EXHIBIT 2.2
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AMENDED AND RESTATED
PLAN AND AGREEMENT OF
MERGER AND REORGANIZATION
AMONG
AEGON N.V.,
LT MERGER CORP.
AND
PROVIDIAN CORPORATION
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December 28, 1996
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TABLE OF CONTENTS
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ARTICLE 1
THE SPIN-OFF........................................................... 2
1.1 The Spin-off..................................................... 2
1.2 Amendments to the Distribution Agreement......................... 2
1.3 Further Agreements with Spinco................................... 2
ARTICLE 2
PLAN OF MERGER......................................................... 2
2.1 The Merger....................................................... 2
2.2 Conversion of Shares............................................. 3
2.3 Exchange of Certificates......................................... 4
2.4 Dividends........................................................ 5
2.5 Escheat Laws..................................................... 6
2.6 Closing of Company Transfer Books................................ 6
ARTICLE 3
CLOSING................................................................ 6
3.1 Time and Place of Closing........................................ 6
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF COMPANY.............................. 6
4.1 Organization, Good Standing and Power............................ 6
4.2 Capitalization................................................... 7
4.3 Company Subsidiaries; Voting Trusts.............................. 7
4.4 Authority; Enforceability........................................ 8
4.5 Non-Contravention; Consents...................................... 8
4.6 SEC Reports; Company Financial Statements........................ 9
4.7 Statutory Statements............................................. 10
4.8 Absence of Certain Changes or Events............................. 10
4.9 Taxes and Tax Returns............................................ 11
4.10 Litigation....................................................... 12
4.11 Contracts and Commitments........................................ 13
4.12 Registration Statement, Etc...................................... 13
4.13 Employee Benefit Plans........................................... 14
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4.14 Collective Bargaining; Labor Disputes; Compliance................ 15
4.15 Brokers and Finders.............................................. 16
4.16 No Violation of Law.............................................. 16
4.17 Indebtedness for Borrowed Money.................................. 17
4.18 Fairness Opinion................................................. 17
4.19 Real Estate Operations........................................... 17
4.20 DGCL Section 203................................................. 19
4.21 Spin-off; Merger................................................. 19
4.22 Voting Requirements.............................................. 19
4.23 Business Operating Condition..................................... 19
4.24 Assets........................................................... 19
4.25 Computer Software................................................ 20
4.26 Intellectual Property............................................ 20
4.27 Permits, Licenses and Franchises................................. 21
4.28 Insurance Business............................................... 21
4.29 Threats of Cancellation.......................................... 21
4.30 Liabilities and Reserves......................................... 21
4.31 Separate Accounts................................................ 22
4.32 Funds............................................................ 23
4.33 Insurance........................................................ 23
4.34 Solvency of Spinco............................................... 23
4.35 Investigation by Company......................................... 23
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
MERGER PARTNER AND SUB................................................. 24
5.1 Organization, Good Standing and Power............................ 24
5.2 Capitalization................................................... 24
5.3 Merger Partner Subsidiaries; Voting Trusts....................... 25
5.4 Authority; Enforceability........................................ 25
5.5 Non-Contravention; Consents...................................... 26
5.6 SEC Reports; Merger Partner Financial Statements................. 27
5.7 Statutory Statements............................................. 27
5.8 Absence of Certain Changes or Events............................. 28
5.9 Taxes and Tax Returns............................................ 28
5.10 Litigation....................................................... 29
5.11 Contracts and Commitments........................................ 29
5.12 Registration Statement, Etc...................................... 30
5.13 Employee Benefit Plans........................................... 30
5.14 Collective Bargaining; Labor Disputes; Compliance................ 32
5.15 Brokers and Finders.............................................. 32
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5.16 No Violation of Law.............................................. 32
5.17 Indebtedness for Borrowed Money.................................. 33
5.18 Environmental Liabilities........................................ 33
5.19 Merger Partner Ownership of Company Common Stock................. 34
5.20 Interim Operations of Sub........................................ 34
5.21 Spin-off; Merger................................................. 34
5.22 Business Operating Condition..................................... 34
5.23 Assets........................................................... 34
5.24 Computer Software................................................ 35
5.25 Intellectual Property............................................ 35
5.26 Permits, Licenses and Franchises................................. 35
5.27 Liabilities and Reserves......................................... 35
5.28 Insurance........................................................ 36
5.29 Investigation by Merger Partner.................................. 36
ARTICLE 6
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; CERTAIN COVENANTS...................................... 37
6.1 Access and Information........................................... 37
6.2 Conduct of Business Pending Merger............................... 38
6.3 Fiduciary Duties................................................. 43
6.4 Certain Fees..................................................... 44
6.5 Amendment to Rights Plan......................................... 44
6.6 Takeover Statutes................................................ 44
6.7 Consents......................................................... 44
6.8 Further Assurances............................................... 45
6.9 NYSE Listing..................................................... 45
6.10 Notice; Efforts to Remedy........................................ 45
6.11 Registration Statement; Stockholder Approvals.................... 46
6.12 Expenses......................................................... 46
6.13 Press Releases; Filings.......................................... 47
6.14 Indemnification of Officers and Directors........................ 47
6.15 Tax Treatment.................................................... 48
6.16 Employee Benefits................................................ 48
6.17 Stock Options.................................................... 49
6.18 Aegon USA Guaranty............................................... 50
6.19 Determination of Comparable Benefits............................. 50
6.20 Merger Partner Exchange Transaction.............................. 50
6.21 Company Contracts................................................ 51
6.22 Agents........................................................... 52
6.23 Litigation....................................................... 52
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6.24 Certain Reporting Requirements................................... 52
6.25 Investment Company Act........................................... 52
6.26 Ruling Request................................................... 52
ARTICLE 7
CONDITIONS PRECEDENT TO MERGER......................................... 53
7.1 Conditions to Each Party's Obligations........................... 53
7.2 Conditions to Obligations of Company............................. 54
7.3 Conditions to Obligations of Merger Partner...................... 55
ARTICLE 8
TERMINATION AND ABANDONMENT OF THE MERGER.............................. 56
8.1 Termination...................................................... 56
8.2 Effect of Termination and Abandonment............................ 58
ARTICLE 9
MISCELLANEOUS.......................................................... 58
9.1 Waiver and Amendment............................................. 58
9.2 Non-Survival of Representations, Warranties and Agreements....... 58
9.3 Notices.......................................................... 58
9.4 Descriptive Headings; Interpretation............................. 60
9.5 Counterparts..................................................... 61
9.6 Entire Agreement................................................. 61
9.7 GOVERNING LAW.................................................... 61
9.8 Severability..................................................... 61
9.9 Enforcement of Agreement......................................... 61
9.10 Assignment....................................................... 61
9.11 Limited Liability................................................ 62
9.12 CONSENT TO JURISDICTION; SERVICE OF PROCESS...................... 62
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DEFINITIONS
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Acquisition Proposal 6.2(f)
Agreement Introductory Paragraph
Association 5.4
Certificate 2.2(c)
Certificate of Merger 2.1(a)
Closing 3.1
Closing Date 3.1
Code Recitals
Company Introductory Paragraph
Company Business Unit 4.8
Company Collective Bargaining Agreements 4.14
Company Common Stock 2.2(b)
Company Consolidated Financial Statements 4.6(b)
Company Controlled Group Liability 4.13(b)
Company Employee Plans 4.13(a)
Company Employees 6.16(b)
Company Entities 4.3
Company Insurance Contracts 4.28
Company Insurance Subsidiary 4.7
Company Investment Assets 4.24(a)
Company Permitted Liens and Encumbrances 4.24(a)
Company Plan 6.17(a)
Company Reports 4.6(a)
Company Rights 6.5
Company Rights Agreement 6.5
Company SAR 6.17(a)
Company Separate Accounts 4.31(a)
Company Stock Option 6.17(a)
Company Subsidiaries 4.3
Confidentiality Agreements 6.1(a)
DGCL Recitals
Distribution Agreement Recitals
Effective Time 2.1(a)
Environmental Laws 4.19(c)
ERISA 4.13(a)
Exchange Act 4.6(a)
Exchange Agent 2.3(a)
Exchange Fund 2.3(a)
Exchange Ratio 2.2(c)
Fair Market Value at the Effective Time 2.2(c)
Fee Payment Event 6.3
Funds 4.32(a)
▇▇▇▇▇▇▇ ▇▇▇▇▇ 4.15
HSR Act 4.4
Indemnified Parties 6.14(a)
Insurance Laws 4.16(a)
IRS 4.9(c)
Knowledge of Company Introduction to Article 4
Knowledge of Merger Partner Introduction to Article 5
Lender 4.19(g)
Manager 4.32(b)
Material Adverse Effect on Company 4.1
Material Adverse Effect on Merger Partner 5.1
Material to Merger Partner 6.2(e)(xii)
Merger Recitals
Merger Partner Introductory Paragraph
Merger Partner Collective Bargaining Agreements 5.14
Merger Partner Common Stock 2.2(c)
Merger Partner Consolidated Financial Statements 5.6(b)
Merger Partner Controlled Group Liability 5.13(b)
Merger Partner Employee Plans 5.13(a)
Merger Partner Entities 5.3
Merger Partner Insurance Subsidiary 5.7
Merger Partner Investment Assets 5.23
Merger Partner Permitted Liens and Encumbrances 5.23
Merger Partner Preferred Stock 5.2
Merger Partner Reports 5.6(a)
Merger Partner Subsidiary 5.3
Merger Partner SARs 6.17(a)
1940 Act 4.31(a)
NYSE 2.2(c)
Option Adjustment Ratio 6.17(a)
Outstanding Company Preferred Stock 2.2(b)
Person 4.24(a)
Pivot Price 2.2(c)
Plan 6.1(b)
Process Agent 9.12(b)
Proxy Statement 4.12
Real Estate Assets 4.19(a)
Registration Statement 4.12
Retirement Plan 6.2(c)(xii)
Ruling 7.1(g)
Ruling Request 6.26
SEC 4.6(a)
Section 6.4 Fee 6.4
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Securities Act 4.6(a)
Share Price 2.2(c)
Significant Brokers 6.22
Spinco Recitals
Spin-off Recitals
Spin-off Adjusted Financial Statements 4.6(c)
Stockholders' Meeting 4.12
Sub Introductory Paragraph
Subsidiaries 6.1(a)
Surviving Corporation 2.1(a)
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AMENDED AND RESTATED
PLAN AND AGREEMENT OF
MERGER AND REORGANIZATION
AMENDED AND RESTATED PLAN AND AGREEMENT OF MERGER AND REORGANIZATION (this
"Agreement"), dated as of December 28, 1996, by and among AEGON N.V., a company
formed under the laws of The Netherlands ("Merger Partner"), LT MERGER CORP., a
Delaware corporation and a wholly owned subsidiary of Merger Partner ("Sub"),
and PROVIDIAN CORPORATION, a Delaware corporation ("Company"), pursuant to the
Amendment No. 1 and Consent, dated as of April 2, 1997, between Merger Partner,
Sub and Company, amending and restating the Plan and Agreement of Merger, dated
as of December 28, 1996, between Merger Partner, Sub and Company.
WHEREAS, the Board of Directors of Company has approved a plan of
distribution embodied in the form of the agreement attached hereto as Exhibit A
and to be signed concurrently with this Agreement (the "Distribution Agreement")
which distribution, subject to the terms and conditions of the Distribution
Agreement, will be effected prior to the Effective Time (as defined in Section
2.1(a)) and pursuant to which all of the shares of capital stock of Providian
Bancorp, Inc., a Delaware corporation and wholly owned subsidiary of Company
("Spinco"), will be distributed on a pro rata basis to Company's stockholders as
provided in the Distribution Agreement (the "Spin-off");
WHEREAS, Merger Partner has formed Sub as a wholly owned subsidiary
corporation under the Delaware General Corporation Law (the "DGCL") for the
purpose of Sub merging with and into Company following the Spin-off pursuant to
the applicable provisions of the DGCL (the "Merger") so that Company will
continue as the surviving corporation of the Merger and will become a wholly
owned subsidiary of Merger Partner;
WHEREAS, the respective Boards of Directors of Company, Merger Partner and
Sub have approved and declared advisable the Merger, the terms and provisions of
this Agreement and the transactions contemplated hereby;
WHEREAS, the respective Boards of Directors of Merger Partner and Company
have determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is fair to and in the best
interests of their respective stockholders;
WHEREAS, for federal income tax purposes, it is intended that (a) the Spin-
off shall qualify as a tax-free distribution within the meaning of Section 355
of the Internal Revenue Code, as amended (the "Code"), and (b) the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Code,
and this Agreement is intended to be and is adopted as a plan of reorganization;
and
WHEREAS, the Merger described herein is subject to the approval of the
stockholders of Company and applicable state and federal authorities, and
satisfaction of certain other conditions described in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
ARTICLE 1
THE SPIN-OFF
1.1 The Spin-off. Upon the terms and subject to the conditions of the
Distribution Agreement, Company shall use commercially reasonable efforts to
divest its interest in Spinco prior to the Effective Time through the
distribution of all of the outstanding shares of capital stock of Spinco on a
pro rata basis to the stockholders of Company as provided in the Distribution
Agreement.
1.2 Amendments to the Distribution Agreement. No amendments to the
Distribution Agreement shall be executed without the approval of Merger Partner,
which approval shall not be unreasonably withheld.
1.3 Further Agreements with Spinco. Unless otherwise approved by Merger
Partner, which approval shall not be unreasonably withheld, except as
contemplated by this Agreement or the Distribution Agreement or as set forth in
Schedule 1.3, neither any new agreement between Spinco and Company or any
Company Subsidiary (as defined in Section 4.3) nor any material amendment to any
existing agreements between Spinco and Company or any Company Subsidiary which
survive the Distribution Date (as defined in the Distribution Agreement) shall
be executed.
ARTICLE 2
PLAN OF MERGER
2.1 The Merger
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(a) Upon the terms and subject to the conditions of this Agreement, at
the Effective Time and in accordance with the provisions of this Agreement and
the DGCL, Sub shall be merged with and into Company, which shall be the
surviving corporation (sometimes referred to hereinafter as the "Surviving
Corporation") in the Merger, and the separate corporate existence of Sub shall
cease. Subject to the provisions of this Agreement, a certificate of merger
(the "Certificate of Merger") shall be duly prepared, executed and acknowledged
by Company, on behalf of the Surviving Corporation, and thereafter delivered to
the Secretary of State of the State of Delaware, for filing, as provided in the
DGCL on the Closing Date (as defined in Section 3.1). The Merger shall become
effective immediately following the Spin-off upon the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware or at such time
thereafter as is provided in the Certificate of Merger (the "Effective Time").
(b) From and after the Effective Time, the Merger shall have all the
effects set forth in the DGCL. Without limiting the generality of the
foregoing, and subject thereto, by virtue of the Merger and in accordance with
the DGCL, all of the properties, rights, privileges, powers and franchises of
Company and Sub shall vest in the Surviving Corporation and all of the debts,
liabilities
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and duties of Company and Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
(c) The Certificate of Incorporation of Sub in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended in accordance with the provisions
thereof and the DGCL.
(d) The Bylaws of Sub in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation until altered, amended or
repealed as provided therein, in the Certificate of Incorporation of the
Surviving Corporation and the DGCL.
(e) The officers and directors of Sub immediately prior to the
Effective Time shall be the initial officers and directors of the Surviving
Corporation, in each case until their respective successors are duly elected and
qualified.
2.2 Conversion of Shares. As of the Effective Time, by virtue of the Merger
and without any action on the part of any holder thereof:
(a) Each share of capital stock of Sub that is issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable share of Common Stock, par value $1 per share, of
the Surviving Corporation.
(b) All shares of common stock, par value $1 per share, of Company
("Company Common Stock") or other capital stock of Company that are owned by
Company as treasury stock or by any wholly owned Company Subsidiary (other than
the outstanding shares of Company Preferred Stock, par value $5 per share (the
"Outstanding Company Preferred Stock"), and any shares of Company Preferred
Stock issued in exchange for the Outstanding Company Preferred Stock) and any
shares of Company Common Stock owned by Merger Partner, Sub or any other wholly
owned Merger Partner Subsidiary (as defined in Section 5.3) shall be canceled
and retired and shall cease to exist and no stock of Merger Partner or other
consideration shall be delivered in exchange therefor. Any shares of Outstanding
Company Preferred Stock (or any shares of Preferred Stock of Company issued in
exchange for, or upon conversion of, the Outstanding Company Preferred Stock)
which are outstanding immediately prior to the Merger shall continue to be
outstanding immediately following the Merger.
(c) Subject to Section 2.3(c), each share of Company Common Stock that
is issued and outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 2.2(b)) shall be converted into
a right to receive a number (the "Exchange Ratio") of shares, or fraction
thereof, of voting common stock, par value of one Dutch Guilder per share, of
Merger Partner ("Merger Partner Common Stock") determined by dividing $28.00 by
the Share Price (as defined below), subject to the provisions of Section
8.1(b)(vi) or 8.1(c)(vi), if applicable. All such shares of Company Common
Stock, when so converted, shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each certificate
previously representing any such shares (a "Certificate") shall thereafter
represent the right to receive that number of shares of Merger Partner Common
Stock into which such shares of Company Common Stock have been converted.
Certificates previously representing shares of Company Common Stock shall be
exchanged for certificates representing whole shares of Merger Partner Common
Stock, and cash in lieu of any fractional share, issued in consideration
therefor upon the surrender of such certificates in accordance with Section 2.3,
without interest. For purposes of this Agreement, (i) the term "Share Price"
shall be equal to the Fair Market Value at the Effective
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Time of one share of Merger Partner Common Stock; provided, however, that if
such Fair Market Value at the Effective Time is less than $50.034, then the
Share Price shall be $50.034, and if such Fair Market Value at the Effective
Time is greater than $61.153, then the Share Price shall be $61.153; and (ii)
the term "Fair Market Value at the Effective Time" of one share of Merger
Partner Common Stock shall be the average during the 20 trading days immediately
preceding the last business day before the date of the Effective Time of the
average daily high and low prices per share of Merger Partner Common Stock on
the New York Stock Exchange ("NYSE").
(d) If after the date hereof and prior to the Effective Time, Merger
Partner shall have declared a stock split (including a reverse split) of Merger
Partner Common Stock or a dividend payable in Merger Partner Common Stock or any
other similar transaction, then the Exchange Ratio shall be appropriately
adjusted to reflect such stock split or dividend or similar transaction.
(e) Each Company Stock Option (as defined in Section 6.17) and each
Company SAR (as defined in Section 6.17) shall be converted in accordance with
Section 6.17.
2.3 Exchange of Certificates.
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(a) As of the Effective Time, Merger Partner shall deposit with ▇▇▇▇▇▇
Guaranty Trust Company of New York, or such other bank or trust company
designated by Merger Partner and reasonably acceptable to Company (the "Exchange
Agent"), for the benefit of the holders of shares of Company Common Stock, for
exchange in accordance with this Article 2 through the Exchange Agent,
certificates representing the shares of Merger Partner Common Stock (such shares
of Merger Partner Common Stock, together with any dividends or distributions
with respect thereto or cash deposited by Merger Partner in accordance with this
Section 2.3, being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.2 in exchange for outstanding shares of Company Common
Stock, together with cash to be paid in lieu of fractional shares. The
aggregate number of shares of Merger Partner Common Stock which shall be
issuable shall be a number of such shares equal to the Exchange Ratio multiplied
by the total number of outstanding shares of Company Common Stock as of the
Effective Time, subject to adjustments for nonissuance of fractional shares as
provided herein.
(b) As soon as practicable after the Effective Time, Merger Partner
and the Surviving Corporation shall cause the Exchange Agent to mail to each
holder of record of a Certificate or Certificates (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent accompanied by a properly executed letter of transmittal and
shall be in such form and have such other provisions as Merger Partner and
Company may reasonably specify), and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Merger Partner Common Stock. Upon the surrender to the Exchange Agent of one
or more Certificates for cancellation, together with such letter of transmittal,
duly executed, the holder will be entitled to receive certificates representing
that number of whole shares of Merger Partner Common Stock to be issued in
respect of the aggregate number of such shares of Company
4
Common Stock previously represented by the stock certificates surrendered based
upon the Exchange Ratio.
(c) No certificate or scrip representing fractional shares of Merger
Partner Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights as a stockholder of Merger Partner. All
fractional shares of Merger Partner Common Stock that a holder of Company Common
Stock would otherwise be entitled to receive as a result of the Merger shall be
aggregated and if a fractional share results from such aggregation, such holder
shall be entitled to receive, in lieu thereof, an amount in cash determined by
multiplying (i) the Fair Market Value at the Effective Time of one share of
Merger Partner Common Stock, by (ii) the fraction of a share of Merger Partner
Common Stock to which such holder would otherwise have been entitled. Merger
Partner shall timely make available to the Exchange Agent any cash necessary to
make payments in lieu of fractional shares as aforesaid. No such cash in lieu
of fractional shares of Merger Partner Common Stock shall be paid to any holder
of Company Common Stock until Certificates are surrendered and exchanged in
accordance with Section 2.3(a).
(d) If a certificate for Merger Partner Common Stock is to be sent to
a person other than the person in whose name the Certificates for shares of
Company Common Stock surrendered for exchange are registered, it shall be a
condition of the exchange that the person requesting such exchange shall pay to
the Exchange Agent any transfer or other taxes required by reason of the
delivery of such Certificate to a person other than the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable.
(e) The cash paid and shares of Merger Partner Common Stock issued
upon the surrender of Certificates in accordance with the terms hereof shall be
deemed to have been paid and issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock.
2.4 Dividends. No dividends or other distributions that are declared or
made after the Effective Time with respect to Merger Partner Common Stock
payable to holders of record thereof after the Effective Time shall be paid to a
Company stockholder entitled to receive certificates representing Merger Partner
Common Stock until such stockholder has properly surrendered such stockholder's
Certificates. Upon such surrender, there shall be paid to the stockholder in
whose name the certificates representing such Merger Partner Common Stock shall
be issued any dividends which shall have become payable with respect to such
Merger Partner Common Stock between the Effective Time and the time of such
surrender, without interest. After such surrender, there shall also be paid to
the stockholder in whose name the certificates representing such Merger Partner
Common Stock shall be issued any dividend on such Merger Partner Common Stock
that shall have a record date subsequent to the Effective Time and prior to such
surrender and a payment date after such surrender; provided that such dividend
payments shall be made on such payment dates. In no event shall the stockholders
entitled to receive such dividends be entitled to receive interest on such
dividends. Any portion of the Exchange Fund which remains undistributed to the
stockholders of Company for six months after the Effective Time pursuant to this
Section 2.4 shall be returned by the Exchange Agent
5
to Merger Partner which shall thereafter act as Exchange Agent, subject to the
rights of holders of unsurrendered Certificates under this Article 2.
2.5 Escheat Laws. Notwithstanding any other provision of this Article 2,
none of Merger Partner, Sub, Company, the Surviving Corporation, the Exchange
Agent or any other party hereto shall be liable to any holder of Company Common
Stock for any Merger Partner Common Stock, or dividends or distributions thereon
or cash in lieu of fractional shares, delivered to a public official pursuant to
any applicable abandoned property, escheat or similar laws.
2.6 Closing of Company Transfer Books. At the Effective Time, the stock
transfer books of Company shall be closed and no transfer of Company Common
Stock shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall, when accompanied by proper
documentation, be exchanged for Merger Partner Common Stock in the manner
provided in this Article 2.
ARTICLE 3
CLOSING
3.1 Time and Place of Closing. Unless otherwise mutually agreed upon in
writing by Merger Partner and Company, the closing of the Merger (the "Closing")
will be held at 10:00 a.m., local time, on the later of (i) June 1, 1997, and
(ii) the second business day following the date that all of the conditions
precedent specified in this Agreement have been (or can be at the Closing)
satisfied or waived by the party or parties permitted to do so (such date being
referred to hereinafter as the "Closing Date"). The place of Closing shall be at
the offices of King & Spalding, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, or at such other place as may be agreed between Merger Partner and
Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Merger Partner as follows (the
words "to the Knowledge of Company" or "to Company's Knowledge" and any words of
similar import shall mean that any one of the persons listed in Exhibit B has
actual knowledge of the matter):
4.1 Organization, Good Standing and Power. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Company is duly qualified or licensed to do business and is in good standing in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties make such qualification or licensing necessary, except
where the failure to be so qualified or licensed
6
or to be in good standing would not, individually or in the aggregate, have a
Material Adverse Effect on Company (as defined below). Company has delivered to
Merger Partner complete and correct copies of its Certificate of Incorporation
and all amendments thereto to the date hereof and its Bylaws as amended to the
date hereof. As used in this Agreement, the phrase "Material Adverse Effect on
Company" means a material adverse effect on (a) the financial condition,
business or results of operations of Company and the Company Subsidiaries on a
consolidated basis or (b) the ability of Company to consummate the transactions
contemplated by this Agreement.
4.2 Capitalization. The authorized capital stock of Company as of the date
hereof consists of 300,000,000 shares of Common Stock, par value $1 per share,
of which as of December 20, 1996, 93,765,999 shares were issued and outstanding,
6,000,000 shares of Preferred Stock, par value $5 per share, of which as of the
date hereof no shares are issued and outstanding (other than 467,400 shares
which are held by a Company Subsidiary), and 25,000,000 shares of Preference
Stock, par value $.01 per share, of which as of the date hereof no shares are
issued or outstanding. All outstanding shares of Company Common Stock are, and
all shares which may be issued prior to the Effective Time pursuant to any
outstanding Company Stock Options will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to any preemptive rights.
Except as set forth above, as of December 20, 1996, there were no shares of
capital stock or other equity securities of Company outstanding, and, except as
set forth in Schedule 4.2, there are no outstanding options, warrants or rights
to purchase or acquire from Company any capital stock of Company, there are no
existing registration covenants with Company with respect to outstanding shares
of Company Common Stock, and there are no convertible securities or other
contracts, commitments, agreements, understandings, arrangements or restrictions
by which Company is bound to issue any additional shares of its capital stock or
other securities.
4.3 Company Subsidiaries; Voting Trusts. Schedule 4.3 sets forth a correct
and complete list of each corporation, association, subsidiary or other entity
of which Company owns or controls, directly or indirectly, more than 20% of the
outstanding equity securities (other than equity securities acquired in the
ordinary course of business for investment purposes which constitute more than
20% but less than 35% of the outstanding equity securities of such issuer and
which, in the case of equity securities acquired prior to December 31, 1995, are
listed in the annual statements of the Company Insurance Subsidiaries), but
excluding Spinco and any subsidiary, corporation, association or other entity in
which Company owns an indirect equity interest exclusively through Spinco of
which Spinco owns or controls, directly or indirectly, more than 20% of the
outstanding equity securities (such entities, excluding Spinco and any entities
so owned or controlled by Spinco, are hereinafter referred to as "Company
Entities"). Any Company Entity of which Company owns or controls, directly or
indirectly, more than 50% of the outstanding equity securities is hereinafter
referred to individually as a "Company Subsidiary" and such entities are
referred to collectively as the "Company Subsidiaries." Except as disclosed in
Schedule 4.3, Company owns, directly or indirectly, the securities of each
Company Entity held by Company, free and clear of all liens, charges, pledges,
security interests or other encumbrances. All of the capital stock of each
Company Subsidiary has been duly authorized, and is validly issued, fully paid
and nonassessable. There are no outstanding options or rights to subscribe to,
or any contracts or commitments to issue or sell any shares of the capital stock
or any securities or obligations convertible into or exchangeable for, or giving
any
7
person any right to acquire, any shares of the capital stock of any Company
Entity to which Company or any Company Subsidiary is a party. There are no
voting trusts or other agreements or understandings with respect to the voting
of capital stock of Company or any Company Subsidiary to which Company or any
Company Subsidiary is a party. Each Company Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has the corporate power and authority
necessary for it to own or lease its properties and assets and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power and authority
would not, individually or in the aggregate, have a Material Adverse Effect on
Company. Each Company Subsidiary is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed or
to be in good standing would not, individually or in the aggregate, have a
Material Adverse Effect on Company.
4.4 Authority; Enforceability. Company has the corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby, subject to the approval of this Agreement by the
stockholders of Company and approval of this Agreement and the Distribution
Agreement by insurance regulatory authorities and banking regulatory
authorities, and subject to compliance with the provisions of the ▇▇▇▇-▇▇▇▇▇-
▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Subject
to such approvals and compliance, the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Company, and this
Agreement has been duly executed and delivered by Company and constitutes the
valid and binding obligation of Company, enforceable against it in accordance
with its terms, (i) except as may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) subject to general principles of equity.
4.5 Non-Contravention; Consents.
---------------------------
(a) Except as set forth in Schedule 4.5(a), neither the execution,
delivery and performance by Company of this Agreement or the Distribution
Agreement, nor the consummation by Company of the transactions contemplated
hereby or the Spin-off, nor compliance by Company with any of the provisions
hereof or the Distribution Agreement, will:
(i) violate, conflict with, result in a breach of any provision of,
constitute a default (or an event that, with notice or lapse of time or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of termination
or acceleration, or the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Company, under any of
the terms, conditions or provisions of, (x) its Certificate of
Incorporation or Bylaws, or (y) any note, bond, mortgage, indenture, deed
of trust, license, lease, contract, agreement or other instrument or
obligation to which Company or any of the Company Subsidiaries is a party,
or by which Company or any of the Company Subsidiaries may be bound, or to
which Company or any of the Company Subsidiaries or the properties or
assets of any of them may
8
be subject, and that would, in any such event specified in this
clause (y), have, individually or in the aggregate, a Material
Adverse Effect on Company; or
(ii) subject to compliance with the statutes and regulations
referred to in Section 4.5(b), violate any valid and enforceable
judgment, ruling, order, writ, injunction, decree, or any statute,
rule or regulation applicable to Company or any of the Company
Subsidiaries or any of their respective properties or assets where
such violation would, individually or in the aggregate, have a
Material Adverse Effect on Company.
(b) Except as set forth in Schedule 4.5(b) and other than
notices, filings, authorizations, exemptions, consents or approvals, the failure
of which to give or obtain would not, individually or in the aggregate, have a
Material Adverse Effect on Company, no notice to, filing with, authorization of,
exemption by, or consent or approval of, any governmental authority or other
regulatory body is necessary for the consummation by Company of the transactions
contemplated by this Agreement.
4.6 SEC Reports; Company Financial Statements.
-----------------------------------------
(a) Since January 1, 1995, Company has timely filed all reports,
registration statements, proxy statements or information statements and all
other documents, together with any amendments required to be made thereto,
required to be filed with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933 (the "Securities Act") or the Securities Exchange Act
of 1934 (the "Exchange Act") (collectively, the "Company Reports"). Company has
heretofore made available to Merger Partner true copies of all the Company
Reports, together with all exhibits thereto, that Merger Partner has requested.
Included in such Company Reports are (i) audited consolidated balance sheets of
Company and its subsidiaries at December 31, 1994 and 1995 and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended, and the notes thereto and (ii) the unaudited consolidated
balance sheets of Company and its subsidiaries at March 31, 1996, June 30, 1996
and September 30, 1996 and the related unaudited consolidated statements of
income, stockholders' equity and cash flows for the periods then ended and the
notes thereto.
(b) All of the financial statements included in the Company Reports
(which are collectively referred to herein as the "Company Consolidated
Financial Statements") fairly presented in all material respects the
consolidated financial position of Company and its subsidiaries as at the dates
mentioned and the consolidated results of operations, changes in stockholders'
equity and cash flows for the periods then ended in conformity with generally
accepted accounting principles applied on a consistent basis (subject to any
exceptions as to consistency specified therein or as may be indicated in the
notes thereto or in the case of the unaudited statements, as may be permitted by
Form 10-Q of the SEC and subject, in the case of unaudited statements, to
normal, recurring audit adjustments). As of their respective dates, the Company
Reports complied in all material respects with all applicable rules and
regulations promulgated by the SEC and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made,
9
not misleading. Except as set forth in the Company Reports, neither Company nor
any Company Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by generally accepted
accounting principles to be set forth on a consolidated balance sheet of Company
and its consolidated subsidiaries or in the notes thereto, other than
liabilities or obligations which would not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect on Company.
(c) Company has delivered to Merger Partner an unaudited pro forma
consolidated balance sheet of Company and the Company Subsidiaries (specifically
excluding Spinco and its subsidiaries) at September 30, 1996 and the related
unaudited pro forma consolidated statements of income and stockholders' equity
for the period then ended, and the notes thereto (the "Spin-off Adjusted
Financial Statements"). Such Spin-Off Adjusted Financial Statements fairly
presented in all material respects the consolidated pro forma financial position
of Company and the Company Subsidiaries (specifically excluding Spinco and its
subsidiaries) as at the date mentioned and the consolidated pro forma results of
operations and pro forma changes in stockholders' equity for the period then
ended in conformity with generally accepted accounting principles applied on a
consistent basis (subject to any exceptions as to consistency specified therein
or as may be indicated in the notes thereto or as may be permitted by Form 10-Q
of the SEC and subject to normal, recurring audit adjustments).
4.7 Statutory Statements. Company has previously furnished to Merger
Partner the annual statements of each Company Subsidiary that is engaged in the
business of insurance (a "Company Insurance Subsidiary") for the years ended
December 31, 1994 and December 31, 1995, which have been filed with the
insurance regulatory authority of the jurisdiction of organization of such
Company Insurance Subsidiary, and statutory statements, where required, for each
such company for the periods ended March 31, 1996, June 30, 1996 and September
30, 1996, and Company shall promptly furnish to Merger Partner all statutory
statements for any calendar years or quarters ending thereafter but prior to the
Effective Time. Except as set forth in Schedule 4.7, such statutory statements
present or will present fairly in all material respects the admitted assets,
liabilities and surplus of each Company Insurance Subsidiary at the end of each
of the periods then ended, and the results of its operations and changes in its
surplus for each of the periods then ended in conformity with accounting
practices prescribed or permitted by the insurance regulatory authority of the
jurisdiction of organization of such Company Insurance Subsidiary, applied on a
consistent basis as and to the extent described in such statutory statements.
4.8 Absence of Certain Changes or Events. Except as disclosed in Schedule
4.8 and the Company Reports and except for transactions contemplated by this
Agreement or the Distribution Agreement, since December 31, 1995, Company and
the Company Subsidiaries have conducted their business in all material respects
only in the ordinary course, and there has not been (i) any change in the
business, financial condition or results of operations of Company and Company
Subsidiaries which has had a Material Adverse Effect on Company, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of Company's
outstanding capital stock, except regular quarterly cash dividends with respect
to the Company Common Stock, (iii) any split, combination or reclassification of
any of Company's outstanding
10
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of Company's
outstanding capital stock, (iv) (x) any granting by Company or any Company
Subsidiary to any executive officer or other employee of Company or any Company
Subsidiary of any increase in compensation, except for increases which in the
aggregate are in the ordinary course of business consistent with prior practice
or as was required under employment agreements in effect as of December 31,
1995, (y) any granting by Company or any Company Subsidiary to any such
executive officer or other employee of any increase in severance or termination
pay, except (A) for obligations which have been satisfied prior to the date
hereof, (B) for increases in the ordinary course of business in any one case not
in excess of $25,000, or (C) as was required under any employment, severance or
termination agreements in effect as of December 31, 1995 or (z) any entry by
Company or any Company Subsidiary into any new severance or termination
agreement with any such executive officer or other employee (other than (A) for
obligations which have been satisfied prior to the date hereof, and (B) new
severance or termination obligations in the ordinary course of business in any
one case not in excess of $25,000), (v) any significant change in accounting
methods, principles or practices by Company or any Company Subsidiary materially
affecting its assets, liabilities or business, except insofar as may be
appropriate to conform to changes in statutory accounting rules or generally
accepted accounting principles, or (vi) except for changes in a manner
consistent with past practice or consistent with industry standards, any
material change in the underwriting, pricing, actuarial or investment practices
or policies of any Company Business Unit (as defined below). Notwithstanding the
foregoing, the representation contained in this Section 4.8 shall not apply to
any change or development, or combination of changes or developments, to the
extent such changes and developments are the result of adverse changes in
general economic conditions, stock market fluctuations or conditions or adverse
changes in or affecting the insurance industry generally. As used in this
Agreement, the term "Company Business Unit" shall mean the business segments of
the Company identified as of the date hereof as Providian Direct Insurance,
Providian Agency Group and Providian Capital Management.
4.9 Taxes and Tax Returns. Except as disclosed in Schedule 4.9 or as
otherwise disclosed to Merger Partner in writing:
(a) Company and the Company Subsidiaries have (i) duly filed (or there
has been filed on their behalf) with appropriate governmental authorities all
tax returns required to be filed by them, on or prior to the date hereof, except
to the extent that any failure to file would not, individually or in the
aggregate, have a Material Adverse Effect on Company, and (ii) duly paid in full
or made provisions in accordance with generally accepted accounting principles
(or there has been paid or provision has been made on their behalf) for the
payment of all taxes for all periods ending on or prior to the date hereof,
except to the extent that any failure to fully pay or make provision for the
payment of such taxes would not, individually or in the aggregate, have a
Material Adverse Effect on Company;
(b) no federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any taxes
or tax returns of Company or the Company Subsidiaries wherein an adverse
determination or ruling in any one such proceeding or in all such proceedings in
the aggregate would have a Material Adverse Effect on Company;
11
(c) the federal income tax returns of Company and the Company
Subsidiaries have been examined by the Internal Revenue Service ("IRS") (or the
applicable statutes of limitation for the assessment of federal income taxes for
such periods have expired) for all periods through and including December 31,
1992, and no material deficiencies were asserted as a result of such
examinations that have not been resolved and fully paid. Neither Company nor any
of the Company Subsidiaries has granted any requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any taxes with respect to any tax returns of Company or any of the
Company Subsidiaries;
(d) neither Company nor any of the Company Subsidiaries is a party to
any tax sharing or material tax indemnity agreement;
(e) any amount that could be received (whether in cash or property or
the vesting of property) as a result of any of the transactions contemplated by
this Agreement by any employee, officer or director of Company or any Company
Subsidiary who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment, severance
or termination agreement, other compensation arrangement or Company Benefit Plan
currently in effect would not be characterized as an "excess parachute payment"
(as such term is defined in Section 280G(b)(1) of the Code). In addition,
Section 162(m) of the Code will not apply to any amount paid or payable by
Company or any Company Subsidiary under any contract or Company Employee Plan
currently in effect;
(f) all annuity contracts and life insurance policies issued by a
Company Insurance Subsidiary meet all definitional or other requirements for
qualification under the Code applicable (or intended to be applicable) to such
annuity contracts or life insurance policies, including, without limitation, the
following: (A) any life insurance policies meet the requirements of Sections
101(f) or 7702 of the Code, as applicable; (B) any annuity contracts that are
intended to qualify as "annuity contracts" (excluding contracts that are
described in Section 72(s) of the Code) meet the requirements of Section 72(s)
of the Code; (C) any annuity contracts that are intended to qualify under
Sections 130, 403(a), 403(b) or 408(b) of the Code contain all provisions
required for qualification under such sections of the Code; and (D) any annuity
contracts that are marketed as, or in connection with, plans that are intended
to qualify under Sections 401, 403, 408 or 457 of the Code comply with the
requirements of such sections; except in the case of any of the foregoing to the
extent that any failure to so meet such requirements has not and would not,
individually or in the aggregate, have a material adverse effect on (A) the
financial condition, business or results of operations of any Company Business
Unit or (B) the ability of Company to consummate the transactions contemplated
by this Agreement; and
(g) as used in this Agreement, "taxes" shall include all Federal,
state, local and foreign income, property, premium, sales, excise, employment,
payroll, withholding and other taxes.
4.10 Litigation. Except as disclosed in Schedule 4.10 or in the Company
Reports, neither Company nor any Company Subsidiary is a party to any pending
or, to the Knowledge of Company, threatened claim, action, suit, investigation
or proceeding which would reasonably be expected to
12
have, either individually or in the aggregate, a Material Adverse Effect on
Company. Except as disclosed in Schedule 4.10, at the date of this Agreement,
neither Company nor any Company Insurance Subsidiary has received actual notice
of any proceeding, claim or investigation pending or threatened against Company
or any Company Insurance Subsidiary before any insurance department or agency
which would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on Company. Except as disclosed in Schedule
4.10, at the date of this Agreement there is no outstanding order, writ,
judgment, stipulation, injunction, decree, determination, award or other
decision against Company or any Company Subsidiary which, either individually or
in the aggregate, has had or would have a Material Adverse Effect on Company.
4.11 Contracts and Commitments. Neither Company nor any Company Subsidiary
has received notice from any person alleging that Company or any Company
Subsidiary is in default under any contracts within the scope of Section 6.21 as
to which it is reasonably foreseeable that an adverse determination would
result, individually or in the aggregate, in a Material Adverse Effect on
Company.
4.12 Registration Statement, Etc. None of the information supplied or to be
supplied by Company for inclusion or incorporation by reference in (a) the
Registration Statement to be filed by Merger Partner with the SEC in connection
with the Merger Partner Common Stock to be issued in the Merger (the
"Registration Statement"), (b) the Proxy Statement (the "Proxy Statement") to be
mailed to Company's stockholders in connection with the meeting (the
"Stockholders' Meeting") to be called to consider the Merger, and (c) any other
documents to be filed with the SEC in connection with the transactions
contemplated hereby (including the Registration Statement on Form 10 or, if
applicable, Form S-1 to be filed in connection with the Spin-off) will, at the
respective times such documents are filed and at the time such documents become
effective or at the time any amendment or supplement thereto becomes effective
contain any untrue statement of a material fact, or omit to state any material
fact required or necessary in order to make the statements therein not
misleading; and, in the case of the Registration Statement, when it becomes
effective or at the time any amendment or supplement thereto become effective,
cause the Registration Statement or such supplement or amendment to contain any
untrue statement of a material fact, or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading; or, in the case of the Proxy Statement, when first mailed to the
stockholders of Company, or in the case of the Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Stockholders' Meeting, cause
the Proxy Statement or any amendment thereof or supplement thereto to contain
any untrue statement of a material fact, or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All documents that Company is responsible for filing with the SEC
and any other regulatory agency in connection with the Merger will comply as to
form in all material respects with the provisions of applicable law and any
applicable rules or regulations thereunder, except that no representation is
made by Company with respect to statements made therein based on information
supplied by Merger Partner or with respect to information concerning Merger
Partner or Sub which is incorporated by reference in the Registration Statement
or the Proxy Statement.
13
4.13 Employee Benefit Plans.
----------------------
(a) Schedule 4.13 contains a list of each material plan, program,
arrangement, practice or contract which is maintained by Company or any Company
Subsidiary or to which Company or any Company Subsidiary is obligated to make
contributions and which provides benefits or compensation to or on behalf of
employees, including but not limited to executive arrangements (for example, any
bonus, incentive compensation, stock option, deferred compensation, commission,
severance, golden parachute or other executive compensation plans, programs,
contracts or arrangements) and "employee benefit plans" as defined in Section
3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans, programs, arrangements, practices or contracts are
referred to herein as "Company Employee Plans." Company has made available to
Merger Partner the plan documents or other writing constituting each Company
Employee Plan and, if applicable, the trust, insurance contract or other funding
arrangement, the ERISA summary plan description and the most recent Forms 5500
and annual reports for each such plan. Company has identified those Company
Employee Plans which Company intends to satisfy the requirements of Section 401
of the Code and has made available to Merger Partner accurate copies of the most
recent favorable determination letters for such plans.
(b) With respect to each Company Employee Plan that is subject to
Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there
does not exist any accumulated funding deficiency within the meaning of Section
412 of the Code or Section 302 of ERISA, whether or not waived; (ii) no
reportable event within the meaning of Section 4043(c) of ERISA with respect to
which the 30-day notice period has not been waived has occurred before the date
of this Agreement, nor will any such event occur after the date of this
Agreement except by reason of the Spin-off; and (iii) all premiums required to
be paid to the Pension Benefit Guaranty Corporation have been timely paid in
full. There does not now exist, nor do any circumstances exist that could result
in, any Company Controlled Group Liability (as defined below) that would be a
liability of Company or any Company Subsidiary following the Effective Time.
"Company Controlled Group Liability" means any and all liabilities under (i)
Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the
Code and (iv) the continuation coverage requirements of Section 601 et seq. of
ERISA and Section 4980B of the Code, other than such liabilities that arise
solely out of, or relate solely to, the Company Employee Plans.
(c) Neither Company nor any Company Subsidiary is, or has been, a
participant in a multi-employer plan (within the meaning of ERISA Section
3(37)). Except as set forth in Schedule 4.13, neither Company nor any Company
Subsidiary maintains or has at any time maintained a Company Employee Plan which
is subject to Title IV of ERISA. Except as set forth in Schedule 4.13, neither
Company nor any Company Subsidiary is obligated to provide post employment or
retirement medical benefits or any other unfunded welfare benefits to or on
behalf of any person who is no longer an employee of Company or any Company
Subsidiary, except for health continuation coverage as required by Section 4980B
of the Code or Part 6 of Title I of ERISA.
(d) Except as set forth in Schedule 4.13, (i) each Company Employee
Plan has at all times been maintained, by its terms and in operation, in
accordance with all applicable laws, and
14
(ii) each of those Company Employee Plans which are intended to be qualified
under Section 401 of the Code has at all times been maintained, by its terms and
in operation, in accordance with Section 401 of the Code, in each case except
where a failure to be so maintained would not have a Material Adverse Effect on
Company. Except as set forth in Schedule 4.13, as of December 31, 1995, neither
Company nor any of the Company Subsidiaries had any liability under any Company
Employee Plan that was not reflected in the Company audited consolidated balance
sheet at December 31, 1995 or disclosed in the notes thereto, other than
liabilities which individually or in the aggregate would not have a Material
Adverse Effect on Company.
(e) Except as set forth in Schedule 4.13, to the Knowledge of Company,
no prohibited transaction has occurred with respect to any Company Employee Plan
maintained by Company or any of the Company Subsidiaries that would result,
directly or indirectly, in the imposition of an excise tax or other liability
under the Code or ERISA, except for such a tax or other liability that would not
have a Material Adverse Effect on Company.
(f) Except as set forth in Schedule 4.13, all contributions or premium
payments with respect to the Company Employee Plans due for any period ending on
or before the Effective Time have been or will be timely paid by Company. Except
as set forth in Schedule 4.13, the execution of or performance of the
transactions contemplated by this Agreement will not create, accelerate or
increase any obligations under the Company Employee Plans which would have a
Material Adverse Effect on Company.
(g) Neither Spinco nor any entity owned or controlled by Spinco is, or
has been, a participant in a multi-employer plan (within the meaning of ERISA
Section 3(37)) or has maintained or contributed to a plan that is subject to
Title IV of ERISA.
4.14 Collective Bargaining; Labor Disputes; Compliance. The only collective
bargaining agreements to which Company or any of the Company Subsidiaries is a
party are set forth in Schedule 4.14 (the "Company Collective Bargaining
Agreements"). Except as set forth in Schedule 4.14, to the Knowledge of Company,
the employees of Company and the Company Subsidiaries are not represented by any
unions other than the unions which are parties to the Company Collective
Bargaining Agreements. Except as set forth in Schedule 4.14, neither Company nor
any of the Company Subsidiaries is currently, nor has been during the past three
years, the subject of any certification or decertification organization drive.
Neither Company nor any of the Company Subsidiaries is currently, nor has been
during the past three years, the subject of any strike relating to Company or
any of the Company Subsidiaries nor, to the Knowledge of Company, is any such
activity threatened. Each of Company and each Company Subsidiary has complied
with all laws relating to the employment and safety of labor, including
provisions relating to wages, hours, benefits, collective bargaining and all
applicable occupational safety and health acts, laws and regulations except, in
each case, where the failure to be in compliance would not, individually or in
the aggregate, have a Material Adverse Effect on Company. Each of Company and
the Company Subsidiaries has complied with the terms of each collective
bargaining agreement to which it is a party or is bound, except where the
failure to so comply would not have, individually or in the aggregate, a
Material Adverse Effect on Company.
15
4.15 Brokers and Finders. Neither Company nor any of the Company
Subsidiaries, nor any of their respective officers, directors or employees, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or indirectly for Company or any of the Company
Subsidiaries, in connection with this Agreement or any of the transactions
contemplated hereby, except that Company has retained ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
("▇▇▇▇▇▇▇ Sachs") as its financial advisor, whose fees and expenses will be paid
by Company.
4.16 No Violation of Law.
-------------------
(a) The business and operations of the Company Insurance Subsidiaries
have been conducted in compliance with all applicable statutes and regulations
regulating the business of insurance and all applicable orders and directives of
insurance regulatory authorities and market conduct recommendations resulting
from market conduct examinations of insurance regulatory authorities
(collectively, "Insurance Laws"), except where the failure to so conduct such
business and operations would not individually or in the aggregate have a
Material Adverse Effect on Company. Notwithstanding the generality of the
foregoing, except where the failure to do so would not have, individually or in
the aggregate, a Material Adverse Effect on Company and except as set forth in
Schedule 4.16, each Company Insurance Subsidiary and its agents have marketed,
sold and issued insurance products in compliance, in all material respects, with
all statutes, laws, ordinances, rules, orders and regulations applicable to the
business of such Company Insurance Subsidiary and in the respective
jurisdictions in which such products have been sold, including, without
limitation, in compliance with (i) all applicable prohibitions against
"redlining," (ii) all applicable requirements relating to the disclosure of the
nature of insurance products as policies of insurance and (iii) all applicable
requirements relating to insurance product projections. In addition, except as
set forth in Schedule 4.16, (i) there is no pending or, to the Knowledge of
Company, threatened charge by any insurance regulatory authority that any of the
Company Insurance Subsidiaries has violated, nor any pending or, to the
Knowledge of Company, threatened investigation by any insurance regulatory
authority with respect to possible violations of, any applicable Insurance Laws
where such violations would have individually or in the aggregate a Material
Adverse Effect on Company; (ii) none of the Company Insurance Subsidiaries is
subject to any order or decree of any insurance regulatory authority relating
specifically to such Company Insurance Subsidiary (as opposed to insurance
companies generally) which would have individually or in the aggregate a
Material Adverse Effect on Company; and (iii) the Company Insurance Subsidiaries
have filed all reports required to be filed with any insurance regulatory
authority on or before the date hereof as to which the failure to file such
reports would have individually or in the aggregate a Material Adverse Effect on
Company.
(b) In addition to Insurance Laws, the business and operations of
Company and the Company Subsidiaries have been conducted in compliance with all
other applicable laws, ordinances, regulations and orders of all governmental
entities and other regulatory bodies (including, without limitation, laws,
ordinances, regulations and orders relating to zoning, environmental matters and
the safety and health of employees), except where such noncompliance,
individually or in the aggregate, would not have a Material Adverse Effect on
Company. Except as set forth in Schedule 4.16, in addition to Insurance Laws,
(i) neither Company nor any Company Subsidiary has
16
been charged with or, to the Knowledge of Company, is now under investigation
with respect to, a violation of any applicable law, regulation, ordinance, order
or other requirement of a governmental entity or other regulatory body, which
violations or penalties would have, individually or in the aggregate, a Material
Adverse Effect on Company, (ii) neither Company nor any Company Subsidiary is a
party to or bound by any order, judgment, decree or award of a governmental
entity or other regulatory body which has or will have, individually or in the
aggregate, a Material Adverse Effect on Company; and (iii) Company and the
Company Subsidiaries have filed all reports required to be filed with any
governmental entity or other regulatory body on or before the date hereof as to
which the failure to file such reports would result, individually or in the
aggregate, in a Material Adverse Effect on Company. Company and the Company
Subsidiaries have all permits, certificates, licenses, approvals and other
authorizations required in connection with the operation of the business of
Company and the Company Subsidiaries, except for permits, certificates,
licenses, approvals and other authorizations the failure of which to have would
not, individually or in the aggregate, have a Material Adverse Effect on Company
and except for such permits, certificates, licenses, approvals and other
authorizations required to be obtained in connection with the consummation of
the transactions contemplated hereby.
4.17 Indebtedness for Borrowed Money. Company has made available to Merger
Partner the instruments or other documents relating to all indebtedness of
Company or any Company Subsidiary for borrowed money the principal balance of
which is $10 million or more, whether such indebtedness is direct or indirect,
primary or secondary, by guarantee or otherwise.
4.18 Fairness Opinion. The Board of Directors of Company has received an
opinion dated December 28, 1996 from ▇▇▇▇▇▇▇ ▇▇▇▇▇ to the effect that as of such
date the consideration to be received by the stockholders of Company pursuant to
the Spin-off and the Merger, taken together, is fair to such stockholders.
4.19 Real Estate Operations. Except as otherwise would not have a Material
Adverse Effect on Company:
(a) Schedules A, B, BA and D of the statutory statements of the
Company Insurance Subsidiaries for the year ended December 31, 1995 contain true
and complete disclosures of all "Real Estate Owned" (Schedule A Assets),
"Mortgage Loans" (Schedule B Assets), "Partnership Interests" in partnerships
owning real estate (Schedule BA Assets) and "Credit Tenant Loans and Industrial
Revenue Bonds with Publicly Traded Borrowers" (Schedule D) owned by the Company
Insurance Subsidiaries as of December 31, 1995. All Real Estate Owned, Mortgage
Loans and Partnership Interests owned by Company or any Company Subsidiaries are
collectively hereinafter referred to as "Real Estate Assets." All information
concerning the Real Estate Assets in the statutory statements of the Company
Insurance Subsidiaries for the year ended December 31, 1995 is true and complete
in all material respects in the opinion of Company; all values expressed in such
statements fairly represent Company's opinion of the value of the Real Estate
Owned and Partnership Interests; and reserves taken in respect of impairment to
value of the Mortgage Loans are in the opinion of Company adequate to fairly
represent such impairment.
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(b) All Real Estate Assets comply with all regulations of the
applicable authorities of the domiciliary jurisdiction of the Company Insurance
Subsidiary owning such assets to qualify as "admitted assets" pursuant to the
laws and regulations of such domicile.
(c) To the Knowledge of Company without inspection or inquiry other
than the most recent property inspection report, each Real Estate Owned asset
and all activities upon, or use or occupancy of, such assets are in material
compliance with all applicable laws, including Environmental Laws (as defined
below). For each Real Estate Owned asset and commercial mortgage loan originated
since 1989, Company has obtained an environmental report covering the
environmental condition of the asset. As used in this Agreement, the term
"Environmental Laws" shall mean all state, federal and local laws and all rules
and regulations promulgated thereunder governing or in any way relating to the
generation, handling, manufacturing, treatment, storage, use, transportation,
spillage, leakage, dumping, release, discharge or disposal of any contaminant,
pollutant or hazardous or toxic substance, material or waste, or other
environmentally regulated material including, but not limited to, those
substances, materials and wastes listed in the United States Department of
Transportation Table (49 CRF 172.101) or by the Environmental Protection Agency
as a hazardous substance, material or waste or which is or becomes regulated
under any applicable local, state or federal law and all rules and regulations
promulgated thereunder, including, without limitation, any of the following
materials, wastes or substances: (i) petroleum and petroleum products, (ii)
asbestos in any form, (iii) polychlorinated biphenyls, (iv) urea formaldehyde,
(v) atmospheric radon at levels over four (4) picocuries per cubic liter, (vi)
those designated as a "hazardous substance" pursuant to Section 311 of the Clean
Water Act, 33 U.S.C. Section 1251 et seq. (33 U.S.C. Section 1321) or listed
pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section 1317), (vii)
those defined as a "hazardous substance" pursuant to Section 1004 of the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42
U.S.C. Section 6903), or (viii) those defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. (42 U.S.C.
Section 9601). Neither Company nor any Company Subsidiary has participated in
the management of any of the partnership properties or of the borrowers under
the Mortgage Loans or has participated in the management or operation of the
real property encumbered by any of the Mortgage Loans or any of the improvements
located on said real property. As used in this Section 4.19(c) "participated in
the management" shall have the meaning ascribed to such phrase in the Asset
Conservation, Lender Liability and Deposit Insurance Protection Act of 1996 and
"operation" shall have the meaning ascribed in 42 U.S.C. 6901 et. seq.
(d) Based solely on opinions from partnership counsel obtained upon
the acquisition of such partnership interests, all Schedule BA assets are valid
limited partnership interests in partnerships which are legally formed.
(e) Company or a Company Subsidiary is owner of a fee simple interest
in all Real Estate Owned assets and such assets are free and clear of prior
monetary liens and encumbrances, except for Company Permitted Liens and
Encumbrances (as defined in Section 4.24), and except as disclosed in the
statutory statements.
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(f) Company or a Company Subsidiary is the sole named insured on a
policy of title insurance with respect to each of the Real Estate Assets (other
than Partnership Interests), and each of said title insurance policies insures
Company as the holder of a first priority mortgage in regard to Mortgage Loans
and as the fee simple owner in regard to Real Estate Owned.
(g) Company or the Company Subsidiary owning each Mortgage Loan asset
(hereinafter sometimes referred to as "Lender") has possession of the original
promissory note or notes creating such Mortgage Loan debt and all other
documents creating, evidencing or modifying the Mortgage Loan or its terms and
conditions. The lien associated with each Mortgage Loan constitutes a first
priority lien against the property purported to be encumbered, subject to
certain exceptions.
(h) To the Knowledge of Company, none of the Mortgage Loans is cross-
defaulted or cross-collateralized with a loan owned by Spinco.
4.20 DGCL Section 203. Assuming the accuracy of Merger Partner's
representations and warranties contained in Section 5.19, prior to the date
hereof Company has taken all appropriate actions so that the restrictions on
business combinations contained in DGCL Section 203 will not apply with respect
to or as a result of this Agreement, the Distribution Agreement, the Merger or
the Spin-off.
4.21 Spin-off; Merger. Neither Company nor any Company Subsidiary has taken
any action or failed to take any action which action or failure to take action
would jeopardize the Spin-off as a tax-free distribution within the meaning of
Section 355 of the Code or the Merger as a reorganization within the meaning of
Section 368(a) of the Code.
4.22 Voting Requirements. The affirmative vote of the holders of a majority
of the shares of Company Common Stock with respect to this Agreement and the
Merger is the only vote of the holders of any class or series of Company's
capital stock necessary to approve this Agreement and the transactions
contemplated by this Agreement.
4.23 Business Operating Condition. Except as listed in Schedule 4.23 and
except as otherwise would not have a Material Adverse Effect on Company, all
furniture, fixtures, machinery and equipment necessary to conduct the businesses
and operations of Company and the Company Insurance Subsidiaries in
substantially the same manner as such businesses and operations are carried on
currently by Company and the Company Insurance Subsidiaries are in the
possession of Company and in good working order and condition for the purposes
for which they are currently used.
4.24 Assets.
(a) Except as set forth in Schedule 4.24 or as otherwise would not
have a Material Adverse Effect on Company and except for Company Permitted Liens
and Encumbrances (as defined below), Company and/or the Company Subsidiaries
have good and valid title to all personal property (including, without
limitation, Company Investment Assets (as defined below)) that was carried as
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an asset on the Spin-off Adjusted Financial Statements or acquired in the
ordinary course of business since September 30, 1996, other than with respect to
those assets which have been disposed of in the ordinary course of business or
redeemed in accordance with their terms since such date or with respect to
statutory deposits which are subject to certain restrictions on transfer. As
used in this Agreement, "Company Permitted Liens and Encumbrances" means, as to
any assets or property, any (i) liens or encumbrances securing taxes,
assessments or other governmental charges which are not yet due or which are
being diligently contested in good faith by appropriate proceedings if adequate
reserves have been established in accordance with generally accepted accounting
principles or the statutory accounting principles and practices prescribed or
permitted by the insurance department of the state of domicile of a Company
Insurance Subsidiary, as appropriate, or, in the case of Mortgage Loans, funds
are held in escrow sufficient to discharge such liens or the borrower has posted
a bond in the amount of such lien, (ii) liens or encumbrances imposed by law or
incurred in the ordinary course of business with respect to the claims of
materialmen, mechanics, carriers, warehousemen, landlords and other Persons (as
defined below) which (A) are not yet due and payable and which do not materially
detract from the value of such property or assets or materially impair the use
thereof by Company and the Company Subsidiaries in the operation of their
respective businesses, or (B) are being diligently contested in good faith and
by proper proceedings if adequate reserves have been established with respect
thereto in accordance with generally accepted accounting principles or the
statutory accounting principles and practices prescribed or permitted by the
insurance department of the state of domicile of a Company Insurance Subsidiary,
as appropriate, and (iii) liens and encumbrances that would not, individually or
in the aggregate, have a Material Adverse Effect on Company. As used in this
Agreement "Company Investment Assets" means bonds, stocks, mortgage loans or
other investments that are carried on the books and records of Company and the
Company Insurance Subsidiaries. As used in this Agreement, "Person" means any
individual, corporation, partnership, firm, joint venture, association, joint-
stock company, trust, unincorporated organization, governmental, judicial or
regulatory body, business unit, division or other entity.
(b) The annual statement of each Company Insurance Subsidiary for the
year ended December 31, 1995 sets forth a list, which list is accurate and
complete in all material respects, of all Company Investment Assets owned by
such Company Insurance Subsidiary as of December 31, 1995, together with the
cost basis book or amortized value, as the case may be, of such Company
Investment Assets as of December 31, 1995.
4.25 Computer Software. Company owns, or possesses valid license rights to,
all computer software programs that are material to the conduct of the business
of Company and the Company Insurance Subsidiaries taken as a whole. Except as
listed in Schedule 4.25, there are no infringement suits, actions or proceedings
pending or, to the Knowledge of Company, threatened against Company or any
Company Insurance Subsidiary with respect to any software owned or licensed by
Company or any Company Subsidiary, which, if determined adversely, would have,
either individually or in the aggregate, a Material Adverse Effect on Company.
4.26 Intellectual Property. Company owns, or possesses valid license rights
to, all intellectual property that is material to the conduct of the business of
Company and the Company Insurance Subsidiaries taken as a whole. Except as
listed in Schedule 4.26, Company has not
20
received any notice of any conflict with or violation or infringement of, any
asserted rights of any other Person with respect to any such intellectual
property owned or licensed by Company or any Company Insurance Subsidiary,
which, if determined adversely, would have, either individually or in the
aggregate, a Material Adverse Effect on Company.
4.27 Permits, Licenses and Franchises. Schedule 4.27 lists (i) all
jurisdictions in which each Company Insurance Subsidiary is licensed to transact
the business of insurance and (ii) the lines of business which each Company
Insurance Subsidiary is authorized to transact in each such jurisdiction. Except
as listed in Schedule 4.27, to the Knowledge of Company, except as otherwise
would not have a material adverse effect on the financial condition, business or
results of operation of any Company Business Unit taken as a whole, neither
Company nor any Company Insurance Subsidiary has engaged in any activity which
would cause revocation or suspension of any license to transact the business of
insurance and no action or proceeding looking to or contemplating the revocation
or suspension of any license to transact the business of insurance is pending or
threatened.
4.28 Insurance Business. Except as listed in Schedule 4.28 and except as
otherwise would not have a Material Adverse Effect on Company, all policies,
binders, slips, certificates, annuity contracts and participation agreements and
other agreements of insurance, whether individual or group, in effect as of the
date hereof (including all supplements, endorsements, riders and ancillary
agreements in connection therewith) that are issued by the Company Insurance
Subsidiaries (the "Company Insurance Contracts"), are, to the extent required
under applicable law, on forms approved by applicable insurance regulatory
authorities or which have been filed and not objected to by such authorities
within the period provided for objection, and such forms comply in all material
respects with the insurance statutes, regulations and rules applicable thereto.
Premium rates established by the Company Insurance Subsidiaries that are
required to be filed with or approved by insurance regulatory authorities have
been so filed or approved, the premiums charged conform thereto in all material
respects, and such premiums comply in all material respects with the insurance
statutes, regulations and rules applicable thereto, except where the failure to
be so filed or approved, or to so conform or comply, would not, individually or
in the aggregate, have a Material Adverse Effect on Company.
4.29 Threats of Cancellation. Except as disclosed in Schedule 4.29 and
except for terminations at maturity or in the ordinary course of business, since
January 1, 1996 and through the date hereof, no individual policyholder (or
individual party to a joinder agreement) which accounted for $5 million or more
in premium income and policyholder deposits for the year ended December 31, 1995
has terminated or, to the Knowledge of Company, has given written notice of
termination of, its relationship with any Company Insurance Subsidiary.
4.30 Liabilities and Reserves.
------------------------
(a) The reserves carried on the books of each Company Insurance
Subsidiary for the year ended December 31, 1995 for future insurance policy
benefits, losses, claims and similar purposes are in compliance in all material
respects with the requirements for reserves established by the insurance
departments of the state of domicile of such Company Insurance Subsidiary, were
21
determined in all material respects in accordance with generally accepted
actuarial standards consistently applied, and are fairly stated in all material
respects in accordance with sound actuarial principles. Company has delivered to
Merger Partner true, correct and complete copies of the actuarial valuation
reports delivered to the insurance department of the domiciliary state of each
Company Insurance Subsidiary for the years ended December 31, 1995 and 1994.
(b) Company has delivered to Merger Partner true, complete and correct
copies of all analyses, reports and other data prepared or submitted by any
Company Insurance Subsidiary to insurance regulatory authorities relating to
risk based capital calculations for the years ended December 31, 1995 and 1994.
(c) Except for regular periodic assessments in the ordinary course of
business or except as set forth in Schedule 4.30(c), no claim or assessment is
pending nor, to the Knowledge of Company, threatened against any Company
Insurance Subsidiary by any state insurance guaranty association in connection
with such association's fund relating to insolvent insurers which if determined
adversely, would have, either individually or in the aggregate, a Material
Adverse Effect on Company.
4.31 Separate Accounts.
(a) Each separate account maintained by a Company Insurance Subsidiary
is listed in Schedule 4.31 (collectively, the "Company Separate Accounts").
Except as otherwise would not, individually or in the aggregate, have a Material
Adverse Effect on Company, each Company Separate Account is duly and validly
established and maintained under the laws of its state of formation and is
either excluded from the definition of an investment company pursuant to Section
3(c)(11) of the Investment Company Act of 1940 (the "1940 Act") or is duly
registered as an investment company under the 1940 Act. Except as otherwise
would not, individually or in the aggregate, have a Material Adverse Effect on
Company, each such Company Separate Account, if registered, is operated in
compliance with the 1940 Act, has filed all reports and amendments of its
registration statement required to be filed, and has been granted all exemptive
relief necessary for its operations as presently conducted. Except as otherwise
would not, individually or in the aggregate, have a Material Adverse Effect on
Company, the Company Insurance Contracts under which Company Separate Account
assets are held are duly and validly issued and are either exempt from
registration under the Securities Act pursuant to Section 3(a)(2) of the
Securities Act or were sold pursuant to an effective registration statement
under the Securities Act, and any such registration statement is currently in
effect to the extent necessary to allow the appropriate Company Insurance
Subsidiary to receive contributions under such policies.
(b) Except as otherwise would not, individually or in the aggregate,
have a Material Adverse Effect on Company, to the extent required, the assets of
each Company Separate Account are adequately diversified within the meaning of
Section 817(h) of the Code.
22
4.32 Funds.
(a) Each of the mutual funds presently intended to be sponsored by a
Company Insurance Subsidiary is listed on Schedule 4.32 (the "Funds"). Except as
listed on Schedule 4.32 and except as otherwise would not have a Material
Adverse Effect on Company, (i) each Fund will be duly registered with the SEC as
an open-end management investment company under the 1940 Act, (ii) each Fund
will be in material compliance with the 1940 Act and the SEC regulations
promulgated thereunder, including the requirements to file semi-annual or annual
reports on N-SAR with the SEC, (iii) all shares of the Funds will be duly
registered under the Securities Act and any applicable state securities laws,
and (iv) each of the Funds will be duly incorporated and in good standing under
the laws of the state of its incorporation or will be a validly existing
business trust under the laws of the jurisdiction in which it was formed.
(b) Except as otherwise would not have a Material Adverse Effect on
Company, Providian Investment Advisors, Inc. (the "Manager") is duly registered
under the Investment Advisers Act of 1940.
4.33 Insurance. The insurance maintained by Company and the Company
Subsidiaries insures against risks and liabilities to the extent and in the
manner reasonably deemed appropriate and sufficient by Company or such Company
Subsidiary, and the coverage provided thereunder will not be materially and
adversely affected by the Merger. Schedule 4.33 sets forth a list of the
insurance policies held by Company relating to directors' and officers'
liability insurance.
4.34 Solvency of Spinco. After giving effect to the Spin-off, Spinco will
not be insolvent and will not be rendered insolvent by the transactions
contemplated by this Agreement or the Distribution Agreement.
4.35 Investigation by Company. Company has conducted its own independent
review and analysis of the businesses, assets, condition, operations and
prospects of Merger Partner and the Merger Partner Subsidiaries and acknowledges
that Company has been provided access to the properties, premises and records of
Merger Partner and the Merger Partner Subsidiaries for this purpose. In entering
into this Agreement, Company has relied solely upon its own investigation and
analysis and the representations and warranties contained herein, and Company:
(a) acknowledges that none of Merger Partner, the Merger Partner
Subsidiaries or any of their respective directors, officers, employees,
affiliates, agents or representatives makes any representation or warranty,
either express or implied, as to the accuracy or completeness of any of the
information provided or made available to Company or their agents or
representatives prior to the execution of this Agreement; and
(b) agrees, to the fullest extent permitted by law, that none of
Merger Partner, the Merger Partner Subsidiaries or any of their respective
directors, officers, employees, affiliates, agents or representatives shall have
any liability or responsibility whatsoever to Company on any basis (including,
without limitation, in contract or tort, under federal or state securities laws
or otherwise)
23
based upon any information provided or made available, or statements made, to
Company prior to the execution of this Agreement,
except that the foregoing shall not apply (i) to the extent Merger Partner makes
the specific representations and warranties set forth in Article 5 of this
Agreement and in the Disclosure Schedules, but always subject to the limitations
and restrictions contained in this Agreement and in such Disclosure Schedules,
or (ii) to the extent Merger Partner, the Merger Partner Subsidiaries or any of
their respective directors, officers, employees, affiliates, agents or
representatives commits fraud with respect to the information that it provides
or makes available to the Company.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
MERGER PARTNER AND SUB
Each of Merger Partner and Sub hereby represents and warrants to Company as
follows (the words "to the Knowledge of Merger Partner" or "to Merger Partner's
Knowledge" and any words of similar import shall mean that any one of the
persons listed in Exhibit C has actual knowledge of the matter):
5.1 Organization, Good Standing and Power. Merger Partner is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Merger Partner is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties make such qualification
or licensing necessary, except where the failure to be so qualified or licensed
or to be in good standing would not, individually or in the aggregate, have a
Material Adverse Effect on Merger Partner (as defined below). Merger Partner has
delivered to Company complete and correct copies of its articles or certificate
of incorporation, bylaws or other organizational documents and all amendments
thereto to the date hereof. As used in this Agreement, the phrase "Material
Adverse Effect on Merger Partner" means a material adverse effect on (a) the
financial condition, business or results of operations of Merger Partner and the
Merger Partner Subsidiaries on a consolidated basis or (b) the ability of Merger
Partner or Sub to consummate the transactions contemplated by this Agreement.
5.2 Capitalization. The authorized capital stock of Merger Partner consists
of 525,000,000 shares of Common Stock, par value of one Dutch Guilder per share,
of which as of November 30, 1996, 265,176,630 shares were issued and
outstanding, 350,000,000 shares of Preferred Stock, par value one Dutch Guilder
per share ("Merger Partner Preferred Stock"), of which as of the date hereof
80,000,000 shares are issued and outstanding and 125,000,000 shares of Preferred
Stock convertible into Merger Partner Common Stock, par value one Dutch Guilder
per share, none of which is issued or outstanding. All outstanding shares of
Merger Partner Common Stock are, and all shares which may be issued prior to the
Effective Date pursuant to any outstanding
24
stock options issued by Merger Partner will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. All of the shares of Merger Partner Common Stock to be issued in
exchange for Company Common Stock at the Effective Time in accordance with this
Agreement will be, when so issued, duly authorized, validly issued, fully paid
and nonassessable and free of preemptive rights. Except as set forth above, as
of November 30, there were no shares of capital stock or other equity securities
of Merger Partner outstanding, and, except as set forth in Schedule 5.2, there
are no outstanding options, warrants or rights to purchase or acquire from
Merger Partner any capital stock of Merger Partner, there are no existing
registration covenants with Merger Partner with respect to outstanding shares of
Merger Partner Common Stock, and there are no convertible securities or other
contracts, commitments, agreements, understandings, arrangements or restrictions
by which Merger Partner is bound to issue any additional shares of its capital
stock or other securities.
5.3 Merger Partner Subsidiaries; Voting Trusts. Schedule 5.3 sets forth a
correct and complete list of each corporation, association, subsidiary or other
entity of which Merger Partner owns or controls, directly or indirectly, more
than 20% of the outstanding equity securities and which is material to the
operations of Merger Partner and its subsidiaries, taken as a whole (such
entities are hereinafter referred to as "Merger Partner Entities"). Any Merger
Partner Entity of which Merger Partner owns or controls, directly or indirectly,
more than 50% of the outstanding equity securities is hereinafter referred to
individually as a "Merger Partner Subsidiary" and such entities are referred to
collectively as the "Merger Partner Subsidiaries." Except as disclosed in
Schedule 5.3, Merger Partner owns, directly or indirectly, the securities of
each Merger Partner Entity held by Merger Partner, free and clear of all liens,
charges, pledges, security interests or other encumbrances. All of the capital
stock of each Merger Partner Subsidiary has been duly authorized, and is validly
issued, fully paid and nonassessable. Except as disclosed in Schedule 5.3, there
are no outstanding options or rights to subscribe to, or any contracts or
commitments to issue or sell any shares of the capital stock or any securities
or obligations convertible into or exchangeable for, or giving any person any
right to acquire, any shares of the capital stock of any Merger Partner Entity
to which Merger Partner or any Merger Partner Subsidiary is a party. Except as
disclosed in Schedule 5.3, there are no voting trusts or other agreements or
understandings with respect to the voting of capital stock of Merger Partner or
any Merger Partner Subsidiary to which Merger Partner or any Merger Partner
Subsidiary is a party. Each Merger Partner Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has the corporate power and authority
necessary for it to own or lease its properties and assets and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power and authority
would not, individually or in the aggregate, have a Material Adverse Effect on
Merger Partner. Each Merger Partner Subsidiary is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed or to be in good standing would not, individually or in
the aggregate, have a Material Adverse Effect on Merger Partner.
5.4 Authority; Enforceability. Each of Merger Partner and Sub has the
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby,
25
subject to the approval of this Agreement by insurance regulatory authorities
and banking regulatory authorities and subject to compliance with the provisions
of the HSR Act. Subject to such approvals and compliance, the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of each of Merger Partner and Sub (including all necessary approvals on the part
of Vereniging AEGON (the "Association")), and this Agreement has been duly
executed and delivered by Merger Partner and Sub and constitutes the valid and
binding obligation of each such party, enforceable against it in accordance with
its terms, (i) except as may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) subject to general principles of equity.
5.5 Non-Contravention; Consents.
---------------------------
(a) Except as set forth in Schedule 5.5, neither the execution, delivery
and performance by Merger Partner or Sub of this Agreement, nor the consummation
by Merger Partner or Sub of the transactions contemplated hereby, nor compliance
by Merger Partner or Sub with any of the provisions hereof, will:
(i) violate, conflict with, result in a breach of any provision of,
constitute a default (or an event that, with notice or lapse of time or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of termination
or acceleration, or the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Merger Partner or Sub,
under any of the terms, conditions or provisions of, (x) its respective
organizational documents, or (y) any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to
which Merger Partner or any of the Merger Partner Subsidiaries is a party,
or by which Merger Partner or any of the Merger Partner Subsidiaries may be
bound, or to which Merger Partner or any of the Merger Partner Subsidiaries
or the properties or assets of any of them may be subject, and that would,
in any such event, specified in this clause (y) have, individually or in
the aggregate, a Material Adverse Effect on Merger Partner; or
(ii) subject to compliance with the statutes and regulations referred
to in Section 5.5, violate any valid and enforceable judgment, ruling,
order, writ, injunction, decree, or any statute, rule or regulation
applicable to Merger Partner or any of the Merger Partner Subsidiaries or
any of their respective properties or assets where such violation would,
individually or in the aggregate, have a Material Adverse Effect on Merger
Partner.
(b) Except as set forth in Schedule 5.5 and other than notices,
filings, authorizations, exemptions, consents or approvals, the failure of which
to give or obtain would not, individually or in the aggregate, have a Material
Adverse Effect on Merger Partner, no notice to, filing with, authorization of,
exemption by, or consent or approval of, any governmental authority or other
regulatory body is necessary for the consummation by Merger Partner or Sub of
the transactions contemplated by this Agreement.
26
5.6 SEC Reports; Merger Partner Financial Statements.
------------------------------------------------
(a) Since January 1, 1995, Merger Partner has timely filed all
reports, registration statements, proxy statements or information statements and
all other documents, together with any amendments required to be made thereto,
required to be filed with the SEC under the Securities Act or the Exchange Act
(collectively, the "Merger Partner Reports"). Merger Partner has heretofore made
available to Company true copies of all the Merger Partner Reports, together
with all exhibits thereto, that Company has requested. Included in such Merger
Partner Reports are (i) audited consolidated balance sheets of Merger Partner
and its subsidiaries at December 31, 1994 and 1995 and the related consolidated
statements of income, stockholders' equity and cash flows for the years then
ended, and the notes thereto and (ii) the unaudited balance sheets of Merger
Partner and its subsidiaries at March 31, 1996, June 30, 1996 and September 30,
1996 and the related unaudited statements of income, stockholders' equity and
cash flows for the periods then ended and the notes thereto, each consolidated
to the extent indicated therein.
(b) All of the financial statements included in the Merger Partner
Reports (which are collectively referred to herein as the "Merger Partner
Consolidated Financial Statements") fairly presented in all material respects
the consolidated financial position of Merger Partner and its subsidiaries as at
the dates mentioned and the consolidated results of operations, changes in
stockholders' equity and cash flows for the periods then ended in conformity
with Dutch accounting principles with a reconciliation on an annual basis to
United States generally accepted accounting principles applied on a consistent
basis (subject to any exceptions as to consistency specified therein or as may
be indicated in the notes thereto or in the case of the unaudited statements, as
may be permitted by Form 6-K of the SEC and subject, in the case of unaudited
statements, to normal, recurring audit adjustments). As of their respective
dates, the Merger Partner Reports complied in all material respects with all
applicable rules and regulations promulgated by the SEC and did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Except as set
forth in the Merger Partner Reports, neither Merger Partner nor any Merger
Partner Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by Dutch accounting
principles to be set forth on a consolidated balance sheet of Merger Partner and
its consolidated subsidiaries or in the notes thereto, other than liabilities or
obligations which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Merger Partner.
5.7 Statutory Statements. Merger Partner has previously furnished to
Company the annual statements (or equivalent statements) of each Merger Partner
Insurance Subsidiary (as defined below) that is engaged in the business of
insurance in the United States, the United Kingdom and The Netherlands for the
years ended December 31, 1994 and December 31, 1995, which have been filed with
the insurance regulatory authority of the jurisdiction of organization of such
Merger Partner Insurance Subsidiary, and statutory statements, where required,
for each such Merger Partner Insurance Subsidiary for the periods ended March
31, 1996, June 30, 1996 and September 30, 1996, and Merger Partner shall
promptly furnish to Company all statutory statements for any calendar years
27
or quarters ending thereafter but prior to the Effective Time. As used herein,
the term "Merger Partner Insurance Subsidiary" means each Merger Partner
Subsidiary that is engaged in the business of insurance. Except as set forth in
Schedule 5.7, such statutory statements (or equivalent statements) present or
will present fairly in all material respects the admitted assets, liabilities
and surplus of each Merger Partner Insurance Subsidiary at the end of each of
the periods then ended, and the results of its operations and changes in its
surplus for each of the periods then ended in conformity with accounting
practices prescribed or permitted by the insurance regulatory authority of the
jurisdiction of organization of such Merger Partner Insurance Subsidiary,
applied on a consistent basis as and to the extent described in such statutory
statements (or equivalent statements).
5.8 Absence of Certain Changes or Events. Except as disclosed in Schedule
5.8 and the Merger Partner Reports and except for the transactions contemplated
by this Agreement or the Distribution Agreement, since December 31, 1995, Merger
Partner and the Merger Partner Subsidiaries have conducted their business in all
material respects only in the ordinary course, and there has not been (i) any
change in the business, financial condition or results of operations of Merger
Partner and the Merger Partner Subsidiaries which has had a Material Adverse
Effect on Merger Partner, (ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any of Merger Partner's outstanding capital stock, except regular cash and
stock dividends with respect to its capital stock, or (iii) any split,
combination or reclassification of any of Merger Partner's outstanding capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of Merger
Partner's outstanding capital stock. Notwithstanding the foregoing, the
representation contained in this Section 5.8 shall not apply to any change or
development, or combination of changes or developments, to the extent such
changes and developments are the result of adverse changes in general economic
conditions, stock market fluctuations or conditions or adverse changes in or
affecting the insurance industry generally.
5.9 Taxes and Tax Returns. Except as disclosed in Schedule 5.9:
---------------------
(a) Merger Partner and the Merger Partner Subsidiaries have (i) duly
filed (or there has been filed on their behalf) with appropriate governmental
authorities all tax returns required to be filed by them, on or prior to the
date thereof, except to the extent that any failure to file would not,
individually or in the aggregate, have a Material Adverse Effect on Merger
Partner, and (ii) duly paid in full or made provisions in accordance with Dutch
generally accepted accounting principles (or there has been paid or provision
has been made on their behalf) for the payment of all material taxes for all
periods ending through the date hereof, except to the extent that any failure to
pay or make provision for the payment of such taxes would not, individually or
in the aggregate, have a Material Adverse Effect on Merger Partner;
(b) no federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any taxes
or tax returns of Merger Partner or the Merger Partner Subsidiaries wherein an
adverse determination or ruling in any one such proceeding or in all such
proceedings in the aggregate would have a Material Adverse Effect on Merger
Partner;
28
(c) the United States federal income tax returns of each Merger
Partner Subsidiary have been examined by the IRS (or the applicable statutes of
limitation for the assessment of federal income taxes for such periods have
expired) for all periods through and including December 31, 1987. No
deficiencies have been asserted as a result of such examinations (or as a result
of examinations by any non-United States taxing authorities) that have not been
resolved and fully paid which would have, individually or in the aggregate, a
Material Adverse Effect on Merger Partner. Neither Merger Partner nor any Merger
Partner Subsidiary has granted any requests, agreements, consents or waivers to
extend the statutory period of limitations applicable to the assessment of any
taxes with respect to any tax returns of such Merger Partner Subsidiary; and
(d) all annuity contracts and life insurance policies issued by a
Merger Partner Insurance Subsidiary in the United States meet all definitional
or other requirements for qualification under the Code applicable (or intended
to be applicable) to such annuity contracts or life insurance policies,
including, without limitation, the following: (A) any life insurance policies
that meet the requirements of Sections 101(f) or 7702 of the Code, as
applicable; (B) any annuity contracts that are intended to qualify as "annuity
contracts" (excluding contracts that are described in Section 72(s) of the Code)
meet the requirements of Section 72(s) of the Code; (C) any annuity contracts
that are intended to qualify under Sections 130, 403(a), 403(b) or 408(b) of the
Code contain all provisions required for qualification under such sections of
the Code; and (D) any annuity contracts that are marketed as, or in connection
with, plans that are intended to qualify under Sections 401, 403, 408 or 457 of
the Code comply with the requirements of such sections; except in the case of
any of the foregoing to the extent that any failure to so meet such requirements
has not and would not, individually or in the aggregate, have a material adverse
effect on the financial condition, business or results of operations of the
United States operations of Merger Partner.
5.10 Litigation. Except as disclosed in Schedule 5.10 or in the Merger
Partner Reports, neither Merger Partner nor any Merger Partner Subsidiary is a
party to any pending or, to the Knowledge of Merger Partner, threatened, claim,
action, suit, investigation or proceeding which would reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect on
Merger Partner. Except as disclosed in Schedule 5.10, at the date of this
Agreement, neither Merger Partner nor any Merger Partner Insurance Subsidiary
has received actual notice of any proceeding, claim or investigation pending or
threatened against Merger Partner or any Merger Partner Insurance Subsidiary
before any insurance department or agency which would reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect on
Merger Partner. Except as disclosed in Schedule 5.10, at the date of this
Agreement there is no outstanding order, writ, judgment, stipulation,
injunction, decree, determination, award or other decision against Merger
Partner or any Merger Partner Subsidiary which, either individually or in the
aggregate, has had or would have a Material Adverse Effect on Merger Partner.
5.11 Contracts and Commitments. Except as set forth in Schedule 5.11,
neither Merger Partner nor any Merger Partner Subsidiary has received notice
from any person alleging that Merger Partner or any Merger Partner Subsidiary is
in default under any contracts, agreements, leases, commitments, assignments in
other interests which are material to Merger Partner and the Merger
29
Partner Subsidiaries as a whole as to which it is reasonably foreseeable that an
adverse determination would result, individually or in the aggregate, in a
Material Adverse Effect on Merger Partner.
5.12 Registration Statement, Etc. None of the information supplied or to be
supplied by Merger Partner for inclusion or incorporation by reference in (a)
the Registration Statement, (b) the Proxy Statement and (c) any other documents
to be filed with the SEC in connection with the transactions contemplated hereby
(including the Registration Statement on Form 10 or, if applicable, Form S-1, to
be filed in connection with the Spin-off) will, at the respective times such
documents are filed, and, in the case of the Registration Statement, when it
becomes effective, cause the Registration Statement to contain any untrue
statement of a material fact, or omit to state any material fact necessary in
order to make the statements therein not misleading, or, in the case of the
Proxy Statement, when first mailed to the stockholders of Company, or in the
case of the Proxy Statement or any amendment thereof or supplement thereto, at
the time of the Stockholders' Meeting, cause the Proxy Statement or any
amendment thereof or supplement thereto to contain any untrue statement of a
material fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents that Merger Partner is responsible for filing with
the SEC and any other regulatory agency in connection with the Merger will
comply as to form in all material respects with the provisions of applicable
law, except that no representation is made by Merger Partner with respect to
statements made therein based on information supplied by Company or with respect
to information concerning Company or Sub which is incorporated by reference in
the Registration Statement or the Proxy Statement.
5.13 Employee Benefit Plans.
----------------------
(a) Schedule 5.13 contains a list of each material plan, program,
arrangement, practice or contract which is maintained by Merger Partner or any
Merger Partner Subsidiary or to which Merger Partner or any Merger Partner
Subsidiary is obligated to make contributions and which provides benefits or
compensation to or on behalf of persons employed in the United States, including
but not limited to executive arrangements (for example, any bonus, incentive
compensation, stock option, deferred compensation, commission, severance, golden
parachute or other executive compensation plans, programs, contracts or
arrangements) and "employee benefit plans" as defined in Section 3(1) of ERISA.
All such plans, programs, arrangements, practices or contracts are referred to
herein as "Merger Partner Employee Plans." Merger Partner has made available to
Company the plan documents or other writing constituting each Merger Partner
Employee Plan and, if applicable, the trust, insurance contract or other funding
arrangement, the ERISA summary plan description and the most recent Forms 5500
and annual reports for each such plan. Merger Partner has identified those
Merger Partner Employee Plans which Merger Partner intends to satisfy the
requirements of Section 401 of the Code and has made available to Company
accurate copies of the most recent favorable determination letters for such
plans.
(b) With respect to each Merger Partner Employee Plan that is subject
to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code: (i)
there does not exist any accumulated funding deficiency within the meaning of
Section 412 of the Code or Section 302 of
30
ERISA, whether or not waived; (ii) no reportable event within the meaning of
Section 4043(c) of ERISA with respect to which the 30-day notice period has not
been waived has occurred; and (iii) all premiums required to be paid to the
Pension Benefit Guaranty Corporation have been timely paid in full. There does
not now exist, nor do any circumstances exist that could result in, any Merger
Partner Controlled Group Liability (as defined below) that would be a liability
of Merger Partner or any Merger Partner Subsidiary following the Effective Time.
"Merger Partner Controlled Group Liability" means any and all liabilities under
(i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of
the Code and (iv) the continuation coverage requirements of Section 601 et seq.
of ERISA and Section 4980B of the Code, other than such liabilities that arise
solely out of, or relate to, the Merger Partner Employee Plans.
(c) Neither Merger Partner nor any Merger Partner Subsidiary is, or
has been, a participant in a multi-employer plan (within the meaning of ERISA
Section 3(37)). Except as set forth in Schedule 5.13, neither Merger Partner
nor any Merger Partner Subsidiary maintains or has at any time maintained a
Merger Partner Employee Plan which is subject to Title IV of ERISA. Except as
set forth in Schedule 5.13, neither Merger Partner nor any Merger Partner
Subsidiary is obligated to provide post employment or retirement medical
benefits or any other unfunded welfare benefits to or on behalf of any person
who is no longer an employee of Merger Partner or any Merger Partner Subsidiary,
except for health continuation coverage as required by Section 4980B of the Code
or Part 6 of Title I of ERISA.
(d) Except as set forth in Schedule 5.13, (i) each Merger Partner
Employee Plan has at all times been maintained, by its terms and in operation,
in accordance with all applicable laws, and (ii) each of those Merger Partner
Employee Plans which are intended to be qualified under Section 401 of the Code
has at all times been maintained, by its terms and in operation, in accordance
with Section 401 of the Code, except where a failure to be so maintained would
not have a Material Adverse Effect on Merger Partner. Except as set forth in
Schedule 5.13, as of December 31, 1995, neither Merger Partner nor any of the
Merger Partner Subsidiaries had any liability under any Merger Partner Employee
Plan that was not reflected in the Merger Partner audited consolidated balance
sheet at December 31, 1995 or disclosed in the notes thereto, other than
liabilities which individually or in the aggregate would not have a Material
Adverse Effect on Merger Partner.
(e) Except as set forth in Schedule 5.13, to the Knowledge of Merger
Partner, no prohibited transaction has occurred with respect to any Merger
Partner Employee Plan maintained by Merger Partner or any of the Merger Partner
Subsidiaries that would result, directly or indirectly, in the imposition of an
excise tax or other liability under the Code or ERISA, except for such a tax or
other liability that would not have a Material Adverse Effect on Merger Partner.
(f) Except as set forth in Schedule 5.13, all contributions or premium
payments with respect to the Merger Partner Employee Plans due for any period
ending on or before the Effective Time have been or will be timely paid by
Merger Partner. Except as set forth in Schedule 5.13, the execution of or
performance of the transactions contemplated by this Agreement will not create,
accelerate or increase any obligations under the Merger Partner Employee Plans
which would have a Material Adverse Effect on Merger Partner.
31
5.14 Collective Bargaining; Labor Disputes; Compliance. The only collective
bargaining agreements to which Merger Partner or any of the Merger Partner
Subsidiaries is a party with respect to persons employed in the United States
are set forth in Schedule 5.14 (the "Merger Partner Collective Bargaining
Agreements"). Except as set forth in Schedule 5.14, to the Knowledge of Merger
Partner, the employees of Merger Partner and the Merger Partner Subsidiaries
employed in the United States are not represented by any unions other than the
unions which are parties to the Merger Partner Collective Bargaining Agreements.
Except as set forth in Schedule 5.14, neither Merger Partner nor any of the
Merger Partner Subsidiaries is currently, nor has been during the past three
years, the subject of any certification or decertification organization drive
with respect to persons employed in the United States. Neither Merger Partner
nor any of the Merger Partner Subsidiaries is currently, nor has been during the
past three years, the subject of any strike by persons employed in the United
States relating to the Merger Partner or any of the Merger Partner Subsidiaries
nor, to the Knowledge of Merger Partner, is any such activity threatened. Merger
Partner and each Merger Partner Subsidiary have complied in all material
respects with all laws relating to the employment and safety of labor, including
provisions relating to wages, hours, benefits, collective bargaining and all
applicable occupational safety and health acts, laws and regulations except, in
each case, where the failure to be in compliance would not have, individually or
in the aggregate, a Material Adverse Effect on Merger Partner.
5.15 Brokers and Finders. Neither Merger Partner nor any of the Merger
Partner Subsidiaries, nor any of their respective officers, directors or
employees, has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions, or finder's fees, and no
broker or finder has acted directly or indirectly for Merger Partner or any of
the Merger Partner Subsidiaries, in connection with this Agreement or any of the
transactions contemplated hereby, except that Merger Partner has retained UBS
Securities LLP as its financial advisor, whose fees and expenses will be paid by
Merger Partner.
5.16 No Violation of Law.
-------------------
(a) The business and operations of the Merger Partner Insurance
Subsidiaries have been conducted in compliance with all applicable Insurance
Laws, except where the failure to so conduct such business and operations would
not individually or in the aggregate have a Material Adverse Effect on Merger
Partner. Notwithstanding the generality of the foregoing, except where the
failure to do so would not have, individually or in the aggregate, a Material
Adverse Effect on Merger Partner and except as set forth in Schedule 5.16, each
Merger Partner Insurance Subsidiary and its agents have marketed, sold and
issued insurance products in compliance, in all material respects, with all
statutes, laws, ordinances, rules, orders and regulations applicable to the
business of such Merger Partner Insurance Subsidiary and in the respective
jurisdictions in which such products have been sold, including, without
limitation, in compliance with (i) all applicable prohibitions against
"redlining," (ii) all applicable requirements relating to the disclosure of the
nature of insurance products as policies of insurance and (iii) all applicable
requirements relating to insurance product projections. In addition, except as
set forth in Schedule 5.16, (i) there is no pending or, to the Knowledge of
Merger Partner, threatened charge by any insurance regulatory authority that
any of the Merger Partner Insurance Subsidiaries has violated, nor any pending
or, to the Knowledge of
32
Merger Partner, threatened investigation by any insurance regulatory authority
with respect to possible violations of, any applicable Insurance Laws where such
violations would have individually or in the aggregate a Material Adverse Effect
on Merger Partner; (ii) none of the Merger Partner Insurance Subsidiaries is
subject to any order or decree of any insurance regulatory authority relating
specifically to such Merger Partner Insurance Subsidiary (as opposed to
insurance companies generally) which would have individually or in the aggregate
a Material Adverse Effect on Merger Partner; and (iii) the Merger Partner
Insurance Subsidiaries have filed all reports required to be filed with any
insurance regulatory authority on or before the date hereof as to which the
failure to file such reports would have individually or in the aggregate a
Material Adverse Effect on Merger Partner.
(b) In addition to Insurance Laws, the business and operations of
Merger Partner and the Merger Partner Subsidiaries have been conducted in
compliance with all other applicable laws, ordinances, regulations and orders of
all governmental entities and other regulatory bodies (including, without
limitation, laws, ordinances, regulations and orders relating to zoning,
environmental matters and the safety and health of employees), except where such
noncompliance, individually or in the aggregate, would not have a Material
Adverse Effect on Merger Partner. Except as set forth in Schedule 5.16, in
addition to Insurance Laws, (i) neither Merger Partner nor any Merger Partner
Subsidiary has been charged with or, to the Knowledge of Merger Partner, is now
under investigation with respect to, a violation of any applicable law,
regulation, ordinance, order or other requirement of a governmental entity or
other regulatory body, which violations or penalties would have, individually or
in the aggregate, a Material Adverse Effect on Merger Partner, (ii) neither
Merger Partner nor any Merger Partner Subsidiary is a party to or bound by any
order, judgment, decree or award of a governmental entity or other regulatory
body which has or will have, individually or in the aggregate, a Material
Adverse Effect on Merger Partner; and (iii) Merger Partner and the Merger
Partner Subsidiaries have filed all reports required to be filed with any
governmental entity or other regulatory body on or before the date hereof as to
which the failure to file such reports would result, individually or in the
aggregate, in a Material Adverse Effect on Merger Partner. Merger Partner and
the Merger Partner Subsidiaries have all permits, certificates, licenses,
approvals and other authorizations required in connection with the operation of
the business of Merger Partner and the Merger Partner Subsidiaries, except for
permits, certificates, licenses, approvals and other authorizations the failure
of which to have would not have, individually or in the aggregate, a Material
Adverse Effect on Merger Partner and except for such permits, certificates,
licenses, approvals and other authorizations required to be obtained in
connection with the consummation of the transactions contemplated hereby.
5.17 Indebtedness for Borrowed Money. Merger Partner has made available to
Company the instruments or other documents relating to all indebtedness of
Merger Partner or any Merger Partner Subsidiary for borrowed money the principal
balance of which is $250 million or more, whether such indebtedness is direct or
indirect, primary or secondary, by guarantee or otherwise.
5.18 Environmental Liabilities. To the Knowledge of Merger Partner, except
as disclosed in Schedule 5.18, as of the date hereof, neither Merger Partner nor
any Merger Partner Subsidiary
33
has any liability or obligation of any kind arising out of any law or regulation
relating to environmental protection, including obligations relating to removal,
remediation, clean up or improvement of any property owned by Merger Partner or
any Merger Partner Subsidiaries, which individually or in the aggregate would
have a Material Adverse Effect on Merger Partner.
5.19 Merger Partner Ownership of Company Common Stock. Merger Partner does
not "own" and has not within the past three years "owned" (as such terms are
defined in Section 203 of the DGCL), and does not "beneficially own" (as such
term is defined in the Company Rights Agreement) three percent (3%) or more of
the outstanding shares of Company Common Stock. Merger Partner agrees to vote or
cause to be voted any shares of Company Common Stock owned by it or the Merger
Partner Subsidiaries in favor of the Spin-off and the Merger.
5.20 Interim Operations of Sub. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
5.21 Spin-off; Merger. Neither Merger Partner nor any Merger Partner
Subsidiary has taken any action or failed to take any action which action or
failure to take action would jeopardize the Spin-off as a tax-free distribution
within the meaning of Section 355 of the Code or the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
5.22 Business Operating Condition. Except as otherwise would not have a
Material Adverse Effect on Merger Partner, all furniture, fixtures, machinery
and equipment necessary to conduct the businesses and operations of Merger
Partner and the Merger Partner Insurance Subsidiaries in substantially the same
manner as such businesses and operations are carried on currently by Merger
Partner and the Merger Partner Insurance Subsidiaries are in the possession of
Merger Partner and in good working order and condition for the purposes for
which they are currently used.
5.23 Assets. Except as otherwise would not have a Material Adverse Effect
on Merger Partner and except for Merger Partner Permitted Liens and Encumbrances
(as defined below), Merger Partner and/or the Merger Partner Subsidiaries have
good and valid title to all personal property (including, without limitation,
Merger Partner Investment Assets (as defined below)) that was carried as an
asset on the Merger Partner Consolidated Financial Statements or acquired in the
ordinary course of business since September 30, 1996, other than with respect to
those assets which have been disposed of in the ordinary course of business or
redeemed in accordance with their terms since such date or with respect to
statutory deposits which are subject to certain restrictions on transfer. As
used in this Agreement, "Merger Partner Permitted Liens and Encumbrances" means,
as to any assets or property, any (i) liens or encumbrances securing taxes,
assessments or other governmental charges which are not yet due or which are
being diligently contested in good faith by appropriate proceedings if adequate
reserves have been established in accordance with generally accepted accounting
principles or the statutory accounting principles and practices prescribed or
permitted by the insurance department of the state of domicile of a Merger
Partner Insurance Subsidiary, as appropriate, or, in the case of mortgage loans,
funds are held in escrow sufficient to
34
discharge such liens or the borrower has posted a bond in the amount of such
lien, (ii) liens or encumbrances imposed by law or incurred in the ordinary
course of business with respect to the claims of materialmen, mechanics,
carriers, warehousemen, landlords and other Persons which (A) are not yet due
and payable and which do not materially detract from the value of such property
or assets or materially impair the use thereof by Merger Partner and the Merger
Partner Subsidiaries in the operation of their respective businesses, or (B) are
being diligently contested in good faith and by proper proceedings if adequate
reserves have been established with respect thereto in accordance with generally
accepted accounting principles or the statutory accounting principles and
practices prescribed or permitted by the insurance department of the state of
domicile of a Merger Partner Insurance Subsidiary, as appropriate, and (iii)
liens and encumbrances that would not, individually or in the aggregate, have a
Material Adverse Effect on Merger Partner. As used in this Agreement "Merger
Partner Investment Assets" means bonds, stocks, mortgage loans or other
investments that are carried on the books and records of Merger Partner and the
Merger Partner Insurance Subsidiaries.
5.24 Computer Software. Merger Partner owns, or possesses valid license
rights to, all computer software programs which are material to the conduct of
the business of Merger Partner and the Merger Partner Insurance Subsidiaries
taken as a whole. There are no infringement suits, actions or proceedings
pending or, to the Knowledge of Merger Partner, threatened against Merger
Partner or any Merger Partner Insurance Subsidiary with respect to any software
owned or licensed by Merger Partner or any Merger Partner Subsidiary, which, if
determined adversely, would have, either individually or in the aggregate, a
Material Adverse Effect on Merger Partner.
5.25 Intellectual Property. Merger Partner owns, or possesses valid license
rights to, all intellectual property which is material to the conduct of the
business of Merger Partner and the Merger Partner Insurance Subsidiaries taken
as a whole. Merger Partner has not received any notice of any conflict with or
violation or infringement of, any asserted rights of any other Person with
respect to any such intellectual property owned or licensed by Merger Partner or
any Merger Partner Insurance Subsidiary, which, if determined adversely, would
have, either individually or in the aggregate, a Material Adverse Effect on
Merger Partner.
5.26 Permits, Licenses and Franchises. To the Knowledge of Merger Partner,
except as otherwise would not have a Material Adverse Effect on Merger Partner,
neither Merger Partner nor any Merger Partner Insurance Subsidiary has engaged
in any activity which would cause revocation or suspension of any license to
transact the business of insurance and no action or proceeding looking to or
contemplating the revocation or suspension of any license to transact the
business of insurance is pending or threatened.
5.27 Liabilities and Reserves. The reserves carried on the books of each
Merger Partner Insurance Subsidiary for the year ended December 31, 1995 for
future insurance policy benefits, losses, claims and similar purposes are in
compliance in all material respects with the requirements for reserves
established by the insurance departments of the jurisdiction of domicile of such
Merger Partner Insurance Subsidiary, were determined in all material respects in
accordance with generally
35
accepted actuarial standards consistently applied, and are fairly stated in all
material respects in accordance with sound actuarial principles.
5.28 Insurance. The insurance maintained by Merger Partner and the Merger
Partner Subsidiaries insures against risks and liabilities to the extent and in
the manner reasonably deemed appropriate and sufficient by Merger Partner or
such Merger Partner Subsidiary, and the coverage provided thereunder will not be
materially and adversely affected by the Merger.
5.29 Investigation by Merger Partner. Merger Partner has conducted
its own independent review and analysis of the businesses, assets, condition,
operations and prospects of Company and the Company Subsidiaries and
acknowledges that Merger Partner has been provided access to the properties,
premises and records of Company and the Company Subsidiaries for this purpose.
In entering into this Agreement, Merger Partner has relied solely upon its own
investigation and analysis and the representations and warranties contained
herein, and Merger Partner:
(a) acknowledges that none of Company, the Company Subsidiaries or any
of their respective directors, officers, employees, affiliates, agents or
representatives makes any representation or warranty, either express or implied,
as to the accuracy or completeness of any of the information provided or made
available to Merger Partner or their agents or representatives prior to the
execution of this Agreement; and
(b) agrees, to the fullest extent permitted by law, that none of
Company, the Company Subsidiaries or any of their respective directors,
officers, employees, affiliates, agents or representatives shall have any
liability or responsibility whatsoever to Merger Partner on any basis
(including, without limitation, in contract or tort, under federal or state
securities laws or otherwise) based upon any information provided or made
available, or statements made, to Merger Partner prior to the execution of this
Agreement,
except that the foregoing shall not apply (i) to the extent Company makes the
specific representations and warranties set forth in Article 4 of this Agreement
and in the Disclosure Schedules, but always subject to the limitations and
restrictions contained in this Agreement and in the Disclosure Schedules, or
(ii) to the extent Company, the Company Subsidiaries or any of their respective
directors, officers, employees, affiliates, agents or representatives commits
fraud with respect to the information that it provides or makes available to
Company.
36
ARTICLE 6
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; CERTAIN COVENANTS
6.1 Access and Information.
(a) Subject to the restrictions contained in confidentiality
agreements to which such party is subject and subject to Section 6.1(b), upon
reasonable notice, each of Company and Merger Partner shall (and shall cause
each of their respective Subsidiaries (as defined below) to) give to the other
and to the respective accountants, counsel and other representatives of such
other party reasonable access during normal business hours throughout the period
prior to the Effective Time to all of its and its Subsidiaries' properties,
books, contracts, commitments and records (including tax returns and insurance
policies) and shall permit them to consult with its and its Subsidiaries'
respective officers, employees, auditors, actuaries, attorneys and agents;
provided, however, that any such investigation or consultation shall be
conducted in such a manner as not to interfere unreasonably with the business or
operations of the other party or its Subsidiaries. In addition, Company shall
cause Spinco to provide to Merger Partner and to Merger Partner's accountants,
counsel and other representatives reasonable access during normal business hours
throughout the period prior to the Effective Time to all records in Spinco's
possession relating to the business and operations of the Company Subsidiaries;
provided, however that any such investigation shall be conducted in such a
manner as not to interfere unreasonably with the business or operations of
Spinco or its subsidiaries. All confidential information provided pursuant to
this Section 6.1 will be subject to the Confidentiality Agreement dated as of
October 28, 1996 and the Confidentiality Agreement dated as of December 17, 1996
(the "Confidentiality Agreements"), in each case between Company and Merger
Partner. Notwithstanding the foregoing, no party shall have access to
information or documents subject to the attorney/client privilege to the extent
that providing such access would, in the opinion of counsel to Company or Merger
Partner, as the case may be, constitute a waiver of such privilege. As used in
this Agreement, the term "Subsidiaries" shall mean (i) when used with reference
to Company, the Company Subsidiaries, and (ii) when used with reference to
Merger Partner, the Merger Partner Subsidiaries.
(b) As soon as practicable after the date of this Agreement, Company
and Merger Partner shall cooperate in good faith in an effort to develop a plan
(the "Plan") with respect to the communications with their respective employees
and the employees of their respective Subsidiaries regarding the transactions
contemplated by this Agreement and the Distribution Agreement. Notwithstanding
any other provision of this Section 6.1, neither Merger Partner or Company, nor
any of their respective Subsidiaries, nor any employee or other representative
of Merger Partner or Company, or any of their respective Subsidiaries, shall
contact or communicate with any employee of the other party or such other
party's Subsidiaries, with respect to the transactions contemplated by this
Agreement, unless pursuant to the Plan or with the prior consent of such other
party, which consent will not be unreasonably withheld or delayed. Except
pursuant to the Plan or with the prior
37
consent of the other party, which consent will not be unreasonably withheld or
delayed, neither Merger Partner or Company, nor any of their respective
Subsidiaries, nor any employee or other representative of Merger Partner or
Company, or any of their respective Subsidiaries, shall have any communication
or contact with any employee of the other party or such other party's
Subsidiaries concerning, relating to or in any way bearing upon (i) future
employment or terms or conditions of employment of such employee or any other
employee of the other party, or (ii) any closing or relocation of or reduction
in size, staff or function of any present facility of the other party.
6.2 Conduct of Business Pending Merger.
(a) Company agrees that from the date hereof to the Effective Time,
except as contemplated by this Agreement or the Distribution Agreement or to the
extent that Merger Partner shall otherwise consent in writing (which consent
will not be unreasonably withheld or delayed), Company and the Company
Subsidiaries will operate their businesses only in the ordinary course, except
where the failure to so operate their businesses will not individually or in the
aggregate be material to any of the Company Business Units taken as a whole;
and, consistent with such operation, will use reasonable efforts consistent with
past practices to preserve their business organizations intact, to keep
available to them the goodwill of their agents, third party administrators,
policyholders, customers and others with whom business relationships exist to
the end that their goodwill and ongoing business shall not be impaired in any
material respect at the Effective Time, and will further exercise reasonable
efforts to maintain their existing relationships with their employees in
general.
(b) Company agrees that from the date hereof to the Effective Time,
except as otherwise consented to by Merger Partner in writing (which consent
will not be unreasonably withheld or delayed) or as permitted, required or
contemplated by this Agreement or the Distribution Agreement, (i) neither it nor
any Company Subsidiary will change any provision of its Certificate of
Incorporation or Bylaws or similar governing documents; (ii) it will not make,
declare or pay any dividend, except regular quarterly cash dividends with
respect to the Company Common Stock (not to exceed $0.275 per share per quarter)
and regular dividends on the Company's Preferred Stock in accordance with its
terms and except in connection with the Spin-off; and (iii) except in connection
with (v) the Spin-off, (w) the exchange rights on the part of former
shareholders of Durham Corporation and Southlife Corporation who have not
tendered their shares in connection with the mergers pursuant to which such
companies were acquired, (x) the issuance of capital stock under the Company
Rights Agreement pursuant to its terms, (y) the issuance of new employee stock
options after July 31, 1997 in the ordinary course of business consistent with
past practice and (z) the issuance of shares of common stock pursuant to (A) the
exercise of presently outstanding employee stock options or new stock options
granted after July 31, 1997 as contemplated above or (B) any stock ownership
plan, 401(k) plan, dividend reinvestment plan or similar plan (which in the case
of this clause (B) does not involve in the aggregate the issuance of more than
250,000 shares), it will not make any distribution or directly or indirectly
sell, issue, redeem, purchase or otherwise acquire, any shares of its
outstanding capital stock, change the number of shares of its authorized or
issued capital stock or issue or grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating to its
authorized or issued capital stock or any securities convertible into shares of
such stock.
38
(c) Company agrees that from the date hereof to the Effective Time it
will not take or permit any Company Subsidiary to take any of the following
actions, except to the extent consented to by Merger Partner in writing (which
consent will not be unreasonably withheld or delayed) or permitted, required or
contemplated by this Agreement or the Distribution Agreement or except as set
forth in Schedule 6.2:
(i) except in the ordinary course of business, enter into any
agreement representing an obligation for indebtedness for borrowed money or
increase the principal amount of indebtedness under any existing agreement
or assume, guarantee, endorse or otherwise become responsible for the
obligations of any other individual, firm or corporation (except a
guarantee of the obligation of a Subsidiary), except and to the extent all
such obligations in the aggregate do not exceed $10,000,000;
(ii) except in the ordinary course of business, mortgage or pledge any
of its properties or assets;
(iii) except as may be required by law or except in the ordinary
course of business, take any action to amend or terminate any Company
Employee Plan or increase the compensation of any of its executive officers
or employees (other than increases which are in the aggregate in the
ordinary course) or adopt any other material plan, program, arrangement or
practice providing new or increased benefits or compensation to its
employees, provided that this covenant shall not apply to variable payments
pursuant to Company's Management Incentive Plan or Variable Pay Plan or to
actions in the ordinary course of business taken with respect to employees
who are not directors or officers of Company;
(iv) materially amend or cancel or agree to the material amendment or
cancellation of any agreement, treaty or arrangement which is material to
any of the Company Business Units taken as a whole, or enter into any new
material agreement, treaty or arrangement which is material to any of the
Company Business Units taken as a whole (other than the renewal of any
existing agreements, treaties or arrangements);
(v) make any material changes in its underwriting standards, retention
limits or administrative practices with respect to additions to (new
business) or deletions from (policy terminations) any policy master files
which would have a substantive effect on such files;
(vi) enter into any negotiation with respect to, or adopt or amend in
any material respect, any Collective Bargaining Agreement without prior
notice to the other party;
(vii) make any significant change in any accounting methods or systems
of internal accounting controls, except as may be appropriate to conform to
changes in statutory accounting rules or generally accepted accounting
principles;
39
(viii) pay, loan or advance (other than the payment of compensation,
directors' fees or reimbursements of expenses in the ordinary course of
business and other than as may be required by any agreement in effect as of
the date hereof) any amount to, or sell, transfer or lease any properties
or assets (real, personal or mixed, tangible or intangible) to, or enter
into any material agreement or arrangement with, any of its officers or
directors or any "affiliate" or "associate" of any of its officers or
directors (as such terms are defined in Rule 405 promulgated under the
Securities Act);
(ix) acquire, form or commence the operations of any business or any
corporation, partnership, joint venture, marketing arrangement, association
or other business organization or division thereof which in any case is
material to any of the Company Business Units taken as a whole;
(x) make any tax election or settle or compromise tax liability that
would reasonably be expected to have a Material Adverse Effect on Company;
(xi) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) which are material to Company and the Company Subsidiaries as a
whole, other than the payment, discharge or satisfaction of liabilities (i)
reflected or reserved against in, or contemplated by, the financial
statements (or the notes thereto) of Company included in the Company
Reports or (ii) incurred since December 31, 1995 in the ordinary course of
business consistent with past practice;
(xii) increase the benefits payable under the Providian Corporation
Retirement Plan (the "Retirement Plan") pursuant to the provisions of
Section 9.1 of the Retirement Plan;
(xiii) other than consistent with past practice (or following
consultation with the Merger Partner, consistent with industry standards),
materially alter the mix of Company Investment Assets or the duration or
credit quality of such assets;
(xiv) other than consistent with past practice (or following
consultation with the Merger Partner, consistent with industry standards),
materially alter the profile of its insurance liabilities or materially
alter the Company's pricing practices or policies; or
(xv) enter into any agreement to take any of the actions described in
Section 6.2(b) or elsewhere in this Section 6.2(c).
(d) Merger Partner agrees that from the date hereof to the Effective
Time, except as contemplated by this Agreement or to the extent that Company
shall otherwise consent in writing, it will, and will cause each Merger Partner
Subsidiary to, operate its business only in the ordinary course, except where
the failure to so operate its business will not individually or in the aggregate
be material to Merger Partner and the Merger Subsidiaries taken as a whole.
40
(e) Merger Partner agrees that from the date hereof to the Effective
Time it will not take, or permit any Merger Partner Subsidiary to take, any of
the following actions, except to the extent consented to by Company in writing
(which consent will not unreasonably be withheld or delayed) or permitted,
required or contemplated by this Agreement or as set forth in Schedule 6.2:
(i) adopt or propose any change in its governing documents that would
have any adverse impact on the transactions contemplated by this Agreement
or which would amend or modify the terms or provisions of the capital stock
of Merger Partner;
(ii) effect any combination, reclassification, recapitalization,
division or similar transaction with respect to any class or series of
capital stock of Merger Partner (other than a stock split, stock dividend
or similar transaction contemplated by Section 2.2(d));
(iii) merge or consolidate with any other Person if such merger or
consolidation could reasonably be expected to have a material impact on the
ability of Merger Partner to consummate the transactions contemplated by
this Agreement;
(iv) make, declare, set aside or pay any dividend or other
distribution with respect to shares of capital stock of Merger Partner,
except the regular declaration and payment of cash or stock dividends with
respect to the Merger Partner Common Stock (not to exceed, in the aggregate
between the date of this Agreement and the Closing Date, $2.00 per share in
cash and market value of Merger Partner Common Stock), and the regular
declaration and payment of dividends with respect to Merger Partner
Preferred Stock in accordance with its terms;
(v) issue, sell, grant, pledge or otherwise encumber any shares of the
Merger Partner Common Stock, any other voting securities or any securities
convertible into such shares, if any such action could, individually or in
the aggregate, reasonably be expected to (A) require the consent of the
stockholders of Merger Partner, (B) delay materially the date of mailing of
the Proxy Statement such that the Closing would be delayed past June 1,
1997, (C) if it were to occur after such date of mailing, require an
amendment of the Proxy Statement such that the Closing would be delayed
past June 1, 1997 or (D) have a material adverse effect on the ability of
Merger Partner to consummate the transactions contemplated by this
Agreement;
(vi) acquire any business or any corporation, partnership, joint
venture, association or other business organization or division thereof, in
each case if any such action could, individually or in the aggregate,
reasonably be expected to (A) be material to Merger Partner, (B) delay
materially the date of mailing of the Proxy Statement such that the Closing
would be delayed past June 1, 1997, (C) if it were to occur after such date
of mailing, require an amendment of the Proxy Statement such that the
Closing would be delayed past June 1, 1997 or (D) have a material adverse
effect on the ability of Merger Partner to consummate the transactions
contemplated by this Agreement;
41
(vii) except in the ordinary course of business, enter into any
agreement representing an obligation for indebtedness for borrowed money or
increase the principal amount of indebtedness under any existing agreement
or assume, guarantee, endorse or otherwise become responsible for the
obligations of any other individual, firm or corporation (except a
guarantee of the obligation of a Subsidiary), except and to the extent all
such obligations in the aggregate are not material to Merger Partner;
(viii) mortgage or pledge any of its properties or assets, except to
the extent that the aggregate amount of assets subject to such mortgages
and pledges is not material to Merger Partner;
(ix) except in the ordinary course of business, materially amend or
cancel or agree to the amendment or cancellation of any agreement, treaty
or arrangement, or enter into any new agreement, treaty or arrangement
(other than the renewal of any existing agreements, treaties or
arrangements), except and to the extent that the aggregate amount involved
with respect to such agreements, treaties or arrangements is not material
to Merger Partner;
(x) pay, loan or advance (other than the payment of compensation,
directors' fees or reimbursements of expenses in the ordinary course of
business and other than as may be required by any agreement in effect as of
the date hereof) any amount to, or sell, transfer or lease any properties
or assets (real, personal or mixed, tangible or intangible) to, or enter
into any agreement or arrangement with, any of its officers or directors or
any "affiliate" or "associate" of any of its officers or directors (as such
terms are defined in Rule 405 promulgated under the Securities Act), except
and to the extent that the aggregate amount involved with respect to such
transactions is not material to Merger Partner;
(xi) (A) prior to the twenty-fifth trading day before the Effective
Time acquire record or beneficial ownership of any shares of Company Common
Stock such that Merger Partner "beneficially owns" three percent (3%) or
more of the outstanding shares of Company Common Stock, or (B) during the
twenty-five trading days before the Effective Time, acquire record or
beneficial ownership of any shares of Company Common Stock; or
(xii) authorize any of, or commit or agree to take any of, the
foregoing actions.
As used in this Section 6.2(e), the phrase "material to Merger
Partner" means a matter or action that would (i) have a Material Adverse Effect
on Merger Partner or (ii) involve amounts in excess of ten percent (10%) of the
assets of Merger Partner and its subsidiaries, taken as a whole, as reflected on
the consolidated balance sheet of Merger Partner and its subsidiaries at
December 31, 1995 included in the Merger Partner Reports.
(f) Company shall not, nor shall it permit any Company Subsidiary to,
nor shall it authorize or permit any officer, director or employee of, or any
investment banker, attorney or other advisor or representative or agent of,
Company or any Company Subsidiary to, directly or indirectly, (i) solicit,
initiate or encourage the submission of any Acquisition Proposal (as hereinafter
42
defined) or (ii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Acquisition Proposal; provided,
however, that nothing contained in this Section 6.2(f) shall prohibit the Board
of Directors of Company (and its authorized representatives) from furnishing
information to, or entering into discussions or negotiations with, any person or
entity that makes an unsolicited Acquisition Proposal if, and only to the extent
that (A) the Board of Directors of Company after consultation with and based on
the advice of outside counsel, determines in good faith that in order for the
Board of Directors of Company to comply with its fiduciary duties to
stockholders under applicable law it should take such action, (B) prior to
taking such action, Company receives from such person or entity an executed
agreement in reasonably customary form relating to the confidentiality of
information to be provided to such person or entity, and (C) the Acquisition
Proposal contains an offer of consideration that is superior to the
consideration set forth herein. Notwithstanding anything in this Agreement to
the contrary, Company shall (i) promptly advise Merger Partner orally and in
writing of (A) the receipt by it (or any of the other entities or persons
referred to above) after the date hereof of any Acquisition Proposal, or any
inquiry which could reasonably be expected to lead to any Acquisition Proposal,
(B) the material terms and conditions of such Acquisition Proposal or inquiry,
and (C) the identity of the person making any such Acquisition Proposal or
inquiry, (ii) keep Merger Partner reasonably informed of the status and details
of any such Acquisition Proposal or inquiry and (iii) negotiate with Merger
Partner to make such adjustments in the terms and conditions of this Agreement
as would enable Company to proceed with the transactions contemplated herein.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the first sentence of this Section 6.2(f) by any
officer, director or employee of Company or any Company Subsidiary or any
investment banker, attorney or other advisor, representative or agent of Company
or any Company Subsidiary, whether or not such person is purporting to act on
behalf of Company or any Company Subsidiary or otherwise, shall be deemed to be
a breach of this Section 6.2(f) by Company. For purposes of this Agreement,
"Acquisition Proposal" means any bona fide proposal with respect to a merger,
consolidation, share exchange or similar transaction involving Company or any
Company Insurance Subsidiary, or any purchase of all or any significant portion
of the assets of Company or any Company Business Unit other than the
transactions contemplated hereby.
6.3 Fiduciary Duties. Except as set forth below, the Board of Directors of
Company shall not (i) withdraw or modify in a manner materially adverse to
Merger Partner, the approval or recommendation by such Board of Directors of
this Agreement or the Merger, or (ii) approve, recommend or cause Company to
enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, if Company receives an unsolicited Acquisition
Proposal and the Board of Directors of Company determines in good faith,
following consultation with and based on the advice of outside counsel, that it
is necessary to do so in order to comply with its fiduciary duties to
stockholders under applicable law, the Board of Directors may (w) withdraw or
modify its approval or recommendation of this Agreement and the Merger, (x)
approve or recommend such Acquisition Proposal, (y) cause Company to enter into
an agreement with respect to such Acquisition Proposal or (z) terminate this
Agreement pursuant to Section 8.1(b). If the Board of Directors of Company takes
any action described in clause (y) or (z) of the preceding sentence or Merger
Partner exercises its right to terminate this Agreement under Section 8.1(c)
based on the Board of Directors
43
of Company having taken any action described in clause (w) or (x) of the
preceding sentence, Company shall, concurrently with the taking of such action
or such termination (a "Fee Payment Event"), as applicable, pay to Merger
Partner the Section 6.4 Fee (as hereinafter defined). Notwithstanding anything
contained in this Agreement to the contrary, any action by the Board of
Directors of Company permitted by this Section 6.3 shall not constitute a breach
of this Agreement by Company.
6.4 Certain Fees. Company shall pay to Merger Partner upon demand (i) $80
million if the Fee Payment Event occurs on or prior to the date of the
Stockholders' Meeting, or (ii) $100 million if the Fee Payment Event occurs
after the date of the Stockholders' Meeting (the "Section 6.4 Fee"), payable in
same-day funds, as liquidated damages and not as a penalty, if the Section 6.4
Fee is payable pursuant to Section 6.3. If Company fails to promptly pay to
Merger Partner any amounts due under this Section 6.4, Company shall pay the
costs and expenses (including reasonable legal fees and expenses) in connection
with any action, including the filing of any lawsuit or other legal action,
taken to collect payment, together with interest on the amount of any unpaid fee
at the publicly announced prime rate of Citibank, N.A. in effect from time to
time from the date such fee was required to be paid.
6.5 Amendment to Rights Plan. Prior to the Effective Time, the Board of
Directors of Company shall amend the 1987 Stockholder Rights Agreement as
amended on November 4, 1992 (the "Company Rights Agreement") between Company and
First Chicago Trust Company of New York, so that (i) Merger Partner will not
become an "Acquiring Person" as a result of the consummation of the transactions
contemplated by this Agreement, (ii) no "Shares Acquisition Date" or
"Distribution Date" (as such terms are defined in the Company Rights Agreement)
will occur as a result of the consummation of the transactions contemplated by
this Agreement, and (iii) all outstanding Company Common Stock Purchase Rights
(the "Company Rights") issued and outstanding under the Company Rights Agreement
will expire immediately prior to the Effective Time.
6.6 Takeover Statutes. If any "fair price," "moratorium," "control share
acquisition," "business combination," "stockholder protection" or similar
antitakeover statute or regulation enacted under state or Federal law shall
become applicable to the Merger, the Spin-off or any of the other transactions
contemplated hereby, each of Company and Merger Partner and the Board of
Directors of each of Company and Merger Partner shall grant such approvals and
take such commercially reasonable actions as are within its authority and
consistent with its fiduciary obligations to its stockholders as determined in
good faith by such Board so that the Merger, the Spin-off and the other
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise use commercially reasonable
efforts, subject to such fiduciary duties, to eliminate or minimize the effects
of such statute or regulation on the Merger, the Spin-off and the other
transactions contemplated hereby.
6.7 Consents. Company and Merger Partner will use commercially reasonable
efforts to obtain the written consent or approval of each and every governmental
authority and other regulatory body, including, without limitation, each
applicable banking and insurance regulatory authority, the
44
consent or approval of which shall be required in order to permit Merger
Partner, Sub and Company to consummate the transactions contemplated by this
Agreement and the Distribution Agreement. Company will use commercially
reasonable efforts to obtain the written consent or approval, in form and
substance reasonably satisfactory to Merger Partner, of each person whose
consent or approval shall be required in order to permit Merger Partner, Sub and
Company to consummate the transactions contemplated by this Agreement and the
Distribution Agreement, except for any contracts of Company as to which the
failure to obtain any required written consent or approval thereunder would not
individually or in the aggregate result in a Material Adverse Effect on Company.
Merger Partner will use commercially reasonable efforts to obtain the written
consent or approval, in form and substance reasonably satisfactory to Company,
of each person whose consent or approval shall be required in order to permit
Merger Partner, Sub and Company to consummate the transactions contemplated by
this Agreement and the Distribution Agreement, except for any contracts of
Merger Partner as to which the failure to obtain any required written consent or
approval thereunder would not individually or in the aggregate result in a
Material Adverse Effect on Merger Partner.
6.8 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto will promptly file and prosecute diligently
the applications and related documents required to be filed by such party with
the applicable regulatory authorities in order to effect the transactions
contemplated hereby, including filings under the HSR Act requesting early
termination of the applicable waiting period and filings with state banking and
insurance authorities. Each party hereto agrees to use all commercially
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In case at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement, the
proper officers and directors of each corporation which is a party to this
Agreement shall take all such necessary action. Each of the parties hereto
agrees to defend vigorously against any actions, suits or proceedings in which
such party is named as defendant which seeks to enjoin, restrain or prohibit the
transactions contemplated hereby or seeks damages with respect to such
transactions.
6.9 NYSE Listing. Merger Partner will use all commercially reasonable
efforts to cause to be approved for listing on the NYSE, subject to official
notice of issuance, a sufficient number of shares of Merger Partner Common Stock
to be issued in the Merger and pursuant to Company Stock Options (as defined in
Section 6.17).
6.10 Notice; Efforts to Remedy. Each party hereto shall promptly give
written notice to the other parties hereto upon becoming aware of the impending
occurrence of any event which would cause or constitute a breach of any of the
representations, warranties or covenants of such party contained in this
Agreement and shall use all commercially reasonable efforts to prevent or
promptly remedy the same. During the period from the date of this Agreement to
the Effective Time, Company and Merger Partner each shall cause one or more of
its representatives to confer on a regular and frequent basis with
representatives of the other and to report on the general status of its ongoing
operations. Company shall promptly notify Merger Partner of any material change
in each case on
45
a consolidated basis in the normal course of Company's or the Company
Subsidiaries' businesses or in the operation of its or their properties and of
the receipt by Company or the Company Subsidiaries of notice of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) or the receipt by Company or the Company Subsidiaries
of a notice of the institution or the threat of litigation involving Company or
any of the Company Subsidiaries which, individually or in the aggregate, would
have a Material Adverse Effect on Company, and will keep Merger Partner fully
informed with respect to such events. Merger Partner shall promptly notify
Company of any material change in each case on a consolidated basis in the
normal course of Merger Partner's or the Merger Partner Subsidiaries' businesses
or in the operation of its or their properties, and of the receipt by Merger
Partner or the Merger Partner Subsidiaries of notice of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) or the receipt by Merger Partner or the Merger Partner
Subsidiaries of a notice of the institution or the threat of litigation
involving Merger Partner or any of the Merger Partner Subsidiaries which,
individually or in the aggregate, would have a Material Adverse Effect on Merger
Partner and will keep Company fully informed with respect to any such events.
6.11 Registration Statement; Stockholder Approvals.
(a) As soon as is reasonably practicable after the execution of this
Agreement, Merger Partner shall prepare and file with the SEC the Registration
Statement (in which the Proxy Statement will be included as a prospectus) and
Company shall prepare and file with the SEC the Proxy Statement (which shall
also include the Information Statement relating to the Spin-off). Merger Partner
shall use all commercially reasonable efforts to cause the Registration
Statement to become effective under the Securities Act as promptly as
practicable after such filing and shall take all commercially reasonable actions
required to be taken under any applicable state blue sky or securities laws in
connection with the issuance of the shares of Merger Partner Common Stock
pursuant to this Agreement. Each party hereto shall furnish all information
concerning it and the holders of its capital stock as the other party hereto may
reasonably request in connection with such actions.
(b) Company shall call a Stockholders' Meeting to be held as soon as
practicable after the date hereof for the purpose of voting upon the Merger and
this Agreement. In connection with the Stockholders' Meeting, Company and
Merger Partner shall prepare and file the Proxy Statement with the SEC. Subject
to Section 6.3, (i) Company shall mail the Proxy Statement to its stockholders,
(ii) the Board of Directors of Company shall recommend to its stockholders the
approval of the Merger and this Agreement, and (iii) Company shall use
commercially reasonable efforts to obtain such stockholder approval. Without
limiting the generality of the foregoing, Company agrees that, subject to its
right to terminate this Agreement pursuant to Section 6.3, its obligations
pursuant to this Section 6.11(b) shall not be affected by the commencement,
public proposal, public disclosure or communication to Company of any
Acquisition Proposal.
6.12 Expenses. If this Agreement is terminated for any reason without
breach by any party, each party hereto shall pay its own expenses incident to
preparing for, entering into, and carrying out this Agreement and to
consummating the Merger, except that Company and Merger Partner shall
46
divide equally the following expenses: (a) the costs incurred in connection with
the printing and mailing of the Registration Statement, the Proxy Statement and
related documents; and (b) all filing or registration fees paid by Company or
Merger Partner, including state securities laws filing or registration fees, if
any.
6.13 Press Releases; Filings. Without the consent of the other
parties, none of the parties shall issue any press release or make any public
announcement with regard to this Agreement, the Distribution Agreement, the
Merger or the Spin-off or any of the transactions contemplated hereby or
thereby; provided, however, that nothing in this Section 6.13 shall be deemed to
(i) prohibit Company, Merger Partner or Spinco from making any disclosures,
press releases or announcements relating to their respective businesses or
operations, or (ii) prohibit any party hereto from making any disclosure which
its counsel deems necessary or advisable in order to fulfill such party's
disclosure obligations imposed by law or the rules of any national securities
exchange or automated quotation system. Each of Company and Merger Partner
shall promptly notify the other of each report, schedule and other document
filed by it or any of its respective Subsidiaries with the SEC and of any other
document pertaining to the transactions contemplated hereby filed with any other
governmental authorities.
6.14 Indemnification of Officers and Directors.
(a) Until such time as the applicable statute of limitations shall
have expired, the Surviving Corporation shall provide with respect to each
present or former director and officer of Company and its subsidiaries (both
present and past) (the "Indemnified Parties"), the indemnification rights
(including any rights to advancement of expenses) which such Indemnified Parties
had, whether from Company or such subsidiary, immediately prior to the Merger,
whether under the DGCL or the bylaws of Company or such subsidiary or otherwise.
(b) Immediately following the Effective Time, Merger Partner shall
cause to be in effect the current policies of directors' and officers' liability
insurance maintained by Company or any Company Subsidiary (provided Merger
Partner may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are no less advantageous) with
respect to claims arising from facts or events which occurred at or before the
Effective Time, and Merger Partner shall maintain such coverage for a period of
six years after the Effective Time; provided, however, that in no event shall
Merger Partner be required to expend pursuant to this Section 6.14(b) on an
annual basis more than an amount equal to 250% of the current annual premiums
paid by Company and the Company Subsidiaries for such insurance and, in the
event the cost of such coverage shall exceed that amount, Merger Partner shall
purchase as much coverage as possible for such amount.
(c) This Section 6.14 shall survive the Closing and is intended to
benefit Company, the Surviving Corporation and each of the Indemnified Parties
and his or her heirs and representatives (each of whom shall be entitled to
enforce this Section 6.14 against Merger Partner or the Surviving Corporation to
the extent specified herein) and shall be binding on all successors and assigns
of Merger Partner and the Surviving Corporation.
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6.15 Tax Treatment. Merger Partner and Company agree to treat the
Spin-off as a tax-free distribution within the meaning of Section 355 of the
Code and the Merger as a reorganization within the meaning of Section 368(a) of
the Code. During the period from the date of this Agreement through the
Effective Time, unless the parties shall otherwise agree in writing, none of
Merger Partner, Company or any of their respective Subsidiaries shall knowingly
take or fail to take any action which action or failure to act would jeopardize
qualification of the Spin-off as a tax-free distribution within the meaning of
Section 355 of the Code or the Merger as a reorganization within the meaning of
Section 368(a) of the Code.
6.16 Employee Benefits.
(a) From and after the Effective Time, the Surviving Corporation
shall honor all obligations and commitments under the plans, programs,
arrangements, practices and contracts which are maintained by Company or any of
the Company Subsidiaries or to which Company or any Company Subsidiary is
obligated to make contributions and which provide benefits or compensation to or
on behalf of employees, including but not limited to executive arrangements and
"employee benefit plans" as defined in Section 3(1) of ERISA, in each case in
accordance with their terms as in effect at the Effective Time, with only such
amendments as are permitted by the terms thereof as in effect at the Effective
Time.
(b) Merger Partner shall take, and shall cause the Surviving
Corporation and its subsidiaries and all other affiliates of Merger Partner to
take, the following actions: (i) waive any limitations regarding pre-existing
conditions under any welfare or other employee benefit plan maintained by any of
them for the benefit of employees of Company or any of its subsidiaries (the
"Company Employees") or in which Company Employees participate after the
Effective Time, and (ii) for all purposes under all compensation and benefit
plans and policies applicable to employees of any of them, treat all service by
Company Employees with Company or any affiliates of Company before the Effective
Time as service with Merger Partner and its affiliates, except to the extent
such treatment would result in duplication of benefits.
(c) From and after the Effective Time, the Surviving Corporation
shall assume all obligations of Company under Company's Management Incentive
Plan and Variable Pay Plan and shall make all payments owed by Company pursuant
to the Management Incentive Plan and the Variable Pay Plan in respect of periods
through December 31, 1996 in accordance with Company's past practices.
(d) Effective as of the Effective Time: (i) the Pension Trustees of
the Retirement Plan shall appoint as their successors pursuant to Section 6.1 of
the Retirement Plan individuals and/or entities selected by Merger Partner and
shall resign as Pension Trustees; (ii) Section 6.1 of the Retirement Plan shall
be amended to delete the second and third sentences thereof; (iii) Section 9.1
of the Retirement Plan shall be amended to delete the parenthetical phrase in
the first sentence thereof; and (iv) Section 13.2 of the Retirement Plan shall
be amended to clarify that a merger of the Retirement Plan with a defined
benefit pension plan in accordance with Section 414(e) of the Code and all other
applicable law will not be considered a termination of the Retirement Plan for
purposes
48
of Section 13.12 thereof. The amendments adopted pursuant to the preceding
sentence shall be in form and substance satisfactory to Merger Partner. Before
the Effective Time, the Company and Merger Partner shall take all steps
necessary and appropriate to comply with the requirements of Section 29.14
thereof for continuation of the Retirement Plan after the Effective Time.
6.17 Stock Options.
(a) At the Effective Time, each outstanding option to purchase shares
of Company Common Stock (a "Company Stock Option") and each outstanding stock
appreciation right (a "Company SAR") issued pursuant to any incentive or stock
option program of Company (the "Company Plan"), whether vested or unvested,
shall be assumed by Merger Partner, provided that the foregoing shall not apply
to options or stock appreciation rights assumed by Spinco pursuant to the
Distribution Agreement and such options and stock appreciation rights assumed by
Spinco shall not constitute Company Stock Options or Company SARs for purposes
of this Agreement. Each Company Stock Option shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such Company Stock Option, a number of shares of Merger Partner Common Stock
equal to (x) the number of shares of Company Common Stock covered by such
Company Stock Option, multiplied by (y) the Option Adjustment Ratio, at a price
per share equal to (A) the exercise price of such Company Stock Option
immediately prior to the Spin-off, multiplied by (B) (1) one divided by (2) the
Option Adjustment Ratio; provided, however, that in the case of any option to
which Section 421 of the Code applies by reason of its qualification under
Section 422 of the Code ("incentive stock options"), the option price, the
number of shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in order to comply
with Section 424(a) of the Code. For purposes of the foregoing, the "Option
Adjustment Ratio" shall mean the amount obtained by dividing (i) the average of
the daily high and low trading prices on the New York Stock Exchange for the
Company Common Stock on each of the 20 trading days prior to the ex-dividend
date for the Spin-off by (ii) the average of the daily high and low trading
prices on the New York Stock Exchange for the Merger Partner Common Stock on
each of the same 20 trading days. Each holder of a Company SAR shall be
entitled to that number of stock appreciation rights of Merger Partner ("Merger
Partner SARs"), determined in the same manner as set forth above with respect to
Company Stock Options assumed by Merger Partner. At the Effective Time, the
agreements evidencing the grants of Company Stock Options and Company SARs
assumed by Merger Partner shall be amended to provide that the right of a holder
to exercise Company Stock Options and Company SARs shall continue beyond the
termination of such holder's employment, if such holder's employment is
terminated without Cause or such holder leaves employment for Good Reason (as
such terms are defined in the Company's change of control policy as in effect
immediately prior to the Effective Time or, if applicable, such holder's
employment agreement or change of control severance agreement), until the later
of (x) the second anniversary of the Effective Time, (y) 90 days after such
holder's termination of employment, and (z) the end of the period for exercise
of such Company Stock Options or Company SARs as provided in any employment or
severance agreement between the Company and such holder.
(b) As soon as practicable after the Effective Time, Merger Partner
shall deliver to the holders of Company Stock Options and Company SARs
appropriate notices setting forth such
49
holders' rights pursuant to the Company Plan and the agreements evidencing the
grants of such Company Stock Options or Company SARs, as the case may be, shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 6.17 after giving effect to the Merger and the
assumption by Merger Partner as set forth above). If necessary, Merger Partner
shall comply with the terms of the Company Plan and ensure, to the extent
required by, and subject to the provisions of, such Plan, that Company Stock
Options which qualified as incentive stock options prior to the Effective Time
continue to qualify as incentive stock options of Merger Partner after the
Effective Time.
(c) Merger Partner shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Merger Partner Common
Stock for delivery upon exercise of Company Stock Options assumed by it in
accordance with this Section 6.17. As soon as practicable after the Effective
Time, Merger Partner shall file a registration statement on Form S-3 or Form S-
8, as the case may be (or any successor or other appropriate forms), or another
appropriate form with respect to the shares of Merger Partner Common Stock
subject to such options and shall use all reasonable efforts to maintain the
effectiveness of such registration statement or 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, Merger
Partner shall administer each Company Plan assumed pursuant to this Section 6.17
in a manner that complies with Rule 16b-3 promulgated under the Exchange Act to
the extent the Company Plan complied with such rule prior to the Merger.
6.18 AEGON USA Guaranty. At the Closing, Merger Partner shall cause
AEGON USA, Inc. to enter into a Guaranty Agreement with Company and Spinco in
substantially the form of Exhibit D pursuant to which AEGON USA, Inc. will
guarantee the obligations of Company pursuant to Section 6.14 and Section 6.16
of this Agreement and the obligations of Company under the Distribution
Agreement and the Other Agreements (as defined in the Distribution Agreement).
6.19 Determination of Comparable Benefits. Prior to the Closing
Date, Company and Merger Partner shall work together in good faith to determine
whether the employee benefit plans and employee welfare plans currently
maintained by Company and the Company Subsidiaries for their employees are, in
the aggregate, at least as favorable as such plans currently maintained by
Merger Partner and the Merger Partner Subsidiaries, as contemplated in the
definition of "Good Reason" contained in Company's Change in Control Plan. The
determination of Company and Merger Partner, if any, shall be reduced to
writing, which shall be signed by both parties.
6.20 Merger Partner Exchange Transaction. Prior to the Closing Date,
Merger Partner shall effect, in one or more arm's length transactions which will
occur contemporaneously, (i) the purchase by Merger Partner of approximately 8%
of the currently outstanding shares of Merger Partner Common Stock from the
Association, and (ii) the sale of such number of shares of the existing class of
Merger Partner Common Stock to the Association, such that the Association shall
maintain its percentage of voting control as of the date hereof, subject to
increases such that the Association's percentage of voting control shall not
exceed historical percentages of voting control within the last five years.
Merger Partner agrees that, except as set forth in the preceding sentence,
between the date hereof and the Closing Date Merger Partner will not issue or
sell any shares of capital stock of Merger Partner to the
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Association, except that Merger Partner may issue or sell to the Association
during such period a maximum of 500,000 shares of capital stock in connection
with other transactions.
6.21 Company Contracts. Within 28 days after the date of this Agreement,
Company shall furnish to Merger Partner access to and copies of listings of
contracts, agreements, leases, commitments, arrangements or other instruments
hereinafter described in this Section 6.21 to which the Company or any Company
Subsidiary is a party or by or to which it or any of its assets or properties
are bound except for (i) agreements, commitments, arrangements, leases or other
instruments disclosed in the Company Annual Report on Form 10-K for the year
ended December 31, 1995, (ii) the Distribution Agreement (and the other
agreements contemplated thereby), and (iii) insurance, reinsurance and agency
contracts entered into or to be entered into in the normal course of business:
(a) contracts and other agreements with any current or former
officer, director, employee, consultant or other representative (other than an
insurance agent or broker) of Company or any Company Subsidiary pursuant to
which Company or any Company Subsidiary has ongoing obligations calling for
payments in any one year of more than $250,000 in any one case, other than such
contracts and other agreements that are terminable at will by Company or such
Company Subsidiary,
(b) contracts and other agreements for the purchase or sale of
equipment or services or to make capital expenditures (whether through the
purchase of real or personal property or otherwise), other than in the ordinary
course of business (including agreements for ordinary maintenance of equipment),
calling for a purchase price or payments in any one year of more than $2.5
million,
(c) contracts and other agreements for the sale of any of its assets
or properties or for the grant to any Person of any preferential rights to
purchase or use any of its assets or properties in each case involving assets or
properties with a book value in excess of $2.5 million, other than those entered
into in the ordinary course of business,
(d) joint venture, partnership and marketing agreements which are
material to any of the Company Business Units taken as a whole,
(e) contracts and other agreements containing covenants of Company or
any Company Subsidiary not to compete with any Person which are material to
Company and the Company Subsidiaries as a whole or which following the Effective
Time will be material to Merger Partner and the Merger Partner Subsidiaries
taken as a whole,
(f) contracts and other agreements relating to the making of any loan
in excess of $1 million in any one case, other than Investment Assets and
Company Employee Plan loans made in the ordinary course of business and other
than intercompany loans between or among Company and/or the Company
Subsidiaries,
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(g) contracts or other agreements for or relating to computer
equipment or computer services calling for a purchase price or payment in any
one case during any one year of more than $1 million,
(h) contracts or other agreements relating to any derivative
instruments or securities or any "off-balance sheet" financing transaction,
other than those entered into in the ordinary course of business for bona fide
hedging purposes, and
(i) to the Knowledge of Company, any other contract or other
agreement whether or not made in the ordinary course of business calling for
payments in any one year of more than $2.5 million in any one case.
6.22 Agents. Within 28 days after the date of this Agreement, Company
shall furnish to Merger Partner (a) a list of Company's agents and brokers as of
the date hereof who have acted as agent or broker with respect to insurance
contracts of Company which are in force and who were paid commissions in excess
of $500,000 by any Company Insurance Subsidiary within the past twelve months
("Significant Brokers"), (b) a list of and copies of the standard forms of
agreements between each Company Insurance Subsidiary and its insurance agents
and brokers, (c) a list of those Significant Brokers as to which such agreements
specified in clause (b) of this Section 6.22 are in effect and (d) a list of
those Significant Brokers who have entered into other agency agreements with any
Company Insurance Subsidiary that are in effect.
6.23 Litigation. Subject to the restrictions set forth in Section 6.1(a),
during the period from the date hereof until the Effective Time, Company shall,
and shall cause the Company Subsidiaries to, give Merger Partner and its
representatives access to and copies of listings of claims, actions, suits,
investigations and proceedings to which Company or any Company Subsidiary is
subject, to the extent such listings are in the possession of the Company or the
Company Subsidiaries and are reasonably requested by Merger Partner. It is
understood and agreed that the provision of any such listings shall not be
deemed to modify the representations of the Company set forth in Section 4.10.
6.24 Certain Reporting Requirements. After the Effective Time, Merger
Partner shall cause the Surviving Corporation to comply with the reporting
requirements of Section 6038B of the Code and the regulations thereunder.
6.25 Investment Company Act. Merger Partner covenants and agrees that it
will comply in all material respects with any requirements imposed by Section
15(f) of the 1940 Act with respect to the Manager.
6.26 Ruling Request. Prior to the filing of a request (the "Ruling
Request") for a Ruling (as defined in Section 7.1(g)) with the IRS, Company will
permit Merger Partner to review and comment on the Ruling Request and will
consult with Merger Partner regarding such Ruling Request. In addition, Company
will promptly make available for review by Merger Partner all written
correspondence that Company receives from the IRS concerning the Ruling Request
and will allow
52
Merger Partner to participate in discussions with the IRS. Merger Partner
agrees to use all commercially reasonable efforts to cooperate with Company in
connection with such Ruling Request. Company shall be responsible for all costs
and expenses (including IRS user fees) relating to the Ruling Request, except
for costs and expenses relating to Merger Partner's review of the Ruling Request
and participation in such process.
ARTICLE 7
CONDITIONS PRECEDENT TO MERGER
7.1 Conditions to Each Party's Obligations. The respective obligations of
each party to effect the Merger shall be subject to the satisfaction on or
prior to the Closing Date of each of the following conditions:
(a) This Agreement and the Merger shall have been approved and
adopted by the affirmative vote or consent of the holders of at least a majority
of the outstanding shares of Company Common Stock.
(b) All consents, authorizations, orders and approvals of (or filings
or registrations with) any governmental authority or other regulatory body
required in connection with the execution, delivery and performance of this
Agreement and the Distribution Agreement, the failure to obtain which would
prevent the consummation of the Merger or the Spin-off or have a Material
Adverse Effect on Company or a Material Adverse Effect on Merger Partner, shall
have been obtained without the imposition of any conditions which would have,
individually or in the aggregate, a Material Adverse Effect on Company or a
Material Adverse Effect on Merger Partner.
(c) All authorizations, consents, waivers and approvals from parties
to contracts or other agreements to which any of Company or Merger Partner (or
their respective Subsidiaries) is a party, or by which either is bound, as may
be required to be obtained by them in connection with the performance of this
Agreement and the Distribution Agreement, the failure to obtain which would
prevent the consummation of the Merger or the Spin-off or have, individually or
in the aggregate, a Material Adverse Effect on Company or, individually or in
the aggregate, a Material Adverse Effect on Merger Partner, shall have been
obtained.
(d) Early termination shall have been granted or applicable waiting
periods shall have expired under the HSR Act.
(e) No governmental authority or other regulatory body (including any
court of competent jurisdiction) shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which is
then in effect and has the effect of making illegal, materially restricting or
in any way preventing or prohibiting the Merger, the Spin-off or the
transactions contemplated by this Agreement or the Distribution Agreement.
53
(f) The Registration Statement shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such purpose,
or under the proxy rules of the SEC pursuant to the Exchange Act and with
respect to the transactions contemplated hereby, shall be pending before or
threatened by the SEC. At the effective date of the Registration Statement, the
Registration Statement shall not contain any untrue statement of a material
fact, or omit to state any material fact necessary in order to make the
statements therein not misleading, and, at the mailing date of the Proxy
Statement and the date of the Stockholders' Meeting, the Proxy Statement shall
not contain any untrue statement of a material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading.
(g) The parties shall have received a private letter ruling from the
IRS (the "Ruling") to the effect that (i) the Spin-off will qualify as a tax-
free distribution within the meaning of Section 355 of the Code, (ii) the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code, (iii) the exchange in the Merger of Company Common Stock for Merger
Partner Common Stock will not give rise to gain or loss for federal income tax
purposes to the stockholders of Company with respect to such exchange (except to
the extent of the cash received), and (iv) neither Company nor Sub will
recognize gain or loss as a consequence of the Merger.
(h) The shares of Merger Partner Common Stock to be issued pursuant
to this Agreement and pursuant to the Company Stock Options shall have been
authorized for listing on the NYSE, subject to official notice of issuance.
(i) The Spin-off shall have been effected.
7.2 Conditions to Obligations of Company. The obligations of Company to
effect the Merger shall be subject to the satisfaction on or prior to the
Closing Date of each of the following conditions unless waived by Company:
(a) The representations and warranties of Merger Partner set forth in
this Agreement shall be true and correct in all material respects at and as of
the date of this Agreement and at and as of the Closing Date as though made at
and as of the Closing Date, except to the extent such representations and
warranties (i) speak as of a specified date and except to the extent
contemplated or permitted by this Agreement; or (ii) are already qualified by
materiality, in which event such representations and warranties shall be true
and correct in all respects.
(b) Merger Partner and Sub each shall have performed in all material
respects all covenants and agreements required to be performed by them under
this Agreement at or prior to the Closing Date.
(c) Merger Partner shall furnish Company with a certificate of its
appropriate officers as to compliance with the conditions set forth in Sections
7.2(a) and (b).
54
(d) Company shall have received a letter addressed to Company, dated
the Closing Date, from a nationally recognized appraisal firm, which letter
shall be in form and substance reasonably satisfactory to Company and shall
support the conclusions that, after giving effect to the Merger and the Spin-
off, Company will not be insolvent and will not be rendered insolvent by the
transactions contemplated hereby or by the Distribution Agreement, will not be
left with unreasonably small capital with which to engage in their businesses
and will not have incurred debts beyond its ability to pay such debts as they
mature.
(e) Company shall have received from ▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ letters
dated (i) the effective date of the Registration Statement and (ii) the Closing
Date, with respect to certain financial information regarding Merger Partner
included in the Registration Statement, in each case in form and substance
reasonably satisfactory to Company and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
(f) Company shall have received opinions, dated the Closing Date, of
the General Counsel of Merger Partner and the General Counsel of AEGON USA,
Inc., in form and substance reasonably satisfactory to Company, with respect to
the matters set forth in Exhibit E.
7.3 Conditions to Obligations of Merger Partner. The obligations of
Merger Partner to effect the Merger shall be subject to the satisfaction on or
prior to the Closing Date of each of the following conditions unless waived by
Merger Partner:
(a) The representations and warranties of Company set forth in this
Agreement shall be true and correct in all material respects at and as of the
date of this Agreement and at and as of the Closing Date as though made at and
as of the Closing Date, except to the extent such representations and warranties
(i) speak as of a specified date and except to the extent contemplated or
permitted by this Agreement or the Distribution Agreement; and (ii) are already
qualified by materiality, in which event such representations and warranties
shall be true and correct in all respects.
(b) Company shall have performed in all material respects all
covenants and agreements required to be performed by it under this Agreement at
or prior to the Closing Date.
(c) Company shall furnish Merger Partner with a certificate of its
appropriate officers as to compliance with the conditions set forth in Sections
7.3(a) and (b).
(d) Merger Partner shall have received from Ernst & Young LLP letters
dated (i) the date of the Proxy Statement and (ii) the Closing Date, with
respect to certain financial information regarding Company included in the Proxy
Statement, in each case in form and substance reasonably satisfactory to Merger
Partner and customary in scope and substance for letters delivered by
independent public accountants in connection with proxy statements similar to
the Proxy Statement.
55
(e) Company shall have used commercially reasonable efforts to cause
each person who Company believes, at the time the Merger is submitted to a vote
of the stockholders of Company, is an "affiliate" for purposes of Rule 145 under
the Securities Act, to deliver to Merger Partner on or prior to the Closing Date
a written agreement in terms satisfactory to Merger Partner, that such person
will not offer to sell, transfer or otherwise dispose of any of the shares of
Merger Partner Common Stock issued to such person pursuant to the Merger, except
in accordance with the applicable provisions of Rule 145, and except in other
transactions that are not in violation of the Securities Act. Exhibit F sets
forth a list of those persons who the Company believes, at the date hereof, are
"affiliates" for purposes of Rule 145 under the Securities Act.
(f) Merger Partner shall have received an opinion, dated the Closing
Date, of King & Spalding, counsel to Company, in form and substance reasonably
satisfactory to Merger Partner, with respect to the matters set forth in
Exhibit G.
ARTICLE 8
TERMINATION AND ABANDONMENT OF THE MERGER
8.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the approval by the stockholders of
Company:
(a) by the mutual written consent of Merger Partner and Company;
(b) by Company if:
(i) the Merger is not consummated on or before August 31, 1997 (or
such later date as shall have been approved by Merger Partner and Company),
unless the failure of such occurrence shall be due to the failure of
Company to perform or observe the covenants, agreements and conditions
hereof to be performed or observed by it at or before the Effective Time;
(ii) events occur which render impossible the satisfaction of one or
more of the conditions set forth in Sections 7.1 and 7.2 and such
conditions are not waived by Company, unless the failure of such occurrence
shall be due to the failure of Company to perform or observe the covenants,
agreements and conditions hereof to be performed or observed by it at or
before the Effective Time;
(iii) Company is enjoined or restrained by any governmental authority
or other regulatory body (including any court), such injunction or
restraining order prevents the performance by Company of its obligations
hereunder and such injunction shall not have been withdrawn by the earlier
to occur of the date 60 days after the date on which such injunction was
first issued or August 31, 1997;
56
(iv) the Board of Directors of Company shall have exercised any of
its rights set forth in Section 6.3;
(v) the stockholders of Company do not approve this Agreement and
the Merger at the Stockholders' Meeting; or
(vi) the Fair Market Value at the Effective Time of one share of
Merger Partner Common Stock (assuming the Effective Time were to occur on
the Closing Date) would be less than $44.475, unless Merger Partner agrees
in such event that the Exchange Ratio shall be determined by dividing
$24.889 by the Fair Market Value at the Effective Time of one share of
Merger Partner Common Stock.
(c) by Merger Partner if:
(i) the Merger is not consummated on or before August 31, 1997 (or
such later date as shall have been approved by Company and Merger Partner),
unless the failure of such occurrence shall be due to the failure of Merger
Partner or Sub to perform or observe the covenants, agreements and
conditions hereof to be performed or observed by them at or before the
Effective Time;
(ii) events occur which render impossible the satisfaction of one or
more of the conditions set forth in Sections 7.1 and 7.3 and such
conditions are not waived by Merger Partner, unless the failure of such
occurrence shall be due to the failure of Merger Partner or Sub to perform
or observe the covenants, agreements and conditions hereof to be performed
or observed by them at or before the Effective Time;
(iii) Merger Partner is enjoined or restrained by any governmental
authority or other regulatory body (including any court), such injunction
or restraining order prevents the performance by Merger Partner of its
obligations hereunder and such injunction shall not have been withdrawn by
the earlier to occur of the date 60 days after the date on which such
injunction was first issued or August 31, 1997;
(iv) the stockholders of Company do not approve this Agreement and
the Merger at the Stockholders' Meeting;
(v) the Board of Directors of Company shall have withdrawn or
materially modified in a manner adverse to Merger Partner its
recommendation of this Agreement and the Merger or the Board of Directors
shall have approved or recommended another Acquisition Proposal; or
(vi) the Fair Market Value at the Effective Time of one share of
Merger Partner Common Stock (assuming the Effective Time were to occur on
the Closing Date) would be greater than $66.713, unless the Company agrees
in such event that the Exchange Ratio shall
57
be determined by dividing $30.545 by the Fair Market Value at the Effective
Time of one share of Merger Partner Common Stock.
8.2 Effect of Termination and Abandonment. In the event of the
termination and abandonment of this Agreement under Section 8.1, this Agreement
shall become void and have no effect, without any liability on the part of any
party or its directors, officers or stockholders except (i) as provided in the
third sentence of Section 6.1(a), and in Sections 6.4 and 6.12 and (ii) to the
extent that such termination results from the willful breach by any party hereto
of any material representation, warranty or covenant hereunder.
ARTICLE 9
MISCELLANEOUS
9.1 Waiver and Amendment. Any term or provision of this Agreement may be
waived in writing at any time by the party which is, or whose stockholders are,
entitled to the benefits thereof, and any term or provision of this Agreement
may be amended or supplemented at any time by action of the respective Boards of
Directors (or its authorized representative) of Merger Partner or Company
without action of the stockholders, whether before or after the Stockholders'
Meeting; provided, however, that after approval of the stockholders of Company
no such amendment shall reduce the amount or change the form of the
consideration to be delivered to Company's stockholders as contemplated by this
Agreement or otherwise materially adversely affect the interests of such
stockholders unless such amendment is approved by Company's stockholders. No
amendment to this Agreement shall be effective unless it has been executed by
Company, Merger Partner and Sub.
9.2 Non-Survival of Representations, Warranties and Agreements. Except
for the agreements contained in Sections 2.2, 2.3, 2.4, 2.5, 2.6, 6.8, 6.14,
6.15, 6.16, 6.17, 6.18, 6.24 and 6.25 and Article 9 and the representations and
warranties contained in Sections 4.35 and 5.29, none of the representations,
warranties and agreements of Company, Merger Partner or Sub in this Agreement,
or in any instrument or certificate delivered pursuant to this Agreement, shall
survive the Merger nor shall their respective stockholders, directors or
officers have any liability to the other after the Effective Time on account of
any breach of warranty or failure or the incorrectness of any of the
representations or warranties contained herein or in any certificate or other
instrument delivered pursuant to this Agreement. The sole right and remedy
arising from a misrepresentation or breach of warranty, from the failure of any
of the conditions of the Merger to be met, or from the failure to perform any
promise or discharge any obligation in this Agreement shall be termination of
this Agreement by the aggrieved party and the remedies provided in Section 8.2.
9.3 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
telecopied (if confirmed) or sent by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
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If to Company:
Providian Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
King & Spalding
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Mr. E. ▇▇▇▇▇▇▇ ▇▇▇▇▇, II
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Merger Partner:
(via mail):
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ J. Storm
Telecopy No.: (▇▇-▇▇) ▇▇▇-▇▇▇▇
(via hand delivery):
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ J. Storm
Telecopy No.: (▇▇-▇▇) ▇▇▇-▇▇▇▇
59
With a copy to:
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Merger Sub:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
9.4 Descriptive Headings; Interpretation. The descriptive headings are
for convenience of reference only and shall not control or affect the meaning
or construction of any provision of this Agreement. When a reference is made
in this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The phrase "made available" in this
Agreement shall mean that the information referred to has been made available
if requested by the party to whom such information is to be made available.
The phrases "the date of this Agreement", "the date hereof", and terms of
similar import, unless the context otherwise requires, shall be deemed to refer
to December 28, 1996. Notwithstanding anything to the contrary contained in
this Agreement or in any of the Schedules, any information disclosed on one
Schedule shall be deemed to be disclosed in all Schedules provided that the
context makes clear that such information relates to the other Schedule or
Schedules. Certain information set forth in the Schedules is included solely
for informational purposes and may not be required to be disclosed pursuant to
this Agreement. As between Company or Merger Partner, as applicable, and third
parties, the disclosure of any information shall not be deemed to constitute an
acknowledgment that such information is required to be disclosed in connection
with the representations and warranties made by Company and in this Agreement.
The foregoing two sentences shall nevertheless not affect the rights or
obligations of Company or Merger Partner as set forth herein. In addition, it
is understood and agreed that the inclusion of information in any Disclosure
Schedule which is not required to be disclosed in such Schedule shall not give
rise to any inference that any comparable information is required to be
60
disclosed and shall not give rise to any breach by a party due to the failure to
disclose comparable information which is also otherwise not required to be
disclosed.
9.5 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement. This Agreement shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other parties, it
being understood that the parties need not sign the same counterpart.
9.6 Entire Agreement. This Agreement and the Confidentiality Agreements
contain the entire agreement between Merger Partner, Sub and Company with
respect to the Merger, and supersede all prior arrangements or understandings
with respect to the subject matter hereof. Except as otherwise contemplated in
the covenants listed in Section 9.2 (which covenants shall be enforceable by the
person or persons affected thereby following the Effective Time), this Agreement
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
9.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO ANY
APPLICABLE CONFLICTS OF LAW PROVISIONS THEREOF).
9.8 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in a mutually acceptable manner in order that
the transactions be consummated as originally contemplated to the fullest extent
possible.
9.9 Enforcement of Agreement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions 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.
9.10 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, and any attempt to make any such assignment without such consent shall
be null and void. Subject to the preceding sentence, this Agreement will
61
be binding upon, inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns.
9.11 Limited Liability. Notwithstanding any other provision of this
Agreement or the Distribution Agreement, no stockholder, director, officer,
affiliate or representative of Company or Merger Partner shall have any personal
liability in respect of or relating to the covenants, obligations,
representations or warranties of such party under this Agreement or the
Distribution Agreement or in respect of any certificate delivered with respect
hereto or thereto, except to the extent that such person or entity has engaged
in fraud with respect to such matters. Except as set forth in the preceding
sentence, to the fullest extent legally permissible, each of Company and Merger
Partner, for itself and its stockholders, directors, officers and affiliates,
waives and agrees not to seek to assert or enforce any such liability that any
such person otherwise might have pursuant to applicable law.
9.12 CONSENT TO JURISDICTION; SERVICE OF PROCESS.
-------------------------------------------
(a) EACH PARTY IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL
ACTION, SUIT OR PROCEEDING BY OR AGAINST IT WITH RESPECT TO ITS RIGHTS,
OBLIGATIONS OR LIABILITIES UNDER THIS AGREEMENT OR ANY OTHER AGREEMENT EXECUTED
IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT BY SUCH PARTY ONLY IN THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE OR, IF (BUT ONLY IF)
SUCH COURT DOES NOT HAVE SUBJECT MATTER JURISDICTION OVER SUCH ACTION, SUIT OR
PROCEEDING (INCLUDING, WITHOUT LIMITATION, CLAIMS FOR INTERIM RELIEF,
COUNTERCLAIMS, ACTIONS WITH MULTIPLE DEFENDANTS AND ACTIONS IN WHICH SUCH PARTY
IS IMPLED). EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT THAT IT
MAY HAVE TO A JURY TRIAL IN ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT
TO, OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
AGREEMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT.
(b) MERGER PARTNER HEREBY IRREVOCABLY DESIGNATES CT CORPORATION
SYSTEM (IN SUCH CAPACITY, THE "PROCESS AGENT"), WITH AN OFFICE AT ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ AS ITS DESIGNEE, APPOINTEE AND AGENT TO
RECEIVE, FOR AND ON ITS BEHALF SERVICE OF PROCESS IN SUCH JURISDICTION IN ANY
LEGAL ACTION OR PROCEEDINGS WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
AGREEMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT, AND SUCH SERVICE SHALL BE
DEEMED COMPLETE UPON DELIVERY THEREOF TO THE PROCESS AGENT, PROVIDED THAT IN THE
CASE OF ANY SUCH SERVICE UPON THE PROCESS AGENT, THE PARTY EFFECTING SUCH
SERVICE SHALL ALSO DELIVER A COPY THEREOF TO MERGER PARTNER IN THE MANNER
PROVIDED IN SECTION 9.3. MERGER PARTNER SHALL TAKE ALL SUCH ACTION AS MAY BE
NECESSARY TO CONTINUE SAID APPOINTMENT IN FULL FORCE AND EFFECT OR TO APPOINT
ANOTHER AGENT SO
62
THAT MERGER PARTNER WILL AT ALL TIMES HAVE AN AGENT FOR SERVICE OF PROCESS FOR
THE ABOVE PURPOSES IN DELAWARE. IN THE EVENT OF THE TRANSFER OF ALL OR
SUBSTANTIALLY ALL OF THE ASSETS AND BUSINESS OF THE PROCESS AGENT TO ANY OTHER
CORPORATION BY CONSOLIDATION, MERGER, SALE OF ASSETS OR OTHERWISE, SUCH OTHER
CORPORATION SHALL BE SUBSTITUTED HEREUNDER FOR THE PROCESS AGENT WITH THE SAME
EFFECT AS IF NAMED HEREIN IN PLACE OF CT CORPORATION SYSTEM. MERGER PARTNER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED AIRMAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET
FORTH IN THIS AGREEMENT, SUCH SERVICE OF PROCESS TO BE EFFECTIVE UPON
ACKNOWLEDGMENT OF RECEIPT OF SUCH REGISTERED MAIL. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW. MERGER PARTNER EXPRESSLY ACKNOWLEDGES THAT THE FOREGOING WAIVER
IS INTENDED TO BE IRREVOCABLE UNDER THE LAWS OF THE STATE OF DELAWARE AND OF THE
UNITED STATES OF AMERICA.
63
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered by its respective duly authorized officers, all as of
the date first above written.
AEGON N.V.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Member of Executive Board
LT MERGER CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
PROVIDIAN CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
Title: Chairman of the Board and
Chief Executive Officer