion is qualified in its
entirety by reference to Section 262 of the DGCL, which follows this summary. If
you fail to take any action required by Delaware law, your rights to an
appraisal in connection with the merger will be waived or terminated.
Notification of Merger's Effective Time. Either before the effective time
or within 10 days after the effective time, Arguss will send notice of the
effective time of the merger and the availability of appraisal rights to each
holder of its stock.
Electing Appraisal Rights. To exercise appraisal rights, the record holder
of Arguss shares must, within 20 days after the date Arguss mails the notice
referred to in the prior paragraph, deliver a written demand for appraisal to
Arguss. This demand must reasonably inform Arguss of the identify of the holder
of record and that the stockholder demands appraisal of his, her or its Arguss
shares.
A demand for appraisal must be delivered to: Corporate Secretary, Arguss
Communications, Inc., One Church Street, Suite 302, Rockville, Maryland 20850.
Only Record Holders May Demand Appraisal Rights. Only a record holder of
Arguss shares is entitled to demand appraisal rights. The demand must be
executed by or for the record holder, fully and correctly, as the holder's name
appears on the holder's stock certificates.
Court Petition Must Be Filed. Within 120 days after the effective time of
the merger, Arguss or any stockholder who has satisfied the foregoing conditions
may file a petition in the Delaware Court of Chancery demanding a determination
of the fair value of Arguss shares.
Within 120 days after the effective time of the subsequent merger, any
stockholder who has complied with the requirements under Section 262 of the DGCL
for exercise of appraisal rights may make a written request to receive from
Arguss a statement of the aggregate number of shares not voted in favor of the
merger and the total number of Arguss shares with respect to which demands for
appraisal have been received and the total number of holders of these shares.
Arguss will be required to mail these statements within ten days after it
receives a written request.
Appraisal Proceeding by Delaware Court. If a petition for an appraisal is
timely filed, after a hearing on the petition, the Delaware Court of Chancery
will determine which of the stockholders are entitled to appraisal rights. The
court will appraise the common stock owned by the stockholders and determine its
fair value. In determining fair value, the court may consider all relevant
factors. The court will also determine the amount of interest, if any, to be
paid upon the value of the common stock to the stockholders entitled to
appraisal.
The value of Arguss shares determined by the court could be more than, less
than, or the same as the merger consideration, but the form of the consideration
payable as a result of the appraisal proceeding
would be cash. The court may determine the costs of the appraisal proceeding and
allocate them to the parties as the court determines to be equitable under the
circumstances. The court may also order that all or a portion of any
stockholder's expenses incurred in connection with an appraisal proceeding,
including reasonable attorney's fees and expenses and reasonable fees and
expenses of experts utilized in the appraisal proceeding, be charged, on a pro
rata basis against the value of all shares of Arguss' common stock entitled to
appraisal.
Effect of Appraisal Demand on Voting and Right to Dividends; Tax
Consequences. Any stockholder who has duly demanded an appraisal in compliance
with Delaware law will not, after the effective time of the merger, be entitled
to vote the shares subject to demand for any purpose. The shares subject to the
demand will not be entitled to dividends or other distributions, other than
those payable or deemed to be payable to stockholders of record as of a date
prior to the effective time. We describe in the prospectus under "The
Offer-- Material United States Federal Income Tax Consequences," beginning on
page 36, the tax consequences to an Arguss stockholder who receives cash for his
or her Arguss shares pursuant to the exercise of appraisal rights.
Loss, Waiver or Withdrawal of Appraisal Rights. Holders of Arguss shares
will lose the right to appraisal if no petition for appraisal is filed within
120 days after the effective time of the merger. At any time within 60 days
after the effective date of the merger, a stockholder who has made a demand for
appraisal may withdraw such demand and accept the terms offered. The number of
Dycom shares, and cash in lieu of a fraction of a Dycom share, delivered to such
stockholder will be based on the same exchange ratio utilized in the offer and
the merger, regardless of the market price of Dycom's shares at the time of
delivery.
D-2
DELAWARE GENERAL CORPORATION LAW
SECTION 262 APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of stock on
the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing
pursuant to sec.228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a
nonstock corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest
of a member of a nonstock corporation; and the words "depository receipt"
mean a receipt or other instrument issued by a depository representing an
interest in one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251 (other than a merger effected pursuant to
sec.251(g) of this title), sec.252, sec.254, sec.257, sec.258, sec.263 or
sec.264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange
or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers,
Inc. or (ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any shares of
stock of the constituent corporation surviving a merger if the merger
did not require for its approval the vote of the stockholders of the
surviving corporation as provided in subsection (f) of sec.251 of this
title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation
pursuant to sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title
to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national
securities exchange or designated by a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph;
or
d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
D-3
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware
corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such
a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior
to the meeting, shall notify each of its stockholders who was such on
the record date for such meeting with respect to shares for which
appraisal rights are available pursuant to subsection (b) or (c) hereof
that appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of
this section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the
taking of the vote on the merger or consolidation, a written demand for
appraisal of such stockholder's shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such stockholder's shares. A proxy or vote against the
merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, then, either a constituent corporation before
the effective date of the merger or consolidation, or the surviving or
resulting corporation within ten days thereafter, shall notify each of
the holders of any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available for any
or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section.
Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled
to appraisal rights may, within 20 days after the date of mailing of
such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation,
either (i) each such constituent corporation shall send a second notice
before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the effective date
of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or
within 10 days after such effective date; provided, however, that if
such second notice is sent more than 20 days following the sending of
the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection.
An affidavit of the secretary or assistant secretary or of the transfer
agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining
D-4
the stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more
than 10 days prior to the date the notice is given, provided, that if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective
date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the
effective date of the merger or consolidation, any stockholder shall have
the right to withdraw such stockholder's demand for appraisal and to accept
the terms offered upon the merger or consolidation. Within 120 days after
the effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the corporation surviving
the merger or resulting from the consolidation a statement setting forth the
aggregate number of shares not voted in favor of the merger or consolidation
and with respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. Such written statement shall be
mailed to the stockholder within 10 days after such stockholder's written
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register
in Chancery in which the petition was filed a duly verified list containing
the names and addresses of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their shares have
not been reached by the surviving or resulting corporation. If the petition
shall be filed by the surviving or resulting corporation, the petition shall
be accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by one or more
publications at least one week before the day of the hearing, in a newspaper
of general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court shall
appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting corporation or by
any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings
and may proceed to trial upon the appraisal prior to the final determination
of the stockholder entitled to an appraisal. Any
D-5
stockholder whose name appears on the list filed by the surviving or
resulting corporation pursuant to subsection (f) of this section and who has
submitted such stockholder's certificates of stock to the Register in
Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that such stockholder is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares, together
with the interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders
of shares represented by certificates upon the surrender to the corporation
of the certificates representing such stock. The Court's decree may be
enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of
any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed
within the time provided in subsection (e) of this section, or if such
stockholder shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholder's demand for an appraisal and an
acceptance of the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in subsection (e)
of this section or thereafter with the written approval of the corporation,
then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of
Chancery shall be dismissed as to any stockholder without the approval of
the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
D-6
Manually signed facsimiles of the letter of transmittal, properly
completed, will be accepted. The letter of transmittal and certificates
evidencing Arguss shares and any other required documents should be sent or
delivered by each stockholder or his broker, dealer, commercial bank, trust
company or other nominee to the Exchange Agent at one of its addresses set forth
below.
The Exchange Agent for the offer is:
FIRST UNION NATIONAL BANK
By Mail: By Hand: Overnight Courier:
First Union National Bank First Union National Bank First Union National Bank
Corporate Trust Operations--NC1153 599 Lexington Ave., 22nd Floor Corporate Trust Operations--NC1153
Attn: Corporate Actions Dept. New York, New York 10022 Attn: Corporate Actions Dept.
1525 West W.T. Harris Boulevard, 3C3 1525 West W.T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153 Charlotte, North Carolina 28262
By Facsimile:
1-704-590-7628
Confirm by Telephone:
1-800-829-8432
---------------------
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this prospectus, the letter of transmittal
and the notice of guaranteed delivery may be obtained from the Information
Agent. You may also contact your broker, dealer, commercial bank, trust company
or other nominee for assistance concerning this offer.
The Information Agent for the offer and the merger is:
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
111 Commerce Road
Carlstadt, New Jersey 07072
Banks and Brokers, Call Collect: 201-896-1900
All Others, Call Toll Free: 1-877-748-9122
The Dealer Manager for the offer is:
MERRILL LYNCH & CO.
Four World Financial Center
New York, New York 10080
Call Toll Free: 1-866-276-1462
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Florida Business Corporation Act. Section 607.0850(1) of the FBCA provides
that a Florida corporation, such as Dycom, shall have the power to indemnify any
person who was or is a party to any proceeding (other than an action by, or in
the right of, the corporation), by reason of the fact that he is or was a
director or officer of the corporation or is or was serving at the request of
the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
liability incurred in connection with such proceeding, including any appeal
thereof, if he or she acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful.
Section 607.0850(2) of the FBCA provides that a Florida corporation shall
have the power to indemnify any person, who was or is a party to any proceeding
by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses and amounts paid in
settlement not exceeding, in the judgment of the board of directors, the
estimated expense of litigating the proceeding to conclusion, actually and
reasonably incurred in connection with the defense or settlement of such
proceeding, including any appeal thereof. Such indemnification shall be
authorized if such person acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification shall be made under this subsection
in respect of any claim, issue, or matter as to which such person shall have
been adjudged to be liable unless, and only to the extent that, the court in
which such proceeding was brought, or any other court of competent jurisdiction,
shall determine upon application that, despite the adjudication of liability but
in view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
Section 607.850 of the FBCA further provides that: (i) to the extent that a
director or officer of a corporation has been successful on the merits or
otherwise in defense of any proceeding referred to in subsection (1) or
subsection (2), or in defense of any proceeding referred to in subsection (1) or
subsection (2), or in defense of any claim, issue, or matter therein, he or she
shall be indemnified against expenses actually and reasonably incurred by him or
her in connection therewith; (ii) indemnification provided pursuant to Section
607.0850 is not exclusive; and (iii) the corporation shall have the power to
purchase and maintain insurance on behalf of a director or officer of the
corporation against any liability asserted against him or her or incurred by him
or her in any such capacity or arising out of his or her status as such, whether
or not the corporation would have the power to indemnify him or her against such
liabilities under Section 607.0850.
Notwithstanding the foregoing, Section 607.0850 of the FBCA provides that
indemnification or advancement of expenses shall not be made to or on behalf of
any director or officer if a judgment or other final adjudication establishes
that his or her actions, or omissions to act, were material to the cause of
action so adjudicated and constitute: (i) a violation of the criminal law,
unless the director or officer had reasonable cause to believe his or her
conduct was lawful or had no reasonable cause to believe his or her conduct was
unlawful; (ii) a transaction from which the director or officer derived an
improper personal benefit; (iii) in the case of a director, a circumstance under
which the liability provisions regarding unlawful distributions are applicable;
or (iv) willful misconduct or a conscious disregard for the best interests of
the corporation in a proceeding by or in the right of the corporation to procure
a judgment in its favor or in a proceeding by or in the right of a shareholder.
Section 607.0831 of the FBCA provides that a director of a Florida
corporation, such as Dycom, is not personally liable for monetary damages to the
corporation or any other person for any statement, vote,
II-1
decision, or failure to act, regarding corporate management or policy, by a
director, unless: (i) the director breached or failed to perform his or her
duties as a director; and (ii) the director's breach of, or failure to perform,
those duties constitutes: (A) a violation of criminal law, unless the director
had reasonable cause to believe his or her conduct was lawful or had no
reasonable cause to believe his conduct was unlawful; (B) a transaction from
which the director derived an improper personal benefit, either directly or
indirectly; (C) a circumstance under which the liability provisions regarding
unlawful distributions are applicable; (D) in a proceeding by or in the right of
the corporation to procure a judgment in its favor or by or in the right of a
shareholder, conscious disregard for the best interest of the corporation, or
willful misconduct; or (E) in a proceeding by or in the right of someone other
than the corporation or a shareholder, recklessness or an act or omission which
was committed in bad faith or with malicious purpose or in a manner exhibiting
wanton and willful disregard of human rights, safety, or property.
By-laws. Dycom's by-laws provide that, except as prohibited under Florida
law, it shall indemnify any person who was or is made a party to any proceeding
by reason of the fact that he or she was or is a director or officer of the
corporation, or a director or officer of the corporation serving as a trustee or
fiduciary of an employee benefit plan of the corporation, against liability
incurred in connection with such proceeding, including any appeal thereof. Dycom
maintains insurance policies insuring its directors and officers against certain
liabilities they may incur in their capacity as directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) List of Exhibits.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
2 Agreement and Plan of Merger, dated as of January 7, 2002,
among Dycom Industries, Inc., Troy Acquisition Corp. and
Arguss Communications, Inc. (included as Annex A to the
prospectus forming a part of this Registration Statement and
incorporated herein by reference).
3.1(i)1 Articles of Incorporation of Dycom (incorporated by
reference herein to Exhibit 3.01 of Dycom's Registration
Statement on Form S-1 filed with the Commission on October
29, 1986, File No. 033-09820).
3.1(i)2 Articles of Amendment to the Articles of Incorporation of
Dycom (incorporated by reference herein to Exhibit 3.01 of
Dycom's Registration Statement on Form S-1 filed with the
Commission on October 29, 1986, File No. 033-09820).
3.1(i)3 Articles of Amendment to the Articles of Incorporation of
Dycom, dated November 30, 1999 and filed with the Secretary
of State of Florida on December 17, 1999 (incorporated by
reference herein to Exhibit 3.1(i)(3) of Dycom's
Registration Statement on Form S-4 filed with the Commission
on January 23, 2002, File No. 333-81268).
3.1(i)4 Articles of Amendment to the Articles of Incorporation of
Dycom, dated April 6, 2001 (incorporated herein by reference
to Exhibit 3 of Dycom's Quarterly Report on Form 10-Q for
the quarter ended April 22, 2001, as filed on June 11, 2001,
File No. 001-10613).
3(ii) Amended By-laws of Dycom, as amended on May 24, 1999
(incorporated by reference herein to Exhibit 3(ii) of
Dycom's Registration Statement on Form S-4 filed with the
Commission on January 23, 2002, File No. 333-81268).
4.1 Description of Dycom's Capital Stock (incorporated by
reference herein to Dycom's Registration Statement on Form
S-3 filed with the Commission on October 23, 2000, File No.
333-48398).
4.2 Shareholder Rights Agreement, dated April 4, 2001, between
Dycom Industries, Inc. and the Rights Agent (which includes
the Form of Rights Certificate, as Exhibit A, the Summary of
Rights to Purchase Preferred Stock, as Exhibit B, and the
Form of Articles of Amendment to the Articles of
Incorporation for Series A Preferred Stock, as Exhibit C
(incorporated herein by reference to Exhibit 1 to Dycom's
Form 8-A filed April 6, 2001, File No. 001-10613).
II-2
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
4.3 Registration Rights Agreement, dated as of March 31, 1999,
among Dycom Industries, Inc., Gary E. Ervin, Timothy W.
Ervin, Robert W. Ervin, Keith E. Walker, Robert J. Chastain,
Charles T. McElroy and Penny J. Ward (incorporated herein by
reference to Exhibit 4(i) of Dycom's Current Report on Form
8-K filed April 15, 1999, File No. 001-10613).
4.4 Registration Rights Agreement, dated as of March 8, 2000,
among Dycom Industries, Inc., Daniel B. Fugal and Guy L.
Fugal (incorporated herein by reference to Exhibit 4(i) of
Dycom's Current Report on Form 8-K filed on March 17, 2000,
File No. 001-10613).
5 Opinion of Marc R. Tiller, Esq., General Counsel of Dycom,
as to the validity of the securities being registered
(incorporated herein by reference to Exhibit 5 of Dycom's
Registration Statement on Form S-4 filed with the Commission
on February 5, 2002, File No. 333-81268).
8 Opinion of Shearman & Sterling regarding United States
federal income tax aspects of the offer and the merger
(incorporated herein by reference to Exhibit 8 of Dycom's
Registration Statement on Form S-4 filed with the Commission
on January 23, 2002, File No. 333-81268).
*8.1 Opinion of Shearman & Sterling regarding the United States
federal income tax treatment of the offer and the merger.
*8.2 Opinion of Gibson, Dunn & Crutcher LLP regarding the United
States federal income tax treatment of the offer and the
merger.
10.1 Second Amended and Restated Credit Facility Agreement, dated
as of April 27, 1999 (incorporated herein by reference to
Exhibit 10(i) of Dycom's Current Report on Form 8-K filed on
April 29, 1999, File No. 001-10613).
10.2 Second Amended and Restated Security Agreement, dated as of
April 27, 1999 (incorporated herein by reference to Exhibit
10(ii) of Dycom's Current Report on Form 8-K filed April 29,
1999, File No. 001-10613).
10.3 Second Amended and Restated Guarantee Agreement, dated as of
April 27, 1999 (incorporated herein by reference to Exhibit
10(iii) of Dycom's Current Report on Form 8-K filed April
29, 1999, File No. 001-10613).
10.4 Amendment two to second amended and restated credit facility
agreement dated as of April 27, 1999, dated as of December
12, 2000 (incorporated herein by reference to Dycom's
Quarterly Report on Form 10-Q filed March 13, 2001, File No.
001-10613).
10.5 Amendment three to second amended and restated credit
facility agreement dated as of April 27, 1999, dated June 4,
2001 (incorporated herein by reference to Exhibit 10.2 of
Dycom's Annual Report on Form 10-K for the fiscal year ended
July 28, 2001 and filed on October 10, 2001, File No.
001-10613).
10.6 1988 Incentive Stock Option Plan (incorporated herein by
reference to Exhibit A of Dycom's Definitive Proxy Statement
filed September 30, 1998, File No. 001-10613).
10.7 1991 Incentive Stock Option Plan (incorporated herein by
reference to Exhibit A of Dycom's Definitive Proxy Statement
filed November 5, 1991, File No. 001-10613).
10.8 Employment Agreement for Thomas R. Pledger (incorporated
herein by reference to Exhibit 10.6 of Dycom's Annual Report
on Form 10-K for the fiscal year ended July 31, 1999 and
filed on October 7, 1999, File No. 001-10613).
10.9 Employment Agreement for Steven E. Nielsen (incorporated
herein by reference to Exhibit 10.7 of Dycom's Annual Report
on Form 10-K for the fiscal year ended July 31, 1999 and
filed on October 7, 1999, File No. 001-10613).
10.10 Employment Letter for Robert J. Gluck (incorporated herein
by reference to Exhibit 10.8 of Dycom's Annual Report on
Form 10-K for the fiscal year ended July 31, 1999 and filed
on October 7, 1999, File No. 001-10613).
II-3
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
10.11 Employment Agreement with Richard L. Dunn (incorporated
herein by reference to Exhibit 10.2 of Dycom's Quarterly
Report on Form 10-Q for the quarter ended April 29, 2000 and
filed on June 9, 2000, File No. 001-10613).
10.12 Employment Agreement for Dennis O'Brien (incorporated herein
by reference to Exhibit 10.6 of Dycom's Annual Report on
Form 10-K for the fiscal year ended July 28, 2001 and filed
on October 10, 2001, File No. 001-10613).
10.13 Stock Purchase Agreement, dated as of March 12, 1999,
between Dycom Industries, Inc. and Gary E. Ervin, Timothy W.
Ervin and Robert W. Ervin (incorporated herein by reference
to Exhibit 2(i) of Dycom's Current Report on Form 8-K filed
April 15, 1999, File No. 001-10613).
10.14 Agreement and Plan of Merger, dated as of March 12, 1999,
among Apex Digital TV, Inc., Dycom Acquisition Corporation
III, Dycom Industries, Inc. and Gary E. Ervin, Timothy W.
Ervin, Robert W. Ervin, Keith E. Walker, Robert J. Chastain,
Charles T. McElroy and Penny J. Ward (incorporated herein by
reference to Exhibit 2(ii) of Dycom's Current Report on Form
8-K filed April 15, 1999, File No. 001-10613).
10.15 Agreement and Plan of Merger, dated as of February 14, 2000,
among Niels Fugal Suns Company, Dycom Acquisition
Corporation IV, Dycom Industries, Inc. and Guy L. Fugal and
Daniel B. Fugal (incorporated herein by reference to Exhibit
2(i) of Dycom's Current Report on Form 8-K filed March 17,
2000, File No. 001-10613).
21 Subsidiaries of Dycom (incorporated herein by reference to
Exhibit 21 of Dycom's Annual Report on Form 10-K for the
fiscal year ended July 28, 2001).
23.1 Consent of Deloitte & Touche LLP (for Dycom Industries,
Inc.) (included in Amendment No. 2 to Dycom's Registration
Statement on Form S-4 filed on February 12, 2002, File No.
333-81268).
23.2 Consent of KPMG LLP (for Arguss Communications, Inc.) (for
Dycom Industries, Inc.) (included in Amendment No. 2 to
Dycom's Registration Statement on Form S-4 filed on February
12, 2002, File No. 333-81268).
23.3 Consent of Marc R. Tiller, Esq., General Counsel of Dycom
(included in the opinion filed as Exhibit 5 of Dycom's
Registration Statement on Form S-4 filed with the Commission
on February 5, 2002, File No. 333-81268).
23.4 Consent of Shearman & Sterling, counsel to Dycom (included
in the opinion filed as Exhibit 8 of Dycom's Registration
Statement on Form S-4 filed on January 23, 2002, File No.
333-81268).
23.5 Consent of Shearman & Sterling (included in the opinion
filed as Exhibit 8.1 to this Registration Statement).
23.6 Consent of Gibson, Dunn & Crutcher LLP (included in the
opinion filed as Exhibit 8.2 to this Registration
Statement).
24 Power of Attorney (included on the signature page of Dycom's
Registration Statement on Form S-4 filed on January 23,
2002, File No. 333-81268).
99.1 Stockholders' Agreement, dated as of January 7, 2002, among
Dycom, Troy Acquisition Corp., Arguss Communications, Inc.
and certain stockholders of Arguss Communications, Inc.
(included as Annex B to the prospectus forming a part of
this Registration Statement and incorporated herein by
reference).
99.2 Confidentiality Agreement, dated as of December 11, 2001,
between Dycom Industries, Inc. and Arguss Communications,
Inc. (incorporated herein by reference to Exhibit 99.2 of
Dycom's Registration Statement on Form S-4 filed with the
Commission on January 23, 2002, File No. 333-81268).
II-4
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
99.3 Opinion of Allen & Company Incorporated (included as Annex C
to the prospectus forming a part of this Registration
Statement and incorporated herein by reference).
99.4 Consent of Allen & Company Incorporated (for Dycom
Industries, Inc.) (included in Amendment No. 2 to Dycom's
Registration Statement on Form S-4 filed on February 12,
2002, File No. 333-81268).
99.5 Form of Letter of Transmittal (incorporated herein by
reference to Exhibit 99.5 of Dycom's Registration Statement
on Form S-4 filed with the Commission on January 23, 2002,
File No. 333-81268).
99.6 Form of Notice of Guaranteed Delivery (incorporated herein
by reference to Exhibit 99.6 of Dycom's Registration
Statement on Form S-4 filed with the Commission on January
23, 2002, File No. 333-81268).
99.7 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees (incorporated herein by
reference to Exhibit 99.7 of Dycom's Registration Statement
on Form S-4 filed with the Commission on January 23, 2002,
File No. 333-81268).
99.8 Form of Letter to Clients (incorporated herein by reference
to Exhibit 99.8 of Dycom's Registration Statement on Form
S-4 filed with the Commission on January 23, 2002, File No.
333-81268).
99.9 Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 (incorporated herein by
reference to Exhibit 99.9 of Dycom's Registration Statement
on Form S-4 filed with the Commission on January 23, 2002,
File No. 333-81268).
99.10 Summary Advertisement as published in The Wall Street
Journal on January 23, 2002 (incorporated herein by
reference to Exhibit 99.10 of Dycom's Registration Statement
on Form S-4 filed with the Commission on January 23, 2002,
File No. 333-81268).
99.11 Joint Press Release dated January 7, 2002 (incorporated
herein by reference to Exhibit 99.1 of Dycom's Current
Report on Form 8-K dated January 7, 2002, File No.
001-10613).
99.12 Joint Press Release dated January 7, 2002 (incorporated
herein by reference to Exhibit 99.1 of Arguss' Current
Report on Form 8-K dated January 8, 2002, File No.
001-16257).
---------------
* Filed herewith
(b) Not applicable.
(c) Not applicable.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
II-5
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to
be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of any employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement will be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time be deemed to be the
initial bona fide offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
will be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time will be deemed
to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
II-6
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Palm Beach Gardens, State
of Florida, on February 12, 2002.
DYCOM INDUSTRIES, INC.
By: /s/ STEVEN E. NIELSEN
------------------------------------
Name: Steven E. Nielsen
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* (Director and Principal February 12, 2002
--------------------------------------------------- Executive Officer)
Steven E. Nielsen
* (Principal Financial and February 12, 2002
--------------------------------------------------- Accounting Officer)
Richard L. Dunn
* Director February 12, 2002
---------------------------------------------------
Joseph M. Schell
* Director February 12, 2002
---------------------------------------------------
Tony G. Werner
* Director February 12, 2002
---------------------------------------------------
Kristina J. Johnson
* Director February 12, 2002
---------------------------------------------------
Ronald P. Younkin
*By: /s/ STEVEN E. NIELSEN February 12, 2002
---------------------------------------------
Steven E. Nielsen
Attorney-in-Fact
II-8
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
2 Agreement and Plan of Merger, dated as of January 7, 2002,
among Dycom Industries, Inc., Troy Acquisition Corp. and
Arguss Communications, Inc. (included as Annex A to the
prospectus forming a part of this Registration Statement and
incorporated herein by reference).
3.1(i)1 Articles of Incorporation of Dycom (incorporated by
reference herein to Exhibit 3.01 of Dycom's Registration
Statement on Form S-1 filed with the Commission on October
29, 1986, File No. 033-09820).
3.1(i)2 Articles of Amendment to the Articles of Incorporation of
Dycom (incorporated by reference herein to Exhibit 3.01 of
Dycom's Registration Statement on Form S-1 filed with the
Commission on October 29, 1986, File No. 033-09820).
3.1(i)3 Articles of Amendment to the Articles of Incorporation of
Dycom, dated November 30, 1999 and filed with the Secretary
of State of Florida on December 17, 1999 (incorporated by
reference herein to Exhibit 3(i)3 of Dycom's Registration
Statement on Form S-4 filed with the Commission on January
23, 2002, File No. 333-81268).
3.1(i)4 Articles of Amendment to the Articles of Incorporation of
Dycom, dated April 6, 2001 (incorporated herein by reference
to Exhibit 3 of Dycom's Quarterly Report on Form 10-Q for
the quarter ended April 22, 2001, as filed on June 11, 2001,
File No. 001-10613).
3(ii) Amended By-laws of Dycom, as amended on May 24, 1999
(incorporated by reference herein to Exhibit 3(ii) of
Dycom's Registration Statement on Form S-4 filed with the
Commission on January 23, 2002, File No. 333-81268).
4.1 Description of Dycom's Capital Stock (incorporated by
reference herein to Dycom's Registration Statement on Form
S-3 filed with the Commission on October 23, 2000, File No.
333-48398).
4.2 Shareholder Rights Agreement, dated April 4, 2001, between
Dycom Industries, Inc. and the Rights Agent (which includes
the Form of Rights Certificate, as Exhibit A, the Summary of
Rights to Purchase Preferred Stock, as Exhibit B, and the
Form of Articles of Amendment to the Articles of
Incorporation for Series A Preferred Stock, as Exhibit C)
(incorporated herein by reference to Exhibit 1 to Dycom's
Form 8-A filed April 6, 2001, File No. 001-10613).
4.3 Registration Rights Agreement, dated as of March 31, 1999,
among Dycom Industries, Inc., Gary E. Ervin, Timothy W.
Ervin, Robert W. Ervin, Keith E. Walker, Robert J. Chastain,
Charles T. McElroy and Penny J. Ward (incorporated herein by
reference to Exhibit 4(i) of Dycom's Current Report on Form
8-K filed April 15, 1999, File No. 001-10613).
4.4 Registration Rights Agreement, dated as of March 8, 2000,
among Dycom Industries, Inc., Daniel B. Fugal and Guy L.
Fugal (incorporated herein by reference to Exhibit 4(i) of
Dycom's Current Report on Form 8-K filed March 17, 2000,
File No. 001-10613).
5 Opinion of Marc R. Tiller, Esq., General Counsel of Dycom,
as to the validity of the securities being registered
(incorporated herein by reference to Exhibit 5 of Dycom's
Registration Statement on Form S-4 filed with the Commission
on February 5, 2002, File No. 333-81268).
8 Opinion of Shearman & Sterling regarding United States
federal income tax aspects of the offer and the merger
(incorporated herein by reference to Exhibit 8 of Dycom's
Registration Statement on Form S-4 filed with the Commission
on January 23, 2002, File No. 333-81268).
*8.1 Opinion of Shearman & Sterling regarding the United States
federal income tax treatment of the offer and the merger.
*8.2 Opinion of Gibson, Dunn & Crutcher LLP regarding the United
States federal income tax treatment of the offer and the
merger.
10.1 Second Amended and Restated Credit Facility Agreement, dated
as of April 27, 1999 (incorporated herein by reference to
Exhibit 10(i) of Dycom's Current Report on Form 8-K filed
April 29, 1999, File No. 001-10613).
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
10.2 Second Amended and Restated Security Agreement, dated as of
April 27, 1999 (incorporated herein by reference to Exhibit
10(ii) of Dycom's Current Report on Form 8-K filed April 29,
1999, File No. 001-10613).
10.3 Second Amended and Restated Guarantee Agreement, dated as of
April 27, 1999 (incorporated herein by reference to Exhibit
10(iii) of Dycom's Current Report on Form 8-K filed April
29, 1999, File No. 001-10613).
10.4 Amendment two to second amended and restated credit facility
agreement dated as of April 27, 1999, dated as of December
12, 2000 (incorporated herein by reference to Dycom's
Quarterly Report on Form 10-Q filed March 13, 2001, File No.
001-10613).
10.5 Amendment three to second amended and restated credit
facility agreement dated as of April 27, 1999, dated June 4,
2001 (incorporated herein by reference to Exhibit 10.2 of
Dycom's Annual Report on Form 10-K for the fiscal year ended
July 28, 2001 and filed on October 10, 2001, File No.
001-10613).
10.6 1988 Incentive Stock Option Plan (incorporated herein by
reference to Exhibit A of Dycom's Definitive Proxy Statement
filed September 30, 1998, File No. 001-10613).
10.7 1991 Incentive Stock Option Plan (incorporated herein by
reference to Exhibit A of Dycom's Definitive Proxy Statement
filed November 5, 1991, File No. 001-10613).
10.8 Employment Agreement for Thomas R. Pledger (incorporated
herein by reference to Exhibit 10.6 of Dycom's Annual Report
on Form 10-K for the fiscal year ended July 31, 1999 and
filed on October 7, 1999, File No. 001-10613).
10.9 Employment Agreement for Steven E. Nielsen (incorporated
herein by reference to Exhibit 10.7 of Dycom's Annual Report
on Form 10-K for the fiscal year ended July 31, 1999).
10.10 Employment Letter for Robert J. Gluck (incorporated herein
by reference to Exhibit 10.8 of Dycom's Annual Report on
Form 10-K for the fiscal year ended July 31, 1999 and filed
on October 7, 1999, File No. 001-10613).
10.11 Employment Agreement with Richard L. Dunn (incorporated
herein by reference to Exhibit 10.2 of Dycom's Quarterly
Report on Form 10-Q for the quarter ended April 29, 2000 and
filed on June 9, 2000, File No. 001-10613).
10.12 Employment Agreement for Dennis O'Brien (incorporated herein
by reference to Exhibit 10.6 of Dycom's Annual Report on
Form 10-K for the fiscal year ended July 28, 2001 and filed
on October 10, 2001, File No. 001-10613).
10.13 Stock Purchase Agreement, dated as of March 12, 1999,
between Dycom Industries, Inc. and Gary E. Ervin, Timothy W.
Ervin and Robert W. Ervin (incorporated herein by reference
to Exhibit 2(i) of Dycom's Current Report on Form 8-K filed
April 15, 1999, File No. 001-10613).
10.14 Agreement and Plan of Merger, dated as of March 12, 1999,
among Apex Digital TV, Inc., Dycom Acquisition Corporation
III, Dycom Industries, Inc. and Gary E. Ervin, Timothy W.
Ervin, Robert W. Ervin, Keith E. Walker, Robert J. Chastain,
Charles T. McElroy and Penny J. Ward (incorporated herein by
reference to Exhibit 2(ii) of Dycom's Current Report on Form
8-K filed April 15, 1999, File No. 001-10613).
10.15 Agreement and Plan of Merger, dated as of February 14, 2000,
among Niels Fugal Suns Company, Dycom Acquisition
Corporation IV, Dycom Industries, Inc. and Guy L. Fugal and
Daniel B. Fugal (incorporated herein by reference to Exhibit
2(i) of Dycom's Current Report on Form 8-K filed March 17,
2000, File No. 001-10613).
21 Subsidiaries of Dycom (incorporated herein by reference to
Exhibit 21 of Dycom's Annual Report on Form 10-K for the
fiscal year ended July 28, 2001).
23.1 Consent of Deloitte & Touche LLP (for Dycom Industries,
Inc.) (for Dycom Industries, Inc.) (included in Amendment
No. 2 to Dycom's Registration Statement on Form S-4 filed on
February 12, 2002, File No. 333-81268).
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
23.2 Consent of KPMG LLP (for Arguss Communications, Inc.) (for
Dycom Industries, Inc.) (included in Amendment No. 2 to
Dycom's Registration Statement on Form S-4 filed on February
12, 2002, File No. 333-81268).
23.3 Consent of Marc R. Tiller, Esq., General Counsel of Dycom
(included in the opinion filed as Exhibit 5 of Dycom's
Registration Statement on Form S-4 filed with the Commission
on February 5, 2002, File No. 333-81268).
23.4 Consent of Shearman and Sterling, counsel to Dycom (included
in the opinion filed as Exhibit 8 of Dycom's Registration
Statement on Form S-4 filed on January 23, 2002, File No.
333-81268).
23.5 Consent of Shearman & Sterling (included in the opinion
filed as Exhibit 8.1 to this Registration Statement).
23.6 Consent of Gibson, Dunn & Crutcher LLP (included in the
opinion filed as Exhibit 8.2 to this Registration
Statement).
24 Power of Attorney (included on the signature page of Dycom's
Registration Statement on Form S-4 filed on January 23,
2002, File No. 333-81268).
99.1 Stockholders' Agreement, dated as of January 7, 2002, among
Dycom, Troy Acquisition Corp., Arguss Communications, Inc.
and certain stockholders of Arguss Communications, Inc.
(included as Annex B to the prospectus forming a part of
this Registration Statement and incorporated herein by
reference).
99.2 Confidentiality Agreement, dated as of December 11, 2001,
between Dycom Industries, Inc. and Arguss Communications,
Inc. (incorporated herein by reference to Exhibit 99.2 of
Dycom's Registration Statement on Form S-4 filed with the
Commission on January 23, 2002, File No. 333-81268).
99.3 Opinion of Allen & Company Incorporated (included as Annex C
to the prospectus forming a part of this Registration
Statement and incorporated herein by reference).
99.4 Consent of Allen & Company Incorporated (for Dycom
Industries, Inc.) (included in Amendment No. 2 to Dycom's
Registration Statement on Form S-4 filed on February 12,
2002, File No. 333-81268).
99.5 Form of Letter of Transmittal (incorporated herein by
reference to Exhibit 99.5 of Dycom's Registration Statement
on Form S-4 filed with the Commission on January 23, 2002,
File No. 333-81268).
99.6 Form of Notice of Guaranteed Delivery (incorporated herein
by reference to Exhibit 99.6 of Dycom's Registration
Statement on Form S-4 filed with the Commission on January
23, 2002, File No. 333-81268).
99.7 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees (incorporated herein by
reference to Exhibit 99.7 of Dycom's Registration Statement
on Form S-4 filed with the Commission on January 23, 2002,
File No. 333-81268).
99.8 Form of Letter to Clients (incorporated herein by reference
to Exhibit 99.8 of Dycom's Registration Statement on Form
S-4 filed with the Commission on January 23, 2002, File No.
333-81268).
99.9 Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 (incorporated herein by
reference to Exhibit 99.9 of Dycom's Registration Statement
on Form S-4 filed with the Commission on January 23, 2002,
File No. 333-81268).
99.10 Summary Advertisement as published in The Wall Street
Journal on January 23, 2002 (incorporated herein by
reference to Exhibit 99.10 of Dycom's Registration Statement
on Form S-4 filed with the Commission on January 23, 2002,
File No. 333-81268).
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
99.11 Joint Press Release dated January 7, 2002 (incorporated
herein by reference to Exhibit 99.1 of Dycom's Current
Report on Form 8-K dated January 7, 2002, File No.
001-10613).
99.12 Joint Press Release dated January 7, 2002 (incorporated
herein by reference to Exhibit 99.1 of Arguss' Current
Report on Form 8-K dated January 8, 2002, File No.
001-16257).
---------------
* Filed herewith