<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 4, 1999
REGISTRATION NO. 333-72585
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LOWE'S COMPANIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NORTH CAROLINA 5211 56-0578072
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
HIGHWAY 268 EAST
NORTH WILKESBORO, NORTH CAROLINA 28659
(336) 658-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
WILLIAM C. WARDEN, JR.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL, SECRETARY
AND CHIEF ADMINISTRATIVE OFFICER
LOWE'S COMPANIES, INC.
HIGHWAY 268 EAST
NORTH WILKESBORO, NORTH CAROLINA 28659
(336) 658-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
LATHAN M. EWERS, JR. MICHAEL J. ERICKSON ROBERT I. TOWNSEND, III
DANIEL M. LEBEY LAURA A. BERTIN CRAVATH, SWAINE & MOORE
HUNTON & WILLIAMS SUMMIT LAW GROUP, P.L.L.C. 825 EIGHTH AVENUE
951 EAST BYRD STREET 1505 WESTLAKE AVENUE NORTH, SUITE 300 NEW YORK, NEW YORK 10019
RICHMOND, VIRGINIA 23219 SEATTLE, WASHINGTON 98109
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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 THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
[EAGLE HARDWARE & GARDEN LOGO]
To the Eagle Shareholders:
Eagle Hardware & Garden, Inc. invites its shareholders to attend a special
meeting of shareholders to be held at 9:00 a.m. local time on Friday, April 2,
1999, at The SeaTac Marriott Hotel, 3201 South 176th Street, SeaTac, Washington
98188. At the special meeting, Eagle shareholders will be asked to vote on a
merger agreement between Eagle and Lowe's Companies, Inc.
In the merger, each outstanding share of Eagle common stock will be
converted into a number of shares of Lowe's common stock based on an exchange
ratio that will be calculated shortly before the merger. The exchange ratio will
equal $29.00 divided by the ten-day average closing price of Lowe's common stock
shortly before completion of the merger. In no event, however, will each share
of Eagle common stock be converted into less than .6400 or more than .8659
shares of Lowe's common stock. Therefore, it is possible that each share of
Eagle common stock will be valued in the merger at more or less than $29.00. The
actual number of Lowe's shares that Eagle shareholders will receive will not be
determined until after Eagle shareholders vote on the merger.
Lowe's common stock trades on the New York Stock Exchange under the symbol
"LOW." Eagle shareholders will not incur federal income tax as a result of the
merger, except on any cash received for fractional shares.
SEE "RISK FACTORS RELATING TO THE MERGER" BEGINNING ON PAGE 13 FOR FACTORS
EAGLE SHAREHOLDERS SHOULD CONSIDER BEFORE VOTING.
Eagle has enclosed a notice of the special meeting and a proxy
statement/prospectus discussing the merger. Eagle shareholders should read the
proxy statement/prospectus carefully.
Eagle management looks forward to seeing its shareholders at the special
meeting.
/s/ Richard T. Takata
Richard T. Takata
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE MERGER DESCRIBED IN THE PROXY
STATEMENT/PROSPECTUS OR THE LOWE'S COMMON STOCK TO BE ISSUED IN CONNECTION WITH
THE MERGER OR DETERMINED IF THE PROXY STATEMENT/PROSPECTUS IS ACCURATE OR
ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The proxy statement/prospectus is dated March 5, 1999
and is first being mailed to Eagle shareholders on or about March 5, 1999.
<PAGE> 3
THIS PROXY STATEMENT/PROSPECTUS GIVES EAGLE SHAREHOLDERS DETAILED
INFORMATION ABOUT THE PROPOSED MERGER. THIS PROXY STATEMENT/PROSPECTUS
INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT LOWE'S AND EAGLE
THAT IS NOT INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS. SEE "WHERE EAGLE
SHAREHOLDERS CAN FIND MORE INFORMATION" ON PAGE 56 FOR ADDITIONAL INFORMATION
ABOUT LOWE'S AND EAGLE ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS
INFORMATION IS AVAILABLE TO EAGLE SHAREHOLDERS FROM BOTH COMPANIES WITHOUT
CHARGE UPON WRITTEN OR ORAL REQUEST. TO OBTAIN TIMELY DELIVERY, EAGLE
SHAREHOLDERS MUST REQUEST THIS INFORMATION NO LATER THAN FIVE BUSINESS DAYS
BEFORE THEY MAKE THEIR INVESTMENT DECISION. THEREFORE, EAGLE SHAREHOLDERS MUST
REQUEST THIS INFORMATION BY MARCH 26, 1999. EAGLE SHAREHOLDERS MAY REQUEST THESE
DOCUMENTS IN WRITING OR BY TELEPHONE FROM THE APPROPRIATE COMPANY AT THE
FOLLOWING ADDRESSES AND TELEPHONE NUMBERS:
<TABLE>
<S> <C>
LOWE'S COMPANIES, INC. EAGLE HARDWARE & GARDEN, INC.
P.O. BOX 1111 981 POWELL AVENUE SW
HIGHWAY 268 EAST RENTON, WASHINGTON 98055
NORTH WILKESBORO, NORTH CAROLINA 28656 ATTN.: STEVE STENBERG, VICE
PRESIDENT-CONTROLLER
ATTN.: ROBERT NIBLOCK, SENIOR VICE PRESIDENT- TELEPHONE: (425) 227-5740
FINANCE
TELEPHONE: (336) 658-4860 OR (888) 34LOWES
</TABLE>
<PAGE> 4
EAGLE HARDWARE & GARDEN, INC.
NOTICE OF THE SPECIAL MEETING OF SHAREHOLDERS
APRIL 2, 1999
Notice is hereby given that a special meeting of shareholders of Eagle
Hardware & Garden, Inc. will be held at 9:00 a.m. local time on Friday, April 2,
1999 at The SeaTac Marriott Hotel, 3201 South 176th Street, SeaTac, Washington
98188 for the following purpose:
To consider and vote on a proposal to approve the Agreement and Plan
of Merger dated as of November 22, 1998, among Eagle, Lowe's Companies,
Inc. and a subsidiary of Lowe's. As a result of the merger, Eagle will
become a subsidiary of Lowe's, and all outstanding shares of Eagle common
stock, excluding any shares held by Eagle or Lowe's, other than in a
fiduciary capacity, and excluding shares held by shareholders who perfect
their statutory dissenters' rights under Washington law, will be converted
into the right to receive shares of Lowe's common stock.
In addition, Eagle shareholders will be asked to transact any other
business that properly comes before the special meeting. The Eagle Board of
Directors has fixed the close of business on February 19, 1999 as the record
date for the determination of shareholders entitled to notice of, and to vote
at, the special meeting and any postponement or adjournment of the special
meeting. Eagle shareholders have the right to dissent from the merger and to
receive payment in cash for the fair value of their shares of Eagle common
stock. A copy of the Washington law that grants dissenters' rights is attached
to this proxy statement/prospectus as Annex D.
By Order of the Board of Directors
/s/ Richard T. Takata
Richard T. Takata
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Renton, Washington
March 5, 1999
EACH VOTE IS IMPORTANT
EAGLE SHAREHOLDERS ARE URGED TO SIGN, DATE AND RETURN THEIR PROXIES AT
THEIR EARLIEST CONVENIENCE, WHETHER OR NOT THEY EXPECT TO ATTEND THE MEETING IN
PERSON. THIS WILL ENSURE THE PRESENCE OF A QUORUM AT THE MEETING. PROMPTLY
RETURNING A SIGNED AND DATED PROXY WILL SAVE EAGLE THE EXTRA EXPENSE OF
ADDITIONAL SOLICITATIONS. EAGLE HAS PROVIDED AN ADDRESSED, POSTAGE-PAID ENVELOPE
FOR THAT PURPOSE. SENDING IN A PROXY WILL NOT PREVENT AN EAGLE SHAREHOLDER FROM
VOTING HIS OR HER SHARES AT THE MEETING IF HE OR SHE SO DESIRES, BECAUSE THE
PROXY IS REVOCABLE AT THE SHAREHOLDER'S OPTION IN THE MANNER DESCRIBED IN THIS
PROXY STATEMENT/PROSPECTUS.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... i
SUMMARY..................................................... 1
The Companies.......................................... 1
The Merger............................................. 1
What Eagle Shareholders Will Receive................... 1
Material Federal Income Tax Consequences............... 2
Rights of Dissenting Shareholders...................... 2
Reasons For the Merger................................. 2
Recommendation of the Eagle Board of Directors......... 3
Interests of Management and Directors in the Merger.... 3
Conditions to the Merger............................... 4
Termination Rights..................................... 4
Termination Fee........................................ 4
Regulatory Approvals................................... 5
Accounting Treatment................................... 5
The Special Meeting.................................... 5
Record Date; Voting Rights and Requirements............ 5
Vote Required.......................................... 5
Voting by Eagle Directors and Executive Officers....... 5
Certain Financial Information.......................... 5
Market Price and Dividend Information.................. 5
Comparative Per Share Information...................... 7
SELECTED PRO FORMA AND HISTORICAL FINANCIAL DATA............ 9
Selected Pro Forma Financial Data of Lowe's and Eagle
Combined.............................................. 10
Lowe's Selected Historical Financial Data.............. 11
Eagle Selected Historical Financial Data............... 12
RISK FACTORS RELATING TO THE MERGER......................... 13
A WARNING ABOUT FORWARD-LOOKING INFORMATION................. 13
THE COMPANIES............................................... 13
Lowe's................................................. 13
Eagle.................................................. 14
THE SPECIAL MEETING......................................... 14
The Special Meeting.................................... 14
Matters to be Considered at the Special Meeting........ 14
Record Date and Voting Rights and Requirements......... 15
Voting of Proxies...................................... 16
Revocation of Proxies.................................. 16
Solicitation of Proxies................................ 16
THE MERGER.................................................. 17
General................................................ 17
What Eagle Shareholders Will Receive................... 17
Eagle's "Walk-Away" Right.............................. 18
Background of the Merger............................... 18
Eagle Projections...................................... 21
Eagle's Reasons for the Merger......................... 21
Recommendation of the Eagle Board of Directors......... 23
Lowe's Reasons for the Merger.......................... 23
Opinion of Eagle's Financial Advisor................... 24
Interests of Management and Directors in the Merger.... 31
Effective Time......................................... 33
Exchange of Eagle Common Stock for Lowe's Common
Stock................................................. 33
Conditions to the Completion of the Merger............. 34
Termination............................................ 35
Effect of Termination.................................. 37
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Termination Fee........................................ 37
No Solicitation........................................ 38
Conduct of Business Pending the Merger................. 38
Waiver; Amendment...................................... 38
Expenses............................................... 39
Material Federal Income Tax Consequences............... 39
Accounting Treatment................................... 40
Hart-Scott-Rodino...................................... 40
Resales of Lowe's Common Stock......................... 40
Rights of Dissenting Shareholders...................... 41
Assumption of Eagle Benefit Plans...................... 43
Effect on Awards Outstanding Under Eagle Stock Plans... 43
Convertible Debentures................................. 44
Representations and Warranties......................... 44
Delisting and Deregistration of Eagle Common Stock..... 45
COMPARATIVE SHARE MARKET PRICES DATA AND DIVIDENDS.......... 46
DESCRIPTION OF LOWE'S CAPITAL STOCK......................... 47
Description of Common Stock............................ 47
Preferred Share Purchase Rights........................ 47
Change of Control Provisions........................... 48
Description of Preferred Stock......................... 49
COMPARATIVE RIGHTS OF SHAREHOLDERS OF LOWE'S AND EAGLE...... 49
Authorized Capital..................................... 50
Board of Directors..................................... 50
Special Meetings of Shareholders....................... 50
Shareholder Meetings................................... 50
Shareholder Vote for Certain Actions................... 51
Anti-takeover Statutes................................. 51
Anti-takeover Effect of Articles of Incorporation and
Bylaws................................................ 52
Amendment of Governing Documents....................... 52
Removal of Officers.................................... 53
Rights Plan............................................ 53
Preemptive Rights...................................... 53
Dividends and Other Distributions...................... 53
Director's Liability and Indemnification............... 53
Dissenters' Rights..................................... 55
Shareholder Proposal and Nomination Procedures......... 55
LEGAL OPINIONS.............................................. 55
EXPERTS..................................................... 55
SHAREHOLDER PROPOSALS....................................... 56
OTHER MATTERS............................................... 56
WHERE EAGLE SHAREHOLDERS CAN FIND MORE INFORMATION.......... 56
ANNEXES
Annex A -- Agreement and Plan of Merger dated as of
November 22, 1998..................................... A-1
Annex B -- Plan of Merger.............................. B-1
Annex C -- Opinion of NationsBanc Montgomery Securities
LLC................................................... C-1
Annex D -- Washington Business Corporation
Act -- Dissenters' Rights............................. D-1
</TABLE>
<PAGE> 7
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL HAPPEN TO EAGLE AS A RESULT OF THE MERGER?
A: If the merger is completed, Eagle will become a subsidiary of Lowe's.
Q: WHEN DO EAGLE AND LOWE'S EXPECT THE MERGER TO BE COMPLETE?
A: Eagle and Lowe's are working to complete the merger as quickly as possible.
The companies expect to complete the merger late in the first quarter of fiscal
1999.
Q: WHAT DO EAGLE SHAREHOLDERS NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
proxy statement/prospectus, each Eagle shareholder should complete and sign his
or her proxy and return it in the enclosed return envelope as soon as possible
so that his or her shares may be represented at the special meeting. Failing to
vote in person or by proxy will have the same effect as a vote against the
merger agreement.
Q: CAN EAGLE SHAREHOLDERS CHANGE THEIR VOTE AFTER THEY HAVE MAILED THEIR SIGNED
PROXIES?
A: Yes. Eagle shareholders can change their vote at any time before their
proxies are voted at the special meeting. Eagle shareholders can do this in one
of three ways. First, an Eagle shareholder can send a written notice stating
that he or she would like to revoke his or her proxy. Second, an Eagle
shareholder can complete and submit a new proxy. If an Eagle shareholder chooses
either of these two methods, he or she must submit the notice of revocation or
the new proxy to Eagle at the address on page 58. Third, an Eagle shareholder
can attend the special meeting and vote in person.
Q: IF EAGLE SHARES ARE HELD IN "STREET NAME" BY A SHAREHOLDER'S BROKER, WILL THE
BROKER VOTE THESE SHARES ON THE MERGER AGREEMENT ON BEHALF OF THE SHAREHOLDER?
A: A broker will vote Eagle shares on the merger agreement only if the holder of
these shares provides the broker with instructions on how to vote. Eagle
shareholders should follow the directions provided by their brokers regarding
how to instruct brokers to vote the shares.
Q: SHOULD EAGLE SHAREHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?
A: No. After the merger is completed, Lowe's will send written instructions to
Eagle shareholders for exchanging their stock certificates. Eagle shareholders
should not send in their stock certificates with their proxies.
Q: WHO CAN HELP ANSWER QUESTIONS?
A: If Eagle shareholders have any questions about the merger or if they need
additional copies of this proxy statement/prospectus or the enclosed proxy, they
should contact:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
1-800-714-3306
i
<PAGE> 8
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to Eagle shareholders. To understand the merger fully and for a more
complete description of the legal terms of the merger, Eagle shareholders should
read carefully this entire proxy statement/prospectus and the documents referred
to in this proxy statement/prospectus. See "Where Eagle Shareholders Can Find
More Information."
THE COMPANIES (SEE PAGE 13)
LOWE'S COMPANIES, INC.
P.O. Box 1111
Highway 268 East
North Wilkesboro, North Carolina 28656
(336) 658-4000
Lowe's is a specialty retailer of building materials and related products
for do-it-yourself home improvement, home decor, home construction, repair and
remodeling. As of March 3, 1999, Lowe's operated 484 retail stores with more
than 43 million square feet of sales floor located principally in the South
Atlantic and South Central regions of the United States. Lowe's is the second
largest home center retailer in the United States. Lowe's general offices are
located in North Wilkesboro, North Carolina.
EAGLE HARDWARE & GARDEN, INC.
981 Powell Avenue SW
Renton, Washington 98055
(425) 227-5740
Eagle is a leading operator of home improvement centers in the western
United States. Eagle opened its first store in November 1990 and as of March 3,
1999, operated 38 home improvement centers with approximately 5 million square
feet of retail selling space. Eagle's home improvement centers are located in
Washington, Colorado, Utah, Hawaii, Alaska, California, Idaho, Montana, Nevada
and Oregon. Eagle's corporate offices are located in Renton, Washington.
THE MERGER
THE MERGER AGREEMENT IS ATTACHED AS ANNEX A TO THIS PROXY
STATEMENT/PROSPECTUS AND IS INCORPORATED BY THIS REFERENCE INTO THIS PROXY
STATEMENT/PROSPECTUS. EAGLE ENCOURAGES ITS SHAREHOLDERS TO READ THE MERGER
AGREEMENT BECAUSE IT IS THE LEGAL DOCUMENT THAT GOVERNS THE MERGER.
WHAT EAGLE SHAREHOLDERS WILL RECEIVE
(SEE PAGE 17)
Under the terms of the merger agreement, Eagle shareholders will receive
the whole number of shares of Lowe's common stock for each share of Eagle common
stock they own determined by dividing $29.00 by the average of the daily closing
price of Lowe's common stock on the New York Stock Exchange for the 10-day
trading period ending on the fifth trading day before the closing of the merger.
This exchange ratio is subject to the following two adjustments:
- if the average closing price of Lowe's common stock as calculated above
exceeds $45.31, the exchange ratio described above will be fixed at .6400
- if the average closing price falls below $33.49, the exchange ratio
described above will be fixed at .8659
This means that the number of shares of Lowe's common stock received for
each share of Eagle common stock will never be less than .6400 or more than
.8659 regardless of what happens to Lowe's stock price shortly before the
merger. Therefore, it is possible that each share of Eagle common stock will be
valued in the merger at more or less than $29.00.
Eagle shareholders will receive a check in payment for any fractional
shares based on the closing market price of Lowe's common stock on the last
trading day before the merger.
On March 3, 1999, the latest practicable date prior to the date of this
proxy statement/ prospectus, Lowe's common stock closed at $59.75 per share on
the New York Stock
1
<PAGE> 9
Exchange. If this were the average closing price of Lowe's common stock shortly
before the merger, then, because the price is greater than $45.31, the exchange
ratio would become fixed and Eagle shareholders would receive .6400 shares of
Lowe's common stock for each share of Eagle common stock they own. This would
result in a value of $38.24 per share of Eagle common stock. The actual number
of shares issued by Lowe's may differ from this example because of the time
lapse between the date of the proxy statement/prospectus and the date the merger
consideration is finalized.
Eagle has the option not to complete the merger if the average of the
closing prices of Lowe's common stock shortly before the merger, as calculated
above, is less than $27.58. See "The Merger -- Eagle's "Walk-Away" Right."
Set forth below is a table showing a range of prices of Lowe's common
stock, along with entries showing the corresponding exchange ratios and
corresponding valuations of a share of Eagle common stock. The table also
highlights the minimum and maximum exchange ratios and the point at which
Eagle's walk-away right would be effective:
<TABLE>
<CAPTION>
AVERAGE
CLOSING PRICE VALUE OF A
OF LOWE'S EXCHANGE SHARE OF EAGLE
COMMON STOCK RATIO COMMON STOCK
------------- -------- --------------
<S> <C> <C> <C>
$60.00 .6400 $38.40
58.00 .6400 37.12
56.00 .6400 35.84
54.00 .6400 34.56
52.00 .6400 33.28
50.00 .6400 32.00
48.00 .6400 30.72
Exchange 46.00 .6400 29.44
Ratio -> 45.31 .6400 29.00
Limitation 44.00 .6591 29.00
42.00 .6905 29.00
40.00 .7250 29.00
38.00 .7632 29.00
36.00 .8056 29.00
Exchange 34.00 .8529 29.00
Ratio -> 33.49 .8659 29.00
Limitation 32.00 .8659 27.70
30.00 .8659 25.98
Walk- 28.00 .8659 24.25
Away -> 27.58 .8659 23.88
Right 26.00 .8659 22.51
</TABLE>
For an Eagle shareholder who owns 100 shares of Eagle common stock, if the
exchange ratio was .6905, for example, this would translate into 69.05 shares of
Lowe's common stock. Since cash will be paid instead of fractional shares, that
Eagle shareholder would receive 69 shares of Lowe's common stock and a check in
an amount equal to the fractional share multiplied by Lowe's closing market
price on the trading day before completion of the merger.
Lowe's and Eagle anticipate that the effective date of the merger will
occur within 15 days after the Eagle shareholder vote. Lowe's and Eagle
anticipate that Eagle shareholders will own approximately 6.2% of Lowe's common
stock after the merger, although this number will depend on the price of Lowe's
common stock shortly before the time of the merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 39)
The merger is structured to qualify as a reorganization so that Eagle
shareholders will not recognize any gain or loss for federal income tax purposes
in the merger, except for cash received by Eagle shareholders instead of
fractional shares or because of the exercise of dissenters' rights. The merger
is conditioned on the receipt of legal opinions that the merger will qualify as
a reorganization for federal income tax purposes.
RIGHTS OF DISSENTING SHAREHOLDERS
(SEE PAGE 41)
Eagle shareholders have the right to dissent from the merger and to receive
payment in cash for the fair value of their shares of Eagle common stock. To
preserve their rights, shareholders who wish to dissent must follow specific
procedures. These procedures are described in this proxy statement/prospectus,
and the Washington law that grants dissenters' rights and governs such
procedures is attached as Annex D.
REASONS FOR THE MERGER (SEE PAGE 21)
The Eagle Board of Directors believes that the terms of the merger and the
merger agreement are in the best interests of Eagle and its shareholders. The
Boards of Directors of both Lowe's and Eagle have identified various
2
<PAGE> 10
benefits that are likely to result from the
merger. The Boards of Directors believe the merger will:
- provide Eagle with the opportunity to enhance its competitive position by
becoming a part of the nation's second largest retailer of building
materials and related products for do-it-yourself home improvement, home
decor and home construction, repair and remodeling
- enable Lowe's to accelerate its West Coast expansion and give Lowe's an
immediate presence in a number of key metropolitan markets in the West
- combine two strong management teams in a home improvement center retailer
that is regarded as one of the best employers in the country
RECOMMENDATION OF THE EAGLE BOARD OF
DIRECTORS (SEE PAGE 23)
The Eagle Board of Directors has unanimously approved and adopted the
merger agreement and recommends a vote FOR approval of the merger agreement. In
reaching this decision, the Eagle Board of Directors took into account the
potential conflict of interest of Richard T. Takata, Chief Executive Officer,
President and a director of Eagle, resulting from his new employment agreement.
INTERESTS OF MANAGEMENT AND DIRECTORS IN THE MERGER (SEE PAGE 31)
The Eagle Board of Directors considered the following interests in
approving the merger agreement:
- if the merger takes place, Mr. Takata will be named President and Chief
Operating Officer of Eagle. Eagle and Lowe's have entered into an
employment agreement with Mr. Takata, which would become effective only
if the merger takes place. Under the terms of this employment agreement,
Mr. Takata would receive a base salary of $325,000 per year and would be
eligible for annual bonuses of up to 150% of his base salary. Mr. Takata
would also receive a bonus of $100,000 immediately before completion of
the merger and Lowe's would grant to Mr. Takata an option to purchase
70,000 shares of Lowe's common stock under Lowe's 1997 Incentive Plan
upon completion of the merger
- David J. Heerensperger will resign as Chairman of the Board of Eagle if
the merger takes place, and he will receive certain payments and other
benefits in connection with his separation
- indemnification arrangements and directors' and officers' liability
insurance for existing directors and officers of Eagle will be continued
by Lowe's and Eagle after the merger
- at the effective time of the merger, each outstanding and unexercised
option to purchase shares of Eagle common stock granted under the Eagle
stock option plans, including those held by Eagle's officers and
directors, will be converted into an option to purchase Lowe's common
stock, with the number of shares and exercise price adjusted for the
exchange ratio. Completion of the merger will result in a "change in
control" under the Eagle stock option plans and, as a result, Eagle
options granted under the Eagle stock option plans prior to the date of
the merger agreement, will be immediately vested and exercisable for the
remainder of their full ten-year term. The number of unvested Eagle stock
options held by Mr. Takata that will become vested and fully exercisable
as a result of the merger is 33,333. The number of Eagle stock options
held by Eagle directors and executive officers as a group that will
become vested and fully exercisable as a result of the merger is 119,333
3
<PAGE> 11
CONDITIONS TO THE MERGER (SEE PAGE 34)
The completion of the merger is subject to the satisfaction of a number of
conditions, including:
- approval of the merger agreement by Eagle shareholders
- receipt of listing approval from the New York Stock Exchange for the
Lowe's common stock to be issued in the merger
- expiration or termination of the waiting period required under the
Hart-Scott-Rodino Antitrust Improvements Act
- effectiveness of Lowe's registration statement relating to the shares of
Lowe's common stock to be issued to Eagle shareholders in the merger, of
which this proxy statement/prospectus forms a part
- receipt at the closing of the merger of letters from Deloitte & Touche
LLP and Ernst & Young LLP regarding the appropriateness of pooling of
interests accounting treatment for the merger
- receipt of opinions of Lowe's and Eagle's counsel that the merger will be
treated for U.S. federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986
Unless prohibited by law, either Lowe's or Eagle could elect to waive a
condition that has not been satisfied and complete the merger anyway.
TERMINATION RIGHTS (SEE PAGE 35)
Either Lowe's or Eagle may terminate the merger agreement and prevent
completion of the merger under certain circumstances, including if:
- both parties consent in writing
- the merger is not completed on or before May 31, 1999
- Eagle shareholders do not approve the merger agreement
- the other party breaches in a material manner any of the representations
or warranties or any covenant or agreement it has under the merger
agreement and the breach is not cured within 30 business days of notice
to the breaching party
- any condition to its obligations under the merger agreement has not been
met or waived at a time when the condition could no longer be satisfied
In addition, Lowe's may terminate the merger agreement and prevent
completion of the merger if the Eagle Board of Directors withdraws its
recommendation to Eagle shareholders that they approve the merger agreement.
TERMINATION FEE (SEE PAGE 37)
Eagle has agreed to pay Lowe's a termination fee of $35 million if either
of the two following scenarios occurs:
1. the merger agreement is terminated because
- the Eagle Board of Directors withdraws its recommendation to Eagle
shareholders that they approve the merger agreement, or
- Eagle shareholders do not approve the merger agreement at the special
meeting, or
- the merger has not been completed on or before May 31, 1999
and, in each case,
- the termination happens at a time when Eagle or Eagle shareholders have
received an alternative offer from a third party, and
- Eagle completes a business combination transaction with a third party
within 12 months after the merger agreement is terminated
2. the merger agreement is terminated by Eagle because Eagle or Eagle
shareholders have received a higher offer from a third party which Lowe's
does not agree to match
4
<PAGE> 12
REGULATORY APPROVALS (SEE PAGE 40)
Under the provisions of the Hart-Scott-Rodino Act, the merger may not be
completed until the applicable waiting period has expired or been terminated.
The applicable waiting period expired on January 30, 1999.
ACCOUNTING TREATMENT (SEE PAGE 40)
Lowe's and Eagle expect the merger to qualify as a pooling of interests,
which means that Lowe's and Eagle will be treated as if they had always been
combined for accounting and financial reporting purposes.
THE SPECIAL MEETING
The special meeting will be held at The SeaTac Marriott Hotel, 3201 South
176th Street, SeaTac, Washington 98188, at 9:00 a.m. local time on April 2,
1999. At the special meeting, Eagle shareholders will be asked to consider and
vote on a proposal to approve the merger agreement.
RECORD DATE; VOTING RIGHTS AND REQUIREMENTS (SEE PAGE 15)
Eagle shareholders are entitled to vote at the special meeting if they
owned shares on February 19, 1999, the record date for the special meeting. On
that date, there were 33,981,135 shares of Eagle common stock issued and
outstanding held by approximately 1,000 holders of record. Eagle shareholders
are entitled to one vote per share on any matter that properly comes before the
special meeting.
VOTE REQUIRED (SEE PAGE 15)
The affirmative vote of two-thirds of the shares of Eagle common stock
outstanding on the record date is required to approve the merger agreement.
VOTING BY EAGLE DIRECTORS AND EXECUTIVE OFFICERS (SEE PAGE 15)
On the record date, the directors and executive officers of Eagle,
including their affiliates, had voting power with respect to a total of
2,947,876 shares of Eagle common stock, or approximately 8.7% of the shares of
Eagle common stock outstanding at that date.
Eagle currently expects that its directors and executive officers will vote
their shares of Eagle common stock FOR the proposal to approve the merger
agreement. In addition, each of the Eagle directors executed a voting agreement
with Lowe's and Eagle in which he agreed to vote all of the shares of Eagle
common stock owned by him as to which he has exclusive voting power for approval
of the merger agreement.
CERTAIN FINANCIAL INFORMATION
MARKET PRICE AND DIVIDEND INFORMATION
(SEE PAGE 46)
Shares of Lowe's common stock are listed on the New York Stock Exchange and
certain other stock exchanges. Shares of Eagle common stock are listed on The
Nasdaq Stock Market. The following table sets forth, in each case as of:
(1) November 20, 1998, the last full trading day prior to the public
announcement of the proposed merger and
(2) March 3, 1999, the last practicable day for which such information
could be calculated prior to the date of this proxy
statement/prospectus,
the following information:
- the market value of one share of Lowe's common stock, as reported on the
New York Stock Exchange
- the market value of one share of Eagle common stock, as reported on The
Nasdaq Stock Market, and
- the market value of one share of Eagle common stock on an equivalent per
share basis determined as if the completion of the merger occurred on
such date
The equivalent price per share of Eagle common stock calculated as of
November 20, 1998 was determined by multiplying the market value of one share of
Lowe's common stock on
5
<PAGE> 13
November 20, 1998 by an exchange ratio of .7330. This exchange ratio was
determined by dividing $29.00 by $39.5625, which was the price of Lowe's common
stock on November 20, 1998. The equivalent price per share of Eagle common stock
calculated as of March 3, 1999, was determined on an equivalent price per share
basis by multiplying the closing price of one share of Lowe's common stock on
March 3, 1999 by an exchange ratio of .6400. Because the price of Lowe's common
stock was greater than $45.31 on March 3, 1999, the exchange ratio was fixed at
.6400. The equivalent price per share of Eagle common stock illustrates the
valuation that will be given to Eagle common stock in the merger. See
"-- Comparative Per Share Information."
<TABLE>
<CAPTION>
EQUIVALENT
PRICE PER
SHARE OF
LOWE'S EAGLE EAGLE
COMMON COMMON COMMON
DATE STOCK STOCK STOCK
---- ------ ------ ----------
<S> <C> <C> <C>
November 20, 1998.... $39.56 $27.50 $29.00
March 3, 1999........ $59.75 $37.63 $38.24
------ ------ ------
</TABLE>
Lowe's has historically paid a regular quarterly dividend to its
shareholders. The Lowe's dividend is currently $0.03 per share per quarter.
There are currently no restrictions on Lowe's ability to pay dividends, however
Lowe's decision whether to pay dividends in the future will depend on business
conditions, its financial position and earnings and other factors. Eagle has
never paid dividends to its shareholders.
6
<PAGE> 14
COMPARATIVE PER SHARE INFORMATION
The following tables show summary historical financial data for Lowe's and
Eagle and also show similar information reflecting the combination of the two
companies, which is referred to as "pro forma" information. In presenting the
comparative pro forma information, it is assumed the companies had been combined
for accounting and financial reporting purposes for all periods presented. This
is known as "pooling of interests" accounting.
The unaudited comparative per share data is derived from the historical
financial statements of Lowe's and Eagle. All per share amounts for Lowe's and
the pro forma information have been adjusted to reflect a two-for-one stock
split declared May 29, 1998. The fiscal year ended January 31, 1997 was a
53-week year for Eagle and a 52-week year for Lowe's.
The Eagle "equivalent pro forma" data was calculated by multiplying the
corresponding pro forma combined data by the applicable exchange ratio. The
exchange ratio will be determined by dividing $29.00 by the average closing
price of Lowe's common stock shortly before the merger, subject to certain
exchange ratio limitations, as more fully described above under "What Eagle
Shareholders Will Receive."
The "current" exchange ratio equivalent pro forma data was calculated as if
the average stock price of Lowe's common stock shortly before the merger was
$59.75, which was Lowe's closing stock price on March 3, 1999. Because this
price was greater than $45.31, the exchange ratio was fixed at .6400, which is
the minimum exchange ratio. This exchange ratio will not necessarily be the
exchange ratio applicable to the merger. In addition, equivalent pro forma data
based on the maximum exchange ratio of .8659 has been included for comparative
purposes.
The following information shows how each share of Eagle common stock would
have participated in net earnings, cash dividends and book value of Lowe's if
the companies had always been combined for accounting and financial reporting
purposes for all periods presented. However, these amounts are not intended to
reflect future per share levels of net earnings, cash dividends and book value
of Lowe's.
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, JANUARY 30, JANUARY 29,
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
LOWE'S -- HISTORICAL
Basic earnings per share.................................. $ 0.87 $ 1.03 $ 1.37
Diluted earnings per share................................ 0.86 1.03 1.36
Cash dividends declared per share......................... 0.10 0.11 0.12
Book value per share...................................... $ 6.40 $ 7.42 $ 8.89
EAGLE -- HISTORICAL
Basic earnings per share.................................. $ 0.87 $ 1.03 $ 1.24
Diluted earnings per share................................ 0.84 0.98 1.16
Book value per share...................................... $10.55 $11.58 $13.58
CURRENT AND MINIMUM EXCHANGE RATIO (.6400):
PRO FORMA -- COMBINED
Basic earnings per share.................................. $ 0.89 $ 1.05 $ 1.40
Diluted earnings per share................................ 0.87 1.05 1.39
Cash dividends declared per share......................... 0.10 0.11 0.12
Book value per share...................................... $ 6.90 $ 7.95 $ 9.69
</TABLE>
7
<PAGE> 15
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, JANUARY 30, JANUARY 29,
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
EQUIVALENT PRO FORMA -- EAGLE
Basic earnings per share.................................. $ 0.57 $ 0.68 $ 0.90
Diluted earnings per share................................ 0.55 0.68 0.89
Cash dividends declared per share......................... 0.06 0.07 0.08
Book value per share...................................... $ 4.42 $ 5.09 $ 6.20
MAXIMUM EXCHANGE RATIO (.8659):
PRO FORMA -- COMBINED
Basic earnings per share.................................. $ 0.87 $ 1.04 $ 1.37
Diluted earnings per share................................ 0.86 1.03 1.36
Cash dividends declared per share......................... 0.10 0.11 0.12
Book value per share...................................... $ 6.78 $ 7.81 $ 9.52
EQUIVALENT PRO FORMA -- EAGLE
Basic earnings per share.................................. $ 0.75 $ 0.90 $ 1.19
Diluted earnings per share................................ 0.74 0.89 1.18
Cash dividends declared per share......................... 0.09 0.10 0.10
Book value per share...................................... $ 5.87 $ 6.76 $ 8.24
</TABLE>
8
<PAGE> 16
SELECTED PRO FORMA AND HISTORICAL FINANCIAL DATA
The following tables show summary pro forma and historical financial data
for Lowe's and Eagle. The pro forma financial data assumes that the merger was
accounted for as a pooling of interests and that the companies had always been
combined for accounting and financial reporting purposes for all periods
presented. It is expected that Lowe's will incur certain reorganization expenses
as a result of combining the companies; however, the unaudited pro forma
earnings per share data does not reflect any anticipated reorganization
expenses.
The companies anticipate that the merger will provide the combined company
with certain financial benefits that include improved operating efficiencies and
opportunities to earn more revenue. However, these anticipated cost savings or
benefits are not reflected in the pro forma information. Therefore, the pro
forma information, while helpful in illustrating the financial characteristics
of the combined company under one set of assumptions, does not attempt to
predict or suggest future results. The pro forma information also does not
attempt to show how the combined company would actually have performed had the
companies been combined throughout these periods. The pro forma results of
operations data does not include $10 million of estimated merger-related
expenses which are non-recurring in nature. The pro forma balance sheet data
reflects the tax-affected impact of the estimated merger-related expenses.
The information in the following tables is based on the historical
financial information of the companies that was presented in prior filings with
the Securities and Exchange Commission. When Eagle shareholders read the summary
financial information that is provided in the following tables, they should also
read the historical financial information in the other documents referred to in
this proxy statement/prospectus. See "Where Eagle Shareholders Can Find More
Information." Lowe's audited historical financial statements were audited by
Deloitte & Touche LLP, independent auditors. Eagle's audited historical
financial statements were audited by Ernst & Young LLP, independent auditors.
9
<PAGE> 17
SELECTED PRO FORMA FINANCIAL DATA OF LOWE'S AND EAGLE COMBINED
(IN THOUSANDS, EXCEPT PER SHARE DATA AND SELECTED OPERATING DATA)
The following table sets forth selected unaudited pro forma combined
financial data for Lowe's and Eagle for the fiscal years 1996, 1997 and 1998.
The results of operations data assume that the companies had always been
combined for accounting and financial reporting purposes, and the balance sheet
data assumes that the merger was completed on January 29, 1999. The fiscal year
ended January 31, 1997 was a 53-week year for Eagle and a 52-week year for
Lowe's. The shareholders' equity figure has been adjusted for estimated
merger-related expenses of $10 million.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, JANUARY 30, JANUARY 29,
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Net sales............................................ $9,361,204 $11,108,378 $13,330,540
Gross margin......................................... 2,435,339 2,963,125 3,602,071
Net earnings......................................... $ 313,887 $ 387,400 $ 518,754
Basic earnings per share............................. $ 0.89 $ 1.05 $ 1.40
Diluted earnings per share........................... $ 0.87 $ 1.05 $ 1.39
Cash dividends per share............................. $ 0.10 $ 0.11 $ 0.12
SELECTED OPERATING DATA:
Number of stores open at end of period............... 429 477 520
Selling square footage at end of period (in
thousands)........................................ 33,748 40,430 48,078
BALANCE SHEET DATA
(AS OF JANUARY 29, 1999):
Total assets......................................... $ 7,064,404
Long-term debt, excluding current maturities......... $ 1,364,278
Shareholders' equity................................. $ 3,587,289
</TABLE>
10
<PAGE> 18
LOWE'S SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA)
The following results of operations and balance sheet data for and as of
the end of fiscal years 1994, 1995, 1996 and 1997 have been derived from Lowe's
audited consolidated financial statements. The selected financial data for and
as of the fiscal year ended January 29, 1999 have been derived from unaudited
consolidated financial statements of Lowe's. All per share amounts have been
adjusted to reflect a two-for-one stock split declared by Lowe's on May 29,
1998. The information set forth below should be read in conjunction with Lowe's
consolidated financial statements and related notes and other financial
information incorporated by reference in this proxy statement/prospectus. See
"Where Eagle Shareholders Can Find More Information."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------------
JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 30, JANUARY 29,
1995 1996 1997 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Net sales......................................... $6,110,521 $7,075,442 $8,600,241 $10,136,890 $12,244,882
Gross margin...................................... 1,512,344 1,763,247 2,223,759 2,689,773 3,294,726
Net earnings...................................... $ 223,560 $ 226,027 $ 292,150 $ 357,484 $ 482,422
Basic earnings per share.......................... $ 0.72 $ 0.71 $ 0.87 $ 1.03 $ 1.37
Diluted earnings per share........................ $ 0.70 $ 0.68 $ 0.86 $ 1.03 $ 1.36
Cash dividends per share.......................... $ 0.09 $ 0.10 $ 0.10 $ 0.11 $ 0.12
SELECTED OPERATING DATA:
Number of stores open at end of period............ 336 365 402 446 484
Selling square footage at end of period (in
thousands)...................................... 18,600 23,900 30,400 36,500 43,400
Same store sales increase......................... 15% -- 7% 4% 6%
BALANCE SHEET DATA:
Total assets...................................... $3,105,992 $3,556,386 $4,434,954 $ 5,219,277 $ 6,344,651
Long-term debt, excluding current portion......... 681,184 866,183 767,338 1,045,570 1,283,092
Shareholders' equity.............................. $1,419,890 $1,656,715 $2,217,476 $ 2,600,609 $ 3,135,952
</TABLE>
11
<PAGE> 19
EAGLE SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA)
The following results of operations and balance sheet data for and as of
the end of fiscal years 1994, 1995, 1996 and 1997 have been derived from Eagle's
audited consolidated financial statements. The selected financial data for and
as of the fiscal year ended January 29, 1999 have been derived from unaudited
consolidated financial statements of Eagle. Eagle recorded a $12.7 million
pre-tax loss on the sale of its Canadian subsidiary in the fiscal year ended
January 27, 1995, which was charged to operations. The fiscal year ended January
31, 1997 was a 53-week year and all other fiscal years presented were 52-week
years. The information set forth below should be read in conjunction with
Eagle's consolidated financial statements and related notes and other financial
information incorporated by reference in this proxy statement/prospectus. See
"Where Eagle Shareholders Can Find More Information."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------------
JANUARY 27, JANUARY 26, JANUARY 31, JANUARY 30, JANUARY 29,
1995 1996 1997 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Net sales............................................. $518,755 $615,674 $760,963 $971,488 $1,085,658
Gross margin.......................................... 139,282 165,809 211,580 273,352 307,345
Net earnings (loss)................................... (6,284) 11,335 21,737 29,916 36,332
Basic earnings (loss) per share....................... $ (0.28) $ 0.50 $ 0.87 $ 1.03 $ 1.24
Diluted earnings (loss) per share..................... $ (0.28) $ 0.50 $ 0.84 $ 0.98 $ 1.16
SELECTED OPERATING DATA:
Number of stores open at end of period................ 19 24 27 31 36
Selling square footage at end of period (in
thousands).......................................... 2,248 2,861 3,348 3,930 4,678
Same store sales increase (decrease).................. (2)% (7)% 11% 11% 5%
BALANCE SHEET DATA:
Total assets.......................................... $321,865 $366,567 $519,385 $601,655 $ 719,753
Long-term debt, excluding current portion............. 103,807 101,542 108,416 145,836 81,186
Shareholders' equity.................................. $143,849 $155,601 $304,843 $336,537 $ 461,337
</TABLE>
12
<PAGE> 20
RISK FACTORS RELATING TO THE MERGER
In addition to the other information included in this proxy
statement/prospectus, Eagle shareholders should consider carefully the matters
described below in determining whether to approve the merger agreement.
- Fixed Exchange Ratio May Result in Lower Valuation of Eagle Common Stock
in the Merger. If the average price of Lowe's common stock before
completion of the merger is less than $33.49, then the exchange ratio
becomes fixed at .8659 and the initial value of the shares of Lowe's
stock received for a share of Eagle stock in the merger will be less than
$29.00. See "The Merger -- What Eagle Shareholders Will Receive."
- Possible Challenges to Integration of Lowe's and Eagle May Adversely
Impact Financial Condition of Combined Company. As retailers, Lowe's and
Eagle both developed distinct store formats and brand images in their
respective markets. Consequently, there will be significant challenges in
integrating the operation of stores under the Eagle name with stores
under the Lowe's name. These challenges include maintaining customer
loyalty, consolidating private label brands, streamlining vendor and
distribution channels and integrating internal operations. These
challenges, if not adequately addressed, could have an adverse impact on
the financial condition of the combined company.
A WARNING ABOUT FORWARD-LOOKING INFORMATION
Each company makes forward-looking statements in this proxy
statement/prospectus and in its public documents, that are subject to risks and
uncertainties. These forward-looking statements include information about
possible or assumed future results of operations or the performance of Lowe's
and Eagle after the merger. Also, when Eagle uses any of the words "believes,"
"expects," "anticipates" or similar expressions, it is making forward-looking
statements. Many possible events or factors could affect the future financial
results and performance of each of the companies and the combined company after
the merger, including the risks described above under "Risk Factors Relating to
the Merger." These risks could cause results or performance to differ materially
from those expressed in the forward-looking statements. Eagle shareholders
should consider these risks when they vote on the merger agreement.
THE COMPANIES
LOWE'S
Lowe's is the second largest retailer of home improvement products in the
United States, with specific emphasis on do-it-yourself retail and commercial
business customers. Lowe's specializes in offering products and services for
home improvement, home decor, home construction, repair and remodeling. Lowe's
principal customer groups are do-it-yourself retail customers, repair and
remodeling contractors, and new home builders. As of March 3, 1999, Lowe's
operated 484 stores in 27 states. Lowe's has more than 65,000 employees and its
retail sales space totals more than 43 million square feet.
Since 1989, Lowe's has been implementing an aggressive store expansion
strategy, which has transformed Lowe's from a chain of small stores into a chain
of destination home improvement warehouses. Lowe's current prototype store has a
115,000 square foot sales floor with a lawn and garden center comprising
approximately 35,000 additional square feet. In fiscal 1998 Lowe's opened 76
stores, including the relocation of 31 older, smaller format stores.
13
<PAGE> 21
In April 1998, Lowe's announced plans for a major expansion into the
western United States, with plans to build over 100 new stores in the western
markets over the next three to four years. The acquisition of Eagle will enable
Lowe's to accelerate its west coast expansion and give it an immediate presence
in a number of key metropolitan markets in the west. It is intended that the
Eagle stores will be in addition to Lowe's previously announced western market
expansion plans.
Lowe's was incorporated in North Carolina in 1952 and has been a publicly
held company since 1961. Lowe's common stock is listed on the New York Stock
Exchange, the Pacific Stock Exchange, and the London Stock Exchange, with shares
trading under the ticker symbol "LOW." Lowe's general offices are located at
Highway 268 East, North Wilkesboro, North Carolina, 28659, and its telephone
number is (336) 658-4000. See "Where Eagle Shareholders Can Find More
Information."
EAGLE
Eagle is a leading operator of home improvement centers in the western
United States. Since opening its first store in Spokane, Washington in November
1990, Eagle has grown to 38 stores at March 3, 1999, with approximately 5
million square feet of retail selling space. Eagle has stores in Washington,
Colorado, Utah, Hawaii, Alaska, California, Idaho, Montana, Nevada and Oregon.
Eagle stores average approximately 130,000 square feet of retail selling space
and feature a product assortment of over 70,000 items. Since its inception,
Eagle has focused on creating the best home improvement shopping experience for
its customers by combining the selection and value associated with traditional
warehouse-format home centers with the comfortable shopping atmosphere and
service orientation of specialty retailers.
Eagle has differentiated its stores from those of other warehouse home
improvement retailers by providing a bright, clean and well-organized shopping
environment and by offering "More of Everything(R)," with one of the broadest
and deepest selections of brand name home improvement products available in the
United States. Through its highly trained associates, Eagle Experts(TM) and
Eagle Service Specialists(TM), Eagle provides exceptional customer service to
its target do-it-yourself customers, as well as professional contractors.
Eagle was incorporated in Washington in 1989 and has been a publicly held
company since 1992. Eagle's common stock is listed on The Nasdaq Stock Market,
with shares trading under the ticker symbol "EAGL." Eagle's principal executive
offices are located at 981 Powell Avenue SW, Renton, Washington 98055, and its
telephone number is (425) 227-5740. See "Where Eagle Shareholders Can Find More
Information."
THE SPECIAL MEETING
Eagle is furnishing this proxy statement/prospectus to Eagle shareholders
as part of the solicitation of proxies by the Eagle Board of Directors for use
at a special meeting of Eagle shareholders. Eagle is mailing this proxy
statement/prospectus and the enclosed proxy to Eagle shareholders on or about
March 5, 1999.
THE SPECIAL MEETING
The special meeting will be held at 9:00 a.m. local time on Friday, April
2, 1999 at The SeaTac Marriott Hotel, 3201 South 176th Street, SeaTac,
Washington 98188.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
The purpose of the special meeting is to consider and vote on a proposal to
approve the Agreement and Plan of Merger dated as of November 22, 1998 among
Eagle, Mariner Merger Corporation, a subsidiary of Lowe's, and Lowe's. According
to the merger agreement, the Lowe's
14
<PAGE> 22
subsidiary will merge with Eagle, becoming a subsidiary of Lowe's, and all
outstanding shares of Eagle common stock, excluding any shares held by Eagle or
Lowe's, in each case other than in a fiduciary capacity, and excluding shares
held by shareholders who perfect their statutory dissenters' rights under
Washington law, will be converted into shares of Lowe's common stock. Eagle
shareholders may also be asked to consider any other business that properly
comes before the special meeting. Finally, Eagle shareholders may be asked to
vote on a proposal to adjourn or postpone the special meeting, which could be
used to allow more time for the soliciting of additional votes to approve the
merger agreement. Each copy of this proxy statement/prospectus mailed to Eagle
shareholders is accompanied by a proxy for use at the special meeting.
RECORD DATE AND VOTING RIGHTS AND REQUIREMENTS
Record Date. The Eagle Board of Directors has fixed February 19, 1999, as
the record date for determination of Eagle shareholders entitled to receive
notice of, and to vote at, the special meeting. Accordingly, only Eagle
shareholders of record at the close of business on the record date will be
entitled to notice of, and to vote at, the special meeting. At the close of
business on the record date, there were 33,981,135 shares of Eagle common stock
entitled to vote at the special meeting, held by approximately 1,000 holders of
record.
Voting Rights. Each share of Eagle common stock outstanding on the record
date entitles its holder to one vote on the proposal to approve the merger
agreement and on any other proposal that properly comes before the special
meeting.
Quorum Requirement. The presence, in person or by proxy, of shares of
Eagle common stock representing a majority of the total voting power of the
shares entitled to vote on the record date is necessary to constitute a quorum
at the special meeting.
Vote Required. Under Washington law, the affirmative vote of two-thirds of
the votes entitled to vote on the record date is required to approve the merger
agreement.
Abstentions and Broker Non-Votes. Eagle intends to count shares of Eagle
common stock present in person at the special meeting but not voting, and shares
of Eagle common stock for which it has received proxies but where holders of
these shares have abstained, as present at the special meeting for purposes of
determining whether a quorum is present for the transaction of business. Under
applicable Nasdaq rules, brokers who hold shares of Eagle common stock in
"street name" for customers who are the beneficial owners of the shares are
prohibited from giving a proxy to vote shares held for these customers on the
matters to be voted on at the special meeting without specific instructions from
these customers. Shares of Eagle common stock represented by proxies returned by
a broker holding those shares in nominee or "street name" will be counted for
purposes of determining whether a quorum exists, even if the shares are broker
non-votes. Abstentions from voting and broker non-votes will be counted as votes
against the approval of the merger agreement. ACCORDINGLY, THE EAGLE BOARD OF
DIRECTORS URGES EACH EAGLE SHAREHOLDER TO COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
Voting by Eagle's Directors and Executive Officers. As of the record date,
2,947,876 shares of Eagle common stock, or approximately 8.7% of the shares
entitled to vote at the special meeting, were owned by directors and executive
officers of Eagle. It is currently expected that each director and executive
officer of Eagle will vote the shares of Eagle common stock owned by him for
approval of the merger agreement. Moreover, at the same time the merger
agreement was signed, each of Eagle's directors entered into an agreement under
which he agreed to vote the shares of Eagle common stock owned by him as to
which he has exclusive voting power for approval of the merger agreement. A form
of this agreement is filed as an exhibit to the registration statement, of which
this proxy statement/prospectus is a part.
Additional information about the beneficial ownership of Eagle common stock
by shareholders owning more than 5% of the outstanding shares of Eagle common
stock and more detailed
15
<PAGE> 23
information about the beneficial ownership of Eagle common stock by Eagle's
directors and executive officers is incorporated by reference to the Eagle
Annual Report on Form 10-K for the fiscal year ended January 30, 1998. See
"Where Eagle Shareholders Can Find More Information."
VOTING OF PROXIES
Eagle shareholders may use the proxy that came with this proxy
statement/prospectus if they are unable to attend the special meeting in person
or wish to have their shares voted by proxy even if they do attend the special
meeting. All shares represented by valid proxies received pursuant to this
solicitation, and not revoked before they are exercised, will be voted in the
manner that they specify. IF EAGLE SHAREHOLDERS DO NOT SPECIFY HOW THEIR PROXIES
ARE TO BE VOTED, THEIR PROXIES WILL BE VOTED FOR APPROVAL OF THE MERGER
AGREEMENT. There are no matters other than voting on the merger agreement that
are scheduled to be brought before the special meeting. If any other business is
properly brought before the special meeting, including a motion to adjourn or
postpone the special meeting to another time and/or place for the purpose of
soliciting additional proxies in favor of the merger agreement or to permit
dissemination of information regarding material developments relating to the
merger or otherwise relevant to the special meeting, the persons named in the
proxy will vote the shares represented by proxies as determined in their
discretion.
If the special meeting is adjourned for any reason prior to the approval of
the merger agreement, then the approval of the merger agreement may be
considered and voted on by shareholders at any subsequently reconvened meeting.
REVOCATION OF PROXIES
An Eagle shareholder may revoke his or her proxy at any time before it is
exercised either by submitting to the Vice President-Controller of Eagle, before
or at the special meeting, a written notice of revocation or a properly executed
proxy of a later date or by attending the special meeting and voting in person.
However, attendance by an Eagle shareholder at the special meeting will not in
and of itself constitute a revocation of his or her proxy. Eagle shareholders
should address any written notice of revocation and other communications about
the revocation of Eagle proxies to Eagle Hardware & Garden, Inc., 981 Powell
Avenue SW, Renton, WA 98055, Attention: Steve Stenberg, Vice
President-Controller.
SOLICITATION OF PROXIES
This solicitation of proxies is made on behalf of the Eagle Board of
Directors. Eagle will pay all of the costs of soliciting the proxies, other than
the costs of filing the registration statement, of which this proxy
statement/prospectus is a part, with the Securities and Exchange Commission and
the costs of printing and mailing the proxy statement/prospectus, which filing
fees and printing costs will be shared equally between Lowe's and Eagle. Proxies
may be solicited by officers, directors and employees of Eagle, none of whom
will receive any additional compensation for their services, but who may be
reimbursed for reasonable out-of-pocket expenses in connection with the
solicitation. In addition, Eagle has engaged the outside proxy solicitation firm
of D. F. King & Co., Inc. to solicit proxies and will pay D. F. King an
estimated fee of approximately $15,000, including expenses, for those services.
Solicitations of proxies may be made personally, or by mail, telephone,
facsimile or messenger. Moreover, Eagle may pay persons holding shares of Eagle
common stock in their names or in the names of nominees, but not owning the
shares beneficially, such as brokerage houses, banks and other fiduciaries, for
the expense of forwarding soliciting materials to their principals.
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THE MERGER
The following information relating to the merger is not intended to be a
complete description of all the information relating to the merger but is
believed to include all material terms of the merger. This description is
qualified in its entirety by reference to more detailed information contained
elsewhere in this proxy statement/prospectus, including the Annexes. A copy of
the merger agreement is set forth in Annex A and is incorporated by this
reference into this proxy statement/prospectus. Eagle shareholders are urged to
read the merger agreement carefully for a complete description of the terms of
the merger.
GENERAL
Subject to the satisfaction or waiver of certain conditions described in
the merger agreement and discussed more fully in "-- Conditions to the
Completion of the Merger," the merger will become effective upon the filing of
articles of merger with the Office of the Secretary of State of Washington, in
accordance with the relevant provisions of Washington law. Immediately following
completion of the merger:
- Eagle will become a subsidiary of Lowe's
- the articles of incorporation of Eagle, as in effect immediately before
the merger, will be the Eagle articles of incorporation
- the bylaws of Eagle, as in effect immediately before the merger, will be
the Eagle bylaws
- the directors of the Lowe's subsidiary immediately before the merger will
be the directors of Eagle
- the officers of Eagle immediately before the merger will be the officers
of Eagle
- David J. Heerensperger will resign as Chairman of the Board
WHAT EAGLE SHAREHOLDERS WILL RECEIVE
Conversion of Stock; Exchange Ratio. Each outstanding share of Eagle
common stock, excluding shares held by shareholders exercising dissenters'
rights, will be converted into that whole number of shares of Lowe's common
stock determined by dividing $29.00 by the average of the closing price of
Lowe's common stock on the New York Stock Exchange in the ten-day trading period
ending on the fifth trading day prior to the day of the effective time, rounded
to the nearest 1/10,000th. However, if the average closing price is greater than
$45.31, then the exchange ratio will be fixed at .6400, and if the average
closing price is less than $33.49, then the exchange ratio will be fixed at
.8659. Therefore, if the average closing price is less than $33.49, then each
share of Eagle common stock will be valued in the merger at less than $29.00,
and if the average closing price is more than $45.31, then each share of Eagle
common stock will be valued in the merger at more than $29.00. The exchange
ratio was arrived at through arms-length negotiations between Lowe's and Eagle.
The actual number of shares of Lowe's common stock Eagle shareholders will
receive will not be determined until after Eagle shareholders vote on the
merger. See "-- Background of the Merger."
Fractional Shares. Each Eagle shareholder who would otherwise be entitled
to receive a fraction of a share of Lowe's common stock will instead receive
cash, without interest, in an amount equal to the fractional part of a share of
Lowe's common stock multiplied by the market value of one share of Lowe's common
stock. In making this calculation, the market value of a share of Lowe's common
stock will be its closing price on the New York Stock Exchange on the last
trading day before the date of the effective time. No Eagle shareholder will be
entitled to dividends, voting rights or any other rights as a shareholder for
any fractional shares.
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<PAGE> 25
EAGLE'S "WALK-AWAY" RIGHT
Eagle has the option not to complete the merger if the ten-day average
closing price of Lowe's common stock shortly before completion of the merger is
less than $27.58, which is 30% lower than the five-day average closing price of
Lowe's common stock immediately before execution of the merger agreement.
Eagle cannot at this point determine whether it would resolicit the proxies
in the event that the average closing price of Lowe's common stock shortly
before completion of the merger is less than $27.58 and Eagle chooses to
complete the merger nonetheless. This decision would depend upon the facts and
circumstances leading to Eagle's decision to complete the merger, and whether
Eagle believes there has been a material change in the terms of the merger and
its effect on Eagle's shareholders. In making its determination, Eagle would
consider, among other factors, the reasons for the decreased price, the effect
of such price on the terms of the merger, whether the resulting exchange ratio
was fair to the shareholders from a financial point of view, the availability of
alternative transactions and the prospects of Eagle as an independent entity.
BACKGROUND OF THE MERGER
Over the last several years, the retail home improvement industry has
become increasingly competitive. A number of factors underlie this trend,
including the national expansion of large-store warehouse format retailers such
as The Home Depot, Inc. Large chains enjoy economies of scale from improved
vendor purchasing power, more efficient marketing programs and improved access
to capital markets. Recognizing this trend, the Eagle Board of Directors has
throughout the past few years periodically considered various strategic
alternatives, including potential business combinations, as well as various
strategies for maximizing its performance as an independent company, with a view
towards remaining competitive with larger home improvement chains.
In early 1997, members of Eagle senior management and the Eagle Board of
Directors began to discuss internally the possibility of seeking a suitable
candidate for a business combination in order to enhance Eagle's competitive
position. In June 1997, in response to an expression of interest by
representatives of Eagle in discussing a possible business combination with
Lowe's, members of Lowe's management suggested that representatives of Eagle
meet with representatives of Lowe's. Members of management from Lowe's and Eagle
met later in June 1997 in Seattle, Washington. These discussions were general in
nature and included visits to various Eagle stores in the Seattle area and to
Eagle's distribution center. These discussions did not progress beyond the
preliminary stage.
In late April 1998, a representative of NationsBanc contacted Lowe's on an
informal basis to inquire as to whether Lowe's would be interested in pursuing a
possible business combination with Eagle. In August 1998, at the request of
Lowe's management, Merrill Lynch & Co., Lowe's financial advisor, advised Lowe's
management as to the potential financial impact of a business combination
between Eagle and Lowe's, assuming various exchange ratios. Later in August
1998, representatives of Lowe's contacted Eagle and indicated that Lowe's was
interested in meeting again to discuss the possibility of a business
combination. On August 26, 1998, the Eagle Board of Directors met at a regularly
scheduled meeting. At this meeting, members of Eagle management updated the
Eagle Board of Directors on Lowe's interest and the Eagle Board of Directors
authorized Eagle's officers to enter into discussions with Lowe's and to engage
NationsBanc to assist Eagle in these discussions. Representatives of the two
companies met in Seattle on September 11 and 12, 1998. Although these talks were
preliminary and general in nature, a Lowe's representative indicated that Lowe's
had an interest in pursuing discussions regarding a business combination with
Eagle, subject to authorization from the Lowe's Board of Directors to proceed.
The Eagle Board of Directors was not, and is not, aware of any other company
with an interest in completing a business combination with Eagle that is
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<PAGE> 26
comparable to the interest expressed by Lowe's at this meeting. Nevertheless,
the Eagle Board of Directors remained interested in and open to any alternative
proposals from other companies.
On September 17, 1998, at a regularly scheduled meeting of Lowe's Board of
Directors, the Lowe's Board of Directors was apprised of the status of the
discussions with Eagle and the results of Merrill Lynch's preliminary analysis
of a combination of Lowe's and Eagle. The Lowe's Board of Directors authorized
Lowe's management to continue the discussions with the Eagle representatives. On
October 13, 1998, representatives of the two companies met in Denver, Colorado.
This meeting included representatives from Merrill Lynch and NationsBanc. The
parties exchanged certain financial information and entered into detailed
discussions regarding a business combination. After the Denver meeting,
representatives of Lowe's, Eagle, Merrill Lynch and NationsBanc engaged in a
series of discussions regarding various terms of a potential business
combination involving Lowe's and Eagle.
On October 22, 1998, the Lowe's Board of Directors met to consider whether
to proceed with a formal proposal to Eagle regarding a business combination. At
this meeting, Merrill Lynch presented its valuation analysis and its analysis of
the financial impact of a business combination with Eagle assuming a range of
exchange ratios. The Lowe's Board of Directors authorized Lowe's management to
negotiate with Eagle a purchase price per share within a specified range. Lowe's
management presented an offer to Eagle of $28.00 in Lowe's common stock per
share of Eagle common stock, subject to certain exchange ratio limitations, in a
stock-for-stock tax-free merger that would be accounted for as a pooling of
interests.
On October 26, 1998, the Eagle Board of Directors met to consider Lowe's
offer. The Lowe's proposal was discussed at length, and Eagle's officers were
directed to continue negotiations with Lowe's. The Eagle Board of Directors met
again the next day, October 27, with representatives of NationsBanc and Eagle's
legal counsel participating. Eagle's legal counsel advised the Eagle Board of
Directors members regarding their fiduciary duties. Eagle's officers and
representatives of NationsBanc participated in a detailed presentation and
discussion of the terms of Lowe's proposal with the members of the Eagle Board
of Directors. After considerable discussion, the Eagle Board of Directors
directed NationsBanc to approach Merrill Lynch to discuss increasing the per
share price of the offer, as well as a "walk-away" provision in the event that
the price of Lowe's common stock decreased significantly in value between the
signing of a definitive merger agreement and the closing. The Eagle Board of
Directors did not direct NationsBanc to make a specific counter-offer regarding
the per share purchase price.
NationsBanc then contacted Merrill Lynch to discuss various possible
improvements to the Lowe's offer, and representatives from NationsBanc and
Merrill Lynch engaged in a series of discussions suggesting possible compromise
proposals. The most material issues that NationsBanc raised at the direction of
the Eagle Board of Directors were purchase price and a "walk-away" right for
Eagle in the event of a significant decline in the market price of Lowe's common
stock before completion of the merger. Merrill Lynch advised Lowe's management
of the status of the negotiations and of Eagle's concerns regarding the original
offer. Lowe's management responded with a revised proposal including a purchase
price of $29.00 in Lowe's common stock per share of Eagle common stock, subject
to possible adjustment if the average price of Lowe's common stock before the
merger were to increase or decrease by more than 15%, and a "walk-away"
provision allowing either party to elect not to complete the merger if the price
of Lowe's common stock decreased by 25% in value between the signing of a
definitive merger agreement and the closing. In subsequent negotiations, the
"walk-away" right was granted to Eagle only and, consequently, the trigger was
set at 30% rather than 25%.
On November 2, 1998, the Eagle Board of Directors met and considered the
revised Lowe's proposal as described above. Representatives of NationsBanc were
present at this meeting to assist the Eagle Board of Directors in its
consideration of the revised proposal and to provide any necessary
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<PAGE> 27
details or clarifications regarding its understanding of the proposal. The Eagle
Board of Directors concluded that the revised Lowe's proposal was responsive to
the earlier concerns of the Eagle Board of Directors and authorized Eagle's
officers, NationsBanc and Eagle's legal counsel to commence negotiation of
definitive agreements.
From November 3 to November 21, 1998, representatives of both companies and
their financial and legal advisors performed due diligence and negotiated the
terms of the definitive agreements in connection with the merger. As part of the
due diligence process, Eagle's legal counsel performed a due diligence review of
certain legal matters at Lowe's corporate offices and the parties exchanged
business, financial and other information. The Eagle Board of Directors held a
brief meeting on November 16, 1998, at which management, NationsBanc and Eagle's
legal counsel updated the directors on the status of the negotiations.
The Eagle Board of Directors and the Lowe's Board of Directors each met
again on November 21, 1998. At the meeting of the Eagle Board of Directors,
NationsBanc and Eagle's legal advisors updated the directors on the status of
the negotiations and informed them that all substantive issues had been
resolved. Eagle's legal counsel reviewed in detail the terms of the merger
agreement and the other definitive agreements. NationsBanc presented its
financial analysis of the terms of the proposed merger and rendered its opinion
to the members of the Eagle Board of Directors to the effect that, as of the
date of the meeting and subject to the conditions, limitations, qualifications,
assumptions and other matters contained in its opinion, the aggregate
consideration to be received by Eagle shareholders in the merger was fair to
Eagle shareholders from a financial point of view. The Eagle Board of Directors,
by unanimous vote, determined that the merger was in the best interests of Eagle
and its shareholders, and approved and adopted the terms of the merger agreement
and the other definitive agreements contemplated by that agreement and
authorized their execution. The merger agreement approved by the Eagle Board of
Directors does not preclude Eagle from considering and approving a better
business combination proposal from a third party if one were presented to Eagle
following announcement of the proposed business combination with Lowe's.
At the meeting of Lowe's Board of Directors on November 21, 1998, Merrill
Lynch and Lowe's legal advisors updated the directors on the status of the
negotiations and informed them that all substantive issues had been resolved.
Lowe's legal counsel described in detail the terms of the merger agreement and
the other definitive agreements. The Lowe's Board of Directors, by unanimous
vote, determined that the merger was in the best interests of Lowe's and its
shareholders, and approved and adopted the terms of the merger agreement and the
other definitive agreements contemplated by that agreement and authorized their
execution.
On November 22, 1998, Eagle and Lowe's executed and delivered the merger
agreement and the other definitive agreements. Also on November 22, Eagle and
Lowe's publicly announced the signing of the merger agreement.
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<PAGE> 28
EAGLE PROJECTIONS
In October 1998, during the course of discussions between Eagle and Lowe's
prior to the execution of the merger agreement, Eagle provided Lowe's with
certain financial projections. These projections included the following
financial information:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDING
-----------------------------------------
JANUARY 29, JANUARY 28, JANUARY 26,
1999 2000 2001
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Sales.................................................. $1,101,072 $1,546,033 $2,220,601
Gross margin........................................... 308,176 432,332 621,759
Net income............................................. 34,435 47,551 76,986
Diluted earnings per share............................. 1.11 1.48 2.30
</TABLE>
The projections were not prepared for public disclosure or compliance with
guidelines of the Securities and Exchange Commission or the American Institute
of Certified Public Accountants regarding projections. These projections were
internal operating projections prepared for capital budgeting and other
management decisions, are subjective in many respects, and are thus susceptible
to various interpretations and periodic revision based on actual experience and
business developments. Because these projections are subject to significant
economic and competitive uncertainties and contingencies beyond Eagle's control,
there can be no assurance that these projections would have been realized and
actual results may have been either higher or lower than those projected.
Neither Eagle's auditors nor any other independent accountants have compiled,
examined or performed any procedures with respect to these projections. In
addition, they have not expressed any opinion or any other form of assurance on
this information or its achievability, and assume no responsibility for, and
disclaim any association with, the prospective financial information. Except to
the extent required under the federal securities laws, Eagle disclaims any duty
to update these projections.
EAGLE'S REASONS FOR THE MERGER
In reaching its decision to approve the merger, the Eagle Board of
Directors consulted with Eagle senior management about strategic and operational
matters. Eagle also sought the advice of its legal counsel regarding the legal
duties of the Eagle Board of Directors, regulatory matters, tax matters and the
terms of the merger agreement, the other definitive agreements contemplated by
that agreement and other relevant matters. The Eagle Board of Directors also
consulted with NationsBanc with respect to the financial aspects and fairness
from a financial point of view, as of November 21, 1998, of the aggregate
consideration to be received by Eagle shareholders under the merger agreement
and with Eagle's independent auditors regarding the appropriate accounting
treatment of the merger. Some of the more important factors taken into account
by the Eagle Board of Directors in approving the merger are described below:
- Strategic Combination. The Eagle Board of Directors considered that the
merger would provide Eagle with the opportunity to enhance its
competitive position by combining with the nation's second largest
retailer of building materials and related products for do-it-yourself
home improvement, home decor, home construction, repair and remodeling.
In this regard, the Eagle Board of Directors considered that the merger
would afford Eagle shareholders the chance, as equity holders of Lowe's,
to participate in the growth of a larger and more geographically diverse
retailer having greater financial resources, competitive strengths and
business opportunities than would be possible for Eagle as an independent
company. In this context, the Eagle Board of Directors also considered
Eagle's prospects as an independent company. While the Eagle Board of
Directors believed these prospects were favorable, it determined that the
proposed strategic combination with Lowe's was a better alternative.
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<PAGE> 29
- Complementary Nature of Businesses. The Eagle Board of Directors
considered the complementary nature of Eagle's business and management
teams with that of Lowe's and the creation of significant opportunities
for development of the companies on a combined basis without the need for
substantial restructuring or redirection. The Eagle Board of Directors
believes that the two companies share many similarities in their approach
to providing strong customer service and a broad array of product and
service offerings in their stores.
- Consideration to be Received by Eagle Shareholders. The Eagle Board of
Directors considered the amount and form of the consideration to be
received by Eagle shareholders in the merger and reviewed information on
the historical trading ranges of Lowe's common stock and Eagle common
stock. The Eagle Board of Directors also considered the financial
performance and condition, business and prospects of each of the
companies, including their respective earnings history and performance,
as well as the results of Eagle's due diligence review of Lowe's. The
Eagle Board of Directors also took into account the financial analyses
and pro forma and other information about the merger presented to it by
NationsBanc. The Eagle Board of Directors also considered that if the
average closing price of Lowe's common stock shortly before the merger is
less than $33.49, then each share of Eagle common stock will be valued at
less than $29.00 and if the average closing price is more than $45.31,
then each share of Eagle common stock will be valued at more than $29.00.
The Eagle Board of Directors also considered that it could terminate the
merger agreement and not complete the merger if the average closing price
is less than $27.58.
- Premium Price Offered. The Eagle Board of Directors considered the fact
that the $29.00 base consideration value offered by Lowe's for each share
of Eagle common stock represented a substantial premium over historical
trading prices of Eagle common stock and the closing price of $27.50 per
share of Eagle common stock on November 20, 1998, the business day before
the Eagle Board of Directors approved the proposed merger. Additionally,
the $29.00 base consideration per share represented a multiple of more
than 25 times consensus earnings per share estimates for Eagle for 1998,
which the Eagle Board of Directors believed to be a favorable multiple
given the risks and growth prospects for Eagle as an independent entity.
- Advice of Financial Advisor and Fairness Opinion. The Eagle Board of
Directors considered the financial advice of NationsBanc and that firm's
opinion that, as of November 21, 1998, the aggregate consideration to be
received by Eagle shareholders under the merger agreement was fair to
such shareholders from a financial point of view. A copy of that opinion,
which sets forth certain important qualifications, assumptions made,
matters considered, areas of reliance on others and limitations, is
attached hereto as Annex C, and a summary description is included in
"-- Opinion of Eagle's Financial Advisor." As further discussed below in
the summary description of NationsBanc's financial opinion, the Eagle
Board of Directors was informed that one of the six financial analyses
conducted by NationsBanc indicated that Eagle's contribution to the
combined operations of Lowe's in certain respects may be greater on a
percentage basis than the aggregate ownership interest that Eagle's
current shareholders would receive in Lowe's pursuant to the merger. In
determining whether to approve and recommend the proposed merger, the
Eagle Board of Directors concluded that the five other analyses and
factors supporting the desirability and fairness of the proposed merger
with Lowe's were more material and persuasive.
- Regulatory Approvals; Likelihood of Completion. The Eagle Board of
Directors took into account the likelihood that the merger would be
completed, including the likelihood of obtaining the regulatory approvals
required pursuant to, and the other conditions to completion of, the
merger, the experience, reputation and financial condition of Lowe's and
the risks to Eagle if the merger is not completed.
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<PAGE> 30
- Tax-Free Treatment. The Eagle Board of Directors considered the
expectation that the merger will be a tax-free transaction to Eagle and
its shareholders for federal income tax purposes, except for cash
received for fractional shares.
- Accounting Treatment. The Eagle Board of Directors considered the
expectation that the merger will be accounted for as a pooling of
interests under generally accepted accounting principles.
- Dissenters' Rights. The Eagle Board of Directors took into account that
Eagle shareholders have the right to exercise dissenters' rights under
Washington law.
- Competing Offers. The Eagle Board of Directors considered that, under
the merger agreement, Eagle shareholders may accept a higher or better
offer if one is presented, and the Eagle Board of Directors may withdraw
its recommendation of the proposed merger with Lowe's and recommend a
better offer if one is received. However, the Eagle Board of Directors
also took into account that under the merger agreement Eagle is
prohibited from soliciting, as opposed to responding to, other competing
offers for Eagle and that under certain circumstances Eagle may be
required to pay Lowe's a termination fee of $35 million if an alternative
offer is completed.
- More Effective Competitor. The Eagle Board of Directors considered that
the merger would likely make the combined company a more effective
competitor through more effective advertising strategies, greater access
to capital resources, improved distribution efficiencies, increased
number of private label brands available to customers and a more refined
site-selection process.
The foregoing discussion of the information and factors considered by the
Eagle Board of Directors is not intended to be exhaustive but is believed to
include all material factors considered by the Eagle Board of Directors. In
reaching its determination to approve the merger agreement and the transactions
contemplated by that agreement, the Eagle Board of Directors did not assign any
relative or specific weights to the foregoing factors, and individual directors
may have given differing weights to different factors.
RECOMMENDATION OF THE EAGLE BOARD OF DIRECTORS
The Eagle Board of Directors has unanimously approved and adopted the
merger agreement. The Eagle Board of Directors believes that the transactions
contemplated by the merger agreement are in the best interests of Eagle and its
shareholders and unanimously recommends that Eagle shareholders vote FOR
approval of the merger agreement. In approving the merger agreement and
recommending shareholder approval, the Eagle Board of Directors took into
account the potential conflict of interest of Mr. Takata resulting from his new
employment agreement. See "-- Interests of Management and Directors in the
Merger." In making its determination, the Eagle Board of Directors also took
into account, among other things, the opinion dated November 21, 1998 of
NationsBanc Montgomery Securities LLC, financial advisor to Eagle, that was
addressed to the members of the Eagle Board of Directors. A copy of that
opinion, which sets forth certain important qualifications, assumptions made,
matters considered, areas of reliance on others and limitations, is attached to
this proxy statement/prospectus as Annex C, and a summary description is
included in the "-- Opinion of Eagle's Financial Advisor" section.
LOWE'S REASONS FOR THE MERGER
The Lowe's Board of Directors announced in April 1998 its plan to pursue an
aggressive West Coast expansion strategy. It was and continues to be Lowe's
intention to implement this strategy by acquiring well-located sites in certain
desirable West Coast metropolitan markets and build new
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<PAGE> 31
Lowe's stores at those sites. After engaging in extensive real estate due
diligence, some of which resulted in executed purchase contracts for new store
sites, Lowe's management determined that a strategic business combination with a
strong regional home improvement retailer such as Eagle would complement its
West Coast expansion plans if the transaction could be effected at a reasonable
price.
Lowe's recognized Eagle as a high quality operator of warehouse-format
retail home improvement stores in the West Coast region. Eagle's
customer-oriented business philosophy, strong management, desirable locations
and prominent position in several West Coast metropolitan markets led the Lowe's
Board of Directors and Lowe's management to conclude that a business combination
with Eagle would contribute significantly to Lowe's West Coast expansion
strategy.
OPINION OF EAGLE'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated November 2, 1998, the Eagle Board of
Directors retained NationsBanc to advise Eagle regarding the financial aspects
of various potential merger or sale opportunities and to render an opinion as
investment bankers to the Eagle Board of Directors as to whether the aggregate
consideration to be received by Eagle shareholders pursuant to any such merger
or acquisition proposal considered by the Eagle Board of Directors is fair to
Eagle shareholders from a financial point of view. Eagle selected NationsBanc on
the basis of NationsBanc's experience and expertise in transactions similar to
the merger and its reputation in the retail and investment communities.
NationsBanc is a nationally recognized investment banking and financial advisory
firm and, as part of its activities, is regularly engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
In connection with the consideration by the Eagle Board of Directors of the
merits of the merger, NationsBanc was asked to perform various financial
analyses and deliver to the Eagle Board of Directors its opinion based on such
analyses, which opinion is more fully described below. At the November 21, 1998
meeting of the Eagle Board of Directors, NationsBanc delivered an oral opinion
described below to the Eagle Board of Directors, which was subsequently
confirmed in writing as of such date. THE OPINION OF NATIONSBANC WAS DIRECTED
SOLELY TO THE EAGLE BOARD OF DIRECTORS FOR ITS CONSIDERATION IN CONNECTION WITH
THE MERGER, AND IS NOT A RECOMMENDATION TO ANY EAGLE SHAREHOLDER AS TO WHETHER
THE MERGER IS IN SUCH SHAREHOLDER'S BEST INTERESTS OR AS TO WHETHER EAGLE
SHAREHOLDERS SHOULD VOTE FOR OR AGAINST THE MERGER. ADDITIONALLY, THE OPINION
ADDRESSES ONLY THE FINANCIAL FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY
EAGLE SHAREHOLDERS PURSUANT TO THE MERGER AND DOES NOT ADDRESS THE RELATIVE
MERITS OF THE MERGER OR ANY ALTERNATIVES TO THE MERGER, THE UNDERLYING DECISION
OF THE EAGLE BOARD OF DIRECTORS TO PROCEED WITH OR EFFECT THE MERGER OR ANY
OTHER ASPECT OF THE MERGER. THE FULL TEXT OF NATIONSBANC'S OPINION IS ATTACHED
TO THIS PROXY STATEMENT/PROSPECTUS AS ANNEX C, AND SETS FORTH CERTAIN IMPORTANT
QUALIFICATIONS, ASSUMPTIONS MADE, MATTERS CONSIDERED, AREAS OF RELIANCE ON
OTHERS, AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION.
The summary description of NationsBanc's opinion set forth below is
qualified in its entirety by the full text of the opinion attached to this proxy
statement/prospectus as Annex C.
In connection with its opinion, NationsBanc among other things:
- reviewed certain publicly available financial and other data with respect
to Eagle and Lowe's, including the consolidated financial statements of
Eagle and Lowe's for recent years and interim periods to October 30,
1998, and reviewed certain other relevant financial and operating data
relating to Eagle and Lowe's made available to it from published sources
and from the internal records of Eagle and Lowe's
- reviewed the financial terms and conditions of the most recent draft of
the merger agreement
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<PAGE> 32
- reviewed certain publicly available information concerning the trading
of, and the trading market for, Eagle common stock and Lowe's common
stock
- compared Eagle and Lowe's from a financial point of view with certain
other companies in the retail industry which NationsBanc deemed to be
relevant
- considered the financial terms, to the extent publicly available, of
selected recent business combinations of companies in the retail industry
which NationsBanc deemed to be comparable, in whole or in part, to the
merger
- reviewed and discussed with representatives of the management of Eagle
and Lowe's certain information of a business and financial nature
regarding Eagle and Lowe's furnished to NationsBanc by them
- made inquiries regarding and discussed the merger and the merger
agreement and other related matters with Eagle's counsel, and
- performed such other analyses and examinations as NationsBanc deemed
appropriate
Based upon its review of the foregoing, but subject to the limitations set
forth below and in reliance upon the assumptions set forth below, NationsBanc
provided the Eagle Board of Directors with its opinion as investment bankers
that as of November 21, 1998, the date of its opinion, the aggregate
consideration to be received by Eagle shareholders pursuant to the merger was
fair to Eagle shareholders from a financial point of view. The terms of the
merger and the amount of the consideration to be received by Eagle shareholders
under the merger agreement were determined pursuant to negotiations between
Eagle and Lowe's and not pursuant to recommendations of NationsBanc. No
limitations were imposed by Eagle on NationsBanc with respect to the
investigations made or procedures followed in rendering its opinion.
In connection with its review, NationsBanc did not assume any obligation to
independently verify the information reviewed by NationsBanc, and NationsBanc
relied on the information being accurate and complete in all material respects.
With the consent of the Eagle Board of Directors, NationsBanc assumed for
purposes of its opinion that:
- the financial forecasts provided by Eagle management reflected the best
currently available estimates by Eagle management as to the future
financial performance of Eagle
- the projections provided a reasonable basis upon which NationsBanc could
form its opinion
- there were no material changes in Eagle's or Lowe's assets, financial
condition, results of operations, business or prospects since the
respective dates of their last financial statements made available to
NationsBanc, and
- the merger would be completed in a manner that complies in all respects
with the applicable provisions of the Securities Act of 1933, the
Securities Exchange Act of 1934 and all other applicable federal and
state statutes, rules and regulations
The Eagle Board of Directors informed NationsBanc, and NationsBanc assumed
without verification and with the consent of the Eagle Board of Directors, that:
- the merger would be accounted for as a pooling of interests under
Accounting Principles Board Opinion No. 16, and
- the merger would be treated as a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code
NationsBanc did not assume responsibility for making an independent evaluation,
appraisal or physical inspection of any of the assets or liabilities, contingent
or otherwise, of Eagle or Lowe's, nor
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<PAGE> 33
was NationsBanc furnished with any appraisals. Finally, NationsBanc's opinion
was based on the economic, monetary and market and other conditions as in effect
on, and the information made available to it as of, November 21, 1998, the date
of the opinion. Accordingly, although subsequent developments may affect its
opinion, NationsBanc did not assume any obligation to update, revise or reaffirm
its opinion.
NationsBanc further assumed with the consent of the Eagle Board of
Directors that the merger would be completed in accordance with the terms
described in the merger agreement, without any amendments and without waiver by
Eagle of any of the conditions to its obligations under the merger agreement.
The full text of the merger agreement is attached as Annex A and the terms
described in the merger agreement and the conditions to Eagle's obligations
under the merger agreement should be reviewed and understood by Eagle
shareholders in connection with their consideration of the merger.
Finally, NationsBanc did not and could not express any opinion regarding
the price at which Lowe's common stock may trade at any future time. The
aggregate consideration to be received by Eagle shareholders pursuant to the
merger is based upon an exchange ratio which becomes fixed if the ten-day
average closing price of Lowe's common stock shortly before completion of the
merger has risen more than 15% above, or fallen more than 15% below, $39.40, the
five-day average closing price of Lowe's common stock immediately prior to the
execution of the merger agreement. Accordingly, if the price fluctuation in the
average closing price exceeds 15%, and the exchange ratio limitations described
above become operative, the market value of the aggregate consideration received
by shareholders could vary significantly from what such shareholders would have
received when the opinion of NationsBanc was presented to the Eagle Board of
Directors.
Set forth below is a brief summary of the report presented by NationsBanc
to the Eagle Board of Directors on November 21, 1998 in connection with its
opinion described above.
Comparable Merger and Acquisition Transaction Analysis. NationsBanc
reviewed the consideration paid in 59 merger and acquisition transactions in the
retail industry that have been announced since January 1995. A total of 45 of
these transactions were announced since January 1996, and NationsBanc considered
this pool of more recent transactions to be sufficient in size and a more
reliable measure of current values. NationsBanc identified 11 of these
transactions announced since 1996 as "high growth retail transactions."
NationsBanc believes that the acquired companies in these 11 transactions,
because they were potentially more comparable to a business combination
transaction involving Eagle, are viewed more similarly by securities analysts
and market participants, given Eagle's similar historic and projected growth
rate. The 11 high growth retail transactions considered, with the acquiring
company underlined, were:
- Saks Holding Inc./Proffitt's Inc.
- Viking Office Products Inc./Office Depot, Inc.
- Quill Corporation/Staples Inc.
- MacFrugal's Bargains/Consolidated Stores Corp.
- Carson Pirie Scott & Co./Proffitt's Inc.
- J Crew Group/Texas Pacific Group
- Amrion Inc./Whole Foods Market Inc.
- Maintenance Warehouse/Home Depot
- Eastbay/Woolworth
- Office Depot/Staples
- Orchard Supply Hardware/Sears, Roebuck & Co.
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<PAGE> 34
The following table presents the consideration paid in (1) all merger and
acquisition retail transactions announced since January 1996, including the high
growth retail transactions, and (2) the 11 high growth retail transactions
announced since January 1996, in each case expressed as a multiple of aggregate
value to the target companies' last twelve months' revenues (LTM Revenues), last
twelve months' earnings before interest, taxes, depreciation and amortization
(LTM EBITDA), and last twelve months' earnings before interest and taxes (LTM
EBIT).
<TABLE>
<CAPTION>
LTM REVENUES LTM EBITDA LTM EBIT
------------ ---------- --------
<S> <C> <C> <C>
All retail transactions since January 1996........... 0.8x 10.4x 15.0x
11 high growth transactions since January 1996....... 1.3x 12.5x 16.5x
</TABLE>
The transactions reviewed by NationsBanc included acquisitions of
privately-owned companies, and in certain cases complete financial data was not
available, publicly or otherwise, to NationsBanc for its analysis. The following
table presents the number of transactions considered by NationsBanc where the
required LTM Revenues, LTM EBITDA and LTM EBIT data were fully available to
NationsBanc.
<TABLE>
<CAPTION>
LTM REVENUES LTM EBITDA LTM EBIT
------------ ---------- --------
<S> <C> <C> <C>
All retail transactions since January 1996........... 44 40 38
11 high growth transactions since January 1996....... 11 10 10
</TABLE>
NationsBanc then applied the foregoing multiples to Eagle's LTM Revenues,
LTM EBITDA and LTM EBIT, and subtracted $57 million from the results to adjust
for Eagle's net debt to determine the resulting equity value of Eagle. For
purposes of the foregoing, net debt was assumed to be the same as the net debt
reflected in Eagle's October 30, 1998 balance sheet, calculated as long-term
debt, including the current portion of long-term debt, minus cash and assuming
the conversion of all convertible debt at $18 per share. The range of values
produced from these calculations indicated an implied equity value of Eagle of
between approximately $21.60 and $38.74 per share, assuming a total of 34.32
million fully-diluted shares of Eagle common stock to be outstanding after
giving effect to the conversion of the above-mentioned convertible debt. This
range of values was then weighted and narrowed by NationsBanc to reflect its
assessment of the appropriate reasonable range for the implied equity value of
Eagle, which was between $24.00 and $29.00 per share based on this analysis.
Comparable Public Company Analysis. Using public and other available
information, NationsBanc calculated a range of implied values for Eagle common
stock based on a comparison of the LTM Revenues, LTM EBITDA, LTM EBIT, estimated
1998 earnings per share ("1998 EPS") and estimated 1999 earnings per share
("1999 EPS") of twelve publicly traded large-format retail companies and five
publicly traded comparable building materials retail companies. The building
materials companies used in this analysis were:
- Building Materials Holding Corporation
- HomeBase, Inc.
- The Home Depot, Inc.
- Lowe's
- White Cap Industries, Inc.
The large-format retail companies used in this analysis, which were not
weighted as heavily by NationsBanc, were:
- Barnes & Noble, Inc.
- Bed, Bath & Beyond Inc.
- Best Buy Co., Inc.
- Borders Group, Inc.
- Circuit City Stores, Inc.
- CSK Auto Corporation
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<PAGE> 35
- Guitar Center, Inc.
- Just For Feet, Inc.
- Linens 'N Things, Inc.
- Office Depot
- Staples, Inc.
- Toys "R" Us, Inc.
The November 19, 1998 stock prices of the building materials companies
reflected the following average multiples of:
- equity value plus net debt: 1.0x LTM Revenues, 11.9x LTM EBITDA, and
15.3x LTM EBIT; and
- equity value: 23.0x estimated 1998 EPS, and 18.9x estimated 1999 EPS
The November 19, 1998 stock prices of all the building materials companies
and the large-format retail companies identified by NationsBanc, when considered
together, reflected the following average multiples of:
- equity value plus net debt: 1.1x LTM Revenues, 13.4x LTM EBITDA, and
17.3x LTM EBIT; and
- equity value: 27.1x estimated 1998 EPS, and 20.9x estimated 1999 EPS
NationsBanc applied the average multiples for the building materials
companies to the applicable results and forecasts for Eagle, and, where
applicable, made adjustments by subtracting $57 million, Eagle's net debt as of
October 30, 1998, to determine the implied equity value of Eagle. The range of
values produced from these calculations for the implied equity value of Eagle
based on the comparable multiples for the building materials companies was
between $25.83 and $29.62 per share of Eagle common stock. NationsBanc then
weighted the results, including the results obtained if the broader class of
building materials companies and warehouse-format retail companies were
considered together, to reflect its assessment of the appropriate reasonable
range for the implied equity value of Eagle, which was between $26.00 and $30.00
per share based on this analysis.
Premiums Paid Analysis. NationsBanc also reviewed the consideration paid
in the 272 U.S. merger and acquisition transactions announced since January 1996
involving consideration of between $500 million and $1 billion. NationsBanc
reviewed these transactions because of the comparable sizes of the consideration
to that in the proposed merger between Eagle and Lowe's. Of those 272
transactions, NationsBanc considered the pool of 191 transactions announced
since January 1997 to be sufficient in size and a more reliable measure of
current values. NationsBanc calculated and weighted the premiums paid in these
transactions announced since January 1997, over the applicable stock prices of
the target companies one day, one week and 30 days prior to the announcement of
the proposed transaction, and then calculated the average of those premiums,
which were 24.2%, 28.5% and 32.0%, respectively. NationsBanc also calculated the
premiums paid in 82 stock-for-stock transactions announced since January 1997
over the applicable stock prices of the target companies one day, one week and
30 days prior to the announcement of the proposed merger, and then calculated
the average of those premiums, which were 17.3%, 21.0% and 25.5%, respectively.
NationsBanc then applied the average premiums so derived to Eagle's closing
stock price on the corresponding trading days prior to the announcement of the
merger, which were $26.25, $23.50 and $22.31, respectively. The application of
the average premiums derived from the pool of 191 transactions announced since
January 1997 to the closing stock price of Eagle common stock on the trading
date prior to the announcement of the merger indicated a mathematical range of
values for Eagle of approximately $29.44 to $32.61 per share. However, because
the proposed merger between Eagle and Lowe's is a stock-for-stock transaction,
NationsBanc applied a heavier weighting to the average premiums derived from the
82 stock-for-stock transactions when calculating its assessment of the
appropriate reasonable range for the implied equity value of Eagle. Based on
this analysis, the application of these average premiums, as so weighted by
NationsBanc, to the closing stock price of Eagle common stock on the trading day
prior to the announcement of the merger indicated an
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<PAGE> 36
implied equity valuation range for Eagle of $960.9 million to $1,063.8 million,
or approximately $28.00 to $31.00 per share.
No company or transaction used in the comparable company analysis, the
comparable transactions analysis or the premiums paid analysis as a comparison
is identical to Eagle or the merger. Accordingly, an analysis of the results of
the foregoing is not mathematical; rather, it involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the companies and other factors that could affect the public trading value of
the companies to which Eagle and the merger are being compared.
Discounted Cash Flow Analysis. NationsBanc conducted a discounted cash
flow analysis based on financial forecasts for 1999 through 2003 provided by
Eagle's management. In conducting this discounted cash flow analysis,
NationsBanc first calculated the estimated future streams of free cash flows
that Eagle would produce through 2003 and then applied a range of exit multiples
from 7.0x to 9.0x to Eagle's estimated earnings before interest, taxes,
depreciation and amortization ("EBITDA") in 2003 to calculate the terminal value
of future streams of cash flow after 2003. These cash flow streams and terminal
values were discounted to present values using discount rates ranging from 14.0%
to 16.0%, chosen to reflect assumptions regarding Eagle's cost of capital. The
range of values produced these calculations was approximately $772.6 million to
$1,233.3 million, which corresponds to a range of implied equity values of
approximately $22.51 to $35.94 per share of Eagle common stock. This range of
values was then weighted and narrowed by NationsBanc to reflect its assessment
of the appropriate reasonable range for the implied equity value of Eagle, which
was between $25.00 and $32.00 per share based on this analysis.
Pro Forma Merger Analysis. Eagle shareholders will receive Lowe's common
stock in the merger. NationsBanc reviewed and analyzed the pro forma financial
impact of the merger on Lowe's projected earnings per share for Lowe's 1999 and
2000 fiscal years, assuming no adjustment to an assumed exchange ratio of 0.74
shares of Lowe's common stock for each share of Eagle common stock. Assuming the
accuracy of the financial forecasts used for Eagle and Lowe's, and without
giving effect to any operating synergies that might be realized following the
merger, this analysis indicated that the merger should be modestly accretive
without synergies to Lowe's projected 1999 and 2000 earnings per share.
Pro Forma Contribution Analysis. Again assuming no adjustment to an
assumed exchange ratio of 0.74 shares of Lowe's common stock for each share of
Eagle common stock, Eagle's current shareholders will have an aggregate
ownership interest in Lowe's of approximately 6.7% after the completion of the
merger. On a pro forma basis, after giving effect to the merger and assuming the
accuracy of the 1998 financial forecasts used for Eagle and Lowe's, Eagle would
contribute the following to the combined operations of Lowe's: 7.1% of the LTM
EBITDA, 6.9% of 1998 estimated EBITDA, 8.1% of the last twelve months' net
income, and 7.8% of 1998 estimated net income. On the basis of this analysis,
applying the foregoing assumptions, Eagle's contribution to the combined
operations of Lowe's with respect to pro forma EBITDA and net income would be
greater on a percentage basis than the aggregate ownership interest that Eagle's
current shareholders would receive in Lowe's pursuant to the merger.
While the foregoing summary describes all analyses and examinations that
NationsBanc deemed material to the preparation of its opinion to the Eagle Board
of Directors, it is not a comprehensive description of all analyses and
examinations actually conducted by NationsBanc. The preparation of a fairness
opinion necessarily is not susceptible to partial analysis or summary
description. NationsBanc believes that its analysis and the summary set forth
above must be considered as a whole, and that selecting portions of the analyses
and of the factors considered by NationsBanc, without considering all analyses
and factors, would create an incomplete view of the process underlying the
analyses set forth in the presentation of NationsBanc to the Eagle Board of
Directors on November 21, 1998. In addition, NationsBanc may have given some
analyses more or less weight than other analyses, and
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<PAGE> 37
may have deemed various assumptions more or less probable than other
assumptions. Accordingly, the ranges of valuations resulting from any particular
analysis described above should not be taken to be NationsBanc's view of the
actual value of Eagle or Eagle common stock. To the contrary, NationsBanc
expressed no opinion on the actual value of Eagle or Eagle common stock, and its
opinion, which is addressed and limited to the Eagle Board of Directors, extends
only to the belief expressed by NationsBanc that the immediate value to Eagle
shareholders, from a financial point of view under the merger, is within the
range of values that might fairly be given to Eagle common stock as of November
21, 1998, the date of the opinion of NationsBanc.
In performing its analyses, NationsBanc made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Eagle and Lowe's. The
analyses performed by NationsBanc are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than those suggested by these analyses. These analyses were prepared
solely as part of NationsBanc's analysis of the fairness of the aggregate
consideration to be received by Eagle shareholders pursuant to the merger from a
financial point of view, and were provided solely to the Eagle Board of
Directors in connection with the delivery of NationsBanc's opinion. The analyses
do not purport to be appraisals or to reflect the prices at which any company
might actually be sold or the prices at which any securities may trade at any
time in the future. NationsBanc used in its analyses various projections of
future performance prepared or adopted by the managements of Eagle and Lowe's.
The projections are based on numerous variables and assumptions which are
inherently unpredictable and in large part are beyond the control of Eagle and
its advisors. Accordingly, actual results could vary significantly from those
set forth in the projections used by NationsBanc in its analyses, and none of
Eagle, NationsBanc or any other person assumes any responsibility if future
results are later found to be materially different from the results contained in
these projections.
As described above, the opinion of NationsBanc and the presentation to the
Eagle Board of Directors summarized above were among the many factors taken into
consideration by the Eagle Board of Directors in making its determination to
approve, and to recommend that its shareholders approve, the merger agreement.
NationsBanc, however, does not make any recommendation to Eagle shareholders or
any other person or entity as to whether the merger is in a shareholder's best
interests.
In accordance with its engagement letter, the opinion of NationsBanc is
addressed solely to the Eagle Board of Directors for the use of the directors in
their capacity as members of the Eagle Board of Directors in connection with
their review and evaluation of the merger. Neither the opinion nor NationsBanc's
underlying financial analysis may be relied upon by any person other than the
directors in their capacity as members of the Eagle Board of Directors without
the prior written consent of NationsBanc. Accordingly, under the terms of the
engagement letter and the NationsBanc opinion letter prepared pursuant to the
engagement letter, no Eagle shareholder may rely or allege any reliance on
NationsBanc's opinion or analysis in connection with the shareholder's
consideration of the merits of the merger or otherwise. It is NationsBanc's
position that its duties in connection with its fairness opinion are solely to
the Eagle Board of Directors, and that it has no legal responsibility to any
other persons, including Eagle shareholders, under New York state law, the
governing law of the engagement letter. NationsBanc would likely assert the
substance of this disclaimer as a defense to claims, if any, that might be
brought against it by Eagle shareholders with respect to its fairness opinion.
However, since no New York court has definitely ruled on the availability to a
financial advisor of this defense to shareholder liability with respect to its
fairness opinion, this issue necessarily would have to be resolved by a court of
competent jurisdiction. Furthermore, there can be no assurance that a court of
competent jurisdiction would apply New York state law to the resolution of this
issue if it were ever to be presented. In any event, the availability or
non-availability of this defense will have no effect on NationsBanc's rights and
responsibilities under the federal securities
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<PAGE> 38
laws, or the rights and responsibilities of the Eagle Board of Directors under
governing state law or under the federal securities laws.
As set forth in NationsBanc's opinion attached to this proxy
statement/prospectus as Annex C, NationsBanc consented to the reproduction of
its opinion letter in this proxy statement/prospectus for the limited purpose of
allowing Eagle to comply with its disclosure obligations under the Exchange Act
of 1934. NationsBanc has also consented to the summary description of the
opinion letter that is included in this section of the proxy
statement/prospectus. In furnishing its consent to the inclusion of its opinion
letter and a summary in this proxy statement/prospectus, NationsBanc did not
admit that it is an expert for the purposes of, and within the meaning of the
term "expert" as used in, the Securities Act, nor did it admit that its opinion
constitutes a report or valuation within the meaning of the Securities Act.
Statements to this effect are included in the NationsBanc opinion.
Pursuant to the terms of the engagement letter, NationsBanc will earn a
$2.65 million fee upon the consummation of the merger. Payment of NationsBanc's
consummation fee is not and was not conditioned on the outcome of the
NationsBanc opinion described above or whether the opinion was deemed favorable
or unfavorable by Eagle or the Eagle Board of Directors; however, Eagle will be
obligated to pay this fee only if the merger or an alternative transaction
within the scope of the transactions covered by the engagement letter is
completed. Accordingly, the payment of substantially all of NationsBanc's total
compensation under the engagement letter is dependent on the completion of the
merger. The Eagle Board of Directors was aware of this fee structure and took it
into account in considering NationsBanc's opinion and in approving the merger
agreement and the transactions contemplated by the merger agreement. Pursuant to
a separate letter agreement, Eagle has agreed to indemnify NationsBanc, its
affiliates, and their respective partners, directors, officers, agents,
consultants, employees and controlling persons against certain liabilities,
including liabilities under the federal securities laws, relating to or arising
out of NationsBanc's engagement.
In the past, NationsBanc has provided financial advisory and investment
banking services to Eagle and Lowe's and has received customary fees for the
rendering of these services totalling $100,000 during the past two years from
Eagle. In the ordinary course of its business, NationsBanc trades the equity
securities of Eagle and Lowe's for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. NationsBanc has also acted as an underwriter in connection with
offerings of securities of Eagle and Lowe's. Additionally, NationsBanc may
participate directly or indirectly in arranging, underwriting or providing debt
or equity financing or other financial services to Lowe's in connection with the
merger or in connection with subsequent financing, or refinancing, or other
transactions involving Lowe's, although none of these possible relationships are
currently contemplated.
INTERESTS OF MANAGEMENT AND DIRECTORS IN THE MERGER
In connection with their approval of the merger agreement and the
transactions contemplated by that agreement, the Lowe's Board of Directors and
the Eagle Board of Directors considered the interests of Eagle management and
directors described below.
Takata Employment Agreement. Lowe's and Eagle entered into an employment
agreement with Mr. Takata on the same date as the merger agreement. Prior to
that time, Mr. Takata had not been subject to an employment agreement with
Eagle. This employment agreement, which would become effective only upon
completion of the merger, provides that Eagle would employ Mr. Takata as
President and Chief Operating Officer of Eagle for a period of two years
following completion of the merger. Mr. Takata would receive a base salary of
$325,000 per year during the term of the agreement and would be eligible to
receive annual bonuses of up to 150% of his base salary, subject to achieving
certain objectives based on the performance of Eagle and Lowe's. In addition,
Lowe's would grant to Mr. Takata an option to purchase 70,000 shares of Lowe's
common stock under
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<PAGE> 39
Lowe's 1997 Incentive Plan, and Eagle would pay Mr. Takata an additional bonus
of $100,000 immediately before the completion of the merger. Moreover, the
employment agreement also contains a severance package for Mr. Takata if his
employment is terminated without cause or he resigns with good reason before the
expiration of the two-year employment term. The agreement also contains
restrictive covenants that, during his employment and for two years after the
termination of his employment, would prevent Mr. Takata from competing in
certain respects with Lowe's and Eagle and from hiring certain key employees. In
fiscal 1998, Mr. Takata earned $367,170 in base compensation and $181,445 in
bonus compensation.
Heerensperger Separation Agreement. In light of the change in ownership of
Eagle that will result from the merger, Mr. Heerensperger, Chairman of the Board
of Eagle, has elected to resign as Chairman upon completion of the merger. In
recognition of Mr. Heerensperger's significant contributions to the growth and
success of Eagle and his many years of valuable service, Eagle entered into a
separation agreement, waiver and release with Mr. Heerensperger providing for
certain severance benefits that would be payable upon completion of the merger.
Prior to execution of the separation agreement, Mr. Heerensperger had not been
subject to any employment or separation agreement with Eagle. The benefits
provided by the separation agreement include:
- payment to Mr. Heerensperger of $315,000 per year during the two years
following the merger
- for two years following the merger, reimbursement of up to $3,000 per
month of expenses incurred by Mr. Heerensperger in maintaining an office
for his use
- providing administrative and secretarial support to Mr. Heerensperger for
two years following the merger
- paying the cost of his continued health care coverage under Eagle's group
health care plan for up to 18 months following the merger
This agreement contains restrictive covenants that would prevent Mr.
Heerensperger from competing in certain respects with Lowe's and Eagle and from
hiring certain key employees of Lowe's and Eagle for two years after termination
of his employment.
Retention and Severance Arrangements. The merger agreement provides that
Eagle may enter into retention and/or severance agreements with approximately 30
employees. With the exception of three employees who have severance arrangements
ranging from approximately $106,000 to $147,000, these employees had not
previously been subject to any retention and/or severance agreements with Eagle.
Under the proposed agreements, certain of these employees would be eligible to
receive a retention payment equal to between six months' and one year's base
pay. Depending on the terms of the individual retention agreement, the proposed
payments will be in a range of approximately $44,000 to $175,000 based on the
employees' respective current salaries. In addition, all these employees whose
employment is terminated without cause, as defined in the individual contract,
will receive salary continuation for between six months and one year after their
date of termination. Depending on the terms of the individual severance
agreement, the proposed payments will be in a range of approximately $44,000 to
$175,000 based on the employees' respective current salaries. No retention
payment or severance benefits would be paid to an employee whose employment is
terminated as a result of a failure by the employee to perform adequately his or
her essential job functions.
Indemnification, Exculpation and Insurance. The merger agreement provides
that all rights to indemnification and exculpation from liabilities for acts or
omissions of current or former officers and directors of Eagle occurring before
the effective time, as provided in Eagle articles of incorporation or bylaws,
will survive the merger and continue in accordance with their terms. In
addition, anyone who
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<PAGE> 40
becomes a director or officer of Eagle after completion of the merger will be
entitled to the same indemnity rights and protections as are currently afforded
to other directors and officers of Eagle.
Lowe's also agreed in the merger agreement that, for six years after the
effective time, it will maintain Eagle's current directors' and officers'
liability insurance, or a policy providing comparable coverage, covering acts or
omissions occurring before the effective time with respect to those persons who
are currently covered by Eagle's directors' and officers' liability insurance
policy; provided, that in no event will Eagle or Lowe's be required to pay
aggregate premiums for this insurance in excess of 200% of the aggregate
premiums paid by Eagle in 1998 on an annualized basis for this purpose.
Stock-Based Rights. At the effective time of the merger, each outstanding
and unexercised option to purchase shares of Eagle common stock granted under
Eagle's stock option plans, including those held by Eagle's executive officers
and directors, will be converted into an option to purchase Lowe's common stock,
with the number of shares and exercise price adjusted for the exchange ratio.
Completion of the merger will result in a "change in control" under the Eagle
stock option plans and, as a result, Eagle options granted prior to the date of
the merger agreement will be immediately vested at the effective time and
exercisable for the remainder of their full 10-year term. The number of unvested
Eagle options held by Mr. Takata that will become vested and fully exercisable
as a result of the merger is 33,333. The number of Eagle options held by Eagle
directors and executive officers as a group that will become vested and fully
exercisable as a result of the merger is 119,333. See "-- Effect on Awards
Outstanding Under Eagle Stock Plans."
Other than as set forth above, no Eagle director has entered into a revised
agreement or will receive benefits from the merger based upon his current
arrangements. Except for the benefits given to Mr. Takata and Mr. Heerensperger,
as described above, all directors will receive identical payments and benefits
for their continued service to the Eagle Board of Directors pending completion
of the merger.
EFFECTIVE TIME
The closing of the merger will take place at 9:00 a.m. Pacific Standard
Time on the first business day following the date on which certain conditions
set forth in the merger agreement are satisfied or waived, or at any other time
as Lowe's and Eagle may mutually agree. The closing will be held at any location
agreed on by Lowe's and Eagle. On the date of the closing, Lowe's and Eagle will
file the articles of merger in accordance with Washington law and will make all
other filings or recordings required under Washington law. The merger will
become effective at the effective time when the articles of merger become
effective with the Office of the Secretary of State of the State of Washington,
or when mutually agreed upon by Lowe's and Eagle.
At the effective time, Eagle shareholders will cease to be Eagle
shareholders, and will have no rights as Eagle shareholders, other than the
right to receive shares of Lowe's common stock and cash instead of fractional
shares to which they may be entitled. After the effective time, there will be no
transfers on the stock transfer books of Eagle or of shares of Eagle common
stock.
EXCHANGE OF EAGLE COMMON STOCK FOR LOWE'S COMMON STOCK
At or before the effective time, Lowe's will deposit with Wachovia
Shareholder Services, the exchange agent, certificates representing the shares
of Lowe's common stock and an estimated amount of cash to be paid instead of
fractional shares, based on the exchange ratio.
As soon as practicable after the effective time, Lowe's will send to each
person who was an Eagle shareholder on the record date transmittal materials for
use in exchanging their Eagle stock certificates for the consideration due to
the Eagle shareholder. After the effective time, an Eagle shareholder's shares
of Eagle common stock will become the right to receive Lowe's stock certificates
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<PAGE> 41
representing the shares of Lowe's common stock into which the Eagle
shareholder's shares of Eagle common stock are converted and a check for any
fractional share interests and any dividends, as described below, the Eagle
shareholder will be entitled to receive. The Lowe's stock certificates and any
checks will be delivered to the Eagle shareholder upon receipt by the exchange
agent of Eagle stock certificates, or indemnity reasonably satisfactory to
Lowe's and the exchange agent, if any of the Eagle stock certificates are lost,
stolen or destroyed, owned by the Eagle shareholder. No interest will be paid on
any cash to be paid instead of fractional shares.
EAGLE SHAREHOLDERS SHOULD NOT SEND IN THEIR EAGLE STOCK CERTIFICATES UNTIL
THEY RECEIVE THE TRANSMITTAL MATERIALS FROM THE EXCHANGE AGENT.
Neither the exchange agent nor any party to the merger agreement will be
liable to any Eagle shareholder, or, if after the effective time, any former
Eagle shareholder, for any shares or cash delivered in good faith to a public
official pursuant to applicable abandoned property, escheat or similar laws.
Until outstanding Eagle stock certificates are surrendered, no dividend
payable to Lowe's shareholders for any period after the effective time will be
paid to holders of the outstanding Eagle stock certificates. When Eagle
shareholders surrender their Eagle stock certificates, the Eagle stock
certificates will be canceled and exchanged for Lowe's stock certificates and
cash representing fractional shares, as described above. In addition, when the
Lowe's stock certificates are issued to Eagle shareholders, any dividend
declared by Lowe's with a record date on or after the effective time, and a
payment date prior to the date the Eagle stock certificates are surrendered,
will be paid promptly to those Eagle shareholders. No interest will be paid on
these dividends upon surrender of outstanding certificates.
At the effective time, Lowe's will also assume the obligations of Eagle
under Eagle's stock option plans. See "-- Effect on Awards Outstanding Under
Eagle Stock Plans."
CONDITIONS TO THE COMPLETION OF THE MERGER
Completion of the merger is subject, among other things, to:
- approval of the merger agreement by Eagle shareholders
- expiration or termination of the waiting period applicable to the merger
under the Hart-Scott-Rodino Act
- no action by a court, governmental or regulatory authority of competent
jurisdiction prohibiting or making completion of the merger illegal
- the registration statement, of which this proxy statement/prospectus
forms a part, becoming effective
- the receipt of letters from Deloitte & Touche LLP and Ernst & Young LLP
regarding the appropriateness of pooling of interests accounting
treatment for the merger
- the shares of Lowe's common stock to be issued in the merger being
approved for listing on the New York Stock Exchange, subject to official
notice of issuance
The respective obligations of Lowe's and Eagle to complete the merger are
also subject to the satisfaction or waiver of various other conditions specified
in the merger agreement. The conditions include, among others:
(1) each party's representations and warranties set forth in the merger
agreement as to its capitalization being true and correct
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(2) each party's other representations and warranties set forth in the
merger agreement, without giving effect to qualifications as to
materiality that appear in these representations and warranties, being
true and correct, except where the failure of these representations and
warranties to be true and correct is not reasonably likely to have,
individually or in the aggregate, a material adverse effect on the
party making the representations and warranties
(3) the performance by each party in all material respects of its
agreements and covenants under the merger agreement
(4) the delivery by Eagle and Lowe's to the other of certificates executed
by their respective chief executive officers and chief financial
officers as to the accuracy of representations and warranties and
performance of agreements and covenants as described in items (1), (2)
and (3) above; and
(5) the receipt by Eagle and Lowe's of opinions from their respective
counsel that the merger will generally be tax-free to Eagle
shareholders. Executed copies of these opinions were filed with the
Securities and Exchange Commission as exhibits to the registration
statement, of which this proxy statement/prospectus constitutes a part
Eagle can provide no assurance that all of the conditions precedent to the
merger will be satisfied or waived by the party permitted to do so. Eagle cannot
at this point determine whether it would resolicit the proxies in the event that
it decides to waive any of the items listed above, including among other things,
the requirement that it receive letters that the merger will qualify for pooling
of interests accounting treatment. This decision would depend upon the facts and
circumstances leading to Eagle's decision to complete the merger and whether
Eagle believes there has been a material change in the terms of the merger and
its effect on Eagle's shareholders. In making its determination, Eagle would
consider, among other factors, the reasons for the waiver, the effect of the
waiver on the terms of the merger, whether the requirement being waived,
including the requirement that the merger be treated as a pooling for accounting
purposes, was necessary in order to make the deal fair to the shareholders from
a financial point of view, the availability of alternative transactions and the
prospects of Eagle as an independent entity. If Eagle determines that a waiver
of a condition would materially change the terms of the merger, including the
tax consequences of the merger, it will resolicit the proxies.
TERMINATION
The merger agreement may be terminated, and the merger may be abandoned, at
any time prior to the effective time, notwithstanding approval of the merger
agreement by Eagle shareholders, in any of the following ways:
a) By the mutual written consent of Lowe's and Eagle
b) By Lowe's or Eagle, if the effective time has not occurred on or before
May 31, 1999; provided, that this right to terminate the merger
agreement is not available to any party whose failure to fulfill any
obligation under the merger agreement has been the cause of or has
resulted in the failure of the effective time to occur on or before May
31, 1999
c) By Eagle if
(1) the holders of fewer than two-thirds of the outstanding shares of
Eagle common stock vote to approve the merger agreement at a meeting
duly convened to vote on the merger agreement
(2) Lowe's representations and warranties set forth in the merger
agreement, without giving effect to materiality qualifications that
appear in these representations and warranties, are not true and
correct, except where the failure of these representations and
warranties to
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be true and correct does not and is not reasonably likely to have, individually
or in the aggregate, a material adverse effect on Lowe's, unless the failure to
be true and correct is cured by Lowe's within 30 business days following receipt
of notice of the failure or by May 31, 1999, whichever comes first; or
(3) Lowe's has failed to perform or comply in all material respects with
its other covenants and agreements in the merger agreement, unless
the failure to perform or comply is cured by Lowe's within 30
business days following receipt of notice of the failure or by May
31, 1999, whichever comes first
d) By Lowe's if
(1) the holders of fewer than two-thirds of the outstanding shares of
Eagle common stock vote to approve the merger agreement at a meeting
duly convened to vote on the merger agreement
(2) Eagle's representations and warranties set forth in the merger
agreement, without giving effect to materiality qualifications that
appear in these representations and warranties, are not true and
correct, except where the failure of these representations and
warranties to be true and correct does not and is not reasonably
likely to have, individually or in the aggregate, a material adverse
effect on Eagle, unless the failure to be true and correct is cured
by Eagle within 30 business days following receipt of notice of the
failure or by May 31, 1999, whichever comes first
(3) Eagle has failed to perform or comply in all material respects with
its other covenants and agreements in the merger agreement, unless
the failure to perform or comply is cured by Eagle within 30 business
days following receipt of notice of the failure or by May 31, 1999,
whichever comes first
(4) the Eagle Board of Directors fails to recommend to Eagle shareholders
approval of the merger agreement or its recommendation was made and
subsequently withdrawn
e) By Eagle if, prior to the effective time, Eagle has received any offer
from a third party relating to a merger, reorganization, share exchange,
consolidation or sale of all or substantially all of the assets of Eagle
or a tender or exchange offer for more than 50% of the equity securities
of Eagle, which the Eagle Board of Directors determines in good faith,
after consultation with its financial advisor, to be more favorable to
Eagle shareholders than the merger; provided, that Lowe's does not make,
within five business days of receiving notice of the more favorable
proposal, an offer that the Eagle Board of Directors determines, in good
faith after consultation with its financial advisor, is at least as
favorable to Eagle shareholders as the more favorable proposal
f) By Lowe's or Eagle in the event that any of the conditions to the
obligations of the terminating party to complete the merger cannot be
satisfied or fulfilled by May 31, 1999; provided, that the terminating
party is not then in material breach of any representation, warranty,
covenant, or other agreement contained in the merger agreement that
would give the non-terminating party the right to terminate the merger
agreement as described in paragraph (c)(2) or (3) above, in the case of
Eagle, or as described in paragraph (d)(2) or (3) above, in the case of
Lowe's, or
g) By Lowe's or Eagle, if any court of competent jurisdiction in the United
States or other regulatory authority has issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the merger and the order, decree, ruling or other action has
become final and non-appealable
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EFFECT OF TERMINATION
If the merger agreement is terminated and the merger is not completed, the
merger agreement will become void and have no effect, without any liability on
the part of either party or their directors, officers or shareholders, except
that termination of the merger agreement will not
- terminate the obligations of the parties in the merger agreement
regarding confidentiality
- terminate the obligations of the parties in the merger agreement
regarding the payment of fees and expenses associated with the merger and
the termination of the merger agreement; or
- relieve a breaching party from liability for any willful and material
breach by the breaching party of any of its representations, warranties,
covenants or agreements set forth in the merger agreement giving rise to
the termination
TERMINATION FEE
If the merger agreement is terminated
(a) by Lowe's as described above in paragraph (b) under "-- Termination" at
a time when any acquisition proposal, which is defined in the merger agreement
to mean any tender offer or exchange offer or any proposal for a merger,
acquisition of all of the stock or assets of, or other business combination
involving Eagle or the acquisition of a substantial equity interest in, or a
substantial portion of the assets of, Eagle, has previously been made known to
Eagle or has previously been made directly to Eagle shareholders generally or
any person has previously publicly announced an intention, whether or not
conditional, to make an acquisition proposal and
- the failure of the effective time to occur has been caused by or is
attributable to any failure of Eagle to fulfill any of its obligations
under the merger agreement,
- Eagle is not otherwise entitled to terminate the merger agreement as
described above in paragraph (c) under "-- Termination" and
- Eagle completes any acquisition proposal within 12 months following May
31, 1999
then Eagle is required under the merger agreement on the date that the
acquisition proposal is completed, to pay Lowe's a termination fee equal to $35
million;
(b) by Lowe's as described above in paragraph (d)(1) or (4) under
"-- Termination" or by Eagle as described above in paragraph (c)(1) under
"-- Termination," in each case at a time when
- an acquisition proposal has previously been made known to Eagle or has
previously been made directly to Eagle shareholders generally or any
person has previously publicly announced an intention, whether or not
conditional, to make an acquisition proposal and
- Eagle subsequently completes any acquisition proposal within 12 months
following the date of termination of the merger agreement
then Eagle is required under the merger agreement to pay Lowe's the termination
fee on the date that the acquisition proposal is completed; or
(c) by Eagle as described above in paragraph (e) under "-- Termination,"
then Eagle is required under the merger agreement to pay Lowe's the termination
fee promptly, but in no event later than the date of termination.
These provisions constitute the sole remedy available to the parties if the
merger agreement is terminated pursuant to any of these provisions.
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NO SOLICITATION
The merger agreement provides that Eagle will not, and Eagle will use its
reasonable efforts to cause any of its officers, directors, employees or any
investment banker, financial advisor, attorney, accountant, consultant or other
representative not to, directly or indirectly, solicit an acquisition proposal;
provided, however, that Eagle may, in response to a more favorable proposal
which it did not solicit, subject to providing prior written notice to Lowe's,
furnish any non-public information in connection with, negotiate with respect
to, or enter into an agreement with respect to, the more favorable proposal.
The merger agreement further provides that the Eagle Board of Directors
will recommend approval of the merger agreement to Eagle shareholders unless the
Eagle Board of Directors, after having consulted with and considered the advice
of outside counsel, reasonably determines in good faith that the making of this
recommendation, or the failure to withdraw or modify its recommendation, would
constitute a breach of the fiduciary duties or other legal obligations of the
Eagle Board of Directors.
CONDUCT OF BUSINESS PENDING THE MERGER
Under the merger agreement, pending completion of the merger, Eagle has
agreed to operate its business only in the usual, regular and ordinary course
and to use its reasonable efforts to preserve and maintain its business and
assets. In addition, pending completion of the merger, Eagle has agreed not to
take certain actions without the prior approval of Lowe's, which approval will
not be unreasonably withheld. These actions include, without limitation:
- repurchasing, redeeming or otherwise acquiring or exchanging, other than
exchanges in the ordinary course of business under existing benefits
plans, any shares of Eagle common stock or declaring or paying any
dividends
- selling, leasing, mortgaging or otherwise disposing of any of Eagle's
assets other than in the ordinary course of business
- granting any increase in compensation or benefits to its employees,
except as described under "-- Interests of Management and Directors in
the Merger," and other than in accordance with past practice or
contractual obligations
- amending the Eagle article of incorporation or the Eagle bylaws
- incurring any additional debt obligation in excess of an aggregate of
$500,000 except in the ordinary course of business and consistent with
past practice; or
- entering into, amending or waiving or releasing any material rights under
any material contract, except in the ordinary course of business
WAIVER; AMENDMENT
Before the effective time, any provision of the merger agreement may either
be waived by the party benefiting from the provisions, unless the waiver would
result in the violation of any law, or amended or modified at any time to the
extent permitted by law by a written agreement among the parties which is
approved by their respective Boards of Directors. However, after approval of the
merger by Eagle shareholders, amendments of the merger agreement that pursuant
to Washington law would require further approval by Eagle shareholders may not
be made without the approval of Eagle shareholders.
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EXPENSES
All expenses incurred by or on behalf of the parties in connection with the
merger agreement and the transactions contemplated by the merger agreement will
be borne by the party incurring the expenses, including filing, registration and
application fees, printing fees, and fees and expenses of its own financial or
other consultants, investment bankers, accountants and counsel; however, the
registration statement filing fees and printing and mailing expenses for this
proxy statement/ prospectus will be shared equally between Eagle and Lowe's.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following summarizes the material federal income tax consequences of
the merger to Eagle shareholders. This summary and the legal opinions described
below are based on current law, which is subject to change at any time, possibly
with retroactive effect. This summary and the legal opinions are not a complete
description of all tax consequences of the merger and, in particular, do not
address all of the federal income tax consequences applicable to the personal
circumstances of Eagle shareholders or to taxpayers that are subject to special
treatment under federal income tax law. In addition, this summary and the legal
opinions do not address the tax consequences of the merger under applicable
state, local or foreign laws. EACH EAGLE SHAREHOLDER SHOULD CONSULT WITH HIS OR
HER OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES OF THE MERGER IN LIGHT OF HIS OR
HER PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICATION OF ANY STATE, LOCAL OR
FOREIGN LAW.
In the opinion of Cravath, Swaine & Moore, special counsel to Eagle, and in
the opinion of Hunton & Williams, counsel to Lowe's, the merger will qualify as
a reorganization within the meaning of Section 368(a) of the Code; Eagle, Lowe's
and Lowe's subsidiary each will be a party to the reorganization within the
meaning of Section 368(b) of the Code; and:
- no gain or loss will be recognized by Eagle, Lowe's subsidiary or Lowe's
upon completion of the merger
- no gain or loss will be recognized by an Eagle shareholder upon the
exchange of his or her stock for Lowe's common stock in the merger,
except with respect to the receipt of cash instead of a fractional share
- the aggregate tax basis of the shares of Lowe's common stock received in
the merger by an Eagle shareholder, including any fractional share
interest, will be the same as the aggregate tax basis of the shares of
Eagle common stock surrendered in the merger
- the holding period of the shares of Lowe's common stock received in the
merger by an Eagle shareholder, including any fractional share interest,
will include the holding period of the shares of Eagle common stock
surrendered in the merger, if the shares of Eagle common stock are held
as capital assets at the effective time
- an Eagle shareholder who receives cash instead of a fractional share of
Lowe's common stock will recognize gain or loss equal to the difference
between the amount of cash received and his or her tax basis in the
Lowe's common stock that is allocable to the fractional share; the gain
or loss recognized by the Eagle shareholder generally will constitute
capital gain or loss if the Eagle common stock was held as a capital
asset at the effective time
Receipt by Eagle of a tax opinion of Cravath, Swaine & Moore as of the date
of closing, and receipt by Lowe's of a tax opinion of Hunton & Williams as of
the date of closing, are conditions to completion of the merger. The opinions of
Cravath, Swaine & Moore and Hunton & Williams are based on, and the opinions to
be given as of the date of the closing will be based on, customary assumptions
and representations made by Lowe's and Eagle. An opinion of counsel represents
counsel's best legal judgment and is not binding on the Internal Revenue Service
or any court, and no
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rulings will be sought from the Internal Revenue Service concerning the merger.
If the merger does not qualify as a reorganization, the exchange of stock in the
merger would be taxable to Eagle shareholders as if they had received cash in
the amount of the fair market value of the merger consideration.
The opinion of Cravath, Swaine & Moore that has been provided to Eagle in
connection with the merger is addressed solely to Eagle, and the opinion of
Hunton & Williams is addressed solely to Lowe's. The opinions of counsel may not
be relied upon by any person other than the addressees without the prior written
consent of counsel. This disclaimer does not affect the liability, if any, of
Cravath, Swaine & Moore or Hunton & Williams under the federal securities laws.
Under the terms of the opinion of Cravath, Swaine & Moore, no Eagle
shareholder may rely or allege any reliance on Cravath, Swaine & Moore's opinion
in connection with the shareholder's consideration of the merits of the merger
or otherwise. It is Cravath, Swaine & Moore's position that its duties in
connection with its opinion are solely to Eagle, and that it has no legal
responsibility to any other persons, including Eagle shareholders, under New
York state law, the governing law of the opinion. Cravath, Swaine & Moore would
likely assert the substance of this disclaimer as a defense to claims, if any,
that might be brought against it by Eagle shareholders with respect to its
opinion. However, since no New York court has definitively ruled on the
availability of this defense to shareholder liability in this context, this
issue necessarily would have to be resolved by a court of competent
jurisdiction. Furthermore, there can be no assurance that a court of competent
jurisdiction would apply New York state law to the resolution of this issue if
it were ever to be presented. In any event, the availability or non-availability
of this defense will have no effect on Cravath, Swaine & Moore's rights and
responsibilities under the federal securities laws, or the rights and
responsibilities of Eagle under governing state law or under the federal
securities laws.
The receipt of cash pursuant to the exercise of dissenters' rights by an
Eagle shareholder will be a taxable transaction. Any Eagle shareholder
considering the exercise of dissenters' rights should consult a tax advisor to
determine the tax consequences of exercising his or her dissenters' rights.
ACCOUNTING TREATMENT
Completion of the merger is conditioned upon the merger being accounted for
on a pooling of interests accounting basis and the receipt at the closing of the
merger by Lowe's and Eagle of letters from Deloitte & Touche LLP and Ernst &
Young LLP regarding the appropriateness of pooling of interests accounting
treatment for the merger. See "-- Conditions to the Completion of the Merger"
and "-- Termination." Under this accounting treatment, as of the effective time,
the assets and liabilities of Eagle would be added to those of Lowe's at their
recorded book values and the shareholders' equity accounts of Lowe's and Eagle
would be combined on Lowe's consolidated balance sheet. On a pooling of
interests accounting basis, income and other financial statements of Lowe's
issued after completion of the merger will be restated retroactively to reflect
the consolidated combined financial position and results of operations of Lowe's
and Eagle as if the merger had taken place prior to the periods covered by these
financial statements.
HART-SCOTT-RODINO
Under the provisions of the Hart-Scott-Rodino Act, the merger may not be
completed until the applicable waiting period has expired or been terminated.
The applicable waiting period expired on January 30, 1999.
RESALES OF LOWE'S COMMON STOCK
The shares of Lowe's common stock issuable to Eagle shareholders upon
completion of the merger have been registered under the Securities Act. These
securities may be traded freely without restriction by those shareholders who
are not deemed to be "affiliates," as defined in the rules under the Securities
Act, of Lowe's or Eagle.
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Shares of Lowe's common stock received by those Eagle shareholders who are
deemed to be "affiliates" of Eagle at the time of the special meeting may be
resold without registration under the Securities Act only as permitted by Rule
145 under the Securities Act or as otherwise permitted under the Securities Act.
Shares of Lowe's common stock received by persons who are deemed to be
"affiliates" of Lowe's after the merger may be sold by them only in transactions
permitted under the provisions of Rule 144 under the Securities Act, or as
otherwise permitted under the Securities Act.
Guidelines issued by the Securities and Exchange Commission regarding
qualifying for the "pooling of interests" method of accounting also limit sales
of shares of the acquiring and acquired company by affiliates of either company
in a business combination. Securities and Exchange Commission guidelines also
indicate that the "pooling of interests" method of accounting generally will not
be challenged on the basis of sales by affiliates of the acquiring or acquired
company if these affiliates do not dispose of any of the shares of the
corporation they own, or shares of a corporation they receive in connection with
a merger, during the period beginning four weeks before the merger is completed
and ending when financial results covering at least four weeks of post-merger
operations of the combined companies have been published.
Each of Lowe's and Eagle has agreed to use its reasonable efforts to cause
each person who is one of its "affiliates," for purposes of Rule 145 under the
Securities Act and for purposes of qualifying the merger for "pooling of
interests" accounting treatment, to deliver to the other party a written
agreement intended, in the case of Eagle affiliates, to ensure compliance with
the Securities Act and, in the case of Lowe's and Eagle affiliates, to preserve
the ability of the merger to be accounted for as a "pooling of interests."
RIGHTS OF DISSENTING SHAREHOLDERS
Under Washington law, Eagle shareholders have the right to dissent from the
merger and to receive payment in cash for the fair value of their shares of
Eagle common stock. To preserve their rights, Eagle shareholders who wish to
exercise their statutory dissenters' rights must deliver to Eagle before the
special meeting written notice of their intent to demand payment for their
shares of Eagle common stock if the merger is effected and not vote their shares
in favor of approval of the merger agreement.
CHAPTER 13 OF THE WASHINGTON BUSINESS CORPORATION ACT IS REPRINTED IN ITS
ENTIRETY IN ANNEX D TO THIS PROXY STATEMENT/PROSPECTUS. THE FOLLOWING DISCUSSION
IS A SUMMARY OF THE MATERIAL TERMS OF THE LAW RELATING TO DISSENTERS' RIGHTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ANNEX D. EAGLE SHAREHOLDERS SHOULD
REVIEW THIS DISCUSSION AND ANNEX D CAREFULLY IF THEY WISH TO EXERCISE STATUTORY
DISSENTERS' RIGHTS, OR PRESERVE THEIR RIGHT TO DISSENT BECAUSE FAILURE TO COMPLY
WITH THE PROCEDURES SET FORTH IN THIS DISCUSSION AND IN THE STATUTE WILL RESULT
IN THE LOSS OF DISSENTERS' RIGHTS.
An Eagle shareholder who wishes to exercise dissenters' rights generally
must dissent with respect to all of the shares he or she owns or over which he
or she has power to direct the vote. However, if a record shareholder is a
nominee for several beneficial shareholders, some of whom wish to dissent and
some of whom do not, then the record shareholder may dissent with respect to all
the shares beneficially owned by any one person by notifying Eagle in writing of
the name and address of each person on whose behalf the record shareholder
asserts dissenters' rights. A beneficial shareholder may assert dissenters'
rights directly by submitting to Eagle the record shareholder's written consent
to the dissent and by dissenting with respect to all the shares of which the
shareholder is the beneficial shareholder or over which the shareholder has
power to direct the vote.
A shareholder who does not deliver to Eagle prior to the vote being taken
at the special meeting a written notice of the shareholder's intent to demand
payment for the fair value of the shares will lose the right to exercise
dissenters' rights. Notice must be sent to Eagle Hardware & Garden, Inc.,
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981 Powell Avenue SW, Renton, Washington, 98055, Attention: Steve Stenberg, Vice
President-Controller. In addition, any shareholder electing to exercise
dissenters' rights must not vote in favor of approval of the merger agreement.
If the merger is effected, Eagle will, within 10 days after the effective
time, deliver a written notice to all shareholders who properly perfected their
dissenters' rights. This notice will, among other things,
- state where the payment demand must be sent and where and when
certificates must be deposited
- supply a form for demanding payment, which requires shareholders to
certify that they acquired beneficial ownership of the shares before the
date on which the merger was first announced
- set a date by which Eagle must receive the payment demand, which date
will be between 30 and 60 days after Eagle delivers the notice to
dissenting shareholders
- include another copy of Chapter 13 of the Washington Business Corporation
Act
A shareholder wishing to exercise dissenters' rights must file the payment
demand, certify as to whether beneficial ownership of the shares was acquired
before the merger was announced, and deliver share certificates, in the manner
and by the time set forth in the notice. Failure to do so will cause this
shareholder to lose his or her dissenters' rights.
Within 30 days after the later of the effective time and the date the
payment demand is received by Eagle, Eagle will pay each dissenter with properly
perfected dissenters' rights Eagle's estimate of the fair value of the
shareholder's shares, plus accrued interest from the effective time. If
dissenters' rights are exercised and perfected with respect to more than five
percent of the outstanding shares of Eagle common stock, then Lowe's will pay
the applicable amounts. Eagle will provide, along with this payment,
- financial information relating to Eagle, including Eagle's balance sheet,
income statement and statement of changes in shareholders' equity for or
as of a fiscal year ending not more than 16 months before the date of
payment and its latest available interim financial statements, if any
- an explanation of how Eagle estimated the fair value of the shares
- an explanation of how the accrued interest was calculated, a statement of
a dissenter's right to demand further payment if he or she is
dissatisfied with the tendered payment
- another copy of Chapter 13 of the Washington Business Corporation Act
- additional information
With respect to a dissenter who did not beneficially own Eagle shares prior to
the public announcement of the merger, Eagle is required to send an offer to
make payment to the dissenter, conditioned upon the dissenter's agreement to
accept the payment in full satisfaction of the dissenter's demands.
A dissenter dissatisfied with Eagle's estimate of the fair value may,
within 30 days of payment or offer for payment by Eagle or Lowe's of Eagle's
estimate of the fair value of the shareholder's shares, notify Eagle in writing
of the shareholder's estimate of fair value of his or her shares and the amount
of interest due, and demand payment of his or her estimate of fair value of his
or her shares. If Eagle does not accept the dissenter's estimate and the parties
do not otherwise settle on a fair value, Washington law requires that, within 60
days of the dissenter's demand for further payment, Eagle start a proceeding in
King County Superior Court, and petition the court to determine the fair value
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of the shares and accrued interest, naming all the Eagle dissenting shareholders
whose demands remain unsettled as parties to the proceeding. The court may
appoint one or more persons as appraisers to receive evidence and recommend the
fair value of the Eagle shares. The dissenters will be entitled to the same
discovery rights as parties in the other civil actions. Each dissenter made a
party to the proceeding will be entitled to judgment for the amount, if any, by
which the court finds the fair value of his or her shares, plus accrued
interest, exceeds the amount, if any, previously paid to the dissenter by Eagle
or Lowe's. If Eagle fails to institute a court action within the specified time
period, it or Lowe's must pay the amount specified in the dissenter's demand.
Court costs and appraisers' fees will be assessed against Eagle, except
that the court may assess these costs against some or all of the dissenters to
the extent that the court finds the dissenters acted arbitrarily, vexatiously or
not in good faith in demanding payment. The court may also assess the fees and
expenses of counsel and experts of the respective parties in amounts that the
court finds equitable against Eagle, if the court finds that Eagle did not
substantially comply with certain provisions of Washington law concerning
dissenters' rights, against either the dissenter or Eagle, if the court finds
that the party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously or not in good faith. If the court finds that services
of counsel for any dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees should not be assessed against Eagle, the
court may award to this dissenter's counsel reasonable fees to be paid out of
the amounts awarded to all dissenters who benefited from the proceedings.
A shareholder entitled to dissent and obtain payment for his or her shares
of Eagle common stock under Washington law may not challenge the merger unless
Eagle fails to comply with the procedural requirements imposed by the Washington
law, the Eagle articles of incorporation or the Eagle bylaws or is fraudulent
with respect to the Eagle shareholder.
Eagle shareholders who dissent from the merger will generally recognize
taxable gain or loss for federal income tax purposes. See "-- Material Federal
Income Tax Consequences."
In view of the complexity of Chapter 13 of the Washington Business
Corporation Act, Eagle shareholders who may wish to dissent from the merger and
pursue dissenters' rights should consult their legal advisors.
ASSUMPTION OF EAGLE BENEFIT PLANS
Lowe's has agreed in the merger agreement to maintain the Eagle employee
benefits plans at least through January 31, 2000, except that Lowe's may amend
the Eagle employee benefit plans prior to January 31, 2000 in order to comply
with any applicable law. Lowe's will not, however, maintain Eagle plans
providing stock options, which will be assumed by Lowe's, or providing Eagle
common stock to employees, which will be terminated by Eagle, all as described
in "-- Effect on Awards Outstanding Under Eagle Stock Plans." Following January
31, 2000, Lowe's has agreed to provide Eagle employees with employee benefits
under the Lowe's employee benefits plans, the Eagle employees benefits plans or
a combination of the two as determined by Lowe's in its discretion, except that,
for one year after January 31, 2000, Lowe's may not modify the employee benefits
offered to Eagle employees in a way that would be materially adverse to the
Eagle employees without the consent of Mr. Takata. The merger agreement further
provides that, to the extent Eagle employees participate in Lowe's employee
benefits plans, the employees will be given past service credit for purposes of
eligibility and vesting to the extent their past service is recognized under the
Eagle employee benefits plans.
EFFECT ON AWARDS OUTSTANDING UNDER EAGLE STOCK PLANS
At the effective time, each outstanding Eagle stock option will be
converted into a Lowe's stock option. The exercise price per share of Lowe's
common stock under the resulting Lowe's stock option
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will be equal to the exercise price per share of Eagle common stock under the
Eagle stock option divided by the exchange ratio, rounded up to the nearest
cent. The number of shares of Lowe's common stock subject to the resulting
Lowe's stock option will be equal to the number of shares of Eagle common stock
subject to the Eagle stock option multiplied by the exchange ratio, rounded down
to the nearest whole share. Completion of the merger will result in a "change in
control" under the Eagle stock option plans and, as a result, at the effective
time, each Eagle stock option granted prior to the date of the merger agreement
will be immediately vested and fully exercisable for the remainder of its full
ten-year term. Except as provided in the preceding sentences, the terms of the
Lowe's stock options will be the same as the terms of the Eagle stock options.
The merger agreement provides that the Eagle employee stock purchase plan
was to continue in effect until December 31, 1998. No further offering periods
have been started after December 31, 1998.
CONVERTIBLE DEBENTURES
Under an Indenture dated as of March 14, 1994 between Eagle and Bank of
America doing business as Seattle-First National Bank, as Trustee, as of
November 27, 1998, Eagle had outstanding approximately $86.2 million in 6.25%
convertible subordinated debentures. On December 29, 1998, Eagle announced that
it would call for redemption on January 29, 1999 all of its outstanding
debentures. As a result, all debentures have been converted into shares of Eagle
common stock or were redeemed by Eagle, and the Indenture was terminated in its
entirety as of January 29, 1999.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties by
Lowe's and Eagle relating to, among other things,
- their respective organizations and similar corporate matters
- authorization, execution, delivery, performance and enforceability of the
merger agreement and related matters
- their respective capital structures
- information about their respective subsidiaries
- the accuracy of certain reports and financial statements filed with the
Securities and Exchange Commission
- the absence of any undisclosed adverse material liabilities
- the absence of any material adverse changes to their respective business
- tax matters
- their respective assets
- their respective intellectual property
- environmental matters
- compliance with applicable laws
- labor matters
- employee benefit plans
- the absence of undisclosed material litigation
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- the truth and correctness of statements made in or pursuant to the merger
agreement
- the absence of any action that would prevent the merger from qualifying
as a tax-free reorganization or for pooling of interests accounting
treatment
The merger agreement also contains additional representations and
warranties of Eagle relating to, among other things,
- insurance matters
- real property matters
- material contracts
- the inapplicability of Chapter 23B.19 of the Washington Business
Corporation Act relating to business combinations with interested
shareholders to the merger agreement and related agreements and
transactions
- affiliate transactions
- brokers' and finders' fees
- business and operation readiness for problems associated with the Year
2000
The merger agreement also contains additional representations and
warranties of Lowe's relating to, among other things, corporate matters
pertaining to the Lowe's subsidiary and its authority to enter into the merger
agreement and a Rights Agreement, dated September 8, 1998, between Lowe's and
Wachovia Bank, N.A.
Compliance with representations and warranties is subject to a materiality
threshold. An inaccuracy of a representation or warranty, other than those
relating to the capital stock, may not be asserted unless the inaccuracy relates
to matters that, individually or in the aggregate, have a material adverse
effect. The term "material adverse effect" encompasses two independent concepts:
- events that have a material adverse impact on the financial position,
business or results of operations and
- events that may have a material adverse impact on the ability of either
party to complete the merger and the other transactions contemplated by
the agreement
The term "material adverse effect" excludes events relating to the United
States economy, the western regional economy or the securities markets in
general, and the effect of the merger and other transactions contemplated under
the merger agreement or the announcement thereof.
DELISTING AND DEREGISTRATION OF EAGLE COMMON STOCK
If the merger is completed, the Eagle common stock will be delisted from
The Nasdaq Stock Market and will be deregistered under the Exchange Act.
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COMPARATIVE SHARE MARKET PRICES DATA AND DIVIDENDS
Lowe's common stock is listed on the New York Stock Exchange under the
trading symbol "LOW." As of March 2, 1999, Lowe's common stock was held of
record by 13,548 persons. The following table sets forth the high and low
closing market prices of the Lowe's common stock as reported on the New York
Stock Exchange Composite Transactions List for the periods indicated.
Eagle common stock is listed on The Nasdaq Stock Market under the symbol
"EAGL." As of February 19, 1999, the record date, Eagle common stock was held of
record by approximately 1,000 persons. The following table sets forth the high
and low closing market prices of the Eagle common stock as reported on The
Nasdaq Stock Market for the periods indicated.
In addition, the following table sets forth dividends declared per share of
Lowe's common stock. Lowe's has historically paid a regular quarterly dividend
to its shareholders. There are currently no restrictions on Lowe's ability to
pay dividends, however, Lowe's decision whether to pay dividends in the future
will depend on business conditions, its financial position and earnings and
other factors. Eagle has never paid dividends on Eagle common stock. The ability
of Eagle to pay dividends to its respective shareholders is subject to certain
restrictions.
<TABLE>
<CAPTION>
LOWE'S EAGLE
MARKET PRICES AND DIVIDENDS MARKET PRICES
--------------------------- ---------------
HIGH LOW DIVIDENDS HIGH LOW
---- ------ --------- ------ ------
<S> <C> <C> <C> <C> <C>
FISCAL 1995:
First Quarter.................................... $19.44 $13.75 $.0225 $ 8.63 $ 6.88
Second Quarter................................... 18.63 13.00 .0225 7.88 6.13
Third Quarter.................................... 18.94 13.13.. .0250 9.88 7.00
Fourth Quarter................................... 17.44 13.94 .0250 8.88 7.13
FISCAL 1996:
First Quarter.................................... 18.13 14.69 .0250 11.63 8.38
Second Quarter................................... 19.50 14.31 .0250 18.50 9.38
Third Quarter.................................... 21.66 16.19 .0250 29.50 17.00
Fourth Quarter................................... 21.75 15.81 .0275 29.50 17.50
FISCAL 1997:
First Quarter.................................... 20.13 16.19 .0275 23.00 16.13
Second Quarter................................... 19.94 16.84 .0275 25.38 18.75
Third Quarter.................................... 22.16 16.97 .0275 22.50 17.00
Fourth Quarter................................... 25.78 20.78 .0275 19.94 16.00
FISCAL 1998:
First Quarter.................................... 36.22 25.88 .0275 19.25 16.13
Second Quarter................................... 45.13 33.88 .0300 24.44 16.69
Third Quarter.................................... 42.25 24.94 .0300 24.75 16.97
Fourth Quarter................................... 58.31 34.44 .0300 36.38 23.31
FISCAL 1999:
First Quarter (through March 3).................. 59.75 52.50 N/A 37.81 33.13
</TABLE>
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DESCRIPTION OF LOWE'S CAPITAL STOCK
Although the following summary is believed to contain all material terms of
Lowe's capital stock, it does not purport to be complete and is subject in all
respects to applicable North Carolina law, Lowe's restated and amended charter
and bylaws, and the Lowe's Rights Agreement.
DESCRIPTION OF COMMON STOCK
Lowe's is authorized by its charter to issue 1,400,000,000 shares of Lowe's
common stock and had 358,954,146 shares of Lowe's common stock outstanding at
March 2, 1999. Each share of Lowe's common stock is entitled to one vote on all
matters submitted to a vote of shareholders. Lowe's shareholders are entitled to
receive dividends when and as declared by Lowe's Board of Directors out of
legally available funds. Dividends may be paid on the Lowe's common stock only
if all dividends on any outstanding preferred stock of Lowe's shareholders have
been paid or reserved.
The issued and outstanding shares of Lowe's common stock are fully paid and
nonassessable. Lowe's shareholders have no preemptive or conversion rights and
are not subject to further calls or assessments by Lowe's. In the event of the
voluntary or involuntary dissolution, liquidation or winding up of Lowe's,
Lowe's shareholders are entitled to receive, pro rata, after satisfaction in
full of the prior rights of creditors and holders of preferred stock, if any,
all of Lowe's remaining assets available for distribution.
Directors are elected by a vote of the Lowe's shareholders. Lowe's
shareholders are not entitled to cumulative voting rights.
Wachovia Bank, N.A. of Winston-Salem, North Carolina, acts as the transfer
agent and registrar for Lowe's common stock.
PREFERRED SHARE PURCHASE RIGHTS
On September 9, 1998, Lowe's distributed as a dividend one "right" for each
outstanding share of Lowe's common stock under the Lowe's Rights Agreement. The
Lowe's Rights Agreement replaced an earlier rights plan which had expired. Each
right entitles the holder to buy one 1/1000th of a share of Participating
Cumulative Preferred Stock, Series A, at an exercise price of $152.50, subject
to customary anti-dilution adjustments. The rights will become exercisable only
if a person or group acquires or announces a tender offer for 15% or more of the
outstanding Lowe's common stock. When the rights are exercisable, Lowe's may
issue a share of Lowe's common stock in exchange for each right other than those
held by the person or group that has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the rights. If a person or group acquires
15% or more of the outstanding Lowe's common stock, each right will entitle the
holder, other than the 15% acquiror, upon payment of the exercise price, to
acquire preferred stock or, at the option of Lowe's, common stock, having a
value equal to twice the right's exercise price. If Lowe's is acquired in a
merger or other business combination, or if 50% of its earnings power is sold,
each right will entitle the holder, other than the 15% acquiror, to purchase
securities of the surviving company having a market value equal to twice the
exercise price of the right. The rights will expire on September 9, 2008, and
may be redeemed by Lowe's at a price of $.01 per right at any time prior to the
tenth day after an announcement that a 15% position has been acquired.
Until a person or group acquires or announces a tender offer for 15% or
more of the Lowe's common stock, the rights will be evidenced by the Lowe's
stock certificates and will be transferred only with the Lowe's stock
certificates. Surrender for transfer of any certificate for Lowe's common stock
will also constitute the transfer of the rights associated with the Lowe's
common stock represented by the certificate. Rights may not be transferred,
directly or indirectly:
- to any person or group that has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the rights
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- to any person in connection with a transaction in which the person
becomes a 15% acquiring person; or
- to any affiliate or associate of any 15% acquiring person
Any right that is the subject of a purported transfer to any 15% acquiring
person or his or her affiliate will be null and void.
The rights may have anti-takeover effects, as they will cause substantial
dilution to a person or group that acquires more than 15% of the outstanding
shares of Lowe's common stock if any merger or other business combination occurs
subsequently without the rights having been redeemed. The rights should not
interfere with any merger or other business combination approved by Lowe's Board
of Directors and/or its shareholders, because the rights are redeemable under
those circumstances.
The execution of the merger agreement did not, and the completion of the
merger will not, result in the grant of any rights to any person under the
Lowe's Rights Agreement, except that each share of Lowe's common stock to be
issued in the merger will be issued with a corresponding right.
CHANGE OF CONTROL PROVISIONS
The rights of Lowe's shareholders are governed by other provisions that are
intended to affect any attempted change of control of Lowe's.
Board of Directors. The Lowe's charter classifies the Lowe's Board of
Directors into three separate classes, with the term of one-third of the
directors expiring at each annual meeting. A director may be removed only upon
the affirmative vote of 70% of outstanding voting shares.
Fair Price Provisions. Provisions of the Lowe's charter limit the ability
of the beneficial owner of 20% of the outstanding voting shares to effect
mergers or other business combination transactions involving Lowe's unless these
transactions meet specific fair price criteria. Unless the fair price provisions
are satisfied, a 20% beneficial owner may not engage in a business combination,
which includes a merger, consolidation, share exchange or similar transaction,
involving Lowe's unless approved by 70% of Lowe's outstanding voting shares. In
general, these fair price provisions require that a 20% beneficial owner pay
shareholders the same amount of cash or the same amount and type of
consideration paid by the 20% beneficial owner when it initially acquired the
shares of Lowe's common stock.
These fair price provisions are designed to discourage attempts to take
over Lowe's in non-negotiated transactions utilizing two-tier pricing tactics,
which typically involve the accumulation of a substantial block of the target
corporation's stock followed by a merger or other reorganization of the acquired
company on terms determined by the purchaser. Due to the difficulties of
complying with the requirements of the fair price provisions, the fair price
provisions generally may discourage attempts to obtain control of Lowe's.
North Carolina Shareholder Protection Act. The North Carolina Shareholder
Protection Act requires the affirmative vote of 95% of a corporation's voting
shares to approve a business combination with any person that beneficially owns
more than 20% of the voting shares of the corporation unless the "fair price"
provisions of the North Carolina Shareholder Protection Act are satisfied and
appropriate proxy solicitation materials are mailed to the corporation's public
shareholders. The statute's intended effect is similar to the fair price
provisions of the Lowe's charter.
North Carolina Control Share Acquisition Act. The North Carolina Control
Share Acquisition Act is designed to protect shareholders of publicly owned
North Carolina corporations based within the state (where at least 10% of the
corporation is owned by shareholders who are residents of North Carolina or at
least 10% of the corporation's shareholders are North Carolina residents)
against specified changes in control and to provide shareholders with the
opportunity to vote on whether to
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certain voting rights to specified shareholders. The North Carolina Control
Share Acquisition Act is triggered upon the acquisition by a person of shares of
voting stock of a covered corporation that, when added to all other shares
beneficially owned by the person, would result in that person holding 20%,
33 1/3% or over 50% of the voting power in the election of directors. Under the
control share acquisition act, the shares acquired that result in the crossing
of any of these thresholds, referred to as control shares, have no voting rights
unless the rights are conferred by the affirmative vote of the holders of a
majority of all outstanding voting shares, excluding those shares held by any
person involved or proposing to be involved in the acquisition of control
shares, any officer of the corporation and any employee of such corporation who
is also a director of such corporation. If voting rights are conferred on
control shares, all shareholders of the corporation have the right to require
that their shares be redeemed at the highest price paid per share by the
acquiror for any control shares.
DESCRIPTION OF PREFERRED STOCK
Lowe's is authorized by the Lowe's charter to issue 5,000,000 shares of
preferred stock. The Lowe's Board of Directors is authorized to designate with
respect to each new series of preferred stock the number of shares in each
series, the dividend rates and dates of payment, voluntary and involuntary
liquidation preferences, redemption prices, whether or not dividends shall be
cumulative and, if cumulative, the date or dates from which dividends will be
cumulative, the sinking fund provisions, if any, for redemption or purchase of
shares, the rights, if any, and the terms and conditions on which shares can be
converted into or exchanged for, or the rights to purchase, shares of any other
class or series, and the voting rights, if any. Any preferred stock issued will
rank prior to the Lowe's common stock as to dividends and as to distributions in
the event of liquidation, dissolution or winding up of Lowe's. The ability of
the Lowe's Board of Directors to issue preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could, among other things, adversely affect the voting powers of
Lowe's shareholders and, under certain circumstances, may discourage an attempt
by others to gain control of Lowe's. Lowe's may amend from time to time the
Lowe's charter to increase the number of authorized shares of preferred stock.
The type of amendment would require the approval of the holders of a majority of
the outstanding shares of Lowe's common stock and the approval of the holders of
a majority of the outstanding shares of all series of preferred stock voting
together as a single class without regard to series. As of the date of this
proxy statement/prospectus, Lowe's had no shares of preferred stock outstanding.
COMPARATIVE RIGHTS OF SHAREHOLDERS
OF LOWE'S AND EAGLE
Lowe's is a North Carolina corporation subject to the provisions of North
Carolina law. Eagle is a Washington corporation subject to the provisions of
Washington law. Eagle shareholders, whose rights are currently governed by the
Eagle articles of incorporation, the Eagle bylaws and Washington law, will, upon
completion of the merger, become shareholders of Lowe's, and their rights will
be governed by the Lowe's charter, the Lowe's bylaws and North Carolina law.
Set forth below are the comparisons between the rights of Eagle
shareholders under the Eagle articles of incorporation, the Eagle bylaws and
Washington law, and the rights of Lowe's shareholders under the Lowe's charter,
the Lowe's bylaws and North Carolina law. The description set forth below
summarizes the material differences which may affect the rights of shareholders
of Eagle and Lowe's but does not purport to be a complete statement of all such
differences. Shareholders should read the relevant provisions of the laws and
documents discussed below.
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AUTHORIZED CAPITAL
Lowe's. Lowe's authorized capital is described under "Description of
Lowe's Capital Stock."
Eagle. The total number of authorized shares of capital stock of Eagle is
60,000,000 shares, consisting of 50,000,000 shares of common stock and
10,000,000 shares of preferred stock.
BOARD OF DIRECTORS
Lowe's. The Lowe's Board of Directors currently consists of 13 members.
The Lowe's Board of Directors is classified into three classes, with the term of
each class expiring at the third annual shareholders' meeting after election of
that class. The number of directors may not be increased or decreased by more
than 30% during any 12-month period except by the affirmative vote of the
holders of at least 70% of the outstanding Lowe's common stock.
Under the Lowe's charter, a director may be removed with or without cause
by the affirmative vote of the holders of 70% of the outstanding Lowe's common
stock. In addition, North Carolina law provides that an appropriate court can
remove a director upon petition of the corporation or the holders of at least
10% of the outstanding shares of any class of stock of that corporation upon
certain findings by such court.
Eagle. The Eagle Board of Directors currently consists of six directors.
Under the Eagle articles of incorporation and the Eagle bylaws, the Eagle Board
of Directors is to consist of that many directors as is determined by resolution
from time to time of the Eagle Board of Directors, but in no event will the
number of directors on the Eagle Board of Directors be less than three. The
Eagle Board of Directors is classified into three classes, with one class to be
elected each year to a three-year term.
Under the Eagle bylaws, a director of Eagle can be removed prior to the
expiration of his or her term, with or without cause, by a vote of the holders
of a majority of shares then entitled to vote at an election of such directors
at a meeting called expressly for that purpose. A director may be removed only
if the number of votes cast to remove the director exceeds the number of votes
cast not to remove the director. Vacancies on the Eagle Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors in
office even though less than a quorum of the Eagle Board of Directors.
SPECIAL MEETINGS OF SHAREHOLDERS
Lowe's. Under North Carolina law, unless provided in the articles of
incorporation or bylaws of a corporation, shareholders of a public corporation
do not have the right to call a special meeting of shareholders. The Lowe's
bylaws provide that a special meeting of Lowe's shareholders may be called for
any purpose by the Chairman of Lowe's Board of Directors or by a majority of
Lowe's Board of Directors.
Eagle. The Eagle bylaws provide that a special meeting of the shareholders
may be called for any purpose at any time by Eagle's President, the Eagle Board
of Directors or the holders of at least 10% of all the votes entitled to be cast
on any issue proposed to be considered at such special meeting.
SHAREHOLDER MEETINGS
Lowe's. On any issue to be determined at any meeting of shareholders, each
Lowe's shareholder is entitled to one vote for each share of stock owned by him
or her. Cumulative voting is not permitted under the Lowe's charter. In all
elections of directors, directors are elected by an affirmative vote of the
holders of the plurality of the shares entitled to vote in the election of
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directors. Except as specifically provided in the Lowe's charter or North
Carolina law, the vote of a majority of shares represented at a meeting and
entitled to vote is generally required to approve other actions requiring
shareholder approval.
Eagle. Eagle shareholders are entitled to one vote per share on all
matters to be voted on by shareholders. Cumulative voting is not permitted under
the Eagle articles of incorporation. If a quorum exists, action on a matter,
other than the election of directors, is approved by a voting group if the votes
cast within the voting group favoring the action exceed the votes cast within
the voting group opposing the action, unless the question is one which by
express provision of law, of the Eagle articles of incorporation or bylaws,
requires a greater number of affirmative votes. In any election of directors,
the candidates elected are those receiving the largest number of votes cast by
the shares entitled to vote in the election, up to the number of directors to be
elected by such shares.
SHAREHOLDER VOTE FOR CERTAIN ACTIONS
Lowe's. North Carolina law generally requires that any merger, share
exchange or sale of all or substantially all the assets of a corporation not in
the ordinary course of business must be approved by the affirmative vote of the
majority of the issued and outstanding shares of each voting group entitled to
vote. Approval of a merger by the shareholders of the surviving corporation is
not required in certain instances, however, including a merger in which the
number of voting shares outstanding immediately after the merger, plus the
number of voting shares issuable as a result of the merger, does not exceed by
more than 20% the number of voting shares outstanding immediately before the
merger. Lowe's is also subject to certain statutory anti-takeover provisions.
See "-- Anti-takeover Statutes."
Eagle. Under Washington law, a merger, share exchange, dissolution or sale
of all or substantially all of the assets of a corporation must be approved by
two-thirds of all the votes entitled to vote, unless otherwise provided in the
articles of incorporation. Under Washington law, a corporation may provide for a
lesser vote, so long as the vote required is not less than a majority of all the
votes to be cast. The Eagle articles of incorporation do not contain any
provision requiring less than the statutory requirement of an affirmative vote
by holders of two-thirds of all votes entitled to vote.
ANTI-TAKEOVER STATUTES
Lowe's. North Carolina has two anti-takeover statutes, the North Carolina
Shareholder Protection Act and the North Carolina Control Share Acquisition Act,
which restrict business combinations with, and the accumulation of shares of
voting stock of, North Carolina corporations. For a discussion of these
statutes, see "Description of Lowe's Capital Stock -- Change of Control
Provisions."
Eagle. Washington law contains certain provisions which may have the
effect of delaying or discouraging a hostile takeover of Eagle. Chapter 19 of
the Washington Business Corporation Act generally prohibits a corporation that
is covered by the act from engaging in significant business transactions with a
person who beneficially owns 10% or more of the corporation's voting securities
for a period of five years after the 10% beneficial owner achieved this level of
ownership. The prohibited transactions include, among others, a merger, share
exchange or consolidation with, disposition of assets to, or issuance, transfer
or redemption of securities to, the 10% beneficial owner, or a reclassification
of securities that has the effect of increasing the proportionate share of the
outstanding securities held by the 10% beneficial owner. After the five-year
period, a "significant business transaction" may take place as long as it
complies with certain "fair price" provisions of the statute. Eagle has not
"opted out" of this statute, however this statute will not be applicable to the
merger.
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ANTI-TAKEOVER EFFECT OF ARTICLES OF INCORPORATION AND BYLAWS
Lowe's. The Lowe's charter and bylaws include a number of provisions which
may have the effect of discouraging hostile takeover attempts or delaying or
preventing changes in control or management of Lowe's. These provisions include
authorization for the issuance of preferred stock having superior rights and
preferences to those of the Lowe's common stock and a classified board of
directors. The Lowe's charter also contains the fair price provisions. For a
description of the fair price provisions, see "Description of Lowe's Capital
Stock -- Change of Control Provisions." Lowe's has also adopted a shareholder
rights plan. See "Description of Lowe's Capital Stock -- Preferred Share
Purchase Rights."
Eagle. The Eagle articles of incorporation and bylaws include a number of
provisions which may have the effect of discouraging hostile takeover attempts
or delaying or preventing changes in control or management of Eagle. These
provisions include authorization for the issuance of preferred stock having
superior rights and preferences to those of the Eagle common stock and a
classified board of directors. However, Eagle has not adopted any other
anti-takeover provisions, such as a fair-price or anti-greenmail provision in
the Eagle articles of incorporation or a rights plan.
AMENDMENT OF GOVERNING DOCUMENTS
Lowe's. North Carolina law provides that a corporation's board of
directors may adopt certain minor amendments to a corporation's articles of
incorporation without a shareholder vote. Other proposed amendments to the
articles of incorporation must be submitted to the shareholders by the board of
directors and such amendments must be approved by a majority of the votes
entitled to be cast on the amendment by any voting group with respect to which
the amendment would create dissenters' rights and, for shares entitled to vote
as a separate voting group, a majority of those shares, provided that a quorum
of the voting group is present. The Lowe's charter also requires that amendments
to the Lowe's charter amending, altering or repealing the portions of the Lowe's
charter relating to removal of directors or the fair price provisions must be
approved by the affirmative vote of more than 70% of the outstanding shares
entitled to vote or the approval of a majority of certain directors of Lowe's
and the approval of shareholders required under the North Carolina law.
The Lowe's bylaws may be amended or altered at any meeting of the Lowe's
Board of Directors by the affirmative vote of the majority of directors.
However, Lowe's shareholders may rescind, amend, alter or repeal any bylaws and
enact bylaws which, if expressly provided, may not be amended, altered or
repealed by the Lowe's Board of Directors.
Eagle. Washington law authorizes a corporation's board of directors to
make various changes to the corporation's articles of incorporation, including
changes of corporate name, and, in the case of a corporation having only one
class of shares outstanding, changes in the number of authorized shares in order
to effectuate a stock split or stock dividend in the corporation's own shares
and changes to or elimination of provisions with respect to the par value of its
stock. In general, other amendments to a corporation's articles of incorporation
must be recommended to the shareholders by the board of directors, and approved
by a majority of all votes entitled to vote on such amendment, unless a higher
percentage is specified under Washington law, the corporation's articles of
incorporation or by the corporation's board of directors. The Eagle articles of
incorporation state that the Eagle Board of Directors may amend the Eagle
articles of incorporation in accordance with the terms of any applicable
statute.
The Eagle articles of incorporation and bylaws provide generally that the
Eagle bylaws may be amended, repealed or replaced by the approval of the Eagle
Board of Directors; provided, however, that any such bylaws or any amendment or
repeal may be subsequently changed or repealed by the holders of a majority of
the stock entitled to vote at any shareholders' meeting. In addition, the
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shareholders may amend or repeal the Eagle bylaws at any regular or special
meeting if the votes cast favoring the action exceed the votes cast opposing the
action.
REMOVAL OF OFFICERS
Lowe's. Under the Lowe's bylaws, any officer may be removed at any time by
the Lowe's Board of Directors, with or without cause.
Eagle. Under the Eagle bylaws, any officer may be removed at any time,
with or without cause, by the affirmative vote of a majority of the entire Eagle
Board of Directors.
RIGHTS PLAN
Lowe's. Lowe's has a rights plan. See "Description of Lowe's Capital
Stock -- Description of Common Stock."
Eagle. Eagle does not have a rights plan.
PREEMPTIVE RIGHTS
Lowe's. The Lowe's shareholders do not have preemptive rights. Thus, if
additional shares of Lowe's common stock were issued, holders of such stock, to
the extent that they did not participate in such additional issuance of shares,
would own proportionately smaller interests in a larger amount of outstanding
capital stock.
Eagle. Eagle shareholders do not have preemptive rights. Thus, if
additional shares of Eagle common stock were issued, holders of such stock, to
the extent that they did not participate in such additional issuance of shares,
would own proportionately smaller interests in a larger amount of outstanding
capital stock.
DIVIDENDS AND OTHER DISTRIBUTIONS
Lowe's. Under North Carolina law, distributions may be paid by a
corporation at the discretion of its board of directors only if, after giving
effect to the distribution, the corporation will be able to pay its debts as
they become due in the usual course of business, and the corporation's total
assets will not be less than the sum of its total liabilities plus the amount
that would be needed if the corporation were to be dissolved at the time of the
distribution to satisfy the preferential rights upon dissolution of shareholders
whose preferential rights are superior to those receiving the distribution. The
Lowe's charter and bylaws provide that Lowe's shareholders are entitled to
dividends to the extent funds are legally available if and when the Lowe's Board
of Directors declares payment by resolution.
Eagle. In accordance with Washington law and the Eagle bylaws, dividends
may be paid by Eagle at the discretion of the Eagle Board of Directors only if,
after giving effect to the dividend, Eagle will be able to pay its debts as they
become due in the usual course of business and Eagle's total assets will not be
less than the sum of its total liabilities plus the amount that would be needed,
if Eagle were to be dissolved at the time of the dividend, to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the dividend.
DIRECTOR'S LIABILITY AND INDEMNIFICATION
Lowe's. Under North Carolina law, a corporation, through its articles of
incorporation or bylaws or by contract or resolution, may eliminate or limit a
director's personal liability to the corporation or its shareholders for any
monetary damages for breach of duty, except for
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- acts or omissions that the director at the time of his or her breach knew
or believed were clearly in conflict with the best interests of the
corporation
- unlawful distributions
- any transaction from which the director derived an improper personal
benefit
- a proceeding by or in the right of the corporation in which the director
was adjudged liable to the corporation
The Lowe's charter provides that to the fullest extent permitted by North
Carolina law, a director of Lowe's shall not be personally liable to Lowe's, its
shareholders or otherwise for monetary damages for breach of his or her duty as
a director.
The Lowe's bylaws provide that Lowe's will indemnify any person as an
officer or director of Lowe's or serving in this capacity at the request of
Lowe's for another corporation, partnership, joint venture, trust or other
enterprise to the fullest extent permitted by law, against any liability
incurred in connection with any proceeding arising out of such service. This
indemnification extends to expenses reasonably incurred in defending these
liabilities and payments made in satisfactions of judgments or reasonable
settlements of these actions. No indemnification is available if
- at the time of the activities that are the subject of the proceeding, the
person knew or believed that the activities were clearly in conflict with
the best interests of Lowe's
- the person derived an improper personal benefit
- the liability arose with respect to voting for unlawful distributions
Eagle. Under Washington law, a corporation's articles of incorporation may
eliminate or limit the personal liability of directors, except for
- acts or omissions involving intentional misconduct or a knowing violation
of law
- approval of certain distributions contrary to law or the articles of
incorporation
- any transaction from which the director personally receives a benefit in
money, property or services to which the director is not legally entitled
The Eagle articles of incorporation provide for the limitation or elimination of
liability of Eagle directors to fullest extent permitted by law.
Under the Eagle articles of incorporation and bylaws, directors, officers,
employees and agents of Eagle are also entitled to indemnification by Eagle to
the fullest extent permitted by applicable law. Under Washington law, the Eagle
articles of incorporation and bylaws, Eagle may indemnify, and/or advance
expenses to, a director made a party to a proceeding because of being a director
of Eagle. However, Eagle may not indemnify any director from or on account of
- acts or omissions involving intentional misconduct or a knowing violation
of law
- approval of certain distributions contrary to law or the articles of
incorporation
- any transaction from which the director personally receives a benefit in
money, property or services to which the director is not legally entitled
In addition, under Washington law, the Eagle articles of incorporation and
bylaws, a director is entitled to mandatory indemnification if he or she is
wholly successful, on the merits or otherwise, in an entire proceeding to which
the director was a party because of being a director of Eagle.
54
<PAGE> 62
DISSENTERS' RIGHTS
Lowe's. North Carolina law generally provides dissenters' rights for
mergers and share exchanges that require shareholder approval, sales of
substantially all the assets, other than sales that are in the usual and regular
course of business and certain liquidations and court-ordered sales, and certain
types of amendments to the articles of incorporation of a North Carolina
corporation. However, unless otherwise provided in the articles of
incorporation, dissenters' rights are not generally available in connection with
a plan of merger, share exchange, or sale or exchange of property, to holders of
shares of any class or series that is either listed on a national securities
exchange or held of record by more than 2,000 shareholders. The Lowe's charter
has no provisions regarding dissenters' rights.
Eagle. Under Washington law, Eagle shareholders generally have dissenters'
rights in connection with
- a plan of merger to which Eagle is a party
- a plan of share exchange to which Eagle is a party as the corporation
whose shares will be acquired
- certain sales or exchanges of all, or substantially all, of Eagle's
property other than in the regular course of business
- amendments to the Eagle articles of incorporation effecting a material
reverse stock split
However, shareholders generally will not have dissenters' rights if shareholder
approval is not required for the corporate action. Eagle shareholders are
entitled to dissenters' rights in connection with the merger. See "The
Merger -- Rights of Dissenting Shareholders."
SHAREHOLDER PROPOSAL AND NOMINATION PROCEDURES
Lowe's. The Lowe's bylaws provide that shareholder proposals may only be
brought before shareholders' meetings if a shareholder has given written notice
of business he or she expects to bring before the meeting to the secretary of
Lowe's not less than 15 days prior to the meeting. The Lowe's bylaws also
provide that any nomination for a director made by a shareholder must be made in
writing to the secretary of Lowe's not less than 15 days prior to the meeting of
shareholders at which directors are to be elected.
Eagle. Neither Washington law, the Eagle articles of incorporation nor
bylaws contain any specific provisions regarding notice of Eagle shareholders'
proposals or nominations for directors.
LEGAL OPINIONS
The legality of the Lowe's common stock to be issued in connection with the
merger will be passed upon by Hunton & Williams. Hunton & Williams, counsel for
Lowe's, and Cravath, Swaine & Moore, special counsel for Eagle, will deliver
opinions to Lowe's and Eagle, respectively, concerning certain federal income
tax consequences of the merger. See "The Merger -- Material Federal Income Tax
Consequences."
EXPERTS
The consolidated financial statements of Lowe's at January 30, 1998 and
January 31, 1997 and for each of the three years in the period ended January 30,
1998 incorporated in this proxy statement/prospectus from Lowe's Annual Report
on Form 10-K for the year ended January 30, 1998, have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report
55
<PAGE> 63
which is incorporated in this proxy statement/prospectus 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.
With respect to the unaudited interim financial information of Lowe's for
the periods ended May 1, 1998, May 2, 1997, July 31, 1998, August 1, 1997,
October 30, 1998 and October 31, 1997, which is incorporated in this proxy
statement/prospectus by reference, Deloitte & Touche LLP have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their reports included in Lowe's Quarterly
Reports on Form 10-Q for the quarters ended May 1, 1998, July 31, 1998 and
October 30, 1998, and incorporated by reference in this proxy
statement/prospectus, they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited nature
of the review procedures applied. Deloitte & Touche LLP are not subject to the
liability provisions of Section 11 of the Securities Act for their reports on
the unaudited interim financial information because those reports are not
"reports" or a "part" of the registration statement prepared or certified by an
accountant within the meaning of Sections 7 and 11 of the Act.
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements which are incorporated by reference in the Eagle Annual
Report on Form 10-K for the year ended January 30, 1998 as set forth in their
report, which is incorporated by reference in this proxy statement/prospectus
and registration statement. Eagle's consolidated financial statements are
incorporated by reference in reliance on their report, given on their authority
as experts in accounting and auditing. Representatives of Ernst & Young LLP are
expected to be present at the special meeting. These representatives will have
the opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
SHAREHOLDER PROPOSALS
Eagle will hold a 1999 annual meeting of Eagle shareholders only if the
merger is not completed before the time of such meeting. In the event that such
a meeting is held, any proposals of Eagle shareholders intended to be presented
at the 1999 annual meeting of Eagle shareholders must have been received by the
Vice President-Controller of Eagle no later than February 26, 1999 in order to
be considered for inclusion in the 1999 proxy materials of Eagle.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the Eagle Board of
Directors knows of no matters that will be presented for consideration at the
special meeting other than as described in this proxy statement/prospectus. If
any other matters shall properly come before the special meeting or any
adjournments or postponements thereof and be voted upon, the enclosed proxies
will be deemed to confer discretionary authority on the individuals named as
proxies therein to vote the shares represented by such proxies as to any such
matters. The persons named as proxies intend to vote or not to vote in
accordance with the recommendation of the management of Eagle.
WHERE EAGLE SHAREHOLDERS CAN FIND MORE INFORMATION
Lowe's and Eagle file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
Eagle shareholders may read and copy any reports, statements or other
information that the companies file with the Securities and Exchange Commission
at the Securities and Exchange Commission's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Eagle shareholders
should call the Securities and
56
<PAGE> 64
Exchange Commission at 1-800-SEC-0330 for further information on the public
reference rooms. These Securities and Exchange Commission filings are also
available to the public from commercial document retrieval services and at the
Internet world wide web site maintained by the Securities and Exchange
Commission at "http://www.sec.gov." Reports, proxy statements and other
information concerning Lowe's may also be inspected at the offices of the New
York Stock Exchange, Inc. at 20 Broad Street, New York, New York 10005. Reports,
proxy statements and other information pertaining to Eagle are also available
for inspection at the offices of The Nasdaq Stock Market, which is located at
1735 K Street, N.W., Washington, D.C. 20006.
Lowe's filed a registration statement on Form S-4 on February 18, 1999, to
register with the Securities and Exchange Commission the Lowe's common stock to
be issued to Eagle shareholders in the merger. This proxy statement/prospectus
is a part of that registration statement and constitutes a prospectus of Lowe's.
As allowed by Commission rules, this proxy statement/prospectus does not contain
all the information that Eagle shareholders can find in Lowe's registration
statement or the exhibits to the registration statement.
The Securities and Exchange Commission allows Lowe's and Eagle to
"incorporate by reference" information into this proxy statement/prospectus,
which means that the companies can disclose important information to Eagle
shareholders by referring Eagle shareholders to another document filed
separately with the Securities and Exchange Commission. The information
incorporated by reference is considered part of this proxy statement/prospectus,
except for any information superseded by information contained directly in this
proxy statement/prospectus or in later-filed documents incorporated by reference
in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that Lowe's and Eagle have previously filed with the Securities and
Exchange Commission. These documents contain important information about Lowe's
and Eagle and their finances. Some of these filings have been amended by later
filings, which are also listed.
<TABLE>
<CAPTION>
LOWE'S COMMISSION FILINGS
FILE NO. 1-7898 PERIOD/AS OF DATE
------------------------- -----------------
<S> <C>
Annual Report on Form 10-K Year ended January 30, 1998
Quarterly Reports on Form 10-Q Quarters ended May 1, 1998, July 31,
1998 and October 30, 1998
Current Reports on Form 8-K Filed on February 20, 1998, October 9,
1998, November 25, 1998, February 22,
1999 and February 22, 1999
EAGLE COMMISSION FILINGS
FILE NO. 0-19830 PERIOD/AS OF DATE
- -------------------------------------------- ----------------------------------------
Annual Report on Form 10-K Year ended January 30, 1998
Quarterly Reports on Form 10-Q Quarters ended May 1, 1998, July 31,
1998 and October 30, 1998
Current Reports on Form 8-K Filed on November 25, 1998, December 31,
1998, January 4, 1999 and March 3,
1999
</TABLE>
Lowe's and Eagle also incorporate by reference additional documents that
may be filed with the Securities and Exchange Commission between the date of
this proxy statement/prospectus and the completion of the merger or the
termination of the merger agreement. These include periodic reports, such as
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K, as well as proxy statements. Specifically, Lowe's incorporates by
reference the description
57
<PAGE> 65
of Lowe's common stock in Lowe's registration statement on Form 8-A filed under
the Exchange Act with respect to Lowe's common stock, including all amendments
and reports filed for the purpose of updating such description.
Lowe's has supplied all information contained or incorporated by reference
in this proxy statement/prospectus relating to Lowe's, and Eagle has supplied
all such information relating to Eagle.
As noted in the "The Merger -- Exchange of Eagle Common Stock for Lowe's
Common Stock" section of this proxy statement/prospectus, Eagle shareholders
should not send in their Eagle stock certificates until they receive the
transmittal materials from the exchange agent. Eagle shareholders who have
further questions about their share certificates or the exchange of their Eagle
common stock for Lowe's common stock should call the exchange agent.
Eagle shareholders may have received some of the documents incorporated by
reference. However, Eagle shareholders can also obtain any of them through the
companies, the Securities and Exchange Commission or the Securities and Exchange
Commission's Internet web site as described above. Documents incorporated by
reference are available from the companies without charge, excluding all
exhibits, except that if the companies have specifically incorporated by
reference an exhibit in this proxy statement/prospectus, the exhibit will also
be available without charge. Shareholders may obtain documents incorporated by
reference in this proxy statement/prospectus by requesting them in writing or by
telephone from the appropriate company at the following addresses:
<TABLE>
<S> <C>
Lowe's Companies, Inc Eagle Hardware & Garden, Inc.
P.O. Box 1111 981 Powell Avenue SW
Highway 268 East Renton, Washington 98055
North Wilkesboro, North Carolina 28656 Attn.: Steve Stenberg, Vice President-Controller
Attn.: Robert Niblock, Senior Vice President-Finance Telephone: (425) 227-5740
Telephone: (336) 658-4860 or
(888) 34LOWES
</TABLE>
Eagle shareholders should rely only on the information contained or
incorporated by reference in this proxy statement/prospectus. Eagle has not
authorized anyone to provide its shareholders with information that is different
from what is contained in this proxy statement/prospectus. This proxy
statement/prospectus is dated March 5, 1999. Eagle shareholders should not
assume that the information contained in this proxy statement/prospectus is
accurate as of any date other than that date. Neither the mailing of this proxy
statement/prospectus to shareholders nor the issuance of Lowe's common stock in
the merger creates any implication to the contrary.
58
<PAGE> 66
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
EAGLE HARDWARE & GARDEN, INC.,
MARINER MERGER CORPORATION
AND
LOWE'S COMPANIES, INC.
DATED AS OF NOVEMBER 22, 1998
A-1
<PAGE> 67
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
AGREEMENT AND PLAN OF MERGER......................................... A-6
PARTIES.............................................................. A-6
Preamble.................................................... A-6
ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER........................... A-6
1.1 Merger...................................................... A-6
1.2 Time and Place of Closing................................... A-6
1.3 Effective Time.............................................. A-6
ARTICLE 2 TERMS OF MERGER............................................ A-7
2.1 Charter..................................................... A-7
2.2 Bylaws...................................................... A-7
2.3 Directors and Officers...................................... A-7
ARTICLE 3 MANNER OF CONVERTING SHARES................................ A-7
3.1 Conversion of Shares........................................ A-7
3.2 Anti-Dilution Provisions.................................... A-8
3.3 Shares Held by Eagle or Lowe's.............................. A-8
3.4 Dissenting Shareholders..................................... A-8
3.5 Fractional Shares........................................... A-8
3.6 Conversion of Stock Options; Restricted Stock............... A-8
ARTICLE 4 EXCHANGE OF SHARES......................................... A-10
4.1 Exchange Procedures......................................... A-10
4.2 Rights of Former Eagle Shareholders......................... A-10
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF EAGLE.................... A-11
5.1 Organization, Standing, and Power........................... A-11
5.2 Authority; No Breach By Agreement........................... A-11
5.3 Capital Stock............................................... A-12
5.4 Eagle Subsidiaries.......................................... A-12
5.5 SEC Filings; Financial Statements........................... A-13
5.6 Absence of Undisclosed Liabilities.......................... A-13
5.7 Absence of Certain Changes or Events........................ A-14
5.8 Insurance................................................... A-14
5.9 Tax Matters................................................. A-15
5.10 Real Property............................................... A-16
5.11 Assets...................................................... A-17
5.12 Intellectual Property....................................... A-18
5.13 Environmental Matters....................................... A-18
5.14 Compliance with Laws........................................ A-19
5.15 Labor Relations............................................. A-20
5.16 Employee Benefit Plans...................................... A-20
5.17 Material Contracts.......................................... A-21
5.18 Legal Proceedings........................................... A-21
5.20 Statements True and Correct................................. A-22
5.21 Accounting and Tax Matters.................................. A-22
5.22 State Takeover Laws......................................... A-22
5.23 Transactions and Affiliates................................. A-22
5.24 Shareholder Agreements...................................... A-23
5.25 Fees and Expenses of Brokers and Others..................... A-23
5.26 Year 2000 Compliance........................................ A-23
</TABLE>
A-2
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<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF LOWE'S................... A-23
6.1 Organization, Standing, and Power........................... A-23
6.2 Authority; No Breach By Agreement........................... A-23
6.3 Capital Stock............................................... A-24
6.4 Lowe's Subsidiaries......................................... A-24
6.5 SEC Filings; Financial Statements........................... A-25
6.6 Absence of Undisclosed Liabilities.......................... A-25
6.7 Absence of Certain Changes or Events........................ A-25
6.8 Tax Matters................................................. A-26
6.9 Assets...................................................... A-26
6.10 Intellectual Property....................................... A-26
6.11 Environmental Matters....................................... A-27
6.12 Compliance with Laws........................................ A-28
6.13 Labor Relations............................................. A-28
6.14 Employee Benefit Plans...................................... A-28
6.15 Legal Proceedings........................................... A-29
6.16 Statements True and Correct................................. A-29
6.17 Authority of Merger Corporation............................. A-30
6.18 Accounting and Tax Matters.................................. A-30
6.19 Rights Agreement............................................ A-30
ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION................... A-30
7.1 Affirmative Covenants of Eagle.............................. A-30
7.2 Negative Covenants of Eagle................................. A-31
7.3 Covenants of Lowe's......................................... A-32
7.4 Adverse Changes in Condition................................ A-33
ARTICLE 8 ADDITIONAL AGREEMENTS...................................... A-33
8.1 Registration Statement; Proxy Statement; Shareholder
Approval.................................................... A-33
8.2 Exchange Listing............................................ A-33
8.3 Applications; Antitrust Notification........................ A-33
8.4 Filings with State Offices.................................. A-34
8.5 Agreement as to Efforts to Consummate....................... A-34
8.6 Investigation and Confidentiality........................... A-34
8.7 Press Releases.............................................. A-34
8.8 Certain Actions; Fiduciary Obligations...................... A-35
8.9 Accounting and Tax Treatment; Tax Representation Letters.... A-35
8.10 State Takeover Laws......................................... A-35
8.11 Agreement of Affiliates..................................... A-35
8.12 Employee Benefits and Contracts............................. A-36
8.13 Indemnification, Exculpation and Insurance.................. A-36
8.14 Convertible Debentures...................................... A-37
8.15 Accountants' Letters........................................ A-37
8.16 Consents and Approvals...................................... A-37
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.......... A-37
9.1 Conditions to Obligations of Each Party..................... A-37
9.2 Conditions to Obligations of Lowe's......................... A-38
9.3 Conditions to Obligations of Eagle.......................... A-39
ARTICLE 10 TERMINATION; AMENDMENT; WAIVER............................ A-40
10.1 Termination................................................. A-40
10.2 Effect of Termination....................................... A-41
</TABLE>
A-3
<PAGE> 69
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
10.3 Termination Fee............................................. A-41
ARTICLE 11 MISCELLANEOUS............................................. A-42
11.1 Definitions................................................. A-42
11.2 Expenses.................................................... A-48
11.3 Entire Agreement............................................ A-48
11.4 Amendments.................................................. A-48
11.5 Waivers..................................................... A-49
11.6 Assignment.................................................. A-49
11.7 Notices..................................................... A-49
11.8 Governing Law............................................... A-50
11.9 Counterparts................................................ A-50
11.10 Captions; Articles and Sections............................. A-50
11.11 Interpretations............................................. A-50
11.12 Enforcement of Agreement.................................... A-50
11.13 Severability................................................ A-50
SIGNATURES........................................................... A-51
</TABLE>
A-4
<PAGE> 70
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1. Plan of Merger (Preamble, sec. 1.1, sec. 11.1).
2. Form of Shareholder Agreement (sec. 5.24).
3. Form of agreement of affiliates of Eagle (sec. 8.11).
</TABLE>
A-5
<PAGE> 71
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of November 22, 1998, by and among EAGLE HARDWARE & GARDEN, INC., a
Washington corporation ("Eagle"); MARINER MERGER CORPORATION, a Washington
corporation ("Merger Corporation"); and LOWE'S COMPANIES, INC., a North Carolina
corporation ("Lowe's").
Preamble
The Boards of Directors of Eagle, Merger Corporation and Lowe's each have
adopted this Agreement, approved the Merger (as defined herein) and the other
transactions contemplated herein and determined that the Merger and such other
transactions are in the best interests of their respective companies and
shareholders. This Agreement provides for the Merger of Merger Corporation with
and into Eagle upon the terms and conditions set forth herein and in the Plan of
Merger, which is incorporated herein and made a part of this Agreement by
reference. At the effective time of the Merger, the outstanding shares of the
capital stock of Eagle shall be converted into the right to receive shares of
the common stock of Lowe's (except as provided herein). As a result,
shareholders of Eagle shall become shareholders of Lowe's and Eagle shall
continue to conduct its business and operations as a wholly-owned subsidiary of
Lowe's. The consummation of the Merger is subject to the approval of this
Agreement by the shareholders of Eagle, expiration of the required waiting
period under the HSR Act and the satisfaction of certain other conditions
described in this Agreement. It is the intention of the parties to this
Agreement that the Merger for federal income tax purposes shall qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code, and for accounting purposes shall qualify for treatment as a pooling of
interests.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions set forth in this
Agreement, which incorporates by reference the Plan of Merger included as
Exhibit 1 hereto, and the terms and conditions set forth therein, at the
Effective Time (as defined in Section 1.3), Merger Corporation shall be merged
with and into Eagle in accordance with the provisions of, and with the effect
provided in, Chapter 23B.11 of the WBCA (the "Merger"). Eagle shall be the
Surviving Corporation resulting from the Merger and shall become a wholly-owned
Subsidiary of Lowe's and shall continue to be governed by the Laws of the State
of Washington.
1.2 Time and Place of Closing. The closing of the Merger (the "Closing")
will take place at 9:00 A.M. Pacific Time on the first business day following
the date on which the conditions set forth in Article 9 shall be satisfied or
waived in accordance with this Agreement (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to fulfillment or
waiver of those conditions), or at such other time as the Parties, acting
through their authorized officers, may mutually agree. The Closing shall be held
at such location as may be mutually agreed upon by the Parties.
1.3 Effective Time. Subject to the provisions of this Agreement, as soon
as practicable on the Closing Date, the parties shall file the Articles of
Merger executed in accordance with the relevant provisions of the WBCA and shall
make all other filings or recordings required under the WBCA. The Merger shall
become effective on the date and at the time the Articles of Merger shall become
A-6
<PAGE> 72
effective with the Secretary of State of the State of Washington, or such other
date and time as mutually agreed upon in writing by the authorized officers of
each Party (the "Effective Time").
ARTICLE 2
TERMS OF MERGER
2.1 Charter. The Articles of Incorporation of Eagle in effect immediately
prior to the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation, except that Article IV of Eagle's Articles of
Incorporation will be amended by deleting it in its entirety and replacing it
with the following: "Article IV -- Authorized Capital Stock -- the Corporation
shall be authorized to issue 1,000 shares of common stock, without par value."
2.2 Bylaws. The Bylaws of Eagle in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until otherwise
amended or repealed.
2.3 Directors and Officers. The directors of Merger Corporation in office
immediately prior to the Effective Time shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation, until such time as new directors are duly
elected by Lowe's, as the sole shareholder of the Surviving Corporation, after
the Effective Time. The officers of Eagle in office immediately prior to the
Effective Time shall serve as the officers of the Surviving Corporation from and
after the Effective Time in accordance with the Bylaws of the Surviving
Corporation, unless and until the directors of the Surviving Corporation shall
elect in their sole discretion to remove any such officers from office and/or
appoint additional officers.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of Lowe's, Eagle, Merger Corporation or the shareholders of any of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of Merger Corporation Common Stock issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into one share of common stock of the
Surviving Corporation.
(b) Each share of Eagle Common Stock (excluding shares held by Eagle
or Lowe's, in each case other than in a fiduciary capacity, and excluding
shares held by shareholders who perfect their statutory dissenters' rights
as provided in Section 3.4) issued and outstanding immediately prior to the
Effective Time shall cease to be outstanding and shall be converted into
and exchanged for the right to receive that multiple (rounded to the
nearest 1/10,000) of a share of Lowe's Common Stock (the "Exchange Ratio")
obtained by dividing $29.00 (the "Per Share Purchase Price") by the Base
Period Trading Price (defined to mean the average of the daily closing
prices for the shares of Lowe's Common Stock for the ten (10) consecutive
trading days on which such shares are actually traded on the NYSE (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by Lowe's) ending at the close of trading on
the fifth trading day immediately preceding the Closing Date); provided,
that for purposes of this calculation, the Base Period Trading Price shall
be deemed to equal (i) $45.31 in the event the Base Period Trading Price is
greater than $45.31 or (ii) $33.49 in the event the Base Period Trading
Price is less than $33.49 (collectively, $45.31 and $33.49 are referred to
as the "Base Period Trading Price Limitations"). Pursuant to the Lowe's
Rights Agreement, each share of Lowe's Common Stock issued in connection
with the Merger upon conversion of Eagle Common Stock shall be accompanied
by a Lowe's Right, and all references
A-7
<PAGE> 73
to Lowe's Common Stock to be issued pursuant to the Merger shall be deemed
to include the corresponding Lowe's Right, unless the context otherwise
requires.
3.2 Anti-Dilution Provisions. In the event Eagle or Lowe's changes the
number of shares of Eagle Common Stock or Lowe's Common Stock, respectively,
issued and outstanding prior to the Effective Time as a result of a stock split,
stock dividend, or similar recapitalization with respect to such stock and the
record date therefor (in the case of a stock dividend) or the effective date
thereof (in the case of a stock split or similar recapitalization for which a
record date is not established) shall be prior to the Effective Time, the Per
Share Purchase Price and the Base Period Trading Price, as applicable, and thus
the Exchange Ratio, shall be appropriately adjusted to eliminate the effect of
such event. In the event Lowe's changes the number of shares of Lowe's Common
Stock issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend, or similar recapitalization with respect to such stock
and the record date therefor (in the case of a stock dividend) or the effective
date thereof (in the case of a stock split or similar recapitalization for which
a record date is not established) shall be prior to the Effective Time, (i) the
Base Period Trading Price Limitations shall be adjusted appropriately to
eliminate the effect of such event, and (ii) if necessary, the anticipated
Closing Date shall be postponed for an appropriate period of time agreed upon by
the Parties in order for the Base Period Trading Price to reflect the market
effect of such stock split, stock dividend, or similar recapitalization.
3.3 Shares Held by Eagle or Lowe's. Each of the shares of Eagle Common
Stock held by Eagle or Lowe's, in each case other than in a fiduciary capacity,
shall be canceled and retired at the Effective Time and no consideration shall
be issued in exchange therefor.
3.4 Dissenting Shareholders. Any holder of shares of Eagle Common Stock
who perfects his dissenters' rights in accordance with and as contemplated by
Chapter 23B.13 of the WBCA shall be entitled to receive the fair value of such
shares (plus accrued interest) in cash as determined pursuant to such provision
of Law; provided, that no such payment shall be made to any dissenting
shareholder unless and until such dissenting shareholder has complied with the
applicable provisions of the WBCA and surrendered to Eagle the certificate or
certificates representing the shares for which payment is being made. In the
event that after the Effective Time a dissenting shareholder of Eagle fails to
perfect, or effectively withdraws or loses, his right to receive payment for his
shares pursuant to Chapter 23B.13 of the WBCA, Lowe's shall issue and deliver
the consideration to which such holder of shares of Eagle Common Stock would
have received under this Article 3 (without interest) upon surrender by such
holder of the certificate or certificates representing shares of Eagle Common
Stock held by him.
3.5 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Eagle Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of Lowe's Common Stock (after taking into account all shares of Lowe's Common
Stock that would otherwise be issuable to such holder upon conversion pursuant
to Section 3.1(b)) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of Lowe's Common Stock
multiplied by the market value of one share of Lowe's Common Stock at the
Effective Time. The market value of one share of Lowe's Common Stock at the
Effective Time shall be the closing price of such common stock on the NYSE (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by Lowe's) on the last trading day preceding the
Effective Time. No such holder will be entitled to dividends, voting rights, or
any other rights as a shareholder in respect of any fractional shares.
3.6 Conversion of Stock Options; Restricted Stock.
(a) At the Effective Time, each option or other right to purchase shares of
Eagle Common Stock pursuant to stock options or stock appreciation rights
("Eagle Options") granted by Eagle
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under the Eagle Stock Plans, which is outstanding at the Effective Time, whether
or not exercisable, shall be converted into and become rights with respect to
Lowe's Common Stock, and Lowe's shall assume each Eagle Option, in accordance
with the terms of the Eagle Stock Plans and stock option agreement by which it
is evidenced, except that from and after the Effective Time, (i) Lowe's and its
Compensation Committee shall be substituted for Eagle and the Committee of
Eagle's Board of Directors (including, if applicable, the entire Board of
Directors of Eagle) administering such Eagle Stock Plans, (ii) each Eagle Option
assumed by Lowe's may be exercised solely for shares of Lowe's Common Stock (or
cash, if so provided under the terms of such Eagle Option), (iii) the number of
shares of Lowe's Common Stock subject to such Eagle Option shall be equal to the
number of shares of Eagle Common Stock subject to such Eagle Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, and (iv) the per
share exercise price under each such Eagle Option shall be adjusted by dividing
the per share exercise price under each such Eagle Option by the Exchange Ratio
and rounding up any fraction of a cent to the nearest cent. Notwithstanding the
provisions of clause (iii) of the preceding sentence, Lowe's shall not be
obligated to issue any fraction of a share of Lowe's Common Stock upon exercise
of Eagle Options and any fraction of a share of Lowe's Common Stock that
otherwise would be subject to a converted Eagle Option shall represent the right
to receive a cash payment upon exercise of such converted Eagle Option equal to
the product of such fraction and the difference between the market value of one
share of Lowe's Common Stock at the time of exercise of such Option and the per
share exercise price of such Option. The market value of one share of Lowe's
Common Stock at the time of exercise of an Option shall be the closing price of
such common stock on the NYSE (as reported by The Wall Street Journal or, if not
reported thereby, any other authoritative source selected by Lowe's) on the last
trading day preceding the date of exercise. In addition, notwithstanding the
provisions of clauses (iii) and (iv) of the first sentence of this Section
3.6(a), each Eagle Option which is an "incentive stock option" shall be adjusted
as required by Section 424 of the Internal Revenue Code, so as not to constitute
a modification, extension or renewal of the option, within the meaning of
Section 424(h) of the Internal Revenue Code. Each of Eagle and Lowe's agrees to
take all necessary steps to effectuate the foregoing provisions of this Section
3.6, including using its reasonable efforts to obtain from each holder of an
Eagle Option any Consent or Contract that may be deemed necessary or advisable
in order to effect the transactions contemplated by this Section 3.6.
(b) As soon as practicable after the Effective Time, Lowe's shall deliver
to the participants in each Eagle Stock Plan an appropriate notice setting forth
such participant's rights pursuant thereto and the grants subject to such Eagle
Stock Plan shall continue in effect on the same terms and conditions (subject to
the adjustments required by Section 3.6(a) after giving effect to the Merger),
and Lowe's shall comply with the terms of each Eagle Stock Plan to ensure, to
the extent required by, and subject to the provisions of, such Eagle Stock Plan,
that Eagle Options which qualified as incentive stock options prior to the
Effective Time continue to qualify as incentive stock options after the
Effective Time. At or prior to the Effective Time, Lowe's shall take all
corporate action necessary to reserve for issuance sufficient shares of Lowe's
Common Stock for delivery upon exercise of Eagle Options assumed by it in
accordance with this Section 3.6. As of the Effective Time, Lowe's shall file a
registration statement on Form S-3, Form S-4/A or Form S-8, as applicable (which
shall include a re-offer prospectus, if necessary), as the case may be (or any
successor or other appropriate forms), with respect to the shares of Lowe's
Common Stock subject to such options and shall use its reasonable efforts to
maintain the effectiveness of such registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such options remain 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, where applicable, Lowe's shall administer
such Eagle Stock Plan assumed pursuant to this Section 3.6 in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act to the extent such
Eagle Stock Plan complied with such rule prior to the Effective Time.
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(c) All contractual restrictions or limitations on transfer with respect to
Eagle Common Stock awarded under the Eagle Stock Plans or any other plan,
program, Contract or arrangement of any Eagle Company, to the extent that such
restrictions or limitations shall not have already lapsed as of the Effective
Time (whether as a result of the Merger or otherwise), and except as otherwise
expressly provided in such plan, program, Contract or arrangement, shall remain
in full force and effect following the Effective Time with respect to shares of
Lowe's Common Stock into which such restricted stock is converted pursuant to
Section 3.1; provided that any restrictions or limitations related to the
performance of any Eagle Company shall be equitably adjusted to reflect the
transactions contemplated by this Agreement.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Lowe's and
Eagle shall cause the exchange agent selected by Lowe's and reasonably
acceptable to Eagle (the "Exchange Agent") to mail to the former shareholders of
Eagle appropriate transmittal materials (which shall specify that delivery shall
be effected, and risk of loss and title to the certificates theretofore
representing shares of Eagle Common Stock shall pass, only upon proper delivery
of such certificates to the Exchange Agent). The Exchange Agent may establish
reasonable and customary rules and procedures in connection with its duties.
After the Effective Time, each holder of shares of Eagle Common Stock (other
than shares to be canceled pursuant to Section 3.3 or as to which statutory
dissenters' rights have been perfected as provided in Section 3.4) issued and
outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the consideration provided
in Section 3.1, together with all undelivered dividends or distributions in
respect of such shares (without interest thereon) pursuant to Section 4.2. To
the extent required by Section 3.5, each holder of shares of Eagle Common Stock
issued and outstanding at the Effective Time also shall receive, upon surrender
of the certificate or certificates representing such shares, cash in lieu of any
fractional share of Lowe's Common Stock to which such holder may be otherwise
entitled (without interest). Lowe's shall not be obligated to deliver the
consideration to which any former holder of Eagle Common Stock is entitled as a
result of the Merger until such holder surrenders such holder's certificate or
certificates representing the shares of Eagle Common Stock for exchange as
provided in this Section 4.1. The certificate or certificates of Eagle Common
Stock so surrendered shall be duly endorsed as the Exchange Agent may require.
Any other provision of this Agreement notwithstanding, neither Lowe's, the
Surviving Corporation nor the Exchange Agent shall be liable to a holder of
Eagle Common Stock for any amounts paid or property delivered in good faith to a
public official pursuant to any applicable abandoned property Law. Adoption of
this Agreement by the shareholders of Eagle shall constitute ratification of the
appointment of the Exchange Agent.
4.2 Rights of Former Eagle Shareholders. At the Effective Time, the stock
transfer books of Eagle shall be closed as to holders of Eagle Common Stock
immediately prior to the Effective Time and no transfer of Eagle Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1, each certificate
theretofore representing shares of Eagle Common Stock (other than shares to be
canceled pursuant to Section 3.3 or as to which statutory dissenters' rights
have been perfected as provided in Section 3.4) shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Sections 3.1 and 3.5 and this Section 4.2 in exchange
therefor, subject, however, to the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which have been declared or made by Eagle in respect of such
shares of Eagle Common Stock in accordance with the terms of this Agreement and
which remain unpaid at the Effective Time. To the extent permitted by Law,
former
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shareholders of record of Eagle shall be entitled to vote after the Effective
Time at any meeting of Lowe's shareholders the number of whole shares of Lowe's
Common Stock into which their respective shares of Eagle Common Stock are
converted, regardless of whether such holders have exchanged their certificates
representing Eagle Common Stock for certificates representing Lowe's Common
Stock in accordance with the provisions of this Agreement. Whenever a dividend
or other distribution is declared by Lowe's on the Lowe's Common Stock, the
record date for which is at or after the Effective Time, the declaration shall
include dividends or other distributions on all shares of Lowe's Common Stock
issuable pursuant to this Agreement, but no dividend or other distribution
payable to the holders of record of Lowe's Common Stock as of any time
subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of Eagle Common Stock issued and outstanding at
the Effective Time until such holder surrenders such certificate for exchange as
provided in Section 4.1. However, upon surrender of such Eagle Common Stock
certificate, both the Lowe's Common Stock certificate (together with all such
undelivered dividends or other distributions without interest) and cash payments
payable hereunder (without interest) shall be delivered and paid with respect to
each share represented by such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF EAGLE
Except as disclosed in Eagle's SEC Documents filed since January 30, 1998
and prior to the date of this Agreement, Eagle hereby represents and warrants to
Lowe's as follows:
5.1 Organization, Standing, and Power. Eagle is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Washington, and has the corporate power and authority to carry on its business
as now conducted and to own, lease and operate its Assets. Eagle is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Eagle.
5.2 Authority; No Breach By Agreement.
(a) Eagle has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and, subject to the
approval of this Agreement by two-thirds of all of the votes entitled to be cast
at the Shareholders' Meeting on the approval of this Agreement by the holders of
the outstanding shares of Eagle Common Stock (the "Eagle Shareholder Approval"),
which is the only shareholder vote required for approval of this Agreement and
consummation of the Merger by Eagle, to consummate the transactions contemplated
hereby. The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated herein, including the Merger, have
been duly and validly authorized by all necessary corporate action in respect
thereof on the part of Eagle, subject to the Eagle Shareholder Approval. This
Agreement represents a legal, valid, and binding obligation of Eagle,
enforceable against Eagle in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
(b) Neither the execution and delivery of this Agreement by Eagle, nor the
consummation by Eagle of the transactions contemplated hereby, nor compliance by
Eagle with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of Eagle's Articles of Incorporation or Bylaws, or (ii)
except as disclosed in Section 5.2 of the Eagle Disclosure Memorandum,
constitute
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or result in a Default under, or require any Consent pursuant to, or result in
the creation of any Lien on any Asset of any Eagle Company under, any Contract
or Permit of any Eagle Company or, (iii) subject to satisfaction of the
condition referred to in Section 9.1(b), violate any Law or Order applicable to
any Eagle Company or any of their respective material Assets other than, in the
case of clauses (ii) and (iii), any such conflicts, breaches, Defaults or other
occurrences of the type referred to above which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Eagle.
(c) No notice to, filing with, or Consent of, any public body or authority
is necessary for the consummation by Eagle of the Merger and the other
transactions contemplated in this Agreement, other than (i) the filing of a
premerger notification and report form by Eagle under the HSR Act; (ii) the
filing with the SEC of (x) the Registration Statement, (y) the Proxy Statement,
(z) such reports under Sections 13(a), 13(d), 15(d) or 16(a) of the 1934 Act as
may be required in connection with this Agreement and the transactions
contemplated hereby; (iii) the filing of the Articles of Merger with the
Washington Secretary of State and appropriate documents with relevant
authorities of other states in which Eagle is qualified to do business and such
filings with governmental entities to satisfy the applicable requirements of
state securities or "blue sky" laws and (iv) such consents, approvals, orders or
authorizations the failure of which to be made or obtained are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Eagle.
5.3 Capital Stock.
(a) The authorized capital stock of Eagle consists of (i) 50,000,000 shares
of Eagle Common Stock, of which 29,143,756 shares are issued and outstanding as
of November 20, 1998 and, except to the extent additional shares are issued in
accordance with Section 7.2, pursuant to the Convertible Debentures or pursuant
to the Eagle Employee Stock Purchase Plan, not more than 30,659,106 shares will
be issued and outstanding as of the Effective Time, and (ii) 10,000,000 shares
of preferred stock, without par value, none of which are issued and outstanding.
All of the issued and outstanding shares of capital stock of Eagle are duly and
validly issued and outstanding and are fully paid and nonassessable. None of the
outstanding shares of capital stock of Eagle has been issued in violation of any
preemptive rights of the current or past shareholders of Eagle. Eagle has
reserved 2,344,500 shares of Eagle Common Stock for issuance under the Eagle
Stock Plans (except the Eagle Employee Stock Purchase Plan), pursuant to which
options to purchase not more than 1,515,350 shares of Eagle Common Stock are
outstanding as of November 20, 1998.
(b) Except as set forth in Section 5.3(a) or under the Eagle Employee Stock
Purchase Plan or disclosed in Section 5.3 of the Eagle Disclosure Memorandum,
there are no shares of capital stock or other equity securities of Eagle
outstanding and no outstanding Rights relating to the capital stock of Eagle.
5.4 Eagle Subsidiaries. Eagle has disclosed in Section 5.4 of the Eagle
Disclosure Memorandum all of the Eagle Subsidiaries that are corporations
(identifying its jurisdiction of incorporation, each jurisdiction in which the
character of its Assets or the nature or conduct of its business requires it to
be qualified and/or licensed to transact business, and the number of shares
owned and percentage ownership interest represented by such share ownership) and
all of the Eagle Subsidiaries that are general or limited partnerships or other
non-corporate entities (identifying the Law under which such entity is
organized, each jurisdiction in which the character of its Assets or the nature
or conduct of its business requires it to be qualified and/or licensed to
transact business, and the amount and nature of the ownership interest therein).
Except as disclosed in Section 5.4 of the Eagle Disclosure Memorandum, Eagle or
one of its wholly-owned Subsidiaries owns all of the issued and outstanding
shares of capital stock (or other equity interests) of each Eagle Subsidiary. No
capital stock (or other equity interest) of any Eagle Subsidiary is or may
become required to be issued (other than to another Eagle Company) by reason of
any Rights, and there are no Contracts
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by which any Eagle Subsidiary is bound to issue (other than to another Eagle
Company) additional shares of its capital stock (or other equity interests) or
Rights or by which any Eagle Company is or may be bound to transfer any shares
of the capital stock (or other equity interests) of any Eagle Subsidiary (other
than to another Eagle Company). There are no Contracts relating to the rights of
any Eagle Company to vote or to dispose of any shares of the capital stock (or
other equity interests) of any Eagle Subsidiary. All of the shares of capital
stock (or other equity interests) of each Eagle Subsidiary held by a Eagle
Company are fully paid and nonassessable under the applicable corporation Law of
the jurisdiction in which such Subsidiary is incorporated or organized and are
owned by the Eagle Company free and clear of any Lien. Except as disclosed in
Section 5.4 of the Eagle Disclosure Memorandum, each Eagle Subsidiary is a
corporation, and each such Subsidiary is duly organized, validly existing, and
in good standing under the Laws of the jurisdiction in which it is incorporated
or organized, and has the corporate power and authority necessary for it to own,
lease, and operate its Assets and to carry on its business as now conducted.
Each Eagle Subsidiary is duly qualified or licensed to transact business as a
foreign corporation in good standing in the states of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Eagle. The minute book and other organizational documents for each
Eagle Subsidiary have been made available to Lowe's for its review, and, except
as disclosed in Section 5.4 of the Eagle Disclosure Memorandum, are true and
complete as in effect as of the date of this Agreement and accurately reflect
all amendments thereto and all proceedings of the Board of Directors and
shareholders thereof.
5.5 SEC Filings; Financial Statements.
(a) Eagle has timely filed all SEC Documents required to be filed by Eagle
since January 31, 1995 (the "Eagle SEC Reports"). The Eagle SEC Reports (i) at
the time filed, complied in all material respects with the applicable
requirements of the Securities Laws and other applicable Laws and (ii) did not,
at the time they were filed (or, if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Eagle SEC Reports (as so amended) or necessary in order to make
the statements in such Eagle SEC Reports (as so amended), in light of the
circumstances under which they were made, not misleading. No Eagle Subsidiary is
required to file any SEC Documents.
(b) Each of the Eagle Financial Statements (including, in each case, any
related notes) contained in the Eagle SEC Reports, including any Eagle SEC
Reports filed after the date of this Agreement until the Effective Time,
complied (or, if filed after the date of this Agreement, will comply when filed)
as to form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared (or, if prepared after
the date of this Agreement, will be prepared) in accordance with GAAP applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements or, in the case of unaudited interim
statements, as permitted by Form 10-Q of the SEC), and fairly presented (or, if
prepared and filed after the date of this Agreement, will fairly present when
prepared and filed) in all material respects the consolidated financial position
of Eagle and its Subsidiaries as at the respective dates and the consolidated
results of operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount or effect.
5.6 Absence of Undisclosed Liabilities. No Eagle Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Eagle, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Eagle as of
January 30, 1998 and July 31, 1998, included in the Eagle Financial Statements
delivered prior to the
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date of this Agreement or reflected in the notes thereto. No Eagle Company has
incurred or paid any Liability since July 31, 1998, except for such Liabilities
incurred or paid (i) in the ordinary course of business consistent with past
business practice and which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Eagle or (ii) in connection with
the transactions contemplated by this Agreement. Except as disclosed in Section
5.6 of the Eagle Disclosure Memorandum or as would otherwise not violate the
first two sentences of this Section 5.6, no Eagle Company is directly or
indirectly liable, by guarantee, indemnity, or otherwise, upon or with respect
to, or obligated, by discount or repurchase agreement or in any other way, to
provide funds in respect to, or obligated to guarantee or assume any Liability
of, any Person for any amount in excess of $500,000.
5.7 Absence of Certain Changes or Events. Since July 31, 1998, except as
disclosed in the Eagle Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 5.7 of the Eagle Disclosure Memorandum, (i)
there have been no events, changes, or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Eagle, and (ii) the Eagle Companies have not taken any action, or
failed to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result in
a breach or violation of any of the covenants and agreements of Eagle provided
in Article 7, except where such breach or violation has not had, or is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Eagle. As of the date hereof, Section 5.7 of the Eagle Disclosure
Memorandum lists (a) all increases in wages, salaries and other compensation
and/or benefits instituted, approved or offered across the board to all or
substantially all of the Eagle employees since January 30, 1998, and (b) all
increases in wages, salaries and other compensation and/or benefits of 10% or
more instituted, approved or offered to any employee (whose salary exceeds
$50,000) or officer of Eagle since January 30, 1998.
5.8 Insurance. As of the date hereof, Section 5.8 of the Eagle Disclosure
Memorandum accurately sets forth the following information with respect to each
insurance policy (including policies providing property, casualty, liability and
workers' compensation coverage and bond and surety arrangements) to which any of
the Eagle Companies is a party or under which any Eagle Company has any
continuing rights or obligations:
(a) the name of the insurer, the name of the policyholder, and the
name of each covered insured; and
(b) the policy number and the period of coverage.
With respect to each such insurance policy, except such as would not have,
individually or in the aggregate, a Material Adverse Effect on Eagle: (a) the
policy is legal, valid, binding, enforceable and in full force and effect
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before any proceeding may be brought); (b) the policy will continue to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby (except as
described in clause (a)); (c) neither any of the Eagle Companies nor, to the
Knowledge of the Eagle Companies, any other party to the policy is in breach or
default thereunder (including with respect to the payment of premiums or the
giving of notices), and no event has occurred that, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification or acceleration under the policy; and (d) no party to the policy
has repudiated any provision thereof. Each of the Eagle Companies has been
covered during the past six years by insurance in scope and amount, in its good
faith judgment, customary and reasonable for the businesses in which it has been
engaged during the aforementioned period. As of the date hereof,
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Section 5.8 of the Eagle Disclosure Memorandum also describes any self-insurance
arrangements affecting any of the Eagle Companies.
5.9 Tax Matters.
(a) Except as set forth in Section 5.9 of the Eagle Disclosure Memorandum:
(i) Eagle and each of its Subsidiaries are members of the affiliated
group, within the meaning of Section 1504(a) of the Internal Revenue Code,
of which Eagle is the common parent, such affiliated group files a
consolidated federal income tax return and neither Eagle nor any of its
Subsidiaries has ever filed a consolidated federal income tax return with
(or been included in a consolidated return of) a different affiliated
group;
(ii) each of the Eagle Companies has timely filed or caused to be
filed all Tax Returns required to have been filed by or for it, and all
information set forth in such Tax Returns is accurate and complete in all
material respects;
(iii) each of the Eagle Companies has paid all Taxes shown as due on
such Tax Returns;
(iv) each of the Eagle Companies is in material compliance with all
applicable information reporting and tax withholding requirements under
federal, state, local and foreign Laws;
(v) there are no Liens with respect to Taxes (other than for current
Taxes not yet due and payable) upon any of the Assets of the Eagle
Companies;
(vi) each of the Eagle Companies has collected or withheld all Taxes
required to be collected or withheld by it, and all such Taxes have been
paid to the appropriate governmental authority or set aside in appropriate
accounts for future payment when due;
(vii) none of the Eagle Companies has granted (or is subject to) any
waiver, which is currently in effect, of the period of limitations for the
assessment of any Tax; no unpaid Tax deficiency has been assessed or
asserted against or with respect to any of the Eagle Companies for any open
tax period; no power of attorney relating to Taxes that is currently in
effect has been granted by or with respect to any of the Eagle Companies;
there is no currently pending administrative or judicial proceeding, or any
deficiency or refund litigation, with respect to Taxes of any of the Eagle
Companies, the adverse outcome of which would have a Material Adverse
Effect on the Eagle Companies; and any such assertion, assessment,
proceeding or litigation disclosed on Section 5.9 of the Eagle Disclosure
Memorandum is being contested in good faith through appropriate measures,
and its status is described in Section 5.9 of the Eagle Disclosure
Memorandum;
(viii) none of the Eagle Companies has made or entered into, or holds
any asset subject to, a consent filed pursuant to Section 341(f) of the
Internal Revenue Code or a "safe harbor lease" subject to former Section
168(f)(8) of the Internal Revenue Code;
(ix) none of the Eagle Companies is required to include in income any
amount from an adjustment pursuant to Section 481 of the Internal Revenue
Code or any similar provision of state or local Law, and Eagle has no
Knowledge that any governmental authority has proposed any such adjustment;
(x) none of the Eagle Companies has made or is obligated to make any
payments, or is a party to any Contract that could obligate it to make any
payments, that would not be deductible by reason of Section 162(m) or 280G
of the Internal Revenue Code; and
(xi) there are no excess loss accounts or deferred intercompany gains
with respect to any member of the affiliated group of which Eagle is the
common parent which would have a Material Adverse Effect on Eagle if taken
into account.
(b) Section 5.9 of the Eagle Disclosure Memorandum lists all types of
material Taxes paid and Tax Returns filed by or on behalf of any of the Eagle
Companies and expressly indicates each Tax
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with respect to which any of the Eagle Companies is or has been included in a
consolidated, unitary or combined return.
5.10 Real Property. Section 5.10 of the Eagle Disclosure Memorandum is a
true and correct list of all Real Property of the Eagle Companies and all real
estate with respect to which any Eagle Company has entered into a written
agreement for purchase, sale or lease as of the date hereof and, except as
otherwise expressly agreed by the Parties in writing, as of the Effective Time.
With respect to the Real Property or such real estate subject to a written
agreement for purchase, sale or lease as of the date hereof and, except as
otherwise expressly agreed by the Parties in writing or as expressly limited
below, as of the Effective Time:
(a) except as set forth in Section 5.10(a) of the Eagle Disclosure
Memorandum, there are no leases or subleases, including amendments or
modifications to leases or subleases, in which any Eagle Company is the
tenant/lessee or subtenant/sublessee of any Real Property;
(b) except as set forth in Section 5.10(b) of the Eagle Disclosure
Memorandum, there are no leases or subleases, including amendments or
modifications to leases or subleases, in which any Eagle Company is the
landlord/lessor of any Real Property or any licenses, concessions or other
agreements, written or oral, granting to any party or parties the right of
use or occupancy of any portion of the parcel;
(c) as of the date hereof, Section 5.10(c) of the Eagle Disclosure
Memorandum contains a true and correct list of all title policies in the
possession or control of any Eagle Company;
(d) to the Knowledge of Eagle, except as set forth in Section 5.10(d)
of the Eagle Disclosure Memorandum, there are no pending or threatened
condemnation proceedings, mechanics' or materialman's Liens or claims of
Lien, lawsuits or administrative actions relating to the Real Property or
any portion thereof or other matters affecting adversely the current use,
occupancy or value thereof;
(e) with respect to the Real Property on which there is an open and
operating Eagle store and any other Real Property that any Eagle Company
owns or leases, (i) the buildings and improvements are located within the
boundary lines of the described parcels of such Real Property, are not in
violation of applicable setback requirements, zoning laws and ordinances
(and none of the properties or buildings or improvements thereon are
subject to "permitted non-conforming use" or "permitted non-conforming
structure" classifications), (ii) no covenant or other restriction or
obligation of any kind is binding on such Real Property owned or leased by
any Eagle Company (provided that such representation is qualified to the
Knowledge of Eagle insofar as it relates to covenants, restrictions or
obligations which any Eagle Company is not responsible for obtaining in its
capacity as lessee) and (iii) to the extent consistent with the current
development of such Real Property, all approvals of governmental
authorities (including licenses and permits) required in connection with
the ownership, occupation, operation or construction thereof have been
obtained or will be timely obtained in accordance with Law with respect to
such Real Property owned or leased by any Eagle Company (provided that such
representation is qualified to the Knowledge of Eagle insofar as it relates
to approvals that any Eagle Company is not responsible for obtaining in its
capacity as lessee), in each case of clauses (i), (ii) and (iii) as would
not, individually or in the aggregate, prohibit the intended use of any
such Real Property as a retail home improvement warehouse store with a lawn
and garden center consistent with Eagle's use of a majority of its existing
stores or, with respect to the Eagle warehouse property, the intended use
of such property as a warehouse and distribution facility; provided that,
notwithstanding the provisions of Section 9.2(a) to the contrary, the
breach by Eagle of this Section 5.10(e) with respect to any Eagle store
location or the Eagle warehouse property shall be deemed to have a Material
Adverse Effect on Eagle under this Agreement;
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(f) except as disclosed in Section 5.10(f) of the Eagle Disclosure
Memorandum, there are no outstanding options, rights of first refusal, or
rights of first offer to purchase or lease any of the Real Property or any
portion thereof or interest therein;
(g) there are no parties (other than any of the Eagle Companies,
except in any case where an Eagle Company has entered into a contract to
purchase a parcel but has not yet closed such purchase) in possession of
the parcel, other than tenants under any leases or subleases disclosed in
Section 5.10(g) of the Eagle Disclosure Memorandum who are in possession of
space to which they are entitled;
(h) to the extent that there is an open and operating Eagle store on
the Real Property, the Real Property is supplied with utilities and other
services necessary for its operation as a Eagle store, including gas,
electricity, water, telephone, sanitary sewer and storm sewer, and to the
extent there is not an open and operating Eagle store on the Real Property,
such utilities and other services are available to serve the Real Property;
(i) each parcel of Real Property has legal vehicular access to a
public road and such access has been properly permitted or otherwise
authorized in accordance with Law;
(j) except as set forth in Section 5.10(j) of the Eagle Disclosure
Memorandum, Eagle has not entered into any (i) site development agreements
where the sitework has not been completed or entirely paid for or (ii)
escrow agreements (other than purchase agreement escrows disclosed in
accordance with Section 5.10(l) of the Eagle Disclosure Memorandum) where
the funds contemplated by such escrow have not been fully disbursed;
(k) as of the date hereof, except as set forth in Section 5.10(k) of
the Eagle Disclosure Memorandum, Eagle has not entered into any options or
agreements to purchase or lease real estate (including any amendments or
modifications thereto);
(l) as of the date hereof, except as set forth in Section 5.10(l) of
the Eagle Disclosure Memorandum, Eagle has not (i) incurred brokerage
commissions or finders fees which have not been paid, (ii) entered into any
brokers or finders agreements, or (iii) has not dealt with any brokers or
finders in connection with any prospective real estate subject to options
or agreements disclosed in Section 5.10(k) of the Eagle Disclosure
Memorandum;
(m) Eagle has not received a notice of default or similar notice
affecting a parcel and has not delivered a notice of default to any third
party that has not otherwise been cured and, to the Knowledge of Eagle,
Eagle is not in default with respect to any obligations affecting a parcel
and no third party is in default with respect to any obligations owing to
Eagle; and
(n) to the Knowledge of Eagle, the legal instruments disclosed in
Section 5.10 of the Eagle Disclosure Memorandum (regardless of what
subsection) are in full force and effect; provided that the foregoing
representation and warranty shall not extend to any matters disclosed in
Section 5.10(l) of the Eagle Disclosure Memorandum.
5.11 Assets. Except as disclosed in Section 5.11 of the Eagle Disclosure
Memorandum, as disclosed or reserved against in the Eagle Financial Statements
or with respect to Real Property of Eagle, the Eagle Companies have good and
marketable title, free and clear of all Liens, to all of their respective Assets
which are material to Eagle's business on a consolidated basis. All Assets which
are material to Eagle's business on a consolidated basis, held under leases or
subleases by any of the Eagle Companies, are held under valid Contracts
enforceable in accordance with their respective terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or other Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceedings may be brought), and each such Contract is in full force and effect.
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5.12 Intellectual Property.
(a) Except as set forth in Section 5.12(a) of the Eagle Disclosure
Memorandum or as is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Eagle: (i) the Eagle Companies own or
have the right to use pursuant to license, sublicense, agreement or permission
all Intellectual Property reasonably necessary or desirable for the operation of
the businesses of the Eagle Companies as presently conducted; (ii) each item of
Intellectual Property owned or used by any of the Eagle Companies immediately
prior to the Effective Time will be owned or available for use by the Eagle
Companies on identical terms and conditions immediately subsequent to the
Effective Time; (iii) each of the Eagle Companies has taken all reasonably
necessary and desirable action to maintain and protect each item of Intellectual
Property that it owns or uses; and (iv) each owned item of Intellectual Property
has not been abandoned.
(b) Except as set forth in Section 5.12(b) of the Eagle Disclosure
Memorandum, to the Knowledge of Eagle, none of the Eagle Companies has
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any intellectual property rights of any third party, and to the Knowledge
of Eagle, none of the Eagle Companies has ever received any charge, complaint,
claim, demand or notice alleging any such interference, infringement,
misappropriation or violation (including any claim that any of the Eagle
Companies must license or refrain from using any intellectual property rights of
any third party), except for infringements, conflicts or other occurrences of
the type described above which are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Eagle. To the Knowledge of
Eagle, no third party has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of any of the
Eagle Companies, except such as have not had, or are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Eagle.
(c) As of the date hereof, Section 5.12(c) of the Eagle Disclosure
Memorandum identifies each patent, trademark, copyright or other registration
that has been issued to any of the Eagle Companies with respect to any of its
Intellectual Property, identifies each pending application or application for
registration that any of the Eagle Companies has made with respect to any of its
Intellectual Property and identifies each license, agreement or other permission
that any of the Eagle Companies has granted to any third party with respect to
any of its Intellectual Property (together with any exceptions thereto). Except
as set forth in Section 5.12(c) of the Eagle Disclosure Memorandum, Eagle has
made available to Lowe's correct and complete copies of all such patents,
registrations, applications, licenses, agreements, permissions (as amended to
date) and all other written documentation evidencing ownership and prosecution
(if applicable) of each such item. As of the date hereof, Section 5.12(c) of the
Eagle Disclosure Memorandum also identifies each trade name or unregistered
trademark used by any of the Eagle Companies in connection with any of its
businesses. Except as set forth in Section 5.12(c) of the Eagle Disclosure
Memorandum, with respect to each item of Intellectual Property required to be
identified therein:
(i) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling or charge;
(ii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or, to the Knowledge of Eagle, is
threatened which challenges the legality, validity, enforceability, use or
ownership of the item; and
(iii) none of the Eagle Companies has licensed or, to the Knowledge of
Eagle, permitted any third party to use any such item.
5.13 Environmental Matters.
(a) To the Knowledge of Eagle, each Eagle Company holds all Permits
required under Environmental Laws for it to carry on its business as now
conducted ("Environmental Permits"), and each Eagle Company, its Participation
Facilities, and its Operating Properties are, and have been, in
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compliance with all such Environmental Permits and Environmental Laws, except
for failures to hold Environmental Permits and instances of noncompliance which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Eagle.
(b) There is no Litigation pending or, to the Knowledge of Eagle,
threatened before any court, governmental agency, or authority or other forum in
which any Eagle Company or any of its Operating Properties or Participation
Facilities (or Eagle in respect of such Operating Property or Participation
Facility) has been or, with respect to threatened Litigation, to the Knowledge
of Eagle, may be named as a defendant (i) for alleged noncompliance (including
by any predecessor) with any Environmental Law or (ii) relating to the release,
discharge, spillage, or disposal into the environment of any Hazardous Material,
whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site owned, leased, or operated by any Eagle Company or
any of its Operating Properties or Participation Facilities, except for such
Litigation pending or, to the Knowledge of Eagle, threatened that is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Eagle, nor, to the Knowledge of Eagle, is there any reasonable basis
for any Litigation of a type described in this sentence, except such as is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Eagle.
(c) During the period of (i) any Eagle Company's ownership or operation of
any of their respective current properties, (ii) any Eagle Company's
participation in the management of any Participation Facility, or (iii) any
Eagle Company's holding of a security interest in an Operating Property, there
have been no releases, discharges, spillages, or disposals of Hazardous Material
in, on, under, adjacent to, or affecting (or potentially affecting) such
properties, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Eagle. Prior to the period of (i)
any Eagle Company's ownership or operation of any of their respective current
properties, (ii) any Eagle Company's participation in the management of any
Participation Facility, or (iii) any Eagle Company's holding of a security
interest in an Operating Property, to the Knowledge of Eagle, there were no
releases, discharges, spillages, or disposals of Hazardous Material in, on,
under, or affecting (or potentially affecting) any such property, Participation
Facility or Operating Property, except such as are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Eagle.
5.14 Compliance with Laws. Each Eagle Company has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Eagle, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Eagle. Except as
disclosed in Section 5.14 of the Eagle Disclosure Memorandum, none of the Eagle
Companies:
(a) is in Default under any of the provisions of its Articles of
Incorporation or Bylaws (or other governing instruments);
(b) is in Default under any Laws or Orders applicable to its business
or employees conducting its business, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Eagle; or
(c) since January 27, 1995, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any Eagle Company is not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, where
such noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Eagle, (ii) threatening to revoke
any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Eagle, or
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(iii) requiring any Eagle Company to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business.
5.15 Labor Relations. No Eagle Company is the subject of any Litigation
asserting that it or any other Eagle Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other Eagle Company to bargain with
any labor organization as to wages or conditions of employment, nor is any Eagle
Company party to any collective bargaining agreement, nor is there any strike or
other labor dispute involving any Eagle Company pending or, to the Knowledge of
Eagle, threatened nor, to the Knowledge of Eagle, is there any activity
involving any Eagle Company's employees seeking to certify a collective
bargaining unit or engaging in any other organization activity.
5.16 Employee Benefit Plans.
(a) Eagle has disclosed in Section 5.16(a) of the Eagle Disclosure
Memorandum, and has made available to Lowe's prior to the execution of this
Agreement copies in each case of, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other employee programs,
arrangements, or agreements, all medical, vision, dental, or other health plans,
all life insurance plans, and all other material employee benefit plans or
fringe benefit plans, including "employee benefit plans" as that term is defined
in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole
or in part by, or contributed to by any Eagle Company or any entity required to
be treated as a single employer with Eagle under Section 414 of the Internal
Revenue Code (an "ERISA Affiliate") thereof for the benefit of employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate (collectively, the "Eagle Benefit Plans"). Any of the Eagle Benefit
Plans which is an "employee pension benefit plan," as that term is defined in
Section 3(2) of ERISA, is referred to herein as a "Eagle ERISA Plan." No Eagle
ERISA Plan is a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code). No Eagle ERISA Plan is or has been a multi-employer plan
within the meaning of Section 3(37) of ERISA.
(b) All Eagle Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Eagle or any ERISA Affiliate. Each Eagle
ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and Eagle is not aware of any circumstances likely to
result in revocation of any such favorable determination letter.
(c) No Eagle Company has any unsatisfied Liability under Title IV of ERISA.
(d) Except as disclosed in Section 5.16(d) of the Eagle Disclosure
Memorandum, or as required by Law, no Eagle Company has any Liability for
retiree health and life benefits under any of the Eagle Benefit Plans. There are
no restrictions on the rights of such Eagle Company to amend or terminate any
Eagle Benefit Plan without incurring any Liability thereunder.
(e) Except as disclosed in Section 5.16(e) of the Eagle Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Eagle Company
from any Eagle Company under any Eagle Benefit Plan or otherwise, (ii) increase
any benefits otherwise
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payable under any Eagle Benefit Plan, or (iii) result in any acceleration of the
time of payment or vesting of any such benefit.
5.17 Material Contracts. Except as disclosed in Section 5.17 of the Eagle
Disclosure Memorandum or otherwise reflected in the Eagle Financial Statements,
none of the Eagle Companies, nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $50,000, (ii) any Contract relating to the borrowing of money by any
Eagle Company or the guarantee by any Eagle Company of any such obligation
(other than trade payables and Contracts relating to borrowings or guarantees
made in the ordinary course of business), (iii) any Contract which prohibits or
restricts any Eagle Company from engaging in any business activities in any
geographic area, line of business or otherwise in competition with any other
Person, (iv) any Contract involving Intellectual Property (other than Contracts
entered into in the ordinary course with customers and "shrink-wrap" software
licenses), (v) any Contract relating to the purchase or sale of any goods or
services (other than Contracts entered into in the ordinary course of business
and involving payments under any individual Contract not in excess of $500,000),
and (vi) any other Contract or amendment thereto that would be required to be
filed as an exhibit to a Form 10-K filed by Eagle with the SEC as of the date of
this Agreement (except as filed as exhibits to Eagle's SEC Documents filed since
January 30, 1998 and prior to the date hereof) (together with all Contracts
referred to in Sections 5.11 and 5.16(a), the "Eagle Contracts"). With respect
to each Eagle Contract and except as disclosed in Section 5.17 of the Eagle
Disclosure Memorandum: (i) the Contract is in full force and effect (except in
all cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before any
proceeding may be brought); (ii) no Eagle Company is in Default thereunder,
except where a Default is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Eagle; (iii) no Eagle Company has
repudiated or waived any material provision of any such Contract; and (iv) no
other party to any such Contract is, to the Knowledge of Eagle, in Default in
any respect or has repudiated or waived any material provision thereunder,
except as is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Eagle. Except as disclosed in Section 5.17 of the
Eagle Disclosure Memorandum, all of the indebtedness of any Eagle Company for
money borrowed is prepayable at any time by such Eagle Company without penalty
or premium.
5.18 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of Eagle, threatened against any Eagle Company, or against any
director, employee or employee benefit plan of any Eagle Company, or against any
Asset, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Eagle, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any Eagle Company, that are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Eagle;
provided that, for purposes of this Section 5.18, any such Litigation or Order
arising after the date hereof shall not be deemed to have a Material Adverse
Effect on Eagle if and to the extent such Litigation or Order is based on this
Agreement or the transactions contemplated hereby. Section 5.18 of the Eagle
Disclosure Memorandum contains a summary of all pending Litigation as of the
date of this Agreement to which any Eagle Company is a party and which names a
Eagle Company as a defendant or cross-defendant and for which any Eagle Company
has potential Liability that is reasonably likely to have a Material Adverse
Effect on Eagle.
5.19 Intentionally omitted.
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5.20 Statements True and Correct. No statement, certificate, instrument,
or other writing furnished or to be furnished by any Eagle Company or any
Affiliate thereof to Lowe's pursuant to this Agreement or any other document,
agreement, or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
Eagle Company or any Affiliate thereof for inclusion in the Registration
Statement to be filed by Lowe's with the SEC will, when the Registration
Statement becomes effective, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
Eagle Company or any Affiliate thereof for inclusion in the Proxy Statement to
be mailed to Eagle's shareholders in connection with the Shareholders' Meeting,
will, at the date the Proxy Statement is first mailed to the shareholders of
Eagle, contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the 1934 Act and the rules and regulations promulgated thereunder, except
that no representation or warranty is made by Eagle with respect to statements
made or incorporated by reference therein based on information supplied by
Lowe's specifically for inclusion or incorporation by reference in the Proxy
Statement.
5.21 Accounting and Tax Matters. No Eagle Company or any Affiliate thereof
has taken or agreed to take any action or has any Knowledge of any fact or
circumstance that is reasonably likely to prevent the Merger from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code.
5.22 State Takeover Laws. No "moratorium," "fair price," "business
combination," "control share," or other anti-takeover Laws (collectively,
"Takeover Laws") of the WBCA, including Chapter 23B.19 of the WBCA, will be
applicable to the execution of this Agreement or the consummation of the Merger,
and to the Knowledge of Eagle, no other Takeover Laws are applicable to this
Agreement or the Merger.
5.23 Transactions and Affiliates. For purposes of this Section, the term
"Affiliate" shall mean (a) any holder of 5% or more of the voting securities of
Eagle, (b) any director, officer or employee of the Eagle Companies, (c) any
person, firm or corporation that directly or indirectly controls, is controlled
by or is under common control with any of the Eagle Companies or (d) any member
of the immediate family of any of such persons. Except as set forth in Section
5.23 of the Eagle Disclosure Memorandum or as disclosed in the Eagle SEC
Reports, since January 27, 1995, the Eagle Companies have not, in the ordinary
course of business or otherwise, (A) purchased, leased or otherwise acquired any
material property or assets or obtained any material services from, (B) sold,
leased or otherwise disposed of any material property or assets or provided any
material services to (except with respect to remuneration for services rendered
in the ordinary course of business as a director, officer or employee of one or
more of the Eagle Companies), (C) entered into or modified in any manner any
Contract with, or (D) borrowed any money from, or made or forgiven any loan or
other advance to, any Affiliate. Except as set forth in Section 5.23 of the
Eagle Disclosure Memorandum, as disclosed in the Eagle SEC Reports, or in each
case in an amount that is less than $100,000, (i) the Contracts of the Eagle
Companies do not include any obligation or commitment between any of the Eagle
Companies and any Affiliate, (ii) the Assets of the Eagle Companies do not
include any receivable or other obligation or commitment from an Affiliate to
any of the Eagle Companies and (iii) the Liabilities of the Eagle Companies do
not include any payable or other obligation or commitment from any of the Eagle
Companies to any Affiliate.
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5.24 Shareholder Agreements. Each of the directors of Eagle has executed
and delivered to Lowe's an agreement in substantially the form of Exhibit 2.
5.25 Fees and Expenses of Brokers and Others. None of the Eagle Companies
(a) has had any dealings, negotiations or communications with any broker or
other intermediary in connection with the transactions contemplated by this
Agreement which could reasonably give rise to any liability for any brokers' or
finders' fees or any similar fees in connection with the transactions
contemplated by this Agreement, (b) is committed to any liability for any
brokers' or finders' fees or any similar fees in connection with the
transactions contemplated by this Agreement or (c) has retained any broker or
other intermediary to act on its behalf in connection with the transactions
contemplated by this Agreement, except that Eagle has engaged NationsBanc
Montgomery Securities, LLC ("NMS") to represent it in connection with such
transactions, and shall pay all of NMS's fees and expenses in connection with
such engagement.
5.26 Year 2000 Compliance. Eagle and the Eagle Subsidiaries have reviewed
the areas within their business and operations which could be adversely affected
by the Year 2000 Problem and have initiated a program to achieve Year 2000
Compliance by December 31, 1999. As of the date hereof, except as is not
reasonably likely to have a Material Adverse Effect on Eagle: (i) Eagle and the
Eagle Subsidiaries have implemented such Year 2000 program in accordance with
the timetable set forth therein; (ii) Eagle and the Eagle Subsidiaries have made
appropriate inquiries as to the Year 2000 Compliance of their material
suppliers, service providers, franchisors and vendors, and neither Eagle nor any
Eagle Subsidiary has received notice of any inability on the part of such
entities to achieve Year 2000 Compliance in a timely manner; and (iii) based on
such review and program, Eagle and the Eagle Subsidiaries believe that the Year
2000 Problem, including costs of remediation, will not have a Material Adverse
Effect on Eagle.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF LOWE'S
Except as disclosed in Lowe's SEC Documents filed since January 30, 1998
and prior to the date of this Agreement, Lowe's hereby represents and warrants
to Eagle as follows:
6.1 Organization, Standing, and Power. Lowe's is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
North Carolina, and has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its Assets. Lowe's is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Lowe's.
6.2 Authority; No Breach By Agreement.
(a) Lowe's has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Lowe's. This Agreement
represents a legal, valid, and binding obligation of Lowe's, enforceable against
Lowe's in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium, or similar Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).
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(b) Neither the execution and delivery of this Agreement by Lowe's, nor the
consummation by Lowe's of the transactions contemplated hereby, nor compliance
by Lowe's with any of the provisions hereof, will (i) conflict with or result in
a breach of any provision of Lowe's Articles of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any Lowe's Company under, any
Contract or Permit of any Lowe's Company or, (iii) subject to satisfaction of
the condition referred to in Section 9.1(b), violate any Law or Order applicable
to any Lowe's Company or any of their respective material Assets other than, in
the case of clauses (ii) and (iii), any such conflicts, breaches, Defaults or
other occurrences of the type referred to above which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Lowe's.
(c) No notice to, filing with, or Consent of, any public body or authority
is necessary for the consummation by Lowe's of the Merger and the other
transactions contemplated in this Agreement, other than (i) the filing of a
premerger notification and report form by Lowe's under the HSR Act; (ii) the
filing with the SEC of (y) the Registration Statement and (z) such reports under
Sections 13(a), 13(d), 15(d) or 16(a) of the 1934 Act as may be required in
connection with this Agreement and the transactions contemplated hereby; (iii)
with respect to Merger Corporation, the filing of the Articles of Merger with
the Washington Secretary of State; (iv) such filings with governmental entities
to satisfy the applicable requirements of state securities or "blue sky" laws;
and (v) such consents, approvals, orders or authorizations the failure of which
to be made or obtained are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Lowe's.
6.3 Capital Stock.
(a) The authorized capital stock of Lowe's consists of (i) 1,400,000,000
shares of Lowe's Common Stock, of which 352,680,698 shares are issued and
outstanding as of November 18, 1998, and (ii) 5,000,000 shares of Lowe's
Preferred Stock, none of which is issued and outstanding. All of the issued and
outstanding shares of Lowe's Capital Stock are, and all of the shares of Lowe's
Common Stock to be issued in exchange for shares of Eagle Common Stock upon
consummation of the Merger, when issued in accordance with the terms of this
Agreement, will be, duly and validly issued and outstanding and fully paid and
nonassessable. None of the outstanding shares of Lowe's Capital Stock has been,
and none of the shares of Lowe's Common Stock to be issued in exchange for
shares of Eagle Common Stock upon consummation of the Merger will be, issued in
violation of any preemptive rights of the current or past shareholders of
Lowe's. Lowe's has reserved 15,811,292 shares of Lowe's Common Stock for
issuance under the Lowe's Stock Plans, pursuant to which options to purchase not
more than 3,341,755 shares of Lowe's Common Stock are outstanding as of November
18, 1998.
(b) Except as set forth in Section 6.3(a), or as provided pursuant to the
Lowe's Rights Agreement, or as disclosed in Section 6.3 of the Lowe's Disclosure
Memorandum, there are no shares of capital stock or other equity securities of
Lowe's outstanding and no outstanding Rights relating to the capital stock of
Lowe's.
6.4 Lowe's Subsidiaries. No capital stock (or other equity interest) of
any Lowe's Subsidiary is or may become required to be issued (other than to
another Lowe's Company) by reason of any Rights, and there are no Contracts by
which any Lowe's Subsidiary is bound to issue (other than to another Lowe's
Company) additional shares of its capital stock (or other equity interests) or
Rights or by which any Lowe's Company is or may be bound to transfer any shares
of the capital stock (or other equity interests) of any Lowe's Subsidiary (other
than to another Lowe's Company). There are no Contracts relating to the rights
of any Lowe's Company to vote or to dispose of any shares of the capital stock
(or other equity interests) of any Lowe's Subsidiary. All of the shares of
capital stock (or other equity interests) of each Lowe's Subsidiary held by a
Lowe's Company are fully paid and nonassessable under the applicable corporation
Law of the jurisdiction in which such Subsidiary is incorporated or organized
and are owned by the Lowe's Company free and clear of any Lien. Each
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Lowe's Subsidiary is a corporation, and is duly organized, validly existing, and
in good standing under the Laws of the jurisdiction in which it is incorporated
or organized, and has the corporate power and authority necessary for it to own,
lease and operate its Assets and to carry on its business as now conducted. Each
Lowe's Subsidiary is duly qualified or licensed to transact business as a
foreign corporation in good standing in the states of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Lowe's.
6.5 SEC Filings; Financial Statements.
(a) Lowe's has timely filed and made available to Eagle all SEC Documents
required to be filed by Lowe's since January 31, 1995 (the "Lowe's SEC
Reports"). The Lowe's SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Laws and
other applicable Laws and (ii) did not, at the time they were filed (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated in such Lowe's SEC Reports (as so
amended) or necessary in order to make the statements in such Lowe's SEC Reports
(as so amended), in light of the circumstances under which they were made, not
misleading. No Lowe's Subsidiary is required to file any SEC Documents.
(b) Each of the Lowe's Financial Statements (including, in each case, any
related notes) contained in the Lowe's SEC Reports, including any Lowe's SEC
Reports filed after the date of this Agreement until the Effective Time,
complied (or, if filed after the date of this Agreement, will comply when filed)
as to form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared (or, if prepared after
the date of this Agreement, will be prepared) in accordance with GAAP applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements or, in the case of unaudited interim
statements, as permitted by Form 10-Q of the SEC), and fairly presented (or, if
prepared and filed after the date of this Agreement, will fairly present when
prepared and filed) in all material respects the consolidated financial position
of Lowe's and its Subsidiaries as at the respective dates and the consolidated
results of operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount or effect.
6.6 Absence of Undisclosed Liabilities. No Lowe's Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Lowe's, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Lowe's as of
January 30, 1998 and July 31, 1998, included in the Lowe's Financial Statements
delivered prior to the date of this Agreement or reflected in the notes thereto.
No Lowe's Company has incurred or paid any Liability since July 31, 1998, except
for such Liabilities incurred or paid (i) in the ordinary course of business
consistent with past business practice and which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Lowe's or
(ii) in connection with the transactions contemplated by this Agreement. Except
as disclosed in Section 6.6 of the Lowe's Disclosure Memorandum or as would
otherwise not violate the first two sentences of this Section 6.6, no Lowe's
Company is directly or indirectly liable, by guarantee, indemnity, or otherwise,
upon or with respect to, or obligated, by discount or repurchase agreement or in
any other way, to provide funds in respect to, or obligated to guarantee or
assume any Liability of, any Person for any amount in excess of $5,000,000.
6.7 Absence of Certain Changes or Events. Since July 31, 1998, except as
disclosed in the Lowe's Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 6.7 of the Lowe's Disclosure Memorandum,
(i) there have been no events, changes, or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a
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Material Adverse Effect on Lowe's, and (ii) the Lowe's Companies have not taken
any action, or failed to take any action, prior to the date of this Agreement,
which action or failure, if taken after the date of this Agreement, would
represent or result in a material breach or violation of any of the covenants
and agreements of Lowe's provided in Article 7.
6.8 Tax Matters. Except as set forth in Section 6.8 of the Lowe's
Disclosure Memorandum:
(a) Lowe's and each of its Subsidiaries are members of the affiliated
group, within the meaning of Section 1504(a) of the Internal Revenue Code,
of which Lowe's is the common parent, such affiliated group files a
consolidated federal income tax return and neither Lowe's nor any of its
Subsidiaries has ever filed a consolidated federal income tax return with
(or been included in a consolidated return of) a different affiliated
group;
(b) each of the Lowe's Companies has timely filed or caused to be
filed all Tax Returns required to have been filed by or for it, and all
information set forth in such Tax Returns is accurate and complete in all
material respects;
(c) each of the Lowe's Companies has paid all Taxes shown as due on
such Tax Returns;
(d) there are no Liens with respect to Taxes (other than for current
Taxes not yet due and payable) upon any of the Assets of the Lowe's
Companies;
(e) each of the Lowe's Companies has collected or withheld all Taxes
required to be collected or withheld by it, and all such Taxes have been
paid to the appropriate governmental authority or set aside in appropriate
accounts for future payment when due; and
(f) none of the Lowe's Companies has granted (or is subject to) any
waiver, which is currently in effect, of the period of limitations for the
assessment of any Tax; no unpaid Tax deficiency has been assessed or
asserted against or with respect to any of the Lowe's Companies for any
open tax period; there is no currently pending administrative or judicial
proceeding, or any deficiency or refund litigation, with respect to Taxes
of any of the Lowe's Companies, the adverse outcome of which would have a
Material Adverse Effect on Lowe's; and any such assertion, assessment,
proceeding or litigation disclosed on Section 6.8 of the Lowe's Disclosure
Memorandum is being contested in good faith through appropriate measures,
and its status is described in Section 6.8 of the Lowe's Disclosure
Memorandum.
6.9 Assets. Except as disclosed in Section 6.9 of the Lowe's Disclosure
Memorandum, as disclosed or reserved against in the Lowe's Financial Statements
made available to Eagle prior to the date of this Agreement, or with respect to
Real Property of Lowe's, the Lowe's Companies have good and marketable title,
free and clear of all Liens, to all of their respective Assets which are
material to Lowe's business on a consolidated basis. All Assets which are
material to Lowe's business on a consolidated basis, held under leases or
subleases by any of the Lowe's Companies, are held under valid Contracts
enforceable in accordance with their respective terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or other Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceedings may be brought), and each such Contract is in full force and effect.
6.10 Intellectual Property. Each Lowe's Company owns or has a license to
use all of the Intellectual Property used by such Lowe's Company in the course
of its business. Each Lowe's Company is the owner of or has a license to any
Intellectual Property sold or licensed to a third party by such Lowe's Company
in connection with such Lowe's Company's business operations, and such Lowe's
Company has the right to convey by sale or license any Intellectual Property so
conveyed. No Lowe's Company is in Default under any of its Intellectual Property
licenses. No proceedings have been instituted, or are pending or to the
Knowledge of Lowe's threatened, which challenge the rights of any Lowe's Company
with respect to Intellectual Property used, sold or licensed by such Lowe's
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Company in the course of its business, nor has any person claimed or alleged any
rights to such Intellectual Property. The conduct of the business of the Lowe's
Companies does not infringe any Intellectual Property of any other person.
Except as disclosed in Section 6.10 of the Lowe's Disclosure Memorandum, no
Lowe's Company is obligated to pay any recurring royalties to any Person with
respect to any such Intellectual Property. Except as disclosed in Section 6.10
of the Lowe's Disclosure Memorandum, every officer, director, or employee of any
Lowe's Company is a party to a Contract which requires such officer, director or
employee to assign any interest in any Intellectual Property to a Lowe's Company
and to keep confidential any trade secrets, proprietary data, customer
information, or other business information of a Lowe's Company, and no such
officer, director or employee is party to any Contract with any Person other
than a Lowe's Company which requires such officer, director or employee to
assign any interest in any Intellectual Property to any Person other than a
Lowe's Company or to keep confidential any trade secrets, proprietary data,
customer information, or other business information of any Person other than a
Lowe's Company. Except as disclosed in Section 6.10 of the Lowe's Disclosure
Memorandum, no officer, director or employee of any Lowe's Company is party to
any Contract which restricts or prohibits such officer, director or employee
from engaging in activities competitive with any Person, including any Lowe's
Company.
6.11 Environmental Matters.
(a) To the Knowledge of Lowe's, each Lowe's Company holds all Environmental
Permits, and each Lowe's Company, its Participation Facilities, and its
Operating Properties are, and have been, in compliance with all such
Environmental Permits and all Environmental Laws, except for failures to hold
Environmental Permits and instances of noncompliance which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Lowe's.
(b) There is no Litigation pending or, to the Knowledge of Lowe's,
threatened before any court, governmental agency, or authority or other forum in
which any Lowe's Company or any of its Operating Properties or Participation
Facilities (or Lowe's in respect of such Operating Property or Participation
Facility) has been or, with respect to threatened Litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release, discharge, spillage, or
disposal into the environment of any Hazardous Material, whether or not
occurring at, on, under, adjacent to, or affecting (or potentially affecting) a
site owned, leased, or operated by any Lowe's Company or any of its Operating
Properties or Participation Facilities, except for such Litigation pending or,
to the Knowledge of Lowe's, threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Lowe's, nor is
there any reasonable basis for any Litigation of a type described in this
sentence, except such as is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Lowe's.
(c) During the period of (i) any Lowe's Company's ownership or operation of
any of their respective current properties, (ii) any Lowe's Company's
participation in the management of any Participation Facility, or (iii) any
Lowe's Company's holding of a security interest in a Operating Property, there
have been no releases, discharges, spillages, or disposals of Hazardous Material
in, on, under, adjacent to, or affecting (or potentially affecting) such
properties, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Lowe's. Prior to the period of (i)
any Lowe's Company's ownership or operation of any of their respective current
properties, (ii) any Lowe's Company's participation in the management of any
Participation Facility, or (iii) any Lowe's Company's holding of a security
interest in a Operating Property, to the Knowledge of Lowe's, there were no
releases, discharges, spillages, or disposals of Hazardous Material in, on,
under, or affecting any such property, Participation Facility or Operating
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Eagle.
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6.12 Compliance with Laws. Each Lowe's Company has in effect all Permits
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Lowe's, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Lowe's. Except as
disclosed in Section 6.12 of the Lowe's Disclosure Memorandum, none of the
Lowe's Companies:
(a) is in Default under its Articles of Incorporation or Bylaws (or
other governing instruments); or
(b) is in Default under any Laws or Orders applicable to its business
or employees conducting its business, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Lowe's; or
(c) since January 27, 1995, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any Lowe's Company is not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, where
such noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Lowe's, (ii) threatening to revoke
any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Lowe's, or
(iii) requiring any Lowe's Company to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business.
6.13 Labor Relations. No Lowe's Company is the subject of any Litigation
asserting that it or any other Lowe's Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other Lowe's Company to bargain with
any labor organization as to wages or conditions of employment, nor is any
Lowe's Company party to any collective bargaining agreement, nor is there any
strike or other labor dispute involving any Lowe's Company pending or, to the
Knowledge of Lowe's, threatened, nor to the Knowledge of Lowe's, is there any
activity involving any Lowe's Company's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
6.14 Employee Benefit Plans.
(a) Lowe's has made available to Eagle prior to the execution of this
Agreement copies in each case of all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health plans,
all life insurance plans, and all other material employee benefit plans or
fringe benefit plans, including "employee benefit plans" as that term is defined
in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole
or in part by, or contributed to by any Lowe's Company or ERISA Affiliate
thereof for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "Lowe's Benefit
Plans"). Any of the Lowe's Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "Lowe's ERISA Plan." No Lowe's ERISA Plan is a "defined benefit plan" (as
defined in Section 414(j) of the Internal Revenue Code). No Lowe's ERISA Plan is
or has been a multi-employer plan within the meaning of Section 3(37) of ERISA.
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(b) All Lowe's Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Lowe's. Each Lowe's ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue Service, and
Lowe's is not aware of any circumstances likely to result in revocation of any
such favorable determination letter.
(c) No Lowe's Company has any unsatisfied Liability under Title IV of
ERISA.
(d) Except as disclosed in Section 6.14(d) of the Lowe's Disclosure
Memorandum, or as required by Law, no Lowe's Company has any Liability for
retiree health and life benefits under any of the Lowe's Benefit Plans. There
are no restrictions on the rights of such Lowe's Company to amend or terminate
any Lowe's Benefit Plan without incurring any Liability thereunder.
(e) Except as disclosed in Section 6.14(e) of the Lowe's Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Lowe's Company
from any Lowe's Company under any Lowe's Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Lowe's Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit.
6.15 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of Lowe's, threatened against any Lowe's Company, or against
any director, employee or employee benefit plan of any Lowe's Company, or
against any Asset, interest, or right of any of them, that is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Lowe's,
nor are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any Lowe's Company, that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Lowe's. Section 6.15 of the Lowe's Disclosure Memorandum contains a
summary of all Litigation as of the date of this Agreement to which any Lowe's
Company is a party and which names Lowe's as a defendant or cross-defendant and
for which any Lowe's Company has potential Liability that is reasonably likely
to have a Material Adverse Effect on Lowe's.
6.16 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any Lowe's Company or any
Affiliate thereof to Eagle pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
Lowe's Company or any Affiliate thereof for inclusion in the Registration
Statement to be filed by Lowe's with the SEC, will, when the Registration
Statement becomes effective, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
Lowe's Company or any Affiliate thereof for inclusion in the Proxy Statement to
be mailed to Eagle's shareholders in connection with the Shareholders Meeting
will, at the date the Proxy Statement is first mailed to the shareholders of
Eagle, contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Registration Statement will comply as to form in all material
respects with the 1933 Act and the rules and regulations promulgated thereunder,
except that no representation or warranty is made by Lowe's with respect to
statements made or incorporated by reference therein
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based on information supplied by Eagle specifically for inclusion or
incorporation by reference in the Registration Statement.
6.17 Authority of Merger Corporation. Merger Corporation is a corporation
duly organized, validly existing and in good standing under the Laws of the
State of Washington as a wholly owned Subsidiary of Lowe's. The authorized
capital stock of Merger Corporation shall consist of 1,000 shares of Merger
Corporation Common Stock, all of which is validly issued and outstanding, fully
paid and non-assessable and is owned by Lowe's free and clear of any Lien.
Merger Corporation has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Merger Corporation. This
Agreement represents a legal, valid, and binding obligation of Merger
Corporation, enforceable against Merger Corporation in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
Lowe's, as the sole shareholder of Merger Corporation, has voted prior to the
Effective Time the shares of Merger Corporation Common Stock in favor of
adoption of this Agreement, as and to the extent required by applicable Law.
6.18 Accounting and Tax Matters. No Lowe's Company or any Affiliate
thereof has taken or agreed to take any action or has any Knowledge of any fact
or circumstance that is reasonably likely to prevent the Merger from qualifying
for pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code.
6.19 Rights Agreement. Execution of this Agreement and consummation of the
Merger and the other transactions contemplated by this Agreement will not result
in the grant of any rights to any Person under the Lowe's Rights Agreement
(other than as contemplated by Section 6.3) or enable or require the Lowe's
Rights to be exercised, distributed or triggered. No "Stock Acquisition Date" or
"Flip-in Date" (as such terms are defined in the Lowe's Rights Agreement) has
occurred.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Eagle. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement, unless
the prior written consent of Lowe's shall have been obtained, which consent
shall not be unreasonably withheld, and except as otherwise expressly
contemplated herein, Eagle shall and shall cause each of its Subsidiaries to (a)
operate its business only in the usual, regular, and ordinary course, (b) use
reasonable efforts to preserve intact its business organization and Assets and
maintain its rights and franchises, and (c) use reasonable efforts to request
estoppels, in form reasonably acceptable to Lowe's, within thirty (30) days from
the date of this Agreement, from every landlord with respect to all Real
Property leased by Eagle, and from every third party to each agreement relating
to Real Property in which Eagle has a contractual right to obtain an estoppel or
such similar instrument.
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7.2 Negative Covenants of Eagle. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, except as
set forth in Section 7.2 of the Eagle Disclosure Memorandum, Eagle covenants and
agrees that it will not do or agree or commit to do, or permit any of its
Subsidiaries to do or agree or commit to do, any of the following without the
prior written consent of the chief executive officer, chief administrative
officer or chief financial officer of Lowe's, which consent shall not be
unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of any Eagle Company; or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a Eagle Company to another Eagle
Company and any refinancing of short-term indebtedness) in excess of an
aggregate of $500,000 (for the Eagle Companies on a consolidated basis)
except in the ordinary course of the business of Eagle Companies consistent
with past practices, or impose, or suffer the imposition, on any Asset of
any Eagle Company of any Lien or permit any such Lien to exist (other than
Liens in effect as of the date hereof that are disclosed in the Eagle
Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any Eagle Company, or declare or pay any dividend or
make any other distribution in respect of Eagle's capital stock; or
(d) except (i) pursuant to the exercise of stock options outstanding
as of the date hereof and pursuant to the terms thereof in existence on the
date hereof, (ii) the grant to new employees (in connection with new store
openings permitted hereunder after the date hereof) of options to acquire
up to 10,000 shares of Eagle Common Stock per new store in the ordinary
course and consistent with past practices (except that no such option grant
shall provide for acceleration of vesting as a result of this Agreement or
consummation of the transactions contemplated herein), (iii) the delivery
of Eagle Common Stock as of December 31, 1998, pursuant to the Eagle
Employee Stock Purchase Plan (except that no additional offering shall be
made under such plan after December 31, 1998), or (iv) as disclosed in
Section 7.2(d) of the Eagle Disclosure Memorandum, issue, sell, pledge,
encumber, authorize the issuance of, enter into any Contract to issue,
sell, pledge, encumber, or authorize the issuance of, or otherwise permit
to become outstanding, any additional shares of Eagle Common Stock or any
other capital stock of any Eagle Company, or any stock appreciation rights,
or any option, warrant, or other Right; or
(e) adjust, split, combine or reclassify any capital stock of any
Eagle Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of Eagle Common Stock, or sell,
lease, mortgage or otherwise dispose of or otherwise encumber (x) any
shares of capital stock of any Eagle Subsidiary (unless any such shares of
stock are sold or otherwise transferred to another Eagle Company) or (y)
any Asset other than in the ordinary course of business; provided, that no
sales of any Assets to any Affiliates of Eagle may be made; or
(f) except for purchases of Assets (other than Real Property Assets)
in the ordinary course of business, consistent with past practice and
except in accordance with Eagle's written investment policies, purchase any
securities or make any material investment, either by purchase of stock or
securities, contributions to capital, Asset transfers or purchase of any
Assets, in any Person other than a wholly owned Eagle Subsidiary, or
otherwise acquire direct or indirect control over any Person, other than in
connection with the creation of new wholly-owned Subsidiaries organized to
conduct or continue activities otherwise permitted by this Agreement; or
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(g) except as required by Law or in accordance with obligations or
Contracts existing as of the date hereof, (i) grant any increase in
compensation or benefits to the employees or officers of any Eagle Company
or make awards under existing Eagle Benefits Plans, except in accordance
with past practice (which includes periodic performance reviews and grants
in connection with the hiring and promotion of employees); (ii) pay any
severance or termination pay or any bonus (except in accordance with past
practice); (iii) enter into or amend any severance agreements with officers
of any Eagle Company; (iv) grant any material increase in fees or other
increases in compensation or other benefits or make awards under existing
Eagle Benefits Plans to directors of any Eagle Company except in accordance
with past practice; or (v) voluntarily accelerate the vesting of any stock
options or other stock-based compensation or employee benefits or other
Rights; or
(h) enter into or amend any employment Contract between any Eagle
Company and any Person having a salary thereunder in excess of $50,000 per
year (unless such amendment is required by Law) that the Eagle Company does
not have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the
Effective Time; or
(i) except as expressly contemplated in Section 8.12, adopt any new
employee benefit plan of any Eagle Company or terminate or withdraw from,
or make any material change in or to, any existing employee benefit plans
of any Eagle Company other than any such change that is required by Law or
that, in the opinion of counsel, is necessary or advisable to maintain the
tax qualified status of any such plan, or make any distributions from such
employee benefit plans, except as required by Law, the terms of such plans
or consistent with past practice; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls other than in the ordinary course
of business, except as may be appropriate to conform to changes in Tax Laws
or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any Eagle
Company for material money damages or restrictions upon the operations of
any Eagle Company; or
(l) except in the ordinary course of business, enter into, modify,
amend or terminate any material Contract or waive, release, compromise or
assign any material rights or claims.
7.3 Covenants of Lowe's. From the date of this Agreement until the earlier
of the Effective Time or the termination of this Agreement, Lowe's covenants and
agrees that it shall (a) continue to conduct its business and the business of
its Subsidiaries in a manner designed in its reasonable judgment, to enhance the
long-term value of the Lowe's Common Stock and the business prospects of the
Lowe's Companies and to the extent consistent therewith use all reasonable
efforts to preserve intact the Lowe's Companies' core businesses and goodwill
with their respective employees and the communities they serve, and (b) take no
action which would (i) materially adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentences of Section 9.1(b) or 9.1(c), or (ii) materially adversely affect the
ability of any Party to perform its covenants and agreements under this
Agreement; provided, that the foregoing shall not prevent any Lowe's Company
from acquiring any Assets or other businesses or from discontinuing or disposing
of any of its Assets or business if such action is, in the reasonable judgment
of Lowe's, desirable in the conduct of the business of Lowe's and its
Subsidiaries, provided that such actions shall not delay in any material respect
the Effective Time or hinder consummation of the Merger. Lowe's further
covenants and agrees that it will not, without the prior written consent of the
chief executive officer, president or chief financial officer of Eagle, which
consent shall not be unreasonably withheld, (A) amend the Articles of
Incorporation or Bylaws of Lowe's or, except as expressly contemplated by this
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Agreement, the Lowe's Rights Agreement, in each case, in any manner adverse to
the holders of Eagle Common Stock as compared to rights of holders of Lowe's
Common Stock generally as of the date of this Agreement, or (B) make any
significant change in any Tax or accounting methods or systems of internal
accounting controls other than in the ordinary course of business, except as may
be appropriate to conform to changes in Tax Laws or regulatory accounting
requirements or GAAP.
7.4 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Shareholder Approval. As soon
as reasonably practicable after execution of this Agreement, Lowe's shall
prepare and file the Registration Statement with the SEC, and shall use its
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act and take any action required to be taken under the applicable state
Blue Sky or securities Laws in connection with the issuance of the shares of
Lowe's Common Stock upon consummation of the Merger. Eagle shall cooperate in
the preparation and filing of the Registration Statement and shall furnish all
information concerning it and the holders of its capital stock as Lowe's may
reasonably request in connection with such action. Eagle shall call a
Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement. In connection with the Shareholders'
Meeting, (i) Eagle shall prepare and file with the SEC a Proxy Statement and
mail such Proxy Statement to its shareholders, (ii) the Parties shall furnish to
each other all information concerning them that they may reasonably request in
connection with such Proxy Statement, (iii) the Board of Directors of Eagle
shall recommend to its shareholders the approval of the matters submitted for
approval (unless the Board of Directors of Eagle, after having consulted with
and considered the advice of outside counsel, reasonably determining in good
faith that the making of such recommendation, or the failure to withdraw or
modify its recommendation, would constitute a breach of the fiduciary duties or
other legal obligations of the Board of Directors), and (iv) Eagle shall use its
reasonable efforts to obtain such shareholders' approval (unless the Board of
Directors of Eagle, after having consulted with and considered the advice of
outside counsel, reasonably determining in good faith that the taking of such
actions would constitute a breach of the fiduciary duties or other legal
obligations of the Board of Directors). Lowe's and Eagle shall make all
necessary filings with respect to the Merger under the Securities Laws.
8.2 Exchange Listing. Lowe's shall use its reasonable efforts to list,
prior to the Effective Time, on the NYSE, subject to official notice of
issuance, the shares of Lowe's Common Stock to be issued to the holders of Eagle
Common Stock pursuant to the Merger, and Lowe's shall give all notices and make
all filings with the NYSE required in connection with the transactions
contemplated herein.
8.3 Applications; Antitrust Notification. Lowe's shall prepare and file,
and Eagle shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement. Each of
the Parties will within five business days of the date hereof file with the
United States Federal Trade Commission and the United States Department of
Justice the notification and report form required for the transactions
contemplated hereby and any supplemental or additional information
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which may reasonably be requested in connection therewith pursuant to the HSR
Act and will comply in all material respects with the requirements of the HSR
Act. The Parties shall deliver to each other copies of all filings,
correspondence and orders to and from all Regulatory Authorities in connection
with the transactions contemplated hereby.
8.4 Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, Eagle and Merger Corporation shall execute and
file the Articles of Merger with the Secretary of State of the State of
Washington in connection with the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use, and
shall cause each of its Subsidiaries to use, its reasonable efforts to obtain
all Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
8.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of financial and legal conditions as the other Party reasonably
requests, provided that such investigation shall be reasonably related to the
transactions contemplated hereby and shall not interfere unnecessarily with
normal operations. No investigation by a Party shall affect the representations
and warranties of the other Party.
(b) In addition to the Parties' respective obligations under the
Confidentiality Agreement, which is hereby reaffirmed and adopted, and
incorporated by reference herein each Party shall, and shall cause its advisers
and agents to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other Party.
(c) Eagle shall use its reasonable efforts to exercise its rights under
confidentiality agreements entered into with Persons which were considering an
Acquisition Proposal with respect to Eagle to preserve the confidentiality of
the information relating to the Eagle Companies provided to such Persons and
their Affiliates and Representatives.
(d) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
Party which it has discovered through the course of its investigation and which
represents, or is reasonably likely to represent, either a material breach of
any representation, warranty, covenant or agreement of the other Party or which
has had or is reasonably likely to have a Material Adverse Effect on the other
Party.
8.7 Press Releases. Prior to the Effective Time, Eagle and Lowe's shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
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8.8 Certain Actions; Fiduciary Obligations. Except with respect to this
Agreement and the transactions contemplated hereby, no Eagle Company nor any
Affiliate thereof nor any Representatives thereof retained by any Eagle Company
shall directly or indirectly solicit any Acquisition Proposal by any Person.
Subject to the provisions of Sections 10.1(e) and 10.3 hereof, Eagle may, in
response to a Superior Proposal (as defined below) which was not solicited by
it, and subject to providing notice of such Superior Proposal to Lowe's as
described below, furnish any non-public information in connection with,
negotiate with respect to, or enter into any Contract with respect to, such
Superior Proposal. Nothing contained in this Agreement shall prevent Eagle from
making any disclosure of information about an Acquisition Proposal to its
shareholders if in the good faith judgment of the Board of Directors of Eagle,
after consultation with outside counsel, failure to so disclose would constitute
a breach of its fiduciary duties or other legal obligations. Pursuant to the
proviso set forth in Section 10.1(e) hereof, Eagle shall promptly advise Lowe's
following the receipt of any Acquisition Proposal or Superior Proposal and the
material details thereof, and advise Lowe's of any material developments with
respect to such Acquisition Proposal or Superior Proposal promptly upon the
occurrence thereof. Eagle shall (i) immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any Persons conducted
heretofore with respect to any of the foregoing, and (ii) direct and use its
reasonable efforts to cause all of its Representatives not to engage in any of
the foregoing. For purposes of this Agreement, a "Superior Proposal" means any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation or sale of all or substantially all of the Assets of the Eagle
Companies or a tender or exchange offer for more than 50% of the equity
securities of Eagle, and with respect to which the Board of Directors of Eagle
determines in good faith, after consultation with its financial advisor, to be
more favorable to Eagle's shareholders than the Merger. For purposes of this
Agreement, "Acquisition Proposal" means any tender offer or exchange offer or
any proposal for a merger, acquisition of all of the stock or assets of, or
other business combination involving Eagle or any of its Subsidiaries or the
acquisition of a substantial equity interest in, or a substantial portion of the
assets of, Eagle or any of its Subsidiaries.
8.9 Accounting and Tax Treatment; Tax Representation Letters. Each of the
Parties undertakes and agrees to use its reasonable efforts to cause the Merger,
and to take no action that is reasonably likely to cause the Merger not, to
qualify for treatment as a pooling of interests for accounting purposes and a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code for federal income tax purposes. For purposes of the tax opinions described
in Sections 9.2 (d) and 9.3(d) of this Agreement, each of Eagle and Lowe's shall
provide representation letters, in form and substance reasonably satisfactory to
Lowe's and Eagle, each dated as of the date that is two business days prior to
the date the Proxy Statement is first mailed to shareholders of Eagle and
reissued as of the Closing Date.
8.10 State Takeover Laws. Each Eagle Company shall take all necessary
steps to exempt the transactions contemplated by this Agreement from, or if
necessary to challenge the validity or applicability of, any applicable Takeover
Law, including Chapter 23B.19 of the WBCA.
8.11 Agreement of Affiliates. No later than 30 days following the date of
this Agreement, Eagle shall deliver to Lowe's a letter identifying all Persons
whom it reasonably believes are "affiliates" of Eagle for purposes of Rule 145
under the 1933 Act or for purposes of qualifying the Merger for pooling of
interests accounting treatment under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations. Eagle shall use its reasonable
efforts to cause each such Person to deliver to Lowe's not later than 30 days
prior to the Closing Date, a written agreement, substantially in the form of
Exhibit 3. Lowe's shall use its reasonable efforts to cause all Persons whom it
reasonably believes are "affiliates" of Lowe's for purposes of qualifying the
Merger for pooling of interests accounting treatment under Opinion 16 of the
Accounting Principles Board
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and applicable SEC rules and regulations to deliver to Eagle not later than 30
days prior to the Closing Date a written agreement of compliance with Section 2
of Exhibit 3.
8.12 Employee Benefits and Contracts. (a) Except as otherwise provided
herein, Lowe's shall, and shall cause Eagle to, maintain the Eagle Benefit Plans
at least through January 31, 2000; provided, however, that Lowe's may, or may
cause Eagle to, amend the Eagle Benefit Plans prior to January 31, 2000 to
conform the Eagle Benefit Plans to applicable Law. Thereafter Lowe's will
provide Eagle employees with benefits under the Lowe's Benefit Plans or the
Eagle Benefit Plans or a combination of such plans as determined by Lowe's in
its discretion; provided, however, that with respect to the period from February
1, 2000 to January 31, 2001, no modifications to the Eagle Benefit Plans which
would be materially adverse to the Eagle employees shall be made without the
prior written consent of Richard T. Takata. To the extent that Eagle employees
participate in Lowe's Benefit Plans, the Lowe's Benefit Plans shall recognize,
for purposes of eligibility and vesting, each such Eagle employee's service with
the Eagle Companies to the extent that such service is recognized under the
Eagle Benefit Plans. Notwithstanding the foregoing, Eagle shall not, and Lowe's
shall not be required to cause Eagle to, continue the Eagle Stock Plans or to
offer Eagle Common Stock as an investment option or an investment under any
Eagle Benefit Plan.
(b) Eagle may take actions to implement any of the items listed in Section
8.12(b) of the Eagle Disclosure Memorandum, which shall not be considered to
violate any other provision of this Agreement.
8.13 Indemnification, Exculpation and Insurance.
(a) Lowe's agrees that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time
now existing in favor of the current or former directors or officers of the
Eagle Companies as provided in their respective Articles of Incorporation or
By-laws (or comparable organizational documents), shall be assumed by the
Surviving Corporation in the Merger, without further action, as of the Effective
Time and shall survive the Merger and shall continue in full force and effect in
accordance with their terms. In addition, from and after the Effective Time,
directors and officers of Eagle who become directors or officers of the
Surviving Corporation will be entitled to the same indemnity rights and
protections as are afforded to other directors and officers of the Surviving
Corporation.
(b) In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any Person, then, and in each such case, proper provision will be made so
that the successors and assigns of the Surviving Corporation assume the
obligations set forth in this Section 8.13.
(c) For six years after the Effective Time, the Surviving Corporation shall
maintain in effect Eagle's current directors' and officers' liability insurance
covering acts or omissions occurring prior to the Effective Time with respect to
those Persons who are currently covered by Eagle's directors' and officers'
liability insurance policy on terms with respect to such coverage and amount no
less favorable than those of such policy in effect on the date hereof; provided,
that the Surviving Corporation may substitute therefor policies of the Surviving
Corporation or its subsidiaries containing terms with respect to coverage and
amount no less favorable to such directors or officers; provided further, that
if the existing or substituted directors' and officers' liability insurance
expires, is terminated or canceled during such six-year period, the Surviving
Corporation will obtain as much directors' and officers' liability insurance as
can be obtained for the remainder of such period for a premium not in excess of
200% of the aggregate premiums paid by Eagle in 1998 on an annualized basis for
such purpose and that in no event shall the Surviving Corporation be required to
pay
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aggregate premiums for insurance under this Section 8.13(c) in excess of 200% of
the aggregate premiums paid by Eagle in 1998 on an annualized basis for such
purpose.
(d) The provisions of this Section 8.13 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
8.14 Convertible Debentures. The Surviving Corporation and Lowe's shall
take all actions, including entering into a supplemental indenture, required by
the Indenture, dated as of March 14, 1994, between Eagle and Seattle-First
National Bank, as Trustee, in order to, among other things, provide that the
6.25% Convertible Debentures due 2001 of Eagle (the "Convertible Debentures")
shall become convertible into that number of shares of Lowe's Common Stock
following the Effective Time as would have been represented if such debentures
had converted into shares of Eagle Common Stock immediately prior to the
Effective Time.
8.15 Accountants' Letters. (a) Eagle shall use its reasonable efforts to
cause to be delivered to Lowe's two letters from Ernst & Young LLP, one dated
not more than five days prior to the date of the Proxy Statement and one dated
not more than five days prior to the Effective Time, with respect to certain
financial information regarding Eagle, in form and substance reasonably
satisfactory to Lowe's, which letters shall be based upon customary specified
procedures undertaken by such firm in accordance with Statement of Auditing
Standards No. 72.
(b) Lowe's shall use its reasonable efforts to cause to be delivered to
Eagle two letters from Deloitte & Touche LLP, one dated not more than five days
prior to the date of the Proxy Statement and one dated not more than five days
prior to the Effective Time, with respect to certain financial information
regarding Lowe's, in form and substance reasonably satisfactory to Eagle, which
letters shall be based upon customary specified procedures undertaken by such
firm in accordance with Statement of Auditing Standards No. 72.
8.16 Consents and Approvals. Each Party shall use reasonable efforts to
obtain any and all Consents required for consummation of the Merger or for the
preventing of any Default under any Contract or Permit of such Party, except for
such Consents (i) the failure to obtain of which is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on either
Party or (ii) which, by their terms, may not be unreasonably withheld by the
party from whom Consent is required. No Consent so obtained which is necessary
to consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner which is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on either Party. To the extent any
lease to which Eagle is a party contains a covenant or other provision which,
without the Consent of a third party (other than Consents which may not be
unreasonably withheld), restricts a Eagle store from being opened or operated
using anything other than the "Eagle Hardware & Garden" tradename, or any
derivative thereof, Eagle shall take all reasonable action to obtain such
Consent or otherwise remove such restriction prior to the Effective Time.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to consummate the Merger are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6:
(a) Shareholder Approval. The Eagle Shareholder Approval shall have
been obtained.
(b) HSR Act. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
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(c) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits or
makes illegal consummation of the Merger.
(d) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing.
(e) Exchange Listing. The shares of Lowe's Common Stock issuable
pursuant to the Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(f) Pooling Letters. Each of the Parties shall have received a letter,
dated as of the date of filing of the Registration Statement with the SEC
and as of the Effective Time, addressed to Lowe's and Eagle, in form and
substance reasonably acceptable to Lowe's and Eagle, from Deloitte & Touche
LLP to the effect that the Merger will qualify for pooling-of-interests
accounting treatment. Each of the Parties shall have received letters,
dated as of the date of filing of the Registration Statement with the SEC
and as of the Effective Time, addressed to Lowe's and Eagle, in form and
substance reasonably acceptable to Lowe's and Eagle, from Ernst & Young LLP
to the effect that such firm is not aware of any matters relating to Eagle
and its Subsidiaries which would preclude the Merger from qualifying for
pooling-of-interests accounting treatment.
9.2 Conditions to Obligations of Lowe's. The obligation of Lowe's to
consummate the Merger is subject to the satisfaction of the following
conditions, unless waived by Lowe's pursuant to Section 11.6(a):
(a) Representations and Warranties. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of Eagle set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of Eagle set forth in Section 5.3 shall be true and correct
(except for inaccuracies which are de minimus in amount). All other
representations and warranties of Eagle set forth in Article 5 shall be
true and correct, except where the failure of such representations and
warranties to be so true and correct does not have and is not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on Eagle; provided, however, that, for purposes of this sentence only,
those representations and warranties of Eagle which are qualified by
reference to "material" or "Material Adverse Effect" shall be deemed not to
include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Eagle to be performed and complied with
pursuant to this Agreement and the other agreements of Eagle contemplated
hereby prior to the Effective Time shall have been duly performed and
complied with in all material respects.
(c) Certificates. Eagle shall have delivered to Lowe's (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions set forth in Sections 9.2(a) and 9.2(b) have been satisfied,
and (ii) certified copies of resolutions duly adopted by Eagle's Board of
Directors and shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby,
all in such reasonable detail as Lowe's and its counsel shall request.
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(d) Tax Opinion. Lowe's shall have received the opinion of Hunton &
Williams, counsel to Lowe's, dated the Closing Date, to the effect that the
Merger will qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code and that each of Lowe's, Merger
Corporation and Eagle will be a party to the reorganization within the
meaning of Section 368(b) of the Internal Revenue Code. In rendering such
opinion, counsel to Lowe's shall be entitled to rely upon satisfactory
representations provided by the parties hereto in the representation
letters referred to in Section 8.9 hereof.
9.3 Conditions to Obligations of Eagle. The obligation of Eagle to
consummate the Merger is subject to the satisfaction of the following
conditions, unless waived by Eagle pursuant to Section 11.6(b):
(a) Representations and Warranties. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of Lowe's set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of Lowe's set forth in Section 6.3 shall be true and correct
(except for inaccuracies which are de minimus in amount). All other
representations and warranties of Lowe's set forth in Article 6 shall be
true and correct, except where the failure of such representations and
warranties to be so true and correct does not have and is not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on Lowe's; provided, however, that, for purposes of this sentence only,
those representations and warranties of Lowe's which are qualified by
reference to "material" or "Material Adverse Effect" shall be deemed not to
include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Lowe's to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(c) Certificates. Lowe's shall have delivered to Eagle (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions set forth in Sections 9.3(a) and 9.3(b) have been satisfied,
and (ii) certified copies of resolutions duly adopted by Lowe's Board of
Directors and Merger Corporation's Board of Directors and sole shareholder
evidencing the taking of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement, and the consummation
of the transactions contemplated hereby, all in such reasonable detail as
Eagle and its counsel shall request.
(d) Tax Opinion. Eagle shall have received the opinion of Cravath,
Swaine & Moore, counsel to Eagle, dated the Closing Date, to the effect
that the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and that each of Lowe's, Merger
Corporation and Eagle will be a party to the reorganization within the
meaning of Section 368(b) of the Internal Revenue Code. In rendering such
opinion, counsel to Eagle shall be entitled to rely upon satisfactory
representations provided by the parties hereto in the representation
letters referred to in Section 8.9 hereof.
(e) Price Condition. In addition to the foregoing, notwithstanding the
provisions of Section 3.1(c) of this Agreement, Eagle shall not be
obligated to consummate the Merger if the Lowe's Ratio is less than 70%.
For purposes of this Section 9.3(e), the following terms shall have the
meanings indicated:
"Lowe's Ratio" shall mean the quotient obtained by dividing the Base
Period Trading Price by the Lowe's Starting Price.
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"Base Period Trading Price" shall mean the average of the daily
closing prices for the shares of Lowe's Common Stock for the ten (10)
consecutive trading days on which such shares are actually traded on the
NYSE (as reported by The Wall Street Journal or, if not reported thereby,
any other authoritative source selected by Lowe's) ending at the close of
trading on the fifth trading day immediately preceding the Closing Date.
"Lowe's Starting Price" means $39.40.
If Lowe's declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares, or similar
transactions prior to the Closing Date, the price for the common stock of Lowe's
shall be appropriately adjusted to eliminate the effect of such event for
purposes of applying this Section 9.3(e).
ARTICLE 10
TERMINATION; AMENDMENT; WAIVER
10.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the shareholders of Eagle, but prior to the Effective Time:
(a) by mutual written consent of Eagle and Lowe's;
(b) by Eagle or Lowe's, if the Effective Time shall not have occurred
on or before May 31, 1999 (provided that the right to terminate this
Agreement under this Section 10.1(b) shall not be available to any Party
whose failure to fulfill any obligation under this Agreement has been the
cause of or has resulted in the failure of the Effective Time to occur on
or before such date);
(c) by Eagle if (i) the transactions contemplated in this Agreement
shall have been voted on by holders of Eagle Common Stock at a meeting duly
convened therefor, and the votes shall not have been sufficient to satisfy
the condition set forth in Section 9.1(a) hereof, or (ii) there has been a
breach by Lowe's of any representation, warranty, covenant or agreement set
forth in this Agreement which gives rise to a failure of a condition set
forth in Section 9.3(a) or 9.3(b), which breach has not been cured within
thirty business days following receipt by Lowe's of notice of such breach
or by the date specified in Section 10.1(b), whichever comes first;
(d) by Lowe's if (i) the transactions contemplated in this Agreement
shall have been voted on by holders of Eagle Common Stock at a meeting duly
convened therefor, and the votes shall not have been sufficient to satisfy
the condition set forth in Section 9.1(a) hereof, (ii) there has been a
breach by Eagle of any representation, warranty, covenant or agreement set
forth in this Agreement which gives rise to a failure of a condition set
forth in Section 9.2(a) or 9.2(b), which breach has not been cured within
thirty business days following receipt by Eagle of notice of such breach or
by the date specified in Section 10.1(b), whichever comes first; or (iii)
the Board of Directors of Eagle should fail to recommend to its
shareholders approval of this Agreement or such recommendation shall have
been made and subsequently withdrawn;
(e) by Eagle if, prior to the Effective Time, a Superior Proposal has
been made; provided, that Lowe's does not make, within five business days
of receiving notice of such Superior Proposal, an offer that the Board of
Directors of Eagle determines, in good faith after consultation with its
financial advisor, is at least as favorable to Eagle's shareholders as such
Superior Proposal;
(f) by either Party (provided the terminating Party is not then in
material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement which gives rise to a failure of a
condition set forth in Section 9.2(a) or 9.2(b), in the case of Eagle, or
Section 9.3(a) or 9.3(b) in the case of Lowe's) in the event that any of
the conditions precedent to the obligations of such Party to consummate the
Merger cannot be satisfied or fulfilled by the
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date specified in Section 10.1(b) of this Agreement as of the date which
such Party may terminate this Agreement; or
(g) by Eagle or Lowe's, if any court of competent jurisdiction in the
United States or other Regulatory Authority shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and non-appealable.
10.2 Effect of Termination. If this Agreement is so terminated and the
Merger is not consummated, this Agreement shall forthwith become void and have
no effect, without any liability on the part of either party or its directors,
officers or shareholders, other than the provisions of Section 8.6, this Section
10.2, Section 10.3 and Section 11.2; provided that, notwithstanding the
foregoing, termination of this Agreement will not relieve a breaching Party from
liability for any willful and material breach by such Party of any of its
representations, warranties, covenants or agreements set forth in this Agreement
giving rise to such termination.
10.3 Termination Fee.
(a) In the event that this Agreement is terminated
(A) by Lowe's pursuant to Section 10.1(b) hereof at a time when an
Acquisition Proposal shall have previously been made known to any Eagle
Company or has previously been made directly to Eagle's shareholders
generally or any Person shall have previously publicly announced an
intention (whether or not conditional) to make an Acquisition Proposal and
(i) the failure of the Effective Time to occur has been caused by or is
attributable to any failure of Eagle to fulfill any of its obligations
under this Agreement, (ii) Eagle is not otherwise entitled to terminate
this Agreement by reason of Section 10.1(c) hereof and (iii) Eagle
consummates the Acquisition Proposal in existence at the time of
termination referenced in this paragraph above or any other Acquisition
Proposal within 12 months following the date specified in Section 10.1(b),
then Eagle shall, on the date that the Acquisition Proposal is consummated,
pay Lowe's a fee equal to Thirty Five Million Dollars ($35 million) (the
"Termination Fee"), payable by wire transfer of same day funds to an
account designated by Lowe's;
(B) by Lowe's pursuant to Section 10.1(d)(i) or (iii) or by Eagle
pursuant to 10.1(c)(i), in each case at a time when an Acquisition Proposal
shall have previously been made known to any Eagle Company or has
previously been made directly to Eagle's shareholders generally or any
Person shall have previously publicly announced an intention (whether or
not conditional) to make an Acquisition Proposal and Eagle subsequently
consummates the Acquisition Proposal in existence at the time of
termination referenced in this paragraph above or any other Acquisition
Proposal within 12 months following the date of termination, then Eagle
shall, on the date that the Acquisition Proposal is consummated, pay Lowe's
the Termination Fee, payable by wire transfer of same day funds to an
account designated by Lowe's; or
(C) by Eagle pursuant to Section 10.1(e) hereof, then Eagle shall
promptly, but in no event later than the date of such termination, pay
Lowe's the Termination Fee, payable by wire transfer of same day funds to
an account designated by Lowe's.
(b) This Section 10.3 shall be the sole remedy of the parties hereto in the
event of any termination of this Agreement.
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ARTICLE 11
MISCELLANEOUS
11.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including
the Exhibits delivered pursuant hereto and incorporated herein by
reference.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be executed
by Eagle and filed with the Secretary of State of the State of Washington
relating to the Merger as contemplated by Section 1.1. The Articles of
Merger shall include the Plan of Merger as required under Section
23B.11.050 of the WBCA.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CONFIDENTIALITY AGREEMENT" shall mean that certain Confidentiality
Agreement, dated October 2, 1998, between Eagle and Lowe's.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets or business.
"DEFAULT" shall mean (i) any breach or violation of or default under
any Contract, Law, Order, or Permit, (ii) any occurrence of any event that
with the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Law, Order, or
Permit, or (iii) any occurrence of any event that with or without the
passage of time or the giving of notice would give rise to a right to
terminate or revoke, change the current terms of, or renegotiate, or to
accelerate, increase, or impose any Liability or to accelerate under, any
Contract, Law, Order, or Permit, where, in any such event, such Default is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on a Party.
"EAGLE COMMON STOCK" shall mean the common stock, without par value,
of Eagle.
"EAGLE COMPANIES" shall mean, collectively, Eagle and all Eagle
Subsidiaries.
"EAGLE DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Eagle Hardware & Garden, Inc. Disclosure Memorandum" delivered
prior to the date of this
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Agreement to Lowe's describing in reasonable detail the matters contained
therein, and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is
being made. Information disclosed with respect to one Section shall not be
deemed to be disclosed for purposes of any other Section not specifically
referenced with respect thereto.
"EAGLE FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Eagle as of July
31, 1998, and as of January 30, 1998 and January 31, 1997, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the six months ended
July 31, 1998, and for each of the three fiscal years ended January 30,
1998, January 31, 1997 and January 31, 1996, as filed by Eagle in SEC
Documents, and (ii) the consolidated balance sheets of Eagle (including
related notes and schedules, if any) and related statements of income,
changes in shareholders' equity, and cash flows (including related notes
and schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to July 31, 1998.
"EAGLE STOCK PLANS" shall mean the existing stock option and other
stock-based compensation plans of Eagle designated as follows: (i) the
Employee Stock Purchase Plan, (ii) the Employee Stock Ownership Plan, (iii)
the 1991 Stock Option Plan, and (iv) the Directors' Nonqualified Stock
Option Plan.
"EAGLE SUBSIDIARIES" shall mean the Subsidiaries of Eagle, which shall
include the Eagle Subsidiaries described in Section 5.4 and any corporation
or other organization acquired as a Subsidiary of Eagle in the future and
held as a Subsidiary by Eagle at the Effective Time.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
discharges, releases, or threatened releases of any Hazardous Material, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of any Hazardous
Material.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EXHIBITS" 1 through 3, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
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"INTELLECTUAL PROPERTY" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor, trade
secrets, franchises, know-how, inventions, and other intellectual property
rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that
are known or should reasonably have been known after due inquiry by the
chairman, president, chief financial officer, chief accounting officer,
chief credit officer, general counsel, any assistant or deputy general
counsel, or any senior executive or other vice president or other member of
management of such Person who, by virtue of such individual's position with
the Person, would be reasonably expected to be aware of the matter at hand
and the knowledge of any such persons obtained or which would have been
obtained from a reasonable investigation.
"LAW" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities, or business, including those
promulgated, interpreted or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect liability, indebtedness,
obligation, penalty, cost or expense, claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary
course of business) of any type, whether accrued, absolute or contingent,
liquidated or unliquidated, matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, or (ii) Liens which do not materially impair
the use of or title to the Assets subject to such Lien.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other examination
or investigation, hearing, administrative or other proceeding relating to
or affecting a Party, its business, its Assets (including Contracts related
to it), or the transactions contemplated by this Agreement.
"LOWE'S CAPITAL STOCK" shall mean, collectively, the Lowe's Common
Stock, the Lowe's Preferred Stock and any other class or series of capital
stock of Lowe's.
"LOWE'S COMMON STOCK" shall mean the $0.50 par value common stock of
Lowe's.
"LOWE'S COMPANIES" shall mean, collectively, Lowe's and all Lowe's
Subsidiaries.
"LOWE'S DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Lowe's Companies, Inc. Disclosure Memorandum" delivered prior to
the date of this Agreement to Eagle describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"LOWE'S FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Lowe's as of July
31, 1998, and as of January 30, 1998 and January 31, 1997, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the six months ended
July 31, 1998, and for each of the three fiscal years ended January 30,
1998, January 31, 1997 and
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January 31, 1996, as filed by Lowe's in SEC Documents, and (ii) the
consolidated balance sheets of Lowe's (including related notes and
schedules, if any) and related statements of income, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to periods
ended subsequent to July 31, 1998.
"LOWE'S PREFERRED STOCK" shall mean the $5.00 par value preferred
stock of Lowe's.
"LOWE'S RIGHTS" shall mean the preferred stock purchase rights issued
pursuant to the Lowe's Rights Agreement.
"LOWE'S RIGHTS AGREEMENT" shall mean that certain Rights Agreement,
dated September 8, 1998, between Lowe's and Wachovia Bank, N.A.
"LOWE'S STOCK PLANS" shall mean the existing stock option and other
stock-based compensation plans of Lowe's designated as follows: Lowe's
Employee Stock Ownership Plan; Lowe's Companies, Inc. 1997 Incentive Plan;
Lowe's Companies, Inc. 1994 Incentive Plan; and Directors' Stock Incentive
Plan.
"LOWE'S SUBSIDIARIES" shall mean the Subsidiaries of Lowe's, which
shall include the Lowe's Subsidiaries described in Section 6.4 and any
corporation or other organization acquired as a Subsidiary of Lowe's in the
future and held as a Subsidiary by Lowe's at the Effective Time.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (a) the financial position,
business, or results of operations of such Party and its Subsidiaries,
taken as a whole, or (b) the ability of such Party to perform its
obligations under this Agreement or to consummate the Merger, other than
any event, change or occurrence relating to (i) the United States economy,
the western regional economy or securities markets in general or (ii) this
Agreement or the transactions contemplated hereby or announcement thereof.
"MERGER CORPORATION COMMON STOCK" shall mean the no par value common
stock of Merger Corporation.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NCBCA" shall mean the North Carolina Business Corporation Act.
"NYSE" shall mean the New York Stock Exchange, Inc.
"OPERATING PROPERTY" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in which
such Party or Subsidiary holds a security interest or other interest
(including an interest in a fiduciary capacity), and, where required by the
context, includes the owner or operator of such property, but only with
respect to such property.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"PARTY" shall mean either Eagle or Lowe's, and "Parties" shall mean
both Eagle and Lowe's.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any
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Person is a party or that is or may be binding upon or inure to the benefit
of any Person or its securities, Assets, or business.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"PLAN OF MERGER" shall mean the plan of merger of Merger Corporation
with and into Eagle in substantially the form attached hereto as Exhibit 1.
"PROXY STATEMENT" shall mean the proxy statement used by Eagle to
solicit the Eagle Shareholder Approval, which shall include the prospectus
of Lowe's relating to the issuance of the Lowe's Common Stock to holders of
Eagle Common Stock pursuant to the Merger.
"REAL PROPERTY" shall mean all of the real property owned or leased by
the Eagle Companies, together with the improvements located thereon,
including all appurtenant rights, claims and interests.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, including any pre-effective or post-effective amendments or
supplements thereto, filed with the SEC by Lowe's under the 1933 Act with
respect to the shares of Lowe's Common Stock to be issued to the
shareholders of Eagle in connection with the Merger.
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC, the NYSE,
the NASD, the Federal Trade Commission, the United States Department of
Justice, and all other federal, state, county, local or other governmental
or regulatory agencies, authorities (including self-regulatory
authorities), instrumentalities, commissions, boards or bodies having
jurisdiction over the Parties and their respective Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock
of a Person or by which a Person is or may be bound to issue additional
shares of its capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"SHAREHOLDERS' MEETING" shall mean the meeting of the shareholders of
Eagle to be held pursuant to Section 8.1, including any adjournment or
adjournments thereof.
"SUBSIDIARIES" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which 50% or more of
the outstanding equity securities is owned directly or indirectly by its
parent (provided, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), or
(ii) in the case of partnerships, serves as a general partner.
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"SURVIVING CORPORATION" shall mean Eagle as the surviving corporation
resulting from the Merger.
"TAX" or "TAXES" shall mean any federal, state, county, local, or
foreign taxes, charges, levies, imposts, duties, other assessments, or
similar charge of any kind whatsoever, including any interest, penalties,
and additions imposed thereon or with respect thereto.
"TAX RETURN" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or any of its Subsidiaries.
"WBCA" shall mean the Washington Business Corporation Act.
"YEAR 2000 COMPLIANT" or "YEAR 2000 COMPLIANCE" shall mean that the
computer systems and other automated equipment used by an entity in
connection with the conduct of its business, including, without limitation,
all hardware, software and operating systems, (i) are able to accurately
recognize, represent, process, manage and manipulate date and
date-sensitive data (including, but not limited to, calculating, comparing,
sorting, tagging and sequencing), in both input and output, whether the
date field uses 2 or 4 digits or any other date coding schema, including
"leap year" calculations and will not cause an abnormal ending scenario
within the application domain or generate incorrect values involving such
dates, (ii) with respect to system time for all hardware, software and
operating systems, automatically function into and beyond the year 2000
C.E. without intervention and that all applications and components will
correctly interpret system time into and beyond the year 2000 C.E., and
(iii) are able to accurately recognize, represent, process and manage any
date fields currently assigned special values (i.e., 99/99/99 or 00/00/00),
if any.
"YEAR 2000 PROBLEM" shall mean the risk that computer applications may
be unable to recognize and properly perform date-sensitive functions
involving certain dates prior to and any date on or after December 31,
1999.
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(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
<TABLE>
<S> <C>
Acquisition Proposal........................................ Section 8.8
Base Period Trading Price................................... Section 3.1(b);
9.3(e)
Base Period Trading Price Limitations....................... Section 3.1(b)
Closing..................................................... Section 1.2
Convertible Debentures...................................... Section 8.14
Eagle Benefit Plans......................................... Section 5.16(a)
Eagle Contracts............................................. Section 5.17
Eagle ERISA Plan............................................ Section 5.16(a)
Eagle Options............................................... Section 3.6(a)
Eagle SEC Reports........................................... Section 5.5(a)
Eagle Shareholder Approval.................................. Section 5.2(a)
Effective Time.............................................. Section 1.3
Environmental Permits....................................... Section 5.13(a)
ERISA Affiliate............................................. Section 5.16(a)
Exchange Agent.............................................. Section 4.1
Exchange Ratio.............................................. Section 3.1(b)
Lowe's Benefit Plans........................................ Section 6.14(a)
Lowe's ERISA Plan........................................... Section 6.14(a)
Lowe's Ratio................................................ Section 9.3(e)
Lowe's SEC Reports.......................................... Section 6.5(a)
Lowe's Starting Price....................................... Section 9.3(e)
Per Share Purchase Price.................................... Section 3.1(b)
Superior Proposal........................................... Section 8.8
Takeover Laws............................................... Section 5.22
</TABLE>
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses. Each of the Parties shall bear and pay all direct costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing, registration and application fees,
printing fees, and fees and expenses of its own financial or other consultants,
investment bankers, accountants, and counsel, except that each of the Parties
shall bear and pay one-half of the filing fees payable in connection with the
Registration Statement and the Proxy Statement and printing costs incurred in
connection with the printing of the Registration Statement and the Proxy
Statement.
11.3 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except, as to Section
8.6(b), for the Confidentiality Agreement). Nothing in this Agreement expressed
or implied, is intended to confer upon any Person, other than the Parties or
their respective successors, any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, other than as provided in Section 8.13.
11.4 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
shareholder approval of this Agreement has been obtained; provided, that after
any such approval by the holders of Eagle Common Stock, there shall be made no
amendment that pursuant to Chapter 23B.11 of the WBCA requires further approval
by such shareholders without the further approval of such shareholders.
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11.5 Waivers.
(a) Prior to or at the Effective Time, Lowe's, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
Eagle, to waive or extend the time for the compliance or fulfillment by Eagle of
any and all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of Lowe's under this Agreement,
except any condition which, if not satisfied, would result in the violation of
any Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of Lowe's.
(b) Prior to or at the Effective Time, Eagle, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
Lowe's, to waive or extend the time for the compliance or fulfillment by Lowe's
of any and all of its obligations under this Agreement, and to waive any or all
of the conditions precedent to the obligations of Eagle under this Agreement,
except any condition which, if not satisfied, would result in the violation of
any Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of Eagle.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
11.6 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the Parties and their respective successors and assigns.
11.7 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
Eagle: EAGLE HARDWARE & GARDEN, INC.
981 Powell Avenue, S.W.
Renton, WA 98055
Telecopy Number: (425) 204-6702
Attention: Richard T. Takata
Copy to Counsel: Summit Law Group, P.L.L.C.
1505 Westlake Avenue North, Suite 300
Seattle, WA 98109
Telecopy Number: (206) 281-9882
Attention: Michael J. Erickson
and to: Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Telecopy Number: (212) 474-3700
Attention: Robert I. Townsend, III
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Lowe's: LOWE'S COMPANIES, INC.
State Highway 268 East (Elkin Highway)
North Wilkesboro, North Carolina 28659
Telecopy Number: (336) 658-2073
Attention: William C. Warden, Jr.
Executive Vice President, General Counsel,
Secretary and Chief Administrative Officer
Copy to Counsel: Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219
Telecopy Number: (804) 788-8218
Attention: Lathan M. Ewers, Jr.
11.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Washington, without regard to any
applicable conflicts of Laws.
11.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.10 Captions; Articles and Sections. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
11.11 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
11.12 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
11.13 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
[Signatures Appear on Following Page]
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf as of the day and year first above written.
EAGLE HARDWARE & GARDEN, INC.
By: /s/ RICHARD T. TAKATA
------------------------------------
Name: Richard T. Takata
Title: President, Chief Executive
Officer and Chief
Operating Officer
LOWE'S COMPANIES, INC.
By: /s/ THOMAS E. WHIDDON
------------------------------------
Name: Thomas E. Whiddon
Title: Executive Vice President
and Chief Financial Officer
MARINER MERGER CORPORATION
By: /s/ THOMAS E. WHIDDON
------------------------------------
Name: Thomas E. Whiddon
Title: President
A-51
<PAGE> 117
ANNEX B
PLAN OF MERGER
OF
MARINER MERGER CORPORATION
INTO
EAGLE HARDWARE & GARDEN, INC.
SECTION 1. MARINER MERGER CORPORATION ("Merger Corporation") shall, at the
time that the Articles of Merger are made effective by the Secretary of State of
the State of Washington (the "Effective Time"), be merged (the "Merger") with
and into EAGLE HARDWARE & GARDEN, INC. ("Eagle") which shall be the surviving
corporation (the "Surviving Corporation"), pursuant to an Agreement and Plan of
Merger dated as of November 22, 1998 (the "Agreement") by and among Eagle,
Merger Corporation and LOWE'S COMPANIES, INC. ("Lowe's"). Initially Capitalized
terms not otherwise defined shall have the meaning set forth in the Agreement.
SECTION 2. Conversion of Stock. At the Effective Time:
(i) Each share of Eagle Common Stock (excluding shares held by Eagle
or Lowe's, in each case other than in a fiduciary capacity, and excluding
shares held by shareholders who perfect their statutory dissenters' rights
as provided in Section 4) issued and outstanding immediately prior to the
Effective Time shall cease to be outstanding and shall be converted into
and exchanged for the right to receive that multiple (rounded to the
nearest 1/10,000) of a share of Lowe's Common Stock (the "Exchange Ratio")
obtained by dividing $29.00 (the "Per Share Purchase Price") by the Base
Period Trading Price (defined to mean the average of the daily closing
prices for the shares of Lowe's Common Stock for the ten (10) consecutive
trading days on which such shares are actually traded on the NYSE (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by Lowe's) ending at the close of trading on
the fifth trading day immediately preceding the Closing Date); provided,
that for purposes of this calculation, the Base Period Trading Price shall
be deemed to equal (i) $45.31 in the event the Base Period Trading Price is
greater than $45.31 or (ii) $33.49 in the event the Base Period Trading
Price is less than $33.49 (collectively, $45.31 and $33.49 are referred to
as the "Base Period Trading Price Limitations"). Pursuant to the Lowe's
Rights Agreement, each share of Lowe's Common Stock issued in connection
with the Merger upon conversion of Eagle Common Stock shall be accompanied
by a Lowe's Right, and all references to Lowe's Common Stock to be issued
pursuant to the Merger shall be deemed to include the corresponding Lowe's
Right, unless the context otherwise requires.
(ii) At the Effective Time, each option or other right to purchase
shares of Eagle Common Stock pursuant to stock options or stock
appreciation rights ("Eagle Options") granted by Eagle under the Eagle
Stock Plans, which is outstanding at the Effective Time, whether or not
exercisable, shall be converted into and become rights with respect to
Lowe's Common Stock, and Lowe's shall assume each Eagle Option, in
accordance with the terms of the Eagle Stock Plans and stock option
agreement by which it is evidenced, except that from and after the
Effective Time, (i) Lowe's and its Compensation Committee shall be
substituted for Eagle and the Committee of Eagle's Board of Directors
(including, if applicable, the entire Board of Directors of Eagle)
administering such Eagle Stock Plans, (ii) each Eagle Option assumed by
Lowe's may be exercised solely for shares of Lowe's Common Stock (or cash,
if so provided under the terms of such Eagle Option), (iii) the number of
shares of Lowe's Common Stock subject to such Eagle Option shall be equal
to the number of shares of Eagle Common Stock subject to such Eagle Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
and (iv) the per share exercise price under each such Eagle Option shall be
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adjusted by dividing the per share exercise price under each such Eagle
Option by the Exchange Ratio and rounding up any fraction of a cent to the
nearest cent. Notwithstanding the provisions of clause (iii) of the
preceding sentence, Lowe's shall not be obligated to issue any fraction of
a share of Lowe's Common Stock upon exercise of Eagle Options and any
fraction of a share of Lowe's Common Stock that otherwise would be subject
to a converted Eagle Option shall represent the right to receive a cash
payment upon exercise of such converted Eagle Option equal to the product
of such fraction and the difference between the market value of one share
of Lowe's Common Stock at the time of exercise of such Option and the per
share exercise price of such Option. The market value of one share of
Lowe's Common Stock at the time of exercise of an Option shall be the
closing price of such common stock on the NYSE (as reported by The Wall
Street Journal or, if not reported thereby, any other authoritative source
selected by Lowe's) on the last trading day preceding the date of exercise.
In addition, notwithstanding the provisions of clauses (iii) and (iv) of
the first sentence of this Section 2(ii), each Eagle Option which is an
"incentive stock option" shall be adjusted as required by Section 424 of
the Internal Revenue Code, so as not to constitute a modification,
extension or renewal of the option, within the meaning of Section 424(h) of
the Internal Revenue Code. Each of Eagle and Lowe's agrees to take all
necessary steps to effectuate the foregoing provisions of this Section
2(ii), including using its reasonable efforts to obtain from each holder of
an Eagle Option any Consent or Contract that may be deemed necessary or
advisable in order to effect the transactions contemplated by this Section
2(ii).
(iii) Each share of Merger Corporation Common Stock issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into one share of common stock of the
Surviving Corporation.
(iv) Each holder of shares of Eagle Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of
a share of Lowe's Common Stock (after taking into account all shares of
Lowe's Common Stock that would otherwise be issuable to such holder upon
conversion pursuant to Section 2(i)) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Lowe's Common Stock multiplied by the market value of one share of Lowe's
Common Stock at the Effective Time. The market value of one share of Lowe's
Common Stock at the Effective Time shall be the closing price of such
common stock on the NYSE (as reported by The Wall Street Journal or, if not
reported thereby, any other authoritative source selected by Lowe's) on the
last trading day preceding the Effective Time. No such holder will be
entitled to dividends, voting rights, or any other rights as a shareholder
in respect of any fractional shares.
SECTION 3. Articles of Incorporation, Bylaws and Directors of the Surviving
Corporation. At the Effective Time, there shall be no change caused by the
Merger in the Articles of Incorporation or Bylaws of the Surviving Corporation
except that Article IV of the Articles of Incorporation shall be amended by
deleting it in its entirety and replacing it with the following: "Article
IV -- Authorized Capital Stock -- The Corporation shall be authorized to issue
1000 shares of common stock, without par value". The directors of Merger
Corporation in office immediately prior to the Effective Time shall serve as the
directors of the Surviving Corporation, until such time as new directors are
duly elected by Lowe's, as the sole shareholder of the Surviving Corporation,
after the Effective Time.
SECTION 4. Dissenting Shareholders. Any holder of shares of Eagle Common
Stock who perfects his dissenters' rights in accordance with and as contemplated
by Chapter 23B.13 of the Washington Business Corporation Act (the "WBCA") shall
be entitled to receive the fair value of such shares (plus accrued interest) in
cash as determined pursuant to such provision of law; provided, that no such
payment shall be made to any dissenting shareholder unless and until such
dissenting shareholder has complied with the applicable provisions of the WBCA
and surrendered to Eagle the certificate or certificates representing the shares
for which payment is being made. In the event that
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after the Effective Time a dissenting shareholder of Eagle fails to perfect, or
effectively withdraws or loses, his right to receive payment for his shares
pursuant to Chapter 23B.13 of the WBCA, Lowe's shall issue and deliver the
consideration to which such holder of shares of Eagle Common Stock would have
received under Section 2 (without interest) upon surrender by such holder of the
certificate or certificates representing shares of Eagle Common Stock held by
him.
SECTION 5. Conditions to Merger. Consummation of the Merger is subject to
the following conditions, unless waived by the party for whose benefit they were
imposed:
(i) The Eagle Shareholder Approval shall have been obtained.
(ii) Eagle shall not be obligated to consummate the Merger if the
quotient of the Base Period Trading price divided by the Lowe's Starting
Price is less than 70%.
(iii) The waiting period (and any extension thereof) applicable to the
Merger under the HSR Act shall have been terminated or shall have expired;
and the Registration Statement shall be effective under the 1933 Act, no
stop orders suspending the effectiveness of the Registration Statement
shall have been issued, and no action, suit, proceeding or investigation by
the SEC to suspend the effectiveness thereof shall have been initiated and
be continuing.
(iv) The satisfaction of the other conditions contained in the
Agreement.
SECTION 6. Manner of Exchange.
(i) Promptly after the Effective Time, Lowe's and Eagle shall cause
the exchange agent selected by Lowe's and reasonably acceptable to Eagle
(the "Exchange Agent") to mail to the former shareholders of Eagle
appropriate transmittal materials (which shall specify that delivery shall
be effected, and risk of loss and title to the certificates theretofore
representing shares of Eagle Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent). The Exchange Agent
may establish reasonable and customary rules and procedures in connection
with its duties. After the Effective Time, each holder of shares of Eagle
Common Stock (other than shares to be canceled or as to which statutory
dissenters' rights have been perfected) issued and outstanding at the
Effective Time shall surrender the certificate or certificates representing
such shares to the Exchange Agent and shall promptly upon surrender thereof
receive in exchange therefor the consideration provided in Section 2(i),
together with all undelivered dividends or distributions in respect of such
shares (without interest thereon) pursuant to Section 6(ii). To the extent
required by Section 2(iv), each holder of shares of Eagle Common Stock
issued and outstanding at the Effective Time also shall receive, upon
surrender of the certificate or certificates representing such shares, cash
in lieu of any fractional share of Lowe's Common Stock to which such holder
may be otherwise entitled (without interest). Lowe's shall not be obligated
to deliver the consideration to which any former holder of Eagle Common
Stock is entitled as a result of the Merger until such holder surrenders
such holder's certificate or certificates representing the shares of Eagle
Common Stock for exchange as provided in this Section 6(i). The certificate
or certificates of Eagle Common Stock so surrendered shall be duly endorsed
as the Exchange Agent may require. Any other provision of the Agreement
notwithstanding, neither Lowe's, the Surviving Corporation nor the Exchange
Agent shall be liable to a holder of Eagle Common Stock for any amounts
paid or property delivered in good faith to a public official pursuant to
any applicable abandoned property law.
(ii) At the Effective Time, the stock transfer books of Eagle shall be
closed as to holders of Eagle Common Stock immediately prior to the
Effective Time and no transfer of Eagle Common Stock by any such holder
shall thereafter be made or recognized. Until surrendered for exchange in
accordance with the provisions of Section 6(i), each certificate
theretofore representing shares of Eagle Common Stock (other than shares to
be canceled) shall from and after the Effective Time represent for all
purposes only the right to receive the consideration provided in Sections
2(i) and (iv) and this Section 6(ii) in exchange therefor, subject,
however,
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to the Surviving Corporation's obligation to pay any dividends or make any
other distributions with a record date prior to the Effective Time which
have been declared or made by Eagle in respect of such shares of Eagle
Common Stock in accordance with the terms of the Agreement and which remain
unpaid at the Effective Time. To the extent permitted by law, former
shareholders of record of Eagle shall be entitled to vote after the
Effective Time at any meeting of Lowe's shareholders the number of whole
shares of Lowe's Common Stock into which their respective shares of Eagle
Common Stock are converted, regardless of whether such holders have
exchanged their certificates representing Eagle Common Stock for
certificates representing Lowe's Common Stock in accordance with the
provisions of the Agreement. Whenever a dividend or other distribution is
declared by Lowe's on the Lowe's Common Stock, the record date for which is
at or after the Effective Time, the declaration shall include dividends or
other distributions on all shares of Lowe's Common Stock issuable pursuant
to the Agreement, but no dividend or other distribution payable to the
holders of record of Lowe's Common Stock as of any time subsequent to the
Effective Time shall be delivered to the holder of any certificate
representing shares of Eagle Common Stock issued and outstanding at the
Effective Time until such holder surrenders such certificate for exchange
as provided in Section 6(i). However, upon surrender of such Eagle Common
Stock certificate, both the Lowe's Common Stock certificate (together with
all such undelivered dividends or other distributions without interest) and
cash payments payable hereunder (without interest) shall be delivered and
paid with respect to each share represented by such certificate.
SECTION 7. Effect of the Merger. The Merger, upon the Effective Time, shall
have the effect provided by Section 23B.11.060 of the WBCA.
SECTION 8. Amendment. The Boards of Directors of Lowe's and Eagle reserve
the right to amend this Plan of Merger at any time prior to the Effective Time,
provided, however, that any such amendment made subsequent to the submission of
this Plan of Merger to the shareholders of Lowe's or Eagle, may not modify
either the amount or form of the consideration to be received by such
shareholders for their shares of Eagle Common Stock or otherwise materially
adversely affect such shareholders without their approval.
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ANNEX C
[NATIONSBANC LETTERHEAD]
November 21, 1998
Board of Directors
Eagle Hardware & Garden, Inc.
981 Powell Avenue, SW
Renton, WA 98055
Gentlemen:
We understand that Eagle Hardware & Garden, Inc., a Washington corporation
(the "Company"), Mariner Merger Corporation, a Washington corporation ("Sub"),
and Lowe's Companies, Inc., a North Carolina corporation ("Parent"), propose to
enter into an Agreement and Plan of Merger, pursuant to which Sub will be merged
with and into the Company (the "Merger"), and the Company will become a
wholly-owned subsidiary of Parent. Pursuant to the Merger, as described to us by
management of the Company, each outstanding share of the common stock, without
par value per share, of the Company ("Company Common Stock") will be converted
into and exchangeable for that number of shares of the common stock, $.50 par
value per share, of Parent ("Parent Common Stock") derived by dividing $29.00 by
the Base Period Trading Price (defined in the Merger Agreement to mean the
average of the daily closing prices for shares of Parent Common Stock for the
ten consecutive trading days on which such shares of Parent Common Stock are
actually traded on the New York Stock Exchange ending at the close of trading on
the fifth trading day immediately preceding the date of the consummation of the
Merger); provided, however, that (i) if the Base Period Trading Price shall be
greater than $45.31, the Base Period Trading Price shall be deemed to equal
$45.31 or (ii) if the Base Trading Price shall be less than $33.49, the Base
Period Trading Price shall be deemed to equal $33.49 (the "Consideration"). The
terms and conditions of the Merger, as we understand them, are set forth in more
detail in the draft copy of the Agreement and Plan of Merger most recently
provided to us by the Company's legal counsel (the "Merger Agreement").
You have asked us for our opinion as investment bankers as to whether the
Consideration to be received by the shareholders of the Company pursuant to the
Merger is fair to such shareholders from a financial point of view, as of the
date hereof.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to the Company
and Parent, including the consolidated financial statements of the Company and
Parent for recent years and interim periods to October 30, 1998, and reviewed
certain other relevant financial and operating data relating to the Company and
Parent made available to us from published sources and from the internal records
of the Company and Parent, (ii) reviewed the financial terms and conditions of
the Merger Agreement, (iii) reviewed certain publicly available information
concerning the trading of, and the trading market for, Company Common Stock and
Parent Common Stock, (iv) compared the Company and Parent from a financial point
of view with certain other companies in the retail industry which we deemed to
be relevant, (v) considered the financial terms, to the extent publicly
available, of selected recent business combinations of companies in the retail
industry which we deemed to be comparable, in whole or in part, to the Merger,
(vi) reviewed and discussed with representatives of the management of the
Company and Parent certain information of a business and financial nature
regarding the Company and Parent furnished to us by them, including financial
forecasts and related assumptions of the Company and Parent, (vii) made
inquiries regarding and discussed the Merger and the Merger
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Board of Directors
Eagle Hardware & Garden, Inc.
November 21, 1998
Page 2
Agreement and other matters related thereto with the Company's counsel and
(viii) performed such other analyses and examinations as we have deemed
appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for the Company and Parent provided to us by their respective
managements, upon their advice and with your consent we have assumed for
purposes of our opinion that the forecasts have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of their
respective managements as to the future financial performance of the Company and
Parent and that they provide a reasonable basis upon which we can form our
opinion. We have also assumed that there have been no material changes in the
Company's or Parent's assets, financial condition, results of operations,
business or prospects since the respective dates of their last financial
statements made available to us. We have relied on advice of the counsel and the
independent accountants to the Company as to all legal, tax and financial
reporting matters with respect to the Company, Parent, the Merger and the Merger
Agreement. You have informed us, and we have assumed without verification and
with your consent, that the Merger will be treated as a pooling of interests
under Accounting Principles Board Opinion No. 16 and that the Merger will be
treated as a tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. We have assumed that the Merger will be consummated in a
manner that complies in all respects with the applicable provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934 and all other applicable federal and state statutes, rules
and regulations. In addition, we have not assumed responsibility for making an
independent evaluation, appraisal or physical inspection of any of the assets or
liabilities (contingent or otherwise) of the Company or Parent, nor have we been
furnished with any such appraisals. Finally, our opinion is based on the
economic, monetary and market and other conditions as in effect on, and the
information made available to us as of, the date hereof. Accordingly, although
subsequent developments may affect this opinion, we have not assumed any
obligation to update, revise or reaffirm this opinion.
We have further assumed with your consent that the Merger will be
consummated in accordance with the terms described in the Merger Agreement,
without any amendments thereto, and without waiver by the Company of any of the
conditions to its obligations thereunder.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the shareholders of
the Company pursuant to the Merger is fair to such shareholders from a financial
point of view, as of the date hereof.
We are not expressing (and cannot express) an opinion regarding the price
at which the Parent Common Stock may trade at any future time. The Consideration
to be received by the shareholders of the Company pursuant to the Merger is
based upon an exchange ratio which becomes fixed if the Base Period Trading
Price (when determined on or about the time of the shareholders' approval of the
Merger) has risen more than 15% above, or fallen more than 15% below, $39.40.
Accordingly, if the price fluctuation in the Base Period Trading Price exceeds
15%, and the collar described above becomes operative, the market value of the
Consideration received by shareholders could vary significantly from what such
shareholders would receive if the Merger were completed today.
We have acted as a financial advisor to the Company in connection with the
Merger and will receive a fee for our services, including for rendering this
opinion, a significant portion of which is contingent upon the consummation of
the Merger. In the ordinary course of our business, we trade
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Board of Directors
Eagle Hardware & Garden, Inc.
November 21, 1998
Page 3
the equity securities of the Company and Parent for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities. We have also acted as an underwriter in connection
with offerings of securities of the Company and Parent. Additionally, we may
participate directly or indirectly in arranging, underwriting or providing debt
or equity financing to Parent in connection with the Merger or in connection
with subsequent financing (or refinancing) transactions involving Parent.
This opinion is directed solely to the Board of Directors of the Company in
connection with its consideration of the Merger, and is not a recommendation to
any shareholder as to how shareholders should vote with respect to the Merger.
Shareholders of the Company are neither addressees nor intended beneficiaries of
our opinion or our underlying financial analysis (which were prepared solely for
the members of the Board of Directors of the Company for their personal use as
directors in connection with their review and evaluation of the Merger), and no
shareholder of the Company may rely or allege any reliance on our opinion or
analysis in connection with such shareholder's consideration of the merits of
the Merger or otherwise. Furthermore, this opinion addresses only the fairness
from a financial point of view of the Consideration to the shareholders of the
Company, as of the date hereof, and does not address any other aspect of the
Merger including, without limitation, any alternatives to the Merger or the
Company's underlying decision to proceed with or effect the Merger. This opinion
may not be used or referred to by the Company, or quoted or disclosed to any
person in any manner, without our prior written consent, which consent is hereby
given to the inclusion of this opinion in its entirety in any proxy statement or
prospectus filed by the Company with the Securities and Exchange Commission in
connection with the Merger that requires a description of the factors considered
by the Board of the Directors of the Company in connection with its approval of
the Merger. In furnishing this opinion, we do not admit that we are experts
within the meaning of the term "experts" as used in the Securities Act and the
rules and regulations promulgated thereunder, nor do we admit that this opinion
constitutes a report or valuation within the meaning of Section 11 of the
Securities Act.
Very truly yours,
[SIGNATURE]
NATIONSBANC MONTGOMERY
SECURITIES LLC
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ANNEX D
CHAPTER 23B.13 RCW
DISSENTERS' RIGHTS
<TABLE>
<CAPTION>
SECTIONS
--------
<S> <C>
23B.13.010 Definitions.
23B.13.020 Right to dissent.
23B.13.030 Dissent by nominees and beneficial owners.
23B.13.200 Notice of dissenters' rights.
23B.13.210 Notice of intent to demand payment.
23B.13.220 Dissenters' notice.
23B.13.230 Duty to demand payment.
23B.13.240 Share restrictions.
23B.13.250 Payment.
23B.13.260 Failure to take action.
23B.13.270 After-acquired shares.
23B.13.280 Procedure if shareholder dissatisfied with payment or offer.
23B.13.300 Court action.
23B.13.310 Court costs and counsel fees.
</TABLE>
RCW 23B.13.010 DEFINITIONS. As used in this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RCW 23B.13.020 and who exercises that right when and
in the manner required by RCW 23B.13.200 through 23B.13.280.
(3) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effective date of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would
be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder. [1989 c 165 s 140.]
RCW 23B.13.020 RIGHT TO DISSENT. (1) A shareholder is entitled to dissent
from, and obtain payment of the fair value of the shareholder's shares in the
event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party (i) if shareholder approval is required for the merger by RCW
23B.11.030, 23B.11.080, or the articles of incorporation and the
shareholder is entitled to vote on the merger, or (ii) if the corporation
is a subsidiary that is merged with its parent under RCW 23B.11.040;
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<PAGE> 125
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale;
(d) An amendment of the articles of incorporation that materially
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional share so created is to be acquired for cash under
RCW 23B.06.040; or
(e) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter may not challenge the corporate action
creating the shareholder's entitlement unless the action fails to comply with
the procedural requirements imposed by this title, RCW 25.10.900 through
25.10.955, the articles of incorporation, or the bylaws, or is fraudulent with
respect to the shareholder or the corporation.
(3) The right of a dissenting shareholder to obtain payment of the fair
value of the shareholder's shares shall terminate upon the occurrence of any one
of the following events:
(a) The proposed corporate action is abandoned or rescinded;
(b) A court having jurisdiction permanently enjoins or sets aside the
corporate action; or
(c) The shareholder's demand for payment is withdrawn with the written
consent of the corporation. [1991 c 269 s 37; 1989 c 165 s 141.]
RCW 23B.13.030 DISSENT BY NOMINEES AND BENEFICIAL OWNERS. (1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in the shareholder's name only if the shareholder dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the shareholder asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares as to which the dissenter
dissents and the dissenter's other shares were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder does so with respect to all shares of
which such shareholder is the beneficial shareholder or over which such
shareholder has power to direct the vote. [1989 c 165 s 142.]
RCW 23B.13.200 NOTICE OF DISSENTERS' RIGHTS. (1) If proposed corporate
action creating dissenters' rights under RCW 23B.13.020 is submitted to a vote
at a shareholders' meeting, the meeting notice must state that shareholders are
or may be entitled to assert dissenters' rights under this chapter and be
accompanied by a copy of this chapter.
(2) If corporate action creating dissenters' rights under RCW 23B.13.020 is
taken without a vote of shareholders, the corporation, within ten days after
[the] effective date of such corporate
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<PAGE> 126
action, shall notify in writing all shareholders entitled to assert dissenters'
rights that the action was taken and send them the dissenters' notice described
in RCW 23B.13.220. [1989 c 165 s 143.]
RCW 23B.13.210 NOTICE OF INTENT TO DEMAND PAYMENT. (1) If proposed
corporate action creating dissenters' rights under RCW 23B.13.020 is submitted
to a vote at a shareholders' meeting, a shareholder who wishes to assert
dissenters' rights must (a) deliver to the corporation before the vote is taken
written notice of the shareholder's intent to demand payment for the
shareholder's shares if the proposed action is effected, and (b) not vote such
shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section is not entitled to payment for the shareholder's shares under
this chapter. [1989 c 165 s 144.]
RCW 23B.13.220 DISSENTERS' NOTICE. (1) If proposed corporate action
creating dissenters' rights under RCW 23B.13.020 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of RCW 23B.13.210.
(2) The dissenters' notice must be sent within ten days after the effective
date of the corporate action, and must:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the person acquired beneficial
ownership of the shares before that date;
(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days
after the date the notice in subsection (1) of this section is delivered;
and
(e) Be accompanied by a copy of this chapter. [1989 c 165 s 145.]
RCW 23B.13.230 DUTY TO DEMAND PAYMENT. (1) A shareholder sent a
dissenters' notice described in RCW 23B.13.220 must demand payment, certify
whether the shareholder acquired beneficial ownership of the shares before the
date required to be set forth in the dissenters' notice pursuant to RCW
23B.13.220(2)(c), and deposit the shareholder's certificates in accordance with
the terms of the notice.
(2) The shareholder who demands payment and deposits the shareholder's
share certificates under subsection (1) of this section retains all other rights
of a shareholder until the proposed corporate action is effected.
(3) A shareholder who does not demand payment or deposit the shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
chapter. [1989 c 165 s 146.]
RCW 23B.13.240 SHARE RESTRICTIONS. (1) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is effected or the restriction is
released under RCW 23B.13.260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until the
effective date of the proposed corporate action. [1989 c 165 s 147.]
D-3
<PAGE> 127
RCW 23B.13.250 PAYMENT. (1) Except as provided in RCW 23B.13.270, within
thirty days of the later of the effective date of the proposed corporate action,
or the date the payment demand is received, the corporation shall pay each
dissenter who complied with RCW 23B.13.230 the amount the corporation estimates
to be the fair value of the shareholder's shares, plus accrued interest.
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(b) An explanation of how the corporation estimated the fair value of
the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under RCW
23B.13.280; and
(e) A copy of this chapter. [1989 c 165 s 148.]
RCW 23B.13.260 FAILURE TO TAKE ACTION. (1) If the corporation does not
effect the proposed action within sixty days after the date set for demanding
payment and depositing share certificates, the corporation shall return the
deposited certificates and release any transfer restrictions imposed on
uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation wishes to undertake the proposed action, it must
send a new dissenters' notice under RCW 23B.13.220 and repeat the payment demand
procedure. [1989 c 165 s 149.]
RCW 23B.13.270 AFTER-ACQUIRED SHARES. (1) A corporation may elect to
withhold payment required by RCW 23B.13.250 from a dissenter unless the
dissenter was the beneficial owner of the shares before the date set forth in
the dissenters' notice as the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of the dissenter's demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares, an explanation of
how the interest was calculated, and a statement of the dissenter's right to
demand payment under RCW 23B.13.280. [1989 c 165 s 150.]
RCW 23B.13.280 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER. (1) A dissenter may notify the corporation in writing of the dissenter's
own estimate of the fair value of the dissenter's shares and amount of interest
due, and demand payment of the dissenter's estimate, less any payment under RCW
23B.13.250, or reject the corporation's offer under RCW 23B.13.270 and demand
payment of the dissenter's estimate of the fair value of the dissenter's shares
and interest due, if:
(a) The dissenter believes that the amount paid under RCW 23B.13.250
or offered under RCW 23B.13.270 is less than the fair value of the
dissenter's shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under RCW 23B.13.250 within
sixty days after the date set for demanding payment; or
(c) The corporation does not effect the proposed action and does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(2) A dissenter waives the right to demand payment under this section
unless the dissenter notifies the corporation of the dissenter's demand in
writing under subsection (1) of this section
D-4
<PAGE> 128
within thirty days after the corporation made or offered payment for the
dissenter's shares. [1989 c 165 s 151.]
RCW 23B.13.300 COURT ACTION. (1) If a demand for payment under RCW
23B.13.280 remains unsettled, the corporation shall commence a proceeding within
sixty days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the sixty-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the superior court of
the county where a corporation's principal office, or, if none in this state,
its registered office, is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled, parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The corporation may join as a party to the proceeding any shareholder
who claims to be a dissenter but who has not, in the opinion of the corporation,
complied with the provisions of this chapter. If the court determines that such
shareholder has not complied with the provisions of this chapter, the
shareholder shall be dismissed as a party.
(5) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(6) Each dissenter made a party to the proceeding is entitled to judgment
(a) for the amount, if any, by which the court finds the fair value of the
dissenter's shares, plus interest, exceeds the amount paid by the corporation,
or (b) for the fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under RCW 23B.13.270. [1989 c 165 s 152.]
RCW 23B.13.310 COURT COSTS AND COUNSEL FEES. (1) The court in a proceeding
commenced under RCW 23B.13.300 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers appointed by
the court. The court shall assess the costs against the corporation, except that
the court may assess the costs against all or some of the dissenters, in amounts
the court finds equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding payment under RCW
23B.13.280.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of RCW 23B.13.200 through 23B.13.280; or
(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by chapter 23B.13 RCW.
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<PAGE> 129
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited. [1989 c 165 s 153.]
D-6
<PAGE> 130
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the NCBCA, a corporation, through its articles of incorporation or
bylaws or by contract or resolution, may eliminate or limit a director's
personal liability to the corporation or its shareholders for any monetary
damages for breach of duty, except for (1) acts or omissions that the director
at the time of such breach knew or believed were clearly in conflict with the
best interests of the corporation, (2) unlawful distributions, (3) any
transaction from which the director derived an improper personal benefit or (4)
a proceeding by or in the right of the corporation in which the director was
adjudged liable to the corporation. The Registrant's Charter provides that to
the fullest extent permitted by the NCBCA, a director of the Registrant shall
not be personally liable to the Registrant, its shareholders or otherwise for
monetary damages for breach of his or her duty as a director.
Article IV of the Registrant's Bylaws provides that the Registrant will
indemnify any person as an officer or director of the Registrant or serving in
such capacity at the request of the Registrant for another corporation,
partnership, joint venture, trust or other enterprise to the fullest extent
permitted by law, against any liability incurred in connection with any
proceeding arising out of such service. Such indemnification extends to expenses
reasonably incurred in defending such liabilities and payments made in
satisfactions of judgments or reasonable settlements of such actions. No
indemnification is available if (1) at the time of the activities that are the
subject of the proceeding, such person knew or believed that such activities
were clearly in conflict with the best interests of the Registrant; (2) such
person derived an improper personal benefit; or (3) such liability arose with
respect to voting for unlawful distributions.
The Registrant maintains an insurance policy for the benefit of directors
and officers insuring them against claims that are made against them by reason
of any wrongful act (as defined) committed in their capacity as directors or
officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed herewith or incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger by and among Lowe's Companies,
Inc., Mariner Merger Corporation and Eagle Hardware &
Garden, Inc., dated as of November 22, 1998 (Included as
Annex A to the accompanying Proxy Statement/Prospectus).
2.2 Plan of Merger by and between Mariner Merger Corporation and
Eagle Hardware & Garden, Inc. (Included as Annex B to the
accompanying Proxy Statement/Prospectus).
4.1 Shareholder Rights Agreement (Incorporated by reference to
Exhibit 4.1 to the Registrant's Current Report on Form 8-K
dated September 9, 1998).
5.1 Opinion of Hunton & Williams as to the validity of the
shares of Lowe's Common Stock.*
8.1 Opinion of Hunton & Williams as to certain tax matters.
8.2 Opinion of Cravath, Swaine & Moore as to certain tax
matters.
10.1 Employment Agreement dated as of November 22, 1998, by and
between Lowe's Companies, Inc. and Richard T. Takata.*
10.2 Separation Agreement, Waiver and Release dated November 22,
1998 by and between Eagle Hardware Garden, Inc. and David J.
Heerensperger.*
23.1 Consent of Hunton & Williams (Included in Exhibit 5.1 to
this Registration Statement).
</TABLE>
II-1
<PAGE> 131
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
23.2 Consent of Cravath, Swaine & Moore (Included in Exhibit 8.2
to this Registration Statement).
23.3 Consent of Ernst & Young LLP.
23.4 Consent of Deloitte & Touche LLP.
24.1 Power of Attorney (Included on the signature page of the
Registration Statement).
99.1 Form of Shareholders Agreement between Eagle Hardware &
Garden, Inc. and each director of Eagle Hardware & Garden,
Inc.*
99.2 Notice of Special Meeting of Shareholders of Eagle Hardware
& Garden, Inc. (Included in the accompanying Proxy
Statement/Prospectus).
99.3 Chief Executive Officer's Letter to Shareholders of Eagle
Hardware & Garden, Inc. (Included in the accompanying Proxy
Statement/Prospectus).
99.4 Form of Proxy for Special Meeting of Shareholders of Eagle
Hardware & Garden, Inc.*
99.5 Consent of NationsBanc Montgomery Securities LLC.*
</TABLE>
- ---------------
* Previously Filed
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) 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.
(c) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (b) immediately preceding, or (ii) that purports to
meet the requirements of Sections 10(a)(3) of the Act 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 shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(d) 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;
(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)
II-2
<PAGE> 132
which, individually or in the aggregate, represent a fundamental
change in the information set forth in the 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 in such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(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.
(e) 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
Securities and Exchange Commission 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.
(f) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 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.
(g) 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-3
<PAGE> 133
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Pre-Effective Amendment No. 1 to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of North Wilkesboro, State of North Carolina, on March 4, 1999.
LOWE'S COMPANIES, INC.
(Registrant)
By: /s/ ROBERT L. TILLMAN
------------------------------------
Robert L. Tillman
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to the Registrant's Registration Statement has
been signed below by the following persons on behalf of the Registrant and in
the capacities indicated on March 4, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ ROBERT L. TILLMAN Chairman, President, Chief Executive
- ----------------------------------------------------- Officer and Director
Robert L. Tillman (Principal Executive Officer)
/s/ THOMAS E. WHIDDON* Executive Vice President and Chief
- ----------------------------------------------------- Financial Officer
Thomas E. Whiddon (Principal Financial Officer)
/s/ KENNETH W. BLACK, JR.* Vice President and Corporate Controller
- ----------------------------------------------------- (Principal Accounting Officer)
Kenneth W. Black, Jr.
/s/ WILLIAM A. ANDRES* Director
- -----------------------------------------------------
William A. Andres
/s/ JOHN M. BELK* Director
- -----------------------------------------------------
John M. Belk
/s/ LEONARD L. BERRY, PH.D.* Director
- -----------------------------------------------------
Leonard L. Berry, Ph.D.
/s/ PETER C. BROWNING* Director
- -----------------------------------------------------
Peter C. Browning
/s/ CAROL A. FARMER* Director
- -----------------------------------------------------
Carol A. Farmer
/s/ PAUL FULTON* Director
- -----------------------------------------------------
Paul Fulton
</TABLE>
II-4
<PAGE> 134
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ JAMES F. HALPIN* Director
- -----------------------------------------------------
James F. Halpin
/s/ LEONARD G. HERRING* Director
- -----------------------------------------------------
Leonard G. Herring
/s/ RICHARD L. LOCHRIDGE* Director
- -----------------------------------------------------
Richard L. Lochridge
/s/ CLAUDINE B. MALONE* Director
- -----------------------------------------------------
Claudine B. Malone
/s/ ROBERT G. SCHWARTZ* Director
- -----------------------------------------------------
Robert G. Schwartz
/s/ ROBERT L. STRICKLAND* Director
- -----------------------------------------------------
Robert L. Strickland
</TABLE>
*By: /s/ ROBERT L. TILLMAN
---------------------------------
Robert L. Tillman
Attorney-in-Fact
II-5
<PAGE> 135
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------- ----------- ----
<S> <C> <C>
2.1 Agreement and Plan of Merger by and among Lowe's Companies,
Inc., Mariner Merger Corporation and Eagle Hardware &
Garden, Inc., dated as of November 22, 1998 (Included as
Annex A to the accompanying Proxy Statement/Prospectus).....
2.2 Plan of Merger by and between Mariner Merger Corporation and
Eagle Hardware & Garden, Inc. (Included as Annex B to the
accompanying Proxy Statement/Prospectus)....................
4.1 Shareholder Rights Agreement (Incorporated by reference to
Exhibit 4.1 to the Registrant's Current Report on Form 8-K
dated September 9, 1998)....................................
5.1 Opinion of Hunton & Williams as to the validity of the
shares of Lowe's Common Stock*..............................
8.1 Opinion of Hunton & Williams as to certain tax matters......
8.2 Opinion of Cravath, Swaine & Moore as to certain tax
matters.....................................................
10.1 Employment Agreement dated as of November 22, 1998, by and
between Lowe's Companies, Inc. and Richard T. Takata*.......
10.2 Separation Agreement, Waiver and Release dated November 22,
1998 by and between Eagle Hardware Garden, Inc. and David J.
Heerensperger*..............................................
23.1 Consent of Hunton & Williams (Included in Exhibit 5.1 to
this Registration Statement)................................
23.2 Consent of Cravath, Swaine & Moore (Included in Exhibit 8.2
to this Registration Statement).............................
23.3 Consent of Ernst & Young LLP................................
23.4 Consent of Deloitte & Touche LLP............................
24.1 Power of Attorney (Included on the signature page of the
Registration Statement).....................................
99.1 Form of Shareholders Agreement between Eagle Hardware &
Garden, Inc. and each director of Eagle Hardware & Garden,
Inc.*.......................................................
99.2 Notice of Special Meeting of Shareholders of Eagle Hardware
& Garden, Inc. (Included in the accompanying Proxy
Statement/Prospectus).......................................
99.3 Chief Executive Officer's Letter to Shareholders of Eagle
Hardware & Garden, Inc. (Included in the accompanying Proxy
Statement/Prospectus).......................................
99.4 Form of Proxy for Special Meeting of Shareholders of Eagle
Hardware & Garden, Inc.*....................................
99.5 Consent of NationsBanc Montgomery Securities LLC*...........
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 8.1
[LETTERHEAD OF HUNTON & WILLIAMS]
March 4, 1999
Lowe's Companies, Inc.
State Highway 268 East (Elkin Highway)
North Wilkesboro, North Carolina 28659
MERGER OF MARINER MERGER CORPORATION INTO
EAGLE HARDWARE & GARDEN, INC.
CERTAIN FEDERAL INCOME TAX MATTERS
Ladies and Gentlemen:
We have acted as counsel to Lowe's Companies, Inc. ("Lowe's"), a North
Carolina corporation, in connection with the proposed merger (the "Merger") of
Mariner Merger Corporation ("Merger Corporation"), a Washington corporation and
wholly-owned subsidiary of Lowe's, with and into Eagle Hardware & Garden, Inc.
("Eagle"), a Washington corporation, pursuant to the Agreement and Plan of
Merger dated as of November 22, 1998, among Lowe's, Merger Corporation, and
Eagle (the "Agreement"). This opinion letter is delivered to you pursuant to
Section 9.2(d) of the Agreement. Any capitalized term used but not defined in
this letter has the meaning given that term in the Agreement.
Eagle's only class of stock outstanding is common stock. Each
outstanding share of Eagle common stock (other than shares for which dissenter's
rights are exercised and any shares held by Eagle) will be converted into a
fraction of a share of Lowe's common stock according to an exchange ratio based
on the Base Period Trading Price of the Lowe's common stock; however, the
maximum exchange ratio will be 0.8659 of a share of Lowe's common stock and the
minimum exchange ratio will be 0.6400 of a share of Lowe's common stock. If an
Eagle shareholder otherwise would be entitled to receive a fractional share of
Lowe's common stock upon the exchange of shares of Eagle common stock, Lowe's
will pay cash in lieu of issuing any fractional share. Any Eagle shareholder who
exercises and perfects dissenter's rights will be entitled to receive cash for
the fair value of the shareholder's shares of Eagle common stock.
Each share of Lowe's common stock issued in the Merger will also
represent one stock purchase right issued pursuant to the Lowe's Rights
Agreement dated as of September 9, 1998. Future references herein to Lowe's
common stock refer to both the common stock and such rights.
<PAGE> 2
Lowe's Companies, Inc.
March 4, 1999
Page 2
You have requested our opinion concerning certain federal income tax
consequences of the Merger. In giving this opinion, we have reviewed the
Agreement, the Form S-4 Registration Statement under the Securities Act of 1933
relating to the Merger (the "S-4"), and such other documents as we have
considered necessary. In addition, we have been advised by appropriate officers
of Lowe's and Eagle as follows:
1. The fair market value of the Lowe's common stock (including any
fractional share interest) received by an Eagle shareholder in exchange for
Eagle common stock will be approximately equal to the fair market value of Eagle
common stock surrendered in the exchange.
2. None of the compensation received by any shareholder-employee of
Eagle will be separate consideration for, or allocable to, any shares of Eagle
common stock; none of the shares of Lowe's common stock received by any
shareholder-employee in the Merger will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to any
shareholder-employee will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
3. The payment of cash in lieu of fractional shares of Lowe's common
stock is solely for the purpose of avoiding the expense and inconvenience to
Lowe's of issuing fractional shares and does not represent separately
bargained-for consideration.
4. No share of Eagle common stock has been or will be redeemed directly
or indirectly (including, without limitation, through a partnership) by Eagle or
acquired directly or indirectly (including, without limitation, through a
partnership) by any subsidiary of Eagle in anticipation of the Merger, and Eagle
has not made and will not make any extraordinary distribution with respect to
its stock in anticipation of the Merger.
5. There is no plan or intention for Lowe's or any subsidiary of Lowe's
to acquire directly or indirectly (including, without limitation, through a
partnership) any of the Lowe's common stock issued in the Merger or to make any
extraordinary distribution with respect to such stock.
6. Neither Lowe's nor any subsidiary of Lowe's (a) owns any shares of
Eagle common stock or (b) has acquired or will acquire directly or indirectly
(including, without limitation, through a partnership) any shares of Eagle
common stock in anticipation of the Merger.
7. Following the Merger, Eagle will hold (a) at least 90 percent of the
fair market value of the net assets and at least 70 percent of the fair market
value of the gross assets held by Eagle immediately before the Merger and (b) at
least 90 percent of the fair market value of the net
<PAGE> 3
Lowe's Companies, Inc.
March 4, 1999
Page 3
assets and at least 70 percent of the fair market value of the gross assets held
by Merger Corporation immediately before the Merger. For this purpose, amounts
paid by Eagle or Merger Corporation for expenses related to the Merger, amounts
paid with respect to shares of Eagle common stock for which dissenter's rights
are exercised, and any redemptions and distributions (except for regular, normal
dividends) made in connection with the Merger will be included as assets held by
Eagle or Merger Corporation, as appropriate, immediately before the Merger, but
any assets transferred to Merger Corporation by Lowe's in connection with the
Merger are not taken into account.
8. On the effective date of the Merger, the fair market value of Eagle's
assets will exceed the sum of Eagle's liabilities plus the amount of
liabilities, if any, to which its assets are subject.
9. Following the Merger, Eagle will continue its historic business or
use a significant portion of its historic business assets in a business.
10. The liabilities of Merger Corporation, if any, that will be assumed
by Eagle and the liabilities, if any, to which assets of Merger Corporation are
subject were incurred by Merger Corporation in the ordinary course of business.
Merger Corporation holds, and will hold, only those assets necessary for it to
effect the Merger.
11. There is no indebtedness existing between (a) Eagle or any
subsidiary of Eagle and (b) Lowe's, Merger Corporation, or any other subsidiary
of Lowe's.
12. Lowe's, Merger Corporation, Eagle, and the shareholders of Eagle
have paid or will pay their respective expenses, if any, incurred in connection
with the Merger, except that filing fees and printing costs incurred in
connection with filing and printing the S-4 and the Proxy Statement relating to
the Merger will be shared equally by Lowe's and Eagle.
13. If dissenter's rights are exercised and perfected with respect to
more than five percent of the outstanding shares of Eagle common stock, neither
Eagle nor any subsidiary of Eagle will directly or indirectly pay or provide
funds for payment to any Eagle shareholder who exercises dissenter's rights.
14. Lowe's owns, and immediately before the Merger will own, all the
outstanding shares of stock of Merger Corporation.
15. After the Merger, Eagle will not issue additional shares of its
stock that would result in Lowe's owning less than 80 percent of the total
combined voting power of all classes of Eagle voting stock or less than 80
percent of each class of Eagle nonvoting stock.
<PAGE> 4
Lowe's Companies, Inc.
March 4, 1999
Page 4
16. Neither Lowe's nor Eagle has any plan or intention (a) to liquidate
Eagle, (b) to merge Eagle into another entity, (c) to sell or otherwise dispose
of any stock of Eagle, or (d) to sell or otherwise dispose of any of Eagle's
assets, except for (i) dispositions made in the ordinary course of business
(including the possible sale and leaseback of certain Eagle facilities) and (ii)
the possible transfer of certain Eagle facilities in southern California to
Lowe's provided that such transfers will not cause the representations in
paragraph number seven above to be untrue.
17. For each of Lowe's, Merger Corporation, and Eagle, less than 50
percent of the fair market value of its adjusted total assets consists of stock
and securities. For purposes of the preceding sentence, (a) a corporation's
adjusted total assets exclude cash, cash items (including accounts receivable
and cash equivalents), and United States government securities and (b) a
corporation's adjusted total assets exclude stock and securities issued by any
subsidiary at least 50 percent of the voting power or 50 percent of the total
fair market value of the stock of which is owned by the corporation, but the
corporation is treated as owning directly a ratable share (based on the
percentage of the fair market value of the subsidiary's stock owned by the
corporation) of the assets owned by any such subsidiary.
18. At all times during the five-year period ending on the effective
date of the Merger, no Eagle shareholder that is a nonresident alien or foreign
entity has owned directly or indirectly of record or, to the knowledge of Eagle,
beneficially more than five percent of the outstanding Eagle common stock.
19. Since April 16, 1997, Eagle has not distributed to its shareholders
or security holders stock or securities of a controlled corporation in a
transaction to which section 355(a) of the Internal Revenue Code of 1986, as
amended (the "Code") applies.
We assume that (a) the preceding enumerated statements are and will
remain accurate, (b) the Merger will be consummated in accordance with the
Agreement, and (c) the sum of (i) the number of shares of Eagle common stock for
which cash is paid in lieu of the issuance of fractional shares of Lowe's common
stock and (ii) the number of shares of Eagle common stock for which dissenter's
rights are exercised will be less than 20 percent of the shares of Eagle common
stock outstanding immediately before the Merger.
On the basis of the foregoing, we are of the opinion that (under
existing law) for federal income tax purposes the Merger will be a
reorganization within the meaning of section 368(a) of the Code and Lowe's,
Merger Corporation, and Eagle each will be a "party to a reorganization" within
the meaning of section 368(b) of the Code. In addition, we confirm that the
material federal income tax consequences of the Merger to the Eagle shareholders
set forth in the S-4 in the second paragraph under the heading "The Merger--
Material Federal Income Tax Consequences" represent our opinion, subject to the
limitations contained therein.
<PAGE> 5
Lowe's Companies, Inc.
March 4, 1999
Page 5
Except as set forth above, we express no opinion regarding any tax
consequences of the Merger. This opinion may not be distributed, quoted in whole
or in part or otherwise reproduced in any document, or filed with any
governmental agency without our prior written consent. We consent to the use of
this opinion as an exhibit to the S-4 and to the references to this firm in the
S-4 under the aforementioned heading. In giving this consent, we do not admit
that we are within the category of persons whose consent is required by section
7 of the Securities Act of 1933 or the rules and regulations promulgated
thereunder by the Securities and Exchange Commission.
Very truly yours,
/s/ Hunton & Williams
<PAGE> 1
EXHIBIT 8.2
[Letterhead of]
CRAVATH, SWAINE & MOORE
[New York Office]
March 4, 1999
Agreement and Plan of Merger
By and Among
Eagle Hardware & Garden, Inc.,
Mariner Merger Corporation
and Lowe's Companies, Inc.,
Dated as of November 22, 1998
Dear Sirs:
We have acted as counsel for Eagle Hardware & Garden, Inc., a Washington
corporation ("Eagle"), in connection with the proposed merger (the "Merger") of
Mariner Merger Corporation, a Washington corporation ("Merger Corporation") that
is a wholly owned subsidiary of Lowe's Companies, Inc., a North Carolina
corporation ("Lowe's") with and into Eagle pursuant to an Agreement and Plan of
Merger, by and among Eagle, Merger Corporation and Lowe's, dated as of November
22, 1998 (the "Merger Agreement").
In that connection, you have requested our opinion regarding certain
U.S. Federal income tax consequences of the Merger. In providing our opinion, we
have examined the Merger Agreement, the registration statement on Form S-4 (the
"Registration Statement"), which includes the Joint Proxy Statement and
Prospectus of Eagle and Lowe's (the "Proxy Statement/Prospectus"), filed with
the Securities and Exchange Commission (the "SEC") on February 18, 1999 and
amended on March 4, 1999, and such other documents and corporate records as we
have deemed necessary or appropriate for purposes of our opinion. In addition,
we have assumed that (i) the Merger will be consummated in accordance with the
provisions of the Merger Agreement and the Registration Statement, (ii) the
statements concerning the Merger set forth in the Merger Agreement and the
Registration Statement are true, complete and correct, (iii) the representations
made by Eagle and Lowe's, in their respective letters delivered to us for
purposes of this opinion (the "Representation Letters") are true, complete and
correct and will remain true, complete and correct at all times up to and
including the Effective Time (as defined in the Merger Agreement), (iv) any
representations made in the Representation Letters "to the best knowledge of" or
similarly qualified are correct without such qualification and (v) the combined
amount of cash paid in lieu of fractional shares and with respect to the
exercise of dissenters' rights will
<PAGE> 2
represent payment for less than 20% of the Eagle common stock outstanding
immediately before the Merger. If any of the above described assumptions are
untrue for any reason or if the Merger is consummated in a manner that is
different from the manner in which it is described in the Merger Agreement or
the Proxy Statement/Prospectus, our opinions as expressed below may be adversely
affected and may not be relied upon.
Based upon the foregoing, for U.S. Federal income tax purposes, we are
of opinion that (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and (ii) Eagle, Merger Corporation and Lowe's will each be a party to
such reorganization within the meaning of Section 368(b) of the Code. We also
confirm that the material Federal income tax consequences of the Merger to Eagle
shareholders set forth in the Proxy Statement/Prospectus, in the second
paragraph under the heading "The Merger--Material Federal Income Tax
Consequences", represent our opinion, subject to the limitations set forth
therein.
Our opinions are based on current provisions of the Code, Treasury
Regulations promulgated thereunder, published pronouncements of the Internal
Revenue Service and case law, any of which may be changed at any time with
retroactive effect. Any change in applicable laws or the facts and circumstances
surrounding the Merger, or any inaccuracy in the statements, facts, assumptions
or representations upon which we have relied, may affect the continuing validity
of our opinions as set forth herein. We assume no responsibility to inform you
of any such change or inaccuracy that may occur or come to our attention.
Finally, our opinions are limited to the tax matters specifically covered
hereby, and we have not been asked to address, nor have we addressed, any other
tax consequences of the Merger.
We consent to the filing of this opinion as Exhibit 8.2 to the
Registration Statement and to the references to this opinion therein. In giving
this consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules or regulations of the SEC promulgated thereunder. This opinion is
being provided for the benefit of Eagle so that Eagle may comply with its
obligations under the Federal securities laws. The filing of this opinion as an
exhibit to the Registration Statement and the references to such opinion and our
Firm therein are not intended to create liability under applicable state law to
any person other than Eagle, our client.
Sincerely,
/s/ Cravath, Swaine & Moore
Eagle Hardware & Garden, Inc.
981 Powell Avenue SW
Renton, WA 98055
<PAGE> 1
EXHIBIT 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 27, 1998 with respect to the consolidated
financial statements of Eagle Hardware & Garden, Inc. incorporated by reference
in the Annual Report (Form 10-K) for the year ended January 30, 1998, which is
incorporated by reference in Pre-effective Amendment No. 1 to the Registration
Statement (Form S-4) and related prospectus of Lowe's Companies for the
registration of shares of its common stock.
Seattle, Washington
March 4, 1999
/s/ Ernst & Young LLP
<PAGE> 1
Exhibit 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Pre-effective Amendment
No. 1 to Registration Statement No. 333-72585 of Lowe's Companies, Inc. on Form
S-4 of our report dated February 19, 1998 appearing and incorporated by
reference in the Annual Report on Form 10-K of Lowe's Companies, Inc. and
subsidiaries for the year ended January 30, 1998, and to the reference to us
under the headings "Summary - The Merger - Conditions to the Merger",
"Selected Pro Forma and Historical Financial Data" and "Experts" in such
Prospectus.
Charlotte, North Carolina
March 2, 1999
/s/ Deloitte & Touche LLP
