EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CITIGROUP INC.,
MERCURY MERGER SUB, INC.
AND
GOLDEN STATE BANCORP INC.
DATED AS OF MAY 21, 2002
TABLE OF CONTENTS
PAGE
----
ARTICLE I THE MERGER...................................................1
SECTION 1.1 The Merger.............................................1
SECTION 1.2 Closing................................................2
SECTION 1.3 Effective Time.........................................2
SECTION 1.4 Effects of the Merger..................................2
SECTION 1.5 Certificate of Incorporation and By-laws of
the Surviving Corporation..............................2
SECTION 1.6 Directors and Officers.................................2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES.................................3
SECTION 2.1 Effect on Capital Stock................................3
SECTION 2.2 Proration..............................................6
SECTION 2.3 Election and Exchange Procedures.......................7
SECTION 2.4 Certain Adjustments...................................12
SECTION 2.5 Shares of Dissenting Stockholders.....................12
SECTION 2.6 Litigation Tracking Warrants..........................12
ARTICLE III REPRESENTATIONS AND WARRANTIES............................13
SECTION 3.1 Representations and Warranties of the Company.........13
SECTION 3.2 Representations and Warranties of Parent..............39
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS..................44
SECTION 4.1 Conduct of Business by the Company....................44
SECTION 4.2 Advice of Changes.....................................49
SECTION 4.3 No Solicitation by the Company........................49
SECTION 4.4 Certain Tax Matters...................................51
SECTION 4.5 Transition............................................52
SECTION 4.6 No Fundamental Changes in the Conduct of
Business by Parent....................................52
ARTICLE V ADDITIONAL AGREEMENTS.......................................53
SECTION 5.1 Preparation of the Form S-4, Proxy Statement;
Stockholders Meeting..................................53
SECTION 5.2 Letters of the Company's Accountants..................54
SECTION 5.3 Letters of Parent's Accountants.......................54
SECTION 5.4 Access to Information; Confidentiality................54
SECTION 5.5 Reasonable Best Efforts...............................55
SECTION 5.6 Company Equity-Based Incentives.......................56
SECTION 5.7 Indemnification, Exculpation and Insurance............57
SECTION 5.8 Fees and Expenses.....................................58
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SECTION 5.9 Public Announcements..................................60
SECTION 5.10 Affiliates............................................60
SECTION 5.11 Stock Exchange Listing................................60
SECTION 5.12 Stockholder Litigation................................60
SECTION 5.13 Standstill Agreements; Confidentiality Agreements.....60
SECTION 5.14 Conveyance Taxes......................................60
SECTION 5.15 Employee Benefits.....................................61
SECTION 5.16 Tax Matters...........................................62
SECTION 5.17 Amendment of Warrant Agreement........................62
ARTICLE VI CONDITIONS PRECEDENT.......................................62
SECTION 6.1 Conditions to Each Party's Obligation to
Effect the Merger.....................................62
SECTION 6.2 Conditions to Obligations of Parent...................63
SECTION 6.3 Conditions to Obligations of the Company..............64
SECTION 6.4 Frustration of Closing Conditions.....................65
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.........................65
SECTION 7.1 Termination...........................................65
SECTION 7.2 Effect of Termination.................................66
SECTION 7.3 Amendment.............................................66
SECTION 7.4 Extension; Waiver.....................................66
ARTICLE VIII GENERAL PROVISIONS.......................................67
SECTION 8.1 Nonsurvival of Representations and Warranties.........67
SECTION 8.2 Notices...............................................67
SECTION 8.3 Definitions...........................................68
SECTION 8.4 Interpretation........................................69
SECTION 8.5 Counterparts..........................................70
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries........70
SECTION 8.7 Governing Law.........................................70
SECTION 8.8 Assignment............................................70
SECTION 8.9 Consent to Jurisdiction...............................70
SECTION 8.10 Headings..............................................70
SECTION 8.11 Severability..........................................71
SECTION 8.12 Enforcement...........................................71
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INDEX OF DEFINED TERMS
TERM PAGE
---- ----
1998 Merger Agreement..................................................5
Actions...............................................................51
Adjusted Option.......................................................56
Adjustment Event......................................................12
affiliate..........................................................68, 3
Aggregate Cash Amount..................................................4
Aggregate Company Share Amount.........................................4
Aggregate Parent Share Amount..........................................5
Agreement..............................................................1
Assumed Options........................................................1
Bank..................................................................14
Bank Combination......................................................55
CALGLs................................................................14
CALGZs................................................................14
Cash Consideration.....................................................3
Cash Election..........................................................3
Cash Election Shares...................................................3
Certificate of Merger..................................................2
Change in the Company Recommendation..................................50
Closing................................................................2
Closing Date...........................................................2
Closing Parent Share Value.........................................5, 68
Closing Transaction Value..............................................5
Code...................................................................1
Company................................................................1
Company Acquisition Agreement.........................................51
Company Common Stock...................................................1
Company Disclosure Schedule...........................................13
Company Filed SEC Documents...........................................19
Company Finance Subsidiaries..........................................23
Company Material Contracts............................................19
Company Preferred Stock...............................................14
Company Recommendation................................................53
Company Regulatory Agreement..........................................21
Company SEC Documents.................................................17
Company Stock Certificates.............................................8
Company Stock Options.................................................15
Company Stock Plans...................................................15
Company Stockholder Approval..........................................35
Company Stockholders Meeting...........................................1
Company Superior Proposal.............................................50
Company Takeover Proposal.............................................50
Confidentiality Agreement.............................................54
iii
Continuation Period...................................................61
Continuing Employees..................................................61
control...............................................................68
Derivative Transactions...............................................36
DGCL...................................................................1
Dissenting Shares.....................................................12
Effective Time.........................................................2
Election...............................................................7
Election Deadline......................................................8
Employee..............................................................19
Environmental Claims..................................................32
ERISA.................................................................28
ERISA Affiliate.......................................................28
Excess Option Shares...................................................4
Exchange Act..........................................................17
Exchange Agent.........................................................8
Exchange Fund..........................................................9
Exchange Ratio.........................................................5
Exchangeable Shares....................................................5
Federal Reserve.......................................................17
Finance Laws..........................................................23
Ford Parties...........................................................6
Form of Election.......................................................8
Form S-4..............................................................17
GAAP..................................................................18
Governmental Approvals................................................17
Governmental Entity...................................................17
Holder.................................................................7
HSR Act...............................................................17
Indemnified Parties...................................................57
Indenture.............................................................55
Instruments of Indebtedness...........................................18
Intellectual Property.................................................32
IRS...................................................................25
knowledge.............................................................69
Leased Properties.....................................................38
Leases................................................................38
Letter of Transmittal.................................................11
Liens.................................................................14
LTWs..................................................................12
Major Shareholder.....................................................16
material..............................................................46
material adverse change...............................................68
material adverse effect...............................................68
Merger.................................................................1
Merger Agreement.......................................................1
Merger Consideration...................................................6
iv
Merger Sub.............................................................1
Non-Election Shares....................................................4
NYSE...................................................................5
Other Company Documents...............................................22
OTS Approval..........................................................17
Owned Properties......................................................37
Parent.................................................................1
Parent Authorized Preferred Stock.....................................39
Parent Common Stock.................................................3, 1
Parent Disclosure Schedule............................................39
Parent Employee Stock Options.........................................40
Parent Regulatory Agreement...........................................43
Parent SEC Documents..................................................42
Parent Series F Preferred Stock.......................................39
Parent Series G Preferred Stock.......................................39
Parent Series H Preferred Stock.......................................39
Parent Series M Preferred Stock.......................................39
Parent Series Q Preferred Stock.......................................39
Parent Series R Preferred Stock.......................................39
Parent Series V Preferred Stock.......................................39
Parent Series Y Preferred Stock.......................................39
Parent Series YY Preferred Stock......................................39
Parent Series YYY Preferred Stock.....................................40
Parent Stock Certificate..............................................10
Parent Stock Plans....................................................40
PBGC..................................................................30
PCC...................................................................27
Per Share Amount.......................................................6
Permits...............................................................21
person................................................................69
Plans.................................................................28
Policies, Practices and Procedures....................................36
Post-Signing Returns..................................................51
Pre-Termination Takeover Proposal Event...............................59
Proxy Statement.......................................................17
PSX...................................................................42
REIT Preferred Stock..................................................14
Requisite Regulatory Approvals........................................63
Restraints............................................................63
SEC................................................................68, 1
Securities Act.....................................................17, 1
Securityholders Agreement..............................................1
Shortfall Number.......................................................7
significant subsidiaries..............................................39
▇▇▇▇▇▇▇ ▇▇▇▇...........................................................2
Software..............................................................32
Stock Consideration....................................................3
v
Stock Conversion Number................................................6
Stock Election.........................................................3
Stock Election Number..................................................6
Stock Election Shares..................................................3
subsidiary............................................................69
Surviving Corporation..................................................1
Tax...................................................................27
Tax Return............................................................28
Taxes.................................................................27
Third Party Leases....................................................38
Title IV Plans........................................................28
Wachtell..............................................................62
Warrant Agreement.....................................................15
vi
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 21, 2002,
by and among CITIGROUP INC., a Delaware corporation ("Parent"), GOLDEN STATE
BANCORP INC., a Delaware corporation (the "Company"), and MERCURY MERGER SUB,
INC., a Delaware corporation and a subsidiary of Parent ("Merger Sub").
WHEREAS, each of Parent, Merger Sub and the Company desire to enter into a
transaction whereby the Company will merge with and into Merger Sub (the
"Merger"), with Merger Sub being the surviving corporation, upon the terms and
subject to the conditions set forth in this Agreement, whereby each issued and
outstanding share of common stock, par value $1.00 per share, of the Company
("Company Common Stock"), will be converted into the right to receive the Merger
Consideration (as defined in Section 2.1(d));
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have each approved this Agreement and the Merger (as defined below) in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL") and determined that the Merger is advisable, and Parent has adopted this
Agreement and the Merger as the parent of Merger Sub;
WHEREAS, concurrently with the execution of this Agreement, and as an
inducement to Parent to enter into this Agreement, Parent and certain
stockholders of the Company have entered into a Securityholders Agreement, dated
as of the date hereof (the "Securityholders Agreement"), providing, among other
things, that such stockholders will vote, or cause to be voted, at the meeting
of the Company's stockholders to be called for the purpose of voting on the
adoption of this Agreement (the "Company Stockholders Meeting") all of the
shares of Company Common Stock owned by them (except as otherwise provided in
such Securityholders Agreement) in favor of the Merger; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"), and that
this Agreement be, and is hereby, adopted as a plan of reorganization for
purposes of Sections 354 and 361 of the Code.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, the Company shall be
merged with and into Merger Sub at the Effective Time. Following the Effective
Time, Merger Sub shall be the surviving corporation (the "Surviving
Corporation"), shall
become a direct, wholly owned subsidiary of Parent and shall succeed to and
assume all of the rights and obligations of the Company in accordance with the
DGCL.
SECTION 1.2 Closing. Subject to the satisfaction or waiver of all of the
conditions to closing contained in Article VI hereof, the closing of the Merger
(the "Closing") will take place at 4:00 p.m. on a date to be specified by the
parties (the "Closing Date"), which shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Article VI
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the fulfillment or waiver of those conditions), unless
another time or date is agreed to by the parties hereto. The Closing will be
held at the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP ("▇▇▇▇▇▇▇
▇▇▇▇"), ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or at such other location as
is agreed to by the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this Agreement, at
the Closing, the parties shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") executed in accordance with
the relevant provisions of the DGCL and shall make all other filings or
recordings required under the DGCL to effectuate the Merger. The Merger shall
become effective at such time as the Certificate of Merger is duly filed with
the Secretary of State of the State of Delaware, or at such subsequent date or
time as Parent and the Company shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to as
the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 1.5 Certificate of Incorporation and By-laws of the Surviving
Corporation. The certificate of incorporation and the by-laws of Merger Sub, as
in effect immediately prior to the Effective Time, shall be the certificate of
incorporation and the by-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law, except that the
name of the Merger Sub shall be amended as of the Effective Time to a name
designated by Parent prior to the Company Stockholders Meeting.
SECTION 1.6 Directors and Officers. The directors of Merger Sub shall, from
and after the Effective Time, become the directors of the Surviving Corporation
until their successors shall have been duly elected, appointed or qualified or
until their earlier death, resignation or removal in accordance with the
certificate of incorporation and the by-laws of the Surviving Corporation. The
officers of the Company shall, from and after the Effective Time, become the
officers of the Surviving Corporation until their successors shall have been
duly elected, appointed or qualified or until their earlier death, resignation
or removal in accordance with the certificate of incorporation and the by-laws
of the Surviving Corporation.
2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of
common stock, par value $.01 per share, of Merger Sub 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 $.01 per share, of
the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of Company Common Stock
that is owned by the Company shall automatically be cancelled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor. Each share of Company Common Stock owned by Merger Sub or a subsidiary
of Parent or Merger Sub shall be converted pursuant to the Merger as provided in
Section 2.1(c) and Section 2.2. Notwithstanding Section 2.1(c) and Section 2.2,
each share of Company Common Stock owned by Parent or a subsidiary of the
Company shall be converted into Parent Common Stock (as defined below).
(c) Conversion of Company Common Stock. Subject to the provisions of
this Article II, each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares cancelled and retired
pursuant to Section 2.1(b) hereof and Dissenting Shares (as defined in Section
2.5 hereof)) shall be converted, at the election of the holder thereof, in
accordance with the procedures set forth in Section 2.3 below and subject to
Sections 2.2 and 2.4, into the right to receive the following:
(i) for each share of Company Common Stock with respect
to which an election to receive cash has been effectively
made and not revoked or lost, pursuant to Section 2.3 (a
"Cash Election"), the right to receive in cash from Parent
an amount equal to the Per Share Amount (as defined below)
(the "Cash Consideration") (collectively, "Cash Election
Shares");
(ii) for each share of Company Common Stock with
respect to which an election to receive common stock, par
value $.01 per share, of Parent ("Parent Common Stock") has
been effectively made and not revoked or lost, pursuant to
Section 2.3 (a "Stock Election"), the right to receive from
Parent the fraction of a share of Parent Common Stock as is
equal to the Exchange Ratio (as defined below) (the "Stock
Consideration") (collectively, the "Stock Election Shares");
and
3
(iii) for each share of Company Common Stock other than
shares as to which a Cash Election or a Stock Election has
been effectively made and not revoked or lost, pursuant to
Section 2.3 (collectively, "Non-Election Shares"), the right
to receive from Parent such Stock Consideration and/or Cash
Consideration as is determined in accordance with Section
2.2(b).
(d) Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "Aggregate Cash Amount" means 40% of the product of
(x) the Aggregate Company Share Amount, less the number of
outstanding shares of Company Common Stock cancelled
pursuant to Section 2.1(b) hereof (but excluding from such
reduction the 16,433,269 treasury shares as of May 17, 2002
and treasury shares arising after May 17, 2002 in connection
with the exercise of Company Stock Options after May 17,
2002) and (y) $41.00; provided, however, that if, at the
Effective Time, the aggregate number of shares of Company
Common Stock issuable upon exercise of then outstanding
Company Stock Options (as defined below) exceeds the
difference between (A) 5,361,680 less (B) the aggregate
number of shares of Company Common Stock issued upon
exercise of Company Stock Options after May 17, 2002 and
prior to the Effective Time (such excess being referred to
herein as the "Excess Option Shares"), then the "Aggregate
Cash Amount" shall be reduced by the product of (A) the
Excess Option Shares and (B) an amount equal to the excess
of $41.00 over the weighted average exercise price of the
Excess Stock Options (if separately identifiable or, if not,
the outstanding Company Stock Options) at the Effective
Time.
(ii) "Aggregate Company Share Amount" shall equal
136,041,431 shares of Company Common Stock; provided,
however, that the Aggregate Company Share Amount shall be
increased (A) by virtue of the issuance of any shares of
Company Common Stock upon the exercise from and after May
17, 2002 and prior to the Effective Time of Company Stock
Options outstanding on May 17, 2002 and (B) upon the
issuance prior to the Effective Time of any shares of
Company Common Stock (x) pursuant to Section 1.6(a) or (b)
of the 1998 Merger Agreement, or (y) to the extent
contemplated by Section 6(c)(iii)(A) of the Securityholders
Agreement, pursuant to Section 1.6(c) of the 1998 Merger
Agreement or (z) pursuant to the terms of the LTWs, in each
case on the basis of one additional share of Company Common
Stock for each share so issued; provided, further, that the
"Aggregate Company Share Amount" shall in no event exceed
146,773,293 shares of Company Common Stock PLUS any shares
of Company Common Stock issued prior to the Effective Time
pursuant to the terms of the LTWs (as such term is defined
is Section 2.6 of this Agreement) or pursuant to Section
1.6(a) or (b) of the 1998 Merger Agreement.
4
(iii) "Aggregate Parent Share Amount" shall be equal to
71,204,085 shares of Parent Common Stock; provided, however,
that the "Aggregate Parent Share Amount" shall be increased
(x) by virtue of the issuance of any shares of Company
Common Stock upon the exercise prior to the Effective Time
of Company Stock Options outstanding on May 17, 2002 and (y)
upon the issuance prior to the Effective Time of any shares
of Company Common Stock issuable (x) pursuant to Section
1.6(a) or (b) of the 1998 Merger Agreement, or (y) to the
extent contemplated by Section 6(c)(iii)(A) of the
Securityholders Agreement, pursuant to Section 1.6(c) of the
1998 Merger Agreement or (z) pursuant to the terms of the
LTWs, and shall be decreased in the event any shares of
Company Common Stock are cancelled pursuant to Section
2.1(b) hereof, other than the 16,433,269 treasury shares as
of May 17, 2002 and treasury shares arising after May 17,
2002 in connection with the exercise of Company Stock
Options after May 17, 2002, in each case on a basis of .5234
additional shares of Parent Common Stock for each share of
Company Common Stock so issued or cancelled; provided,
further that the "Aggregate Parent Share Amount" shall in no
event exceed 76,821,142 shares of Parent Common Stock plus
any additional shares issuable in respect of shares of
Company Common Stock issued prior to the Effective Time
pursuant to the terms of the LTWs or pursuant to Section
1.6(a) or (b) of the 1998 Merger Agreement.
(iv) "Closing Parent Share Value" means the arithmetic
average of the 4:00 p.m. Eastern Time closing sales prices
of Parent Common Stock reported on the New York Stock
Exchange (the "NYSE") Composite Tape for the five
consecutive trading days immediately preceding but not
including the second trading day prior to the Closing Date.
(v) "Closing Transaction Value" means the sum of (A)
the Aggregate Cash Amount and (B) the product obtained by
multiplying the Aggregate Parent Share Amount by the Closing
Parent Share Value.
(vi) "Exchange Ratio" means that fraction of a share of
Parent Common Stock as shall be obtained by dividing the Per
Share Amount by the Closing Parent Share Value.
(vii) "Exchangeable Shares" means the aggregate number
of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time, rounded to the
nearest one-thousandth of a share.
(viii) "1998 Merger Agreement" means the Agreement and
Plan of Reorganization, by and among the Company, GS
Financial Corporation, First Nationwide (Parent) Holdings
Inc., First Nationwide Holdings Inc., First Gibraltar
Holdings Inc., and Hunter's
5
▇▇▇▇/Ford, LTD., dated as of February 4, 1998, as amended and
supplemented.
(ix) "Per Share Amount" means the amount obtained by
dividing the Closing Transaction Value by the number of
Exchangeable Shares.
(x) "Ford Parties" means ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇'▇
▇▇▇▇/Ford, Ltd. and Turtle Creek Revocable Trust.
The Cash Consideration and Stock Consideration are sometimes referred to
herein collectively as the "Merger Consideration."
SECTION 2.2 Proration.
(a) Notwithstanding any other provision contained in this Agreement, the
total number of shares of Company Common Stock to be converted into Stock
Consideration pursuant to Section 2.1(c) (the "Stock Conversion Number") shall
be equal to the quotient obtained by dividing (x) the Aggregate Parent Share
Amount by (y) the Exchange Ratio. All of the other shares of Company Common
Stock shall be converted into Cash Consideration (in each case, excluding shares
of Company Common Stock to be canceled as provided in Section 2.1(b) and
Dissenting Shares).
(b) Within five business days after the later to occur of the Election
Deadline or the Effective Time (as such terms are defined in Sections 2.3(d) and
1.3, respectively), Parent shall cause the Exchange Agent (as defined in Section
2.3) to effect the allocation among holders of Company Common Stock of rights to
receive the Cash Consideration and the Stock Consideration as follows:
(i) If the aggregate number of shares of Company Common
Stock with respect to which a Stock Election shall have been
made (the "Stock Election Number") exceeds the Stock
Conversion Number, then all Cash Election Shares and all
Non-Election Shares of each holder thereof shall be
converted into the right to receive the Cash Consideration,
and Stock Election Shares of each holder thereof (other than
Stock Election Shares held by the Ford Parties, all of which
shall be converted into Stock Consideration) will be
converted into the right to receive the Stock Consideration
in respect of that number of Stock Election Shares equal to
the product obtained by multiplying (x) the number of Stock
Election Shares held by such holder (other than the Ford
Parties) by (y) a fraction, the numerator of which is the
Stock Conversion Number less the number of Stock Election
Shares held by the Ford Parties and the denominator of which
is the Stock Election Number less the number of Stock
Election Shares held by the Ford Parties, with the remaining
number of such holder's Stock Election Shares being
converted into the right to receive the Cash Consideration;
and
6
(ii) If the Stock Election Number is less than the
Stock Conversion Number (the amount by which the Stock
Conversion Number exceeds the Stock Election Number being
referred to herein as the "Shortfall Number"), then all
Stock Election Shares shall be converted into the right to
receive the Stock Consideration and the Non-Election Shares
and Cash Election Shares shall be treated in the following
manner:
(A) If the Shortfall Number is less than or equal to
the number of Non-Election Shares, then all Cash Election
Shares shall be converted into the right to receive the Cash
Consideration and Non-Election Shares of each holder thereof
shall convert into the right to receive the Stock
Consideration in respect of that number of Non-Election
Shares equal to the product obtained by multiplying (x) the
number of Non-Election Shares held by such holder by (y) a
fraction, the numerator of which is the Shortfall Number and
the denominator of which is the total number of Non-Election
Shares, with the remaining number of such holder's
Non-Election Shares being converted into the right to
receive the Cash Consideration; or
(B) If the Shortfall Number exceeds the number of
Non-Election Shares, then all Non-Election Shares shall be
converted into the right to receive the Stock Consideration
and Cash Election Shares of each holder thereof shall
convert into the right to receive the Stock Consideration in
respect of that number of Cash Election Shares equal to the
product obtained by multiplying (x) the number of Cash
Election Shares held by such holder by (y) a fraction, the
numerator of which is the amount by which (1) the Shortfall
Number exceeds (2) the total number of Non-Election Shares
and the denominator of which is the total number of Cash
Election Shares, with the remaining number of such holder's
Cash Election Shares being converted into the right to
receive the Cash Consideration.
SECTION 2.3 Election and Exchange Procedures. Each holder of record of
shares of Company Common Stock (other than Dissenting Shares) ("Holder") shall
have the right, subject to the limitations set forth in this Article II, to
submit an election in accordance with the following procedures:
(a) Each Holder may specify in a request made in accordance with the
provisions of this Section (herein called an "Election") (x) the number of
shares of Company Common Stock owned by such Holder with respect to which such
Holder desires to make a Stock Election and (y) the number of shares of Company
Common Stock owned by such Holder with respect to which such Holder desires to
make a Cash Election.
7
(b) Parent shall prepare a form reasonably acceptable to the Company
(the "Form of Election") which shall be mailed to the Company's stockholders
entitled to vote at the Company Stockholders Meeting so as to permit the
Company's stockholders to exercise their right to make an Election prior to the
Election Deadline (as defined in subsection (d)).
(c) Parent shall make the Form of Election initially available at the
time that the Proxy Statement (as defined herein) is made available to the
stockholders of the Company, to such stockholders, and shall use all reasonable
efforts to make available as promptly as possible a Form of Election to any
stockholder of the Company who requests such Form of Election following the
initial mailing of the Forms of Election and prior to the Election Deadline. In
no event shall the Form of Election be made available less than twenty (20) days
prior to the Election Deadline.
(d) Any Election shall have been made properly only if the person
authorized to receive Elections and to act as exchange agent under this
Agreement, which person shall be designated by Parent and reasonably acceptable
to the Company (the "Exchange Agent"), shall have received, by 5:00 p.m. local
time in the city in which the principal office of such Exchange Agent is
located, on the date of the Election Deadline, a Form of Election properly
completed and signed and accompanied by certificates of the shares of Company
Common Stock (the "Company Stock Certificates") to which such Form of Election
relates or by an appropriate customary guarantee of delivery of such
certificates, as set forth in such Form of Election, from a member of any
registered national securities exchange or a commercial bank or trust company in
the United States; provided, that such certificates are in fact delivered to the
Exchange Agent by the time required in such guarantee of delivery. Failure to
deliver shares of Company Common Stock covered by such a guarantee of delivery
within the time set forth on such guarantee shall be deemed to invalidate any
otherwise properly made Election, unless otherwise determined by Parent, in its
sole discretion. As used herein, "Election Deadline" means 5:00 p.m. on the date
that is the day prior to the date of the Company Stockholder Meeting. The
Company and Parent shall cooperate to issue a press release reasonably
satisfactory to each of them announcing the date of the Election Deadline not
more than fifteen (15) business days before, and at least five (5) business days
prior to, the Election Deadline.
(e) Any Company stockholder may, at any time prior to the Election
Deadline, change his or her Election by written notice received by the Exchange
Agent prior to the Election Deadline accompanied by a properly completed and
signed, revised Form of Election. If Parent shall determine in its reasonable
discretion that any Election is not properly made with respect to any shares of
Company Common Stock, such Election shall be deemed to be not in effect, and the
shares of Company Common Stock covered by such Election shall, for purposes
hereof, be deemed to be Non-Election Shares, unless a proper Election is
thereafter timely made.
(f) Any Company stockholder may, at any time prior to the Election
Deadline, revoke his or her Election by written notice received by the Exchange
Agent prior to the Election Deadline or by withdrawal prior to the Election
Deadline of his or her Company Stock Certificate, or of the guarantee of
delivery of such certificates,
8
previously deposited with the Exchange Agent. All Elections shall be revoked
automatically if the Exchange Agent is notified in writing by Parent or the
Company that this Agreement has been terminated in accordance with Article VII.
(g) If any portion of the Merger Consideration is to be paid to a person
other than the person in whose name a Company Stock Certificate so surrendered
is registered, it shall be a condition to such payment that such Company Stock
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay to the Exchange Agent
any transfer or other similar Taxes (as defined in Section 3.1(j)) required as a
result of such payment to a person other than the registered holder of such
Company Stock Certificate, or establish to the reasonable satisfaction of the
Exchange Agent that such Tax has been paid or is not payable. Parent or the
Exchange Agent shall be entitled to deduct and withhold from the Merger
Consideration (including cash in lieu of fractional shares of Parent Common
Stock) otherwise payable pursuant to this Agreement to any holder of Company
Common Stock such amounts as Parent or the Exchange Agent are required to deduct
and withhold under the Code, or any provision of state, local or foreign Tax
law, with respect to the making of such payment. To the extent the amounts are
so withheld by Parent or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
shares of Company Common Stock in respect of whom such deduction and withholding
was made by Parent or the Exchange Agent.
(h) After the Effective Time there shall be no further registration or
transfers of shares of Company Common Stock. If after the Effective Time,
Company Stock Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged for the Merger Consideration in accordance with
the procedures set forth in this Article II.
(i) At any time following the nine month anniversary of the Effective
Time, Parent shall be entitled to require the Exchange Agent to deliver to it
any remaining portion of the Merger Consideration not distributed to holders of
shares of Company Common Stock that was deposited with the Exchange Agent at the
Effective Time (the "Exchange Fund") (including any interest received with
respect thereto and other income resulting from investments by the Exchange
Agent, as directed by Parent), and holders shall be entitled to look only to the
Parent (subject to abandoned property, escheat or other similar laws) with
respect to the Merger Consideration, any cash in lieu of fractional shares of
Parent Common Stock and any dividends or other distributions with respect to
Parent Common Stock payable upon due surrender of their Company Stock
Certificates, without any interest thereon. Notwithstanding the foregoing,
neither the Parent nor the Exchange Agent shall be liable to any holder of a
Company Stock Certificate for Merger Consideration (or dividends or
distributions with respect thereto) or cash from the Exchange Fund in each case
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(j) In the event any Company Stock Certificates shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Company Stock Certificate(s) to be lost, stolen or destroyed and,
if
9
required by Parent, the posting by such person of a bond in such sum as Parent
may reasonably direct as indemnity against any claim that may be made against it
or the Surviving Corporation with respect to such Company Stock Certificate(s),
the Exchange Agent will issue the Merger Consideration deliverable in respect of
the shares of Company Common Stock represented by such lost, stolen or destroyed
Company Stock Certificates.
(k) No dividends or other distributions with respect to Parent Common
Stock with a record date after the Effective Time shall be paid to the holder of
any unsurrendered Company Stock Certificate with respect to the shares of Parent
Common Stock represented thereby, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to subsection (l) below, and
all such dividends, other distributions and cash in lieu of fractional shares of
Parent Common Stock shall be paid by Parent to the Exchange Agent and shall be
included in the Exchange Fund, in each case until the surrender of such Company
Stock Certificate in accordance with subsection (l) below. Subject to the effect
of applicable abandoned property, escheat or similar laws, following surrender
of any such Company Stock Certificate there shall be paid to the holder of a
certificate for Parent Common Stock (a "Parent Stock Certificate") representing
whole shares of Parent Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock and the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to subsection (l), and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole shares of Parent
Common Stock. Parent shall make available to the Exchange Agent cash for these
purposes, if necessary.
(l) No Parent Stock Certificates representing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of Company
Stock Certificates; no dividend or distribution by Parent shall relate to such
fractional share interests; and such fractional share interests will not entitle
the owner thereof to vote or to any rights as a shareholder of Parent. In lieu
of any such fractional shares, each holder of a Company Stock Certificate who
would otherwise have been entitled to receive a fractional share interest in
exchange for such Company Stock Certificate shall receive from the Exchange
Agent an amount in cash equal to the product obtained by multiplying (A) the
fractional share interest to which such holder (after taking into account all
shares of Company Common Stock held by such holder at the Effective Time) would
otherwise be entitled by (B) the Closing Parent Share Value.
(m) Parent shall have the right to make all determinations, not
inconsistent with the terms of this Agreement, governing (A) the validity of the
Forms of Election and compliance by any Company Stockholder with the Election
procedures set forth herein, (B) the manner and extent to which Elections are to
be taken into account in making the determinations prescribed by Section 2.3,
(C) the issuance and delivery of Parent Stock Certificates into which shares of
Company Common Stock are converted in
10
the Merger and (D) the method of payment of cash for shares of Company Common
Stock converted into the right to receive the Cash Consideration and cash in
lieu of fractional shares of Parent Common Stock where the holder of the
applicable Company Stock Certificate has no right to receive whole shares of
Parent Common Stock.
(n) As soon as reasonably practicable following the Effective Time,
Parent will deposit with the Exchange Agent certificates representing shares of
Parent Common Stock sufficient to pay in a timely manner, and the Parent shall
instruct the Exchange Agent to timely pay, the aggregate Stock Consideration. In
addition, Parent shall make available to the Exchange Agent on a daily basis
sufficient cash to permit prompt payment of the Cash Consideration and cash in
lieu of fractional shares of Parent Common Stock, and Parent shall instruct the
Exchange Agent to timely pay the Cash Consideration and cash in lieu of
fractional shares of Parent Common Stock where the holder of the applicable
Company Stock Certificate has no right to receive whole shares of Parent Common
Stock.
(o) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a Company Stock
Certificate(s) which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock whose shares were converted into the
right to receive the Merger Consideration pursuant to Section 2.1 and any cash
in lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor who did not complete an Election Form, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Company Stock Certificate(s) shall pass, only upon
delivery of the Company Stock Certificate(s) (or affidavits of loss in lieu of
such certificates) (the "Letter of Transmittal") to the Exchange Agent and shall
be in such form and have such other provisions as Parent or the Exchange Agent
may reasonably specify) and (ii) instructions for use in surrendering the
Company Stock Certificate(s) in exchange for the Merger Consideration and any
cash in lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance with
Section 2.3(l) and any dividends or distributions to which such holder is
entitled pursuant to Section 2.3(k).
(p) Upon surrender to the Exchange Agent of its Company Stock
Certificate or Company Stock Certificates, accompanied by a properly completed
Form of Election or a properly completed Letter of Transmittal a holder of
Company Common Stock will be entitled to receive promptly after the Effective
Time the Merger Consideration (elected or deemed elected by it, subject to
Sections 2.1 and 2.2) in respect of the shares of Company Common Stock
represented by its Company Stock Certificate. Until so surrendered, each such
Company Stock Certificate shall represent after the Effective Time, for all
purposes, only the right to receive the Merger Consideration and any cash in
lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance with
Section 2.3(l) and any dividends or distributions to which such holder is
entitled pursuant to Section 2.3(k).
11
SECTION 2.4 Certain Adjustments. If after the date hereof and on or prior
to the Effective Time the outstanding shares of Parent Common Stock or Company
Common Stock shall be changed into a different number of shares by reason of any
reclassification, recapitalization or combination, stock split, reverse stock
split, stock dividend or rights issued in respect of such stock, or any similar
event shall occur (any such action, an "Adjustment Event"), the Aggregate Parent
Share Amount shall be adjusted accordingly to provide to the holders of Company
Common Stock the same economic effect as contemplated by this Agreement prior to
such Adjustment Event; provided, further, that, in the case of an Adjustment
Event in respect of the distribution of shares of Travelers Property and
Casualty Corp. capital stock to Parent's stockholders, the Aggregate Parent
Share Amount shall be adjusted by determining the value of the distribution
based on the NYSE methodology for setting the opening trading price for shares
of Parent Common Stock on the date that shares of Parent Common Stock begin
trading on an ex-dividend basis (which valuation methodology is the same
methodology that will be used in the anti-dilution adjustments made to the
outstanding employee stock options to purchase Parent Common Stock).
SECTION 2.5 Shares of Dissenting Stockholders. Notwithstanding anything in
this Agreement to the contrary, any shares of Company Common Stock that are
issued and outstanding as of the Effective Time and that are held by a
stockholder who has properly exercised his appraisal rights under the DGCL (the
"Dissenting Shares") shall not be converted into the right to receive the Merger
Consideration unless and until the holder shall have failed to perfect, or shall
have effectively withdrawn or lost, his right to dissent from the Merger under
the DGCL and to receive such consideration as may be determined to be due with
respect to such Dissenting Shares pursuant to and subject to the requirements of
the DGCL. If any such holder shall have so failed to perfect or have effectively
withdrawn or lost such right after the Election Deadline, each share of such
holder's Company Common Stock shall thereupon be deemed to have been converted
into and to have become, as of the Effective Time, the right to receive, without
any interest thereon, the Stock Election Consideration or the Cash Election
Consideration or a combination thereof as determined by Parent in its sole
discretion. The Company shall give Parent (i) prompt notice of any notice or
demands for appraisal or payment for shares of Company Common Stock received by
the Company and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands or notices. The
Company shall not, without the prior written consent of Parent, make any payment
with respect to, or settle, offer to settle or otherwise negotiate, any such
demands.
SECTION 2.6 Litigation Tracking Warrants. Following the Effective Time, the
outstanding litigation tracking warrants issued by the Company to purchase
shares of Company Common Stock and those held in tandem with stock options
outstanding under the Amended and Restated Golden State Bancorp Inc. Stock
Option and Long-Term Performance Incentive Plan, as amended (the "LTWs"),
whether or not then exercisable, shall be assumed by Parent. Each LTW shall
continue to have, and be subject to, the same terms and conditions applicable to
such LTW immediately prior to the Effective Time, except that, from and after
the Effective Time, each LTW shall, when and if it becomes exercisable in
accordance with its terms, be exercisable in respect of
12
Parent Common Stock and cash in the same proportion that the holders of Company
Common Stock receive in the aggregate in the Merger as measured as of the
Effective Time. Parent shall be solely responsible for the issuance of Parent
Common Stock and the delivery of the cash amount upon such exercise. From and
after the Effective Time, (i) Parent shall (A) assume all of the obligations and
obtain all of the rights of the Company under the Warrant Agreement and in
connection with the LTWs and (B) be solely responsible for the issuance of
Parent Common Stock and the delivery of the cash amount upon exercise of the
LTWs, and (ii) the Company shall have no further rights and obligations under
the Warrant Agreement and in connection with the LTWs.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. Except as set
forth on the Disclosure Schedule delivered by the Company to Parent prior to the
execution of this Agreement (the "Company Disclosure Schedule") and making
reference to the particular subsection of this Agreement to which exception is
being taken, the Company represents and warrants to Parent as follows:
(a) Organization, Standing and Corporate Power.
(i) Each of the Company and its subsidiaries (as
defined in Section 8.3) is a corporation or other legal
entity duly organized, validly existing and in good standing
(with respect to jurisdictions which recognize such concept)
under the laws of the jurisdiction in which it is organized
and has the requisite corporate or other power, as the case
may be, and authority to carry on its business as now being
conducted. Each of the Company and its subsidiaries 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, leasing or operation of its properties makes
such qualification or licensing necessary, except for those
jurisdictions where the failure to be so qualified or
licensed or to be in good standing individually or in the
aggregate would not reasonably be expected to have a
material adverse effect on the Company or the applicable
subsidiary.
(ii) The Company has delivered or made available to
Parent prior to the execution of this Agreement complete and
correct copies of the certificate of incorporation and
by-laws or other organizational documents, as amended to
date, of the Company and its subsidiaries.
(iii) The minute books of the Company, in all material
respects, contain accurate records of all meetings and
accurately reflect all other material actions taken by the
stockholders, the Board of
13
Directors and all standing committees of the Board of Directors
of the Company since January 1, 1999.
(b) Subsidiaries. Section 3.1(b) of the Company Disclosure Schedule
lists all the subsidiaries of the Company, whether consolidated or
unconsolidated. The issued and outstanding securities of California Federal Bank
(the "Bank") consists of: (i) 60,880,000 issued and outstanding shares of common
stock and 1,725,000 issued and outstanding shares of 10-5/8% Noncumulative
Perpetual Preferred Stock, Series B and 3,007,900 issued and outstanding shares
of 11-1/2% Noncumulative Perpetual Preferred Stock, Series C, all of which are
owned by Golden State Holdings Inc., a wholly-owned subsidiary of the Company;
(ii) 5,077,323 Contingent Litigation Recovery Participation Interests
("CALGZs"), issued by the Bank, pursuant to an Agreement, dated as of June 30,
1995, between the Bank and Chemical Trust Company of California; and (iii)
5,078,221 Secondary Contingent Litigation Recovery Participation Interests
("CALGLs"), issued by the Bank, pursuant to an Agreement, dated as of December
2, 1996, between the Bank and ChaseMellon Shareholder Services, LLC. Except for
the securities of the Bank identified above the issued and outstanding
securities of the subsidiaries of the Company consists of: (i) 20,000,000 shares
of preferred stock of Preferred Capital Corp. (the "REIT Preferred Stock") with
a stated liquidation value of $25 per share; (ii) shares of capital stock, or
other equity interests, that are owned, directly or indirectly, by the Company;
and (iii) such securities as are set forth in Section 3.1(b) of the Company
Disclosure Schedule. Except as set forth in Section 3.1(b) of the Company
Disclosure Schedule, all outstanding shares of capital stock of, or other equity
interests in, each such subsidiary: (i) have been validly issued and are fully
paid and nonassessable; (ii) are owned directly or indirectly by the Company
(other than the REIT Preferred Stock, the CALGZs and the CALGLs), free and clear
of all pledges, claims, liens, charges, encumbrances and security interests of
any kind or nature whatsoever, other than those imposed generally on similar
entities under applicable law (collectively, "Liens"); and (iii) are free of any
other material restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other ownership interests) that
would prevent the operation by the Surviving Corporation of such subsidiary's
business as currently conducted. Neither the Company nor any of its subsidiaries
conducts any international operations or is subject to any regulatory oversight
by foreign Governmental Entities (as defined below in Section 3.1(d)).
(c) Capital Structure. The authorized capital stock of the Company
consists of 250,000,000 shares of Company Common Stock and 50,000,000 shares of
preferred stock, par value $1.00 per share, of the Company ("Company Preferred
Stock"). As of May 17, 2002: (i) 152,474,700 shares of Company Common Stock were
issued and outstanding, of which 160,056 shares are restricted shares of Company
Common Stock issued pursuant to the Company Stock Plans (as defined below); (ii)
16,433,269 shares of Company Common Stock were held by the Company in its
treasury and no shares of Company Common Stock were held by subsidiaries of the
Company; (iii) no shares of Company Preferred Stock were issued and outstanding;
(iv) no shares of Company Preferred Stock were held by the Company in its
treasury or were held by any subsidiary of the Company; (v) 7,821,666 shares of
Company Common
14
Stock were reserved for issuance pursuant to the Company's Omnibus Stock Plan
and all other plans, agreements or arrangements providing for equity-based
compensation to any director, Employee, consultant or independent contractor of
the Company or any of its subsidiaries (collectively, the "Company Stock
Plans"), of which 5,361,680 shares are subject to outstanding Company Stock
Options (as defined below); and (vi) 83,687,589 LTWs were issued and outstanding
pursuant to the Warrant Agreement dated as of May 4, 1998 between the Company
and ▇▇▇▇▇ ▇▇▇▇▇▇ Shareholder Services L.L.C. (the "Warrant Agreement"). All
outstanding shares of capital stock of the Company are, and all shares thereof
which may be issued prior to the Closing will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. The Company has delivered to Parent a true and complete list, as of the
close of business on May 17, 2002, of all outstanding stock options to purchase
or receive Company Common Stock and all other rights to purchase or receive
Company Common Stock granted under the Company Stock Plans (collectively, the
"Company Stock Options"), the number of shares subject to each such Company
Stock Option, the grant dates and exercise prices of each such Company Stock
Option and the names of the holders thereof. Except as set forth in this Section
3.1(c) and in Section 3.1(c) of the Company Disclosure Schedule and except for
changes since May 17, 2002, resulting from (i) the issuance of shares of Company
Common Stock pursuant to and in accordance with Company Stock Options
outstanding prior to May 17, 2002; (ii) transactions contemplated by the 1998
Merger Agreement pursuant to the terms thereof; (ii) the issuance of Company
Common Stock upon exercise of the LTWs pursuant to the terms thereof and (iv) as
expressly contemplated hereby or by the Securityholders Agreement, (x) there are
not issued, reserved for issuance or outstanding (A) any shares of capital stock
or voting securities or other ownership interests of the Company, (B) any
securities of the Company or any Company subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or voting securities or
other ownership interests of the Company, or (C) any warrants, calls, options or
other rights to acquire from the Company or any Company subsidiary, or any
obligation of the Company or any of its subsidiaries to issue, any capital
stock, voting securities or other ownership interests in, or securities
convertible into or exchangeable or exercisable for, capital stock or voting
securities or other ownership interests of the Company, and (y) there are no
outstanding obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any such securities or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities, other than pursuant
to any "cashless exercise" provision of any Company Stock Options. Except as set
forth in Section 3.1(c) of the Company Disclosure Schedule, there are no
outstanding (A) securities of the Company or any of its subsidiaries convertible
into or exchangeable or exercisable for shares of capital stock or voting
securities or other ownership interests in any subsidiary of the Company, (B)
warrants, calls, options or other rights to acquire from the Company or any of
its subsidiaries, or any obligation of the Company or any of its subsidiaries to
issue, any capital stock, voting securities or other ownership interests in, or
any securities convertible into or exchangeable or exercisable for, any capital
stock, voting securities or other ownership interests in, any subsidiary of the
Company or (C) obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any such outstanding securities of
subsidiaries of the Company or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. Neither the Company nor any of its
15
subsidiaries is a party and, other than the Securityholders Agreement and other
than as described in Section 3.1(c) of the Company Disclosure Schedule, to the
knowledge of the Company, as of the date hereof, no other person having
beneficial ownership (within the meaning of Rule 13d-3) of more than 5% of the
outstanding Company Common Stock (a "Major Shareholder") is a party to any
agreement restricting the transfer of, relating to the voting of, requiring
registration of, or granting any preemptive or antidilutive rights with respect
to any of the securities of the Company or any of its subsidiaries. There are no
voting trusts or other agreements or understandings to which the Company or any
of its subsidiaries is a party or, other than the Securityholders Agreement or
as described in Section 3.1(c) of the Company Disclosure Schedule, to the
knowledge of the Company, as of the date hereof, any Major Shareholder is a
party with respect to the voting of the capital stock of the Company or any of
the subsidiaries.
(d) Authority; Noncontravention. The Company has all requisite corporate
power and authority to enter into this Agreement and, subject, in the case of
the Merger, to the Company Stockholder Approval (as defined in Section 3.1(r))
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject, in the case of the Merger,
to the Company Stockholder Approval. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by Parent and Merger Sub, constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that (i) such enforceability may be subject to applicable
bankruptcy, insolvency or other similar laws now or hereafter in effect
affecting creditors' rights generally and (ii) the availability of the remedy of
specific performance or injunction or other forms of equitable relief may be
subject to equitable defenses and would be subject to the discretion of the
court before which any proceeding therefor may be brought. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby (including, without limitation, the Bank Combination (as
defined in Section 5.5)) and compliance with the provisions of this Agreement
will not, conflict with, or result in any violation, forfeiture or termination
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of forfeiture, termination, cancellation or acceleration (with
or without notice or lapse of time, or both) of any obligation or loss of a
benefit or, in the case of clause (iii) below, any material obligation or loss
of a material benefit, under, or result in the creation of any Lien upon any of
the properties or assets of the Company or any of its subsidiaries under, (i)
the certificate of incorporation or by-laws of the Company, (ii) the certificate
of incorporation or by-laws or the comparable organizational documents of any of
its subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease, vendor agreement, software agreement or other agreement,
instrument, Intellectual Property (as defined in Section 3.1(n)) right, permit,
concession, franchise, license or similar authorization applicable to the
Company or any of its subsidiaries or their respective properties or assets that
is material to the operations of the Company and its subsidiaries taken as a
whole or (iv) subject to the governmental filings and other matters referred to
in the following sentence, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company or any of its subsidiaries or their
respective
16
properties or assets, other than, in the case of clause (iv), any such
conflicts, violations, defaults, rights, losses or Liens that individually or in
the aggregate would not (x) reasonably be expected to have a material adverse
effect on the Company or (y) reasonably be expected to materially impair or
materially delay the ability of the Company to perform its obligations under
this Agreement. Except as set forth in Section 3.1(d) of the Company Disclosure
Schedule, no consent, approval, order or authorization of, action by or in
respect of, or registration, declaration or filing with, any (i) Federal, state,
local, municipal or foreign government, (ii) governmental, quasi-governmental
authority (including any governmental agency, commission, branch, department or
official, and any court or other tribunal) or body exercising, or entitled to
exercise, any governmentally-derived administrative, executive, judicial,
legislative, police, regulatory or taxing authority, or (iii) any
self-regulatory organization, administrative or regulatory agency, commission or
authority (each, a "Governmental Entity") is required by or with respect to the
Company or any of its subsidiaries in connection with the execution and delivery
of this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except for (1) the filing of a pre-merger
notification and report form by the Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and filing of a
copy of the application to the Federal Reserve Board pursuant to Section
7A(c)(8) of the HSR Act; (2) the filings with the SEC of (A) a proxy statement
relating to the Company Stockholders Meeting (such proxy statement, as amended
or supplemented from time to time, the "Proxy Statement") and a registration
statement on Form S-4 to be prepared and filed in connection with the issuance
of Parent Common Stock in the Merger (the "Form S-4"), and (B) such reports
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement and the transactions
contemplated by this Agreement; (3) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware and such filings with
Governmental Entities to satisfy the applicable requirements of the laws of
states in which the Company and its subsidiaries are qualified or licensed to do
business or state securities or "blue sky" laws; (4) the approval of the Board
of Governors of the Federal Reserve System (the "Federal Reserve") under Section
4(j) of the Bank Holding Company Act; (5) the approval of the Office of Thrift
Supervision under the Homeowners' Loan Act (the "OTS Approval"); (6) filings in
respect of, and approvals and authorizations of, any Governmental Entity having
jurisdiction over the consumer lending, banking, insurance or other financial
services businesses; and (7) filings required as a result of the particular
status of Parent or Merger Sub (collectively, the "Governmental Approvals").
(e) Company Documents; Undisclosed Liabilities. Since January 1, 1999,
the Company and each of its SEC reporting subsidiaries have filed all required
reports, schedules, forms, statements and other documents (including exhibits
and all other information incorporated therein) with the SEC (the "Company SEC
Documents"). As of their respective filing dates, (i) the Company SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Company SEC Documents, and (ii) no Company SEC Document, as of their
respective dates, except as amended or supplemented by a subsequent Company
Filed SEC Document (as defined in
17
Section 3.1(g)), contained, and no Company SEC Document filed subsequent to the
date hereof will contain as of their respective dates, any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company and its subsidiaries included in Company SEC Documents
(including the related notes) complied as to form, as of their respective dates
of filing with the SEC, in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles in the United States ("GAAP") (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects the consolidated financial position
of the Company and/or its subsidiaries, as the case may be, as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to notes and
normal year-end audit adjustments that were not, or with respect to any such
financial statements contained in any Company SEC Documents to be filed
subsequent to the date hereof are not reasonably expected to be material in
amount or effect). Except (A) as reflected in the Company's unaudited balance
sheet as of March 31, 2002 or liabilities described in any notes thereto (or
liabilities for which neither accrual nor footnote disclosure is required
pursuant to GAAP) or (B) for liabilities incurred in the ordinary course of
business since March 31, 2002 consistent with past practice or in connection
with this Agreement or the transactions contemplated hereby, neither the Company
nor any of its subsidiaries has any material liabilities or obligations of any
nature. Section 3.1(e) of the Company Disclosure Schedule identifies each
subsidiary of the Company that is required to file Company SEC Documents with
the SEC.
(f) Certain Contracts. Except as set forth in the exhibit index for the
Company's Report on Form 10-K for the year ended December 31, 2001 or as
permitted pursuant to Section 4.1 or as set forth on Section 3.1(f) of the
Company Disclosure Schedule, neither the Company nor any of its subsidiaries is
a party to or bound by (a) any agreement relating to the incurring of
indebtedness by the Company or any of its subsidiaries (including sale and
leaseback transaction in excess of $2,100,000 and including capitalized lease
transactions and other similar financing transactions) including, without
limitation, any such agreement which contains provisions which in any
non-de-minimis manner restrict, or may restrict, the conduct of business of the
issuer thereof as currently conducted (collectively, "Instruments of
Indebtedness"), (b) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC), (c) any non-competition agreement or
any other agreement or obligation which purports to limit in any respect (i) the
ability of the Company or its businesses to solicit customers or (ii) the manner
in which, or the localities in which, all or any substantial portion of the
business of the Company and its subsidiaries, taken as a whole, or, following
consummation of the transactions contemplated by this Agreement, Parent and its
subsidiaries, is or would be conducted, (d) any agreement providing for the
indemnification by the Company or a subsidiary of the Company of any person,
other than customary agreements relating to the indemnity of directors, officers
and employees of the Company or its subsidiaries, (e) any joint venture or
partnership agreement, (f) any
18
agreement that grants any right of first refusal or right of first offer or
similar right or that limits or purports to limit the ability of the Company or
any of its subsidiaries to own, operate, sell, transfer, pledge or otherwise
dispose of any material amount of assets or business (other than in connection
with securitization or financing transactions or contracts entered into in the
ordinary course of business that require that the particular transactions that
are the subject thereof to be conducted with the counterparty or counterparties
to the contract), (g) any contract or agreement providing for any material
future payments that are conditioned, in whole or in part, on a change of
control of the Company or any of its subsidiaries, (h) any collective bargaining
agreement, (i) any employment agreement or any agreement or arrangement that
contains any material severance pay or post-employment liabilities or
obligations to any current or former employee of the Company or its subsidiaries
(any such person, hereinafter, an "Employee"), other than as required under law,
(j) any agreement regarding any agent bank or other similar relationships with
respect to lines of business, (k) any material agreement that contains a "most
favored nation" clause, (l) any material agreement pertaining to the use of or
granting any right to use or practice any rights under any Intellectual
Property, whether the Company is the licensee or licensor thereunder, (m) any
material agreements pursuant to which the Company or any of its subsidiaries
leases any real property, and (n) any contract or other agreement not made in
the ordinary course of business which is material to the Company and its
subsidiaries taken as a whole or which would reasonably be expected to
materially delay the consummation of the Merger or any of the transactions
contemplated by this Agreement (the agreements, contracts and obligations of the
type described in clauses (a) through (n) being referred to herein as "Company
Material Contracts"). Each Company Material Contract is valid and binding on the
Company (or, to the extent a subsidiary of the Company is a party, such
subsidiary) and, to the knowledge of the Company, any other party thereto and is
in full force and effect. Neither the Company nor any of its subsidiaries is in
breach or default under any Company Material Contract. Neither the Company nor
any subsidiary of the Company knows of, or has received notice of, any violation
or default under (nor, to the knowledge of the Company, does there exist any
condition which with the passage of time or the giving of notice or both would
result in such a violation or default under) any Company Material Contract by
any other party thereto. Prior to the date hereof, the Company has made
available to Parent true and complete copies of all Company Material Contracts.
Except as set forth in Section 3.1(f) of the Company Disclosure Schedule, there
are no provisions in any Instrument of Indebtedness that provide any
restrictions on, or that require that any financial payment (other than payment
of outstanding principal and accrued principal) be made in the event of, the
repayment of the outstanding indebtedness thereunder prior to its term.
(g) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, and except as set forth in Section 3.1(g) of the Company Disclosure
Schedule, or as disclosed in the Company SEC Documents filed and publicly
available prior to the date hereof (as amended to the date hereof, "Company
Filed SEC Documents"), since December 31, 2001, the Company and its subsidiaries
have conducted their respective businesses only in the ordinary course, and
there has not been:
19
(i) any material adverse change in the Company,
including, but not limited to, any material adverse change
arising from or relating to fraudulent or unauthorized
activity,
(ii) any issuance of Company Stock Options or
restricted shares of Company Common Stock (in any event
identifying in Section 3.1(g) of the Company Disclosure
Schedule the issue date, exercise price and vesting
schedule, as applicable, for issuances since December 31,
2001),
(iii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital
stock, other than regular quarterly cash dividends not to
exceed $0.10 on the Company Common Stock in accordance with
its terms and regular cash dividends on the REIT Preferred
Stock of Preferred Capital Corp. in accordance with its
terms,
(iv) any split, combination or reclassification of any
of the Company's 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 the
Company's capital stock, except for issuances of Company
Common Stock (and LTWs, if any) upon the exercise of Company
Stock Options awarded prior to the date hereof in accordance
with their present terms,
(v) prior to the date hereof (A) any granting by the
Company or any of its subsidiaries to any current or former
director, executive officer or other Employee of any
increase in compensation, bonus or other benefits, except
for increases to then current Employees who are not
directors or executive officers that were made in the
ordinary course of business, (B) any granting by the Company
or any of its subsidiaries to any such current or former
director, executive officer or Employee of any increase in
severance or termination pay, or (C) any entry by the
Company or any of its subsidiaries into, or any amendment
of, any employment, deferred compensation, consulting,
severance, termination or indemnification agreement with any
such current or former director, executive officer or any
Employee,
(vi) except insofar as may have been required by a
change in GAAP or regulatory accounting principles, any
change in accounting methods, principles or practices by the
Company affecting its assets, liabilities or business,
including, without limitation, any reserving, renewal or
residual method, or estimate of practice or policy,
(vii) any Tax election or change in any Tax election,
amendment to any Tax Return (as defined in Section 3.1(j)),
closing agreement with respect to Taxes, or settlement or
compromise of
20
any income Tax liability by the Company or its subsidiaries,
except as would not be required to be disclosed in the Company
SEC Documents,
(viii) any material change in investment policies, or
(ix) any agreement or commitment (contingent or
otherwise) to do any of the foregoing.
(h) Licenses; Compliance with Applicable Laws
(i) Section 3.1(h) of the Company Disclosure Schedule
sets forth a true and complete listing of all states in
which the Company and its subsidiaries are licensed to
conduct business, including in connection with their
mortgage or auto lending businesses. The Company, its
subsidiaries and Employees hold all material permits,
licenses, variances, authorizations, exemptions, orders,
registrations and approvals of all Governmental Entities
which are required for the operation of the respective
businesses of the Company and its subsidiaries (the
"Permits") as presently conducted. Each of the Company and
its subsidiaries is, and for the last five years has been,
in compliance in all material respects with the terms of the
Permits and all the Permits are in full force and effect and
no suspension modification or revocation of any of them is
pending or, to the knowledge of the Company, threatened nor,
to the knowledge of the Company, do grounds exist for any
such action.
(ii) Each of the Company and its subsidiaries is, and
for the last five years has been, in compliance in all
material respects with all applicable statutes, laws,
regulations, ordinances, Permits, rules, judgments, orders,
decrees or arbitration awards of any Governmental Entity
applicable to the Company or its subsidiaries.
(iii) Neither the Company nor any of its subsidiaries
is subject to any outstanding order, injunction or decree or
is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any
commitment letter or similar undertaking to, or, except as
would not have a material adverse effect on the Company, is
subject to any order or directive by, or is a recipient of
any supervisory letter from or has adopted any resolutions
at the request of any Governmental Entity that restricts in
any respect the conduct of its business or, except as would
not have a material adverse effect on the Company, that in
any manner relates to its capital adequacy, its policies,
its management or its business (each, a "Company Regulatory
Agreement"), nor has the Company or any of its subsidiaries
or affiliates (as defined in Section 8.3(a)) (A) to the
Company's knowledge, been advised since January 1, 2001 by
any Governmental Entity that it is considering issuing or
requesting any such Company Regulatory
21
Agreement or (B) have knowledge of any pending or threatened
regulatory investigation.
(iv) Except for filings with the SEC, which are the
subject of Section 3.1(e), the Company and each of its
subsidiaries have timely filed all regulatory reports,
schedules, forms, registrations and other documents,
together with any amendments required to be made with
respect thereto, that they were required to file since
January 1, 1999 with any Governmental Entity (the "Other
Company Documents"), and have timely paid all taxes, fees
and assessments due and payable in connection therewith,
except where the failure to make such payments and filings
individually or in the aggregate would not have a material
adverse effect on the Company. There is no material
unresolved violation or exception by any of such
Governmental Entities with respect to any report or
statement relating to any examinations of the Company or any
of its subsidiaries. No Other Company Document, as of their
respective dates, except as amended or supplemented by an
Other Company Document filed prior to the date hereof,
contained, and no Other Company Document filed subsequent to
the date hereof will contain as of their respective dates,
any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
The Company has delivered or made available to Parent a true
and complete copy of each material Other Company Document,
including currently effective Forms BD.
(v) Neither the Company nor any of its subsidiaries nor
any of their respective current directors, executive
officers or Employees has been the subject of any
disciplinary proceedings or orders of any Governmental
Entity arising under applicable laws or regulations which
would be required to be disclosed in any Other Company
Document except as disclosed therein, and no such
disciplinary proceeding or order is pending, nor to the
knowledge of the Company threatened.
(vi) Except as disclosed on such Forms BD or Forms U-4,
neither the Company or any of its affiliates, nor, to the
knowledge of the Company, any "affiliated person" (as
defined in the Investment Company Act) of the Company or any
of its affiliates, is ineligible pursuant to Section 9(a) or
9(b) of the Investment Company Act to act as, or subject to
any disqualification which would form a reasonable basis for
any denial, suspension or revocation of the registration of
or licenses or for any limitation on the activities of the
Company or any its affiliates as, an investment advisor (or
in any other capacity contemplated by the Investment Company
Act) to a registered investment company. Neither the Company
or any of its affiliates, nor to the knowledge of the
Company, any "associated person of a broker or dealer" (as
defined in the
22
Exchange Act) of the Company or any of its affiliates, is
ineligible pursuant to Section 15(b) of the Exchange Act to act
as a broker-dealer or as an associated person to a registered
broker-dealer or is subject to a "statutory disqualification" as
defined in Section 3(a)(39) of the Exchange Act or otherwise
ineligible to serve as a broker-dealer or as an associated person
to a registered broker-dealer.
(vii) Each of the Company's insured depository
institution subsidiaries is "well-capitalized" (as that term
is defined at 12 C.F.R. 225.2(r)(2)(i)) and "well managed"
(as that term is defined at 12 C.F.R. 225.81(c)), and each
institution's examination rating under the Community
Reinvestment Act of 1977 is satisfactory or outstanding.
(viii) The business and operations of the Company and
of each of the Company's subsidiaries through which the
Company conducts its finance activities (including mortgage
banking and mortgage lending activities and consumer finance
activities, which consumer finance activities include direct
and indirect automobile lending, banking, home equity
operations and consumer financial services (together the
"Company Finance Subsidiaries") have been conducted in
compliance in all material respects with all applicable
statutes and regulations regulating the business of consumer
lending, including state usury laws, the Truth in Lending
Act, the Real Estate Settlement Procedures Act, the Consumer
Credit Protection Act, the Equal Credit Opportunity Act, the
Fair Credit Reporting Act, the Homeowners Ownership and
Equity Protection Act, the Fair Debt Collections Act and
other Federal, state, local and foreign laws regulating
lending ("Finance Laws"), and have complied in all material
respects with all applicable collection practices in seeking
payment under any loan or credit extension of such
subsidiaries. In addition, there is no pending or, to the
knowledge of the Company, threatened charge by any
Governmental Entity that any of the Company Finance
Subsidiaries has violated, nor any pending or, to the
knowledge of the Company, threatened investigation by any
Governmental Entity with respect to possible violations of,
any applicable Finance Laws where such violations would,
individually or in the aggregate, have a material adverse
effect on the Company.
(ix) Since December 31, 1999, neither the Company nor
any of its subsidiaries, nor to the knowledge of the Company
any other person acting on behalf of the Company or any of
its subsidiaries that qualifies as a "financial institution"
under the U.S. Anti-Money Laundering laws has knowingly
acted, by itself or in conjunction with another, in any act
in connection with the concealment of any currency,
securities, other proprietary interest that is the result of
a felony as defined in the U.S. Anti-Money Laundering laws
("Unlawful Gains"), nor knowingly accepted, transported,
stored, dealt in or brokered any sale, purchase or any
transaction of other nature for Unlawful Gains. The
23
Company and each of its subsidiaries that qualifies as a "financial
institution" under the U.S. Anti-Money Laundering laws has, during the past
three years, implemented in all material respects such anti-money laundry
mechanisms and kept and filed all material reports and other necessary
material documents as required by, and otherwise complied in all material
respects with, the U.S. Anti-Money Laundering laws and the rules and
regulations issued thereunder.
(i) Litigation. Except as set forth in Section 3.1(i) of the
Company Disclosure Schedule, which contains a true and current summary
description of any pending and, to the Company's knowledge, threatened material
litigation, action, suit, proceeding, investigation or arbitration, the forum,
the parties thereto, the subject matter thereof and the amount of damages
claimed or other remedies requested as of the date hereof, no material action,
demand, charge, requirement or investigation by any Governmental Entity and no
material litigation, action, suit, proceeding, investigation or arbitration by
any person or Governmental Entity, in each case with respect to the Company or
any of its subsidiaries or any of their respective properties or Permits, is
pending or, to the knowledge of the Company, threatened. Except as set forth in
Section 3.1(i) of the Company Disclosure Schedule or as contemplated by the
LTWs, the CALGZs, the CALGLs and the 1998 Merger Agreement, no person is
entitled, directly or indirectly, to participate or receive any portion of any
recovery, settlement or award granted in respect of any litigation, action,
suit, proceeding or arbitration in which the Company or any of its subsidiaries
is plaintiff or claimant.
(j) Taxes. For purposes of this Section 3.1(j) any reference to the
Company or the Company's subsidiaries shall be deemed to include a reference to
the Company's predecessors or the Company's subsidiaries' predecessors,
respectively, except where inconsistent with the language of this Section
3.1(j).
(i) Each of the Company and each of its subsidiaries
has (A) timely filed (or there have been timely filed on its
behalf) with the appropriate Governmental Entities all
income and other material Tax Returns required to be filed
by it (giving effect to all extensions) and such Tax Returns
are true, correct and complete; (B) timely paid in full (or
there has been timely paid in full on its behalf) all income
and other material Taxes required to have been paid by it;
and (C) made adequate provision (or adequate provision has
been made on its behalf) for all accrued Taxes not yet due.
The accruals and reserves for Taxes reflected in the
Company's audited consolidated balance sheet as of December
31, 2001 (and the notes thereto) and the most recent
quarterly financial statements (and the notes thereto) are
adequate in accordance with GAAP to cover all Taxes accrued
or accruable through the date thereof.
(ii) There are no material Liens for Taxes upon any
property or assets of the Company or any subsidiary of the
Company, except for Liens for Taxes not yet due or for Taxes
which are being contested in good faith by appropriate
proceedings (and for which
24
adequate reserves have been established in the Company's
audited consolidated financial statements in accordance
with GAAP).
(iii) Each of the Company and its subsidiaries has
complied in all material respects with all applicable laws,
rules and regulations relating to the payment and
withholding of Taxes and has, within the time and in the
manner prescribed by law, withheld and paid over to the
proper Governmental Entities all material amounts required
to be so withheld and paid over under applicable laws.
(iv) As of the date of this Agreement, 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 the Company or any of
its subsidiaries, and neither the Company nor any subsidiary
of the Company has received a written notice of any material
pending or proposed claims, audits or proceedings with
respect to Taxes.
(v) Neither the Company nor any of its subsidiaries has
granted in writing any power of attorney which is currently
in force with respect to any Taxes or Tax Returns.
(vi) Other than in the ordinary course of business, and
except as provided in Section 3.1(j)(vi) of the Company
Disclosure Schedule, which may be delivered to Parent no
later than 30 days after the date hereof, neither the
Company nor any of its subsidiaries has requested an
extension of time within which to file any Tax Return which
has not since been filed and no currently effective waivers,
extensions, or comparable consents regarding the application
of the statute of limitations with respect to Taxes or Tax
Returns has been given by or on behalf of the Company or any
of its subsidiaries.
(vii) Neither the Company nor any of its subsidiaries
is a party to any agreement providing for the allocation,
sharing or indemnification of Taxes.
(viii) The Federal income Tax Returns of the Company
and each of its subsidiaries have been examined and any
disputes relating thereto have been settled with the
Internal Revenue Service (the "IRS") (or the applicable
statutes of limitation for the assessment of Taxes for such
periods have expired) for all periods through and including
December 31, 1988.
(ix) Neither the Company nor any of its subsidiaries
has been included in any "consolidated," "unitary" or
"combined" Tax Return (other than Tax Returns which include
only the Company and any of its subsidiaries) provided for
under the laws of the
▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, any foreign jurisdiction or any state or locality
with respect to Taxes for any taxable year ending after December
31, 1988.
(x) No election under Section 341(f) of the Code has
been made by the Company or any of its subsidiaries.
(xi) Neither the Company nor any of its subsidiaries
has constituted either a "distributing corporation" or a
"controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock to
which Section 355 of the Code (or so much of Section 356 of
the Code as relates to Section 355 of the Code) applies and
which occurred within two years of the date of this
Agreement.
(xii) Except as provided in Section 3.1(j)(xii) of the
Company Disclosure Schedule, which may be delivered to
Parent no later than 30 days after the date hereof, neither
the Company nor any of its subsidiaries have agreed, or is
required, to make any material adjustment under Section 481
of the Code affecting any taxable year ending after December
31, 1997.
(xiii) Except as disclosed in Section 3.1(j)(xiii) of
the Company Disclosure Schedule, there have not been, within
two years of the date of this Agreement, any (i) redemptions
by the Company or any of its subsidiaries, (ii) transfers or
dispositions of property by the Company or any of its
subsidiaries for which the Company or its subsidiary did not
receive adequate consideration, (iii) distributions to the
holders of Company Common Stock with respect to their stock
other than distributions of cash in the ordinary course of
business, (iv) distributions of cash with respect to the
LTWs, (v) distributions of cash or stock with respect to the
CALGZs or CALGLs, or (vi) distributions of cash or stock
with respect to Section 1.6(a), Section 1.6(b) or Section
1.6(c) of the 1998 Merger Agreement.
(xiv) No claim has been made in writing by any
Governmental Entities in a jurisdiction where the Company or
any of its subsidiaries does not file Tax Returns that any
such entity is, or may be, subject to taxation by that
jurisdiction.
(xv) Each of the Company and each of its subsidiaries
has made available to Parent correct and complete copies of
(i) all of their material Tax Returns filed within the past
three years, (ii) all audit reports, letter rulings,
technical advice memoranda and similar documents issued by a
Governmental Entity within the past five years relating to
the Federal, state, local or foreign Taxes due from or with
respect to the Company or any of its subsidiaries, and (iii)
any closing letters or agreements entered into by the
Company or any of its
26
subsidiaries with any Governmental Entities within the past five
years with respect to Taxes.
(xvi) Neither the Company nor any of its affiliates or
subsidiaries has taken or agreed to take any action, has
failed to take any action or knows of any fact, agreement,
plan or other circumstance that could prevent the Merger
from qualifying as a "reorganization" within the meaning of
Section 368(a) of the Code.
(xvii) Neither the Company nor any of its subsidiaries
has received any notice of deficiency or assessment from any
Governmental Entity for any amount of Tax that has not been
fully settled or satisfied, and to the knowledge of the
Company and its subsidiaries no such deficiency or
assessment is proposed.
(xviii) Preferred Capital Corp. ("PCC") (f/k/a
California Federal Preferred Capital Corporation f/k/a First
Nationwide Preferred Capital Corporation (A) was formed in
1996 and included in the 1996 consolidated Federal income
tax return of the affiliated group of which Mafco Holdings
Inc. was the common parent, (B) has been at all times since
January 1, 1997 a "real estate investment trust" ("REIT") as
defined in Section 856(a) of the Code, (C) has met at all
times since January 1, 1997 the requirements of Section
857(a) of the Code, (D) has not been at any time since
January 1, 1997 described in Section 856(c)(6) of the Code,
(E) has not had at any time since January 1, 1997 any "net
income derived from prohibited transactions" within the
meaning of Section 857(b)(6) of the Code and (F) has not
issued any stock or securities as part of a multiple party
financing transaction described in IRS Notice 97-21, 1997-11
I.R.B. 2, or Treasury Regulations Section 1.7701(l)-3.
(xix) For purposes of this Agreement (A) "Tax" or
"Taxes" shall mean (I) any and all taxes, customs, duties,
tariffs, imposts, charges, deficiencies, assessments, levies
or other like governmental charges, including, without
limitation, income, gross receipts, excise, real or personal
property, ad valorem, value added, estimated, alternative
minimum, stamp, sales, withholding, social security,
occupation, use, service, service use, license, net worth,
payroll, franchise, transfer and recording taxes and
charges, imposed by the IRS or any other taxing authority
(whether domestic or foreign including, without limitation,
any state, county, local or foreign government or any
subdivision or taxing agency thereof (including a United
States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such
term shall include any interest, fines, penalties or
additional amounts attributable to, or imposed upon, or with
respect to, any such amounts, (II) any liability for the
payment of any amounts described in (I) as a result of being
a member of an affiliated, consolidated, combined, unitary,
or similar group or as a result of
27
transferor or successor liability, and (III) any liability for
the payment of any amounts as a result of being a party to any
tax sharing agreement or as a result of any obligation to
indemnify any other person with respect to the payment of any
amounts of the type described in (I) or (II), and (B) "Tax
Return" shall mean any report, return, document, declaration,
election or other information or filing required to be supplied
to any taxing authority or jurisdiction (foreign or domestic)
with respect to Taxes, including, without limitation, information
returns and any documents with respect to or accompanying
payments of estimated Taxes or requests for the extension of time
in which to file any such report, return, document, declaration
or other information.
(k) Employee Benefit Plans.
(i) Section 3.1(k) of the Company Disclosure Schedule
contains a true and complete list of each deferred
compensation and each bonus or other incentive compensation,
stock purchase, stock option and other equity compensation
plan, program, agreement or arrangement; each severance or
termination pay, medical, surgical, hospitalization, life
insurance and other "welfare" plan, fund or program (within
the meaning of Section 3(l) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")); each
profit-sharing, stock bonus or other "pension" plan, fund or
program (within the meaning of Section 3(2) of ERISA); each
employment, termination or severance agreement or
arrangement with any director or former director of the
Company or any of its subsidiaries or any Employee and each
other employee benefit plan, fund, program, agreement or
arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to by the
Company or by any trade or business, whether or not
incorporated, that together with the Company is a "single
employer" within the meaning of Section 4001(b) of ERISA (an
"ERISA Affiliate"), or to which the Company or an ERISA
Affiliate is party, whether written or oral, for the benefit
of any Employee or any director or former director of the
Company or any of its subsidiaries (the "Plans"). Section
3.1(k)(i) of the Company Disclosure Schedule identifies each
of the Plans that is subject to section 302 or Title IV of
ERISA or section 412 of the Code (the "Title IV Plans").
Neither the Company nor any subsidiary of the Company has
any commitment or formal plan, whether legally binding or
not, to create any additional employee benefit plan or
modify or change any existing Plan other than as may be
required by the terms of such Plan or applicable law.
(ii) With respect to each Plan, the Company has
heretofore delivered or made available to Parent true and
complete copies of each of the following documents:
28
(A) a copy of the Plan and any amendments thereto (or
if the Plan is not a written Plan, a description thereof);
(B) a copy of the most recent annual report and
actuarial report, if required under ERISA, and the most
recent report prepared with respect thereto in accordance
with Statement of Financial Accounting Standards No. 87;
(C) a copy of the most recent Summary Plan Description
required under ERISA with respect thereto;
(D) if the Plan is funded through a trust or any third
party funding vehicle, a copy of the trust or other funding
agreement and the latest financial statements thereof; and
(E) the most recent determination letter received from
the Internal Revenue Service with respect to each Plan
intended to qualify under Section 401 of the Code.
(iii) All contributions required to have been made with
respect to any Plan have been paid when due. There has been
no amendment to, written interpretation of or announcement
(whether or not written) by the Company or any affiliate or
the Company or any subsidiary of the Company relating to, or
change in the Plan provisions relating to employee
participation or coverage under, any Plan that would
increase materially the expense of maintaining such Plan
above the level or expense incurred in respect thereof for
the most recent fiscal year ended prior to the date hereof,
except as required by applicable law or previously disclosed
contractual commitment as set forth in Section 3.1(k)(iii)
of the Company Disclosure Schedule.
(iv) Neither the Company nor any ERISA Affiliate
contributes to, or is obligated to contribute to, a
"multiemployer pension plan," as defined in Section 3(37) of
ERISA nor has the Company or any ERISA Affiliate, during the
five year period prior to the date hereof been obligated, to
contribute to such plan for which the Company or any of its
subsidiaries could reasonably be expected to have any
material liability.
(v) Neither the Company or any subsidiary of the
Company, any Plan, any trust created thereunder, nor, to the
knowledge of the Company, any trustee or administrator
thereof has engaged in a transaction in connection with
which the Company or any
29
subsidiary of the Company, any Plan, any such trust, or any
trustee or administrator thereof, or any party dealing with any
Plan or any such trust could be subject to either any material
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA
or a material tax imposed pursuant to Section 4975 or 4976 of the
Code.
(vi) Each Plan has been operated and administered in
accordance with its terms and applicable law in all material
respects, including but not limited to ERISA and the Code.
(vii) The IRS has issued a favorable determination
letter with respect to each Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code that has
not been revoked, and, to the knowledge of the Company no
circumstances exist that could adversely affect the
qualified status of any such plan and the exemption under
Section 501(a) of the Code of the trust maintained
thereunder. Each Plan intended to satisfy the requirements
of Section 501(c)(9) of the Code has satisfied such
requirements in all material respects.
(viii) With respect to any plan subject to Title IV of
ERISA, to which the Company or any ERISA Affiliate made, or
was required to make, contributions on behalf of any
Employee or any director or former director during the five
(5)-year period ending on the last day of the most recent
plan year ended prior to the Closing Date, (a) no liability
under Title IV or Section 302 of ERISA has been incurred by
the Company or any ERISA Affiliate that has not been
satisfied in full, and (b) to the knowledge of the Company,
no condition exists that presents a material risk to the
Company or any ERISA Affiliate of incurring any such
liability, other than liability for premiums due the Pension
Benefit Guaranty Corporation ("PBGC") (which premiums have
been paid when due).
(ix) The PBGC has not instituted proceedings to
terminate any Title IV Plan and, to the knowledge of the
Company, no condition exists that presents a material risk
that such proceedings will be instituted. With respect to
each Title IV Plan, the present value of accrued benefits
under such plan, based upon the actuarial assumptions used
for funding purposes in the most recent actuarial report
prepared by such plan's actuary with respect to such plan
did not exceed, as of its latest valuation date, the then
current value of the assets of such plan allocable to such
accrued benefits. No Title IV Plan or any trust established
thereunder has incurred any "accumulated funding deficiency"
(as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most
recently ended fiscal year.
(x) No Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not
insured)for
30
Employees for periods extending beyond their retirement or other
termination of service, other than (i) coverage mandated by
applicable law, (ii) death benefits under any "pension plan,"
(iii) benefits the full cost of which is borne by the Employee
(or his beneficiary) or (iv) Plans that can be amended or
terminated by the Company without consent.
(xi) No material amounts payable under the Plans will
fail to be deductible for Federal income tax purposes by
virtue of Section 162(m) of the Code.
(xii) The consummation of the transactions contemplated
by this Agreement will not, either alone or in combination
with another event, (i) entitle any current or former
employee or officer of the Company to severance pay,
unemployment compensation or any other payment, except as
expressly provided in this Agreement, or (ii) accelerate the
time of payment or vesting, or increase the amount of
compensation due any such employee or officer.
(xiii) There are no pending or, to the knowledge of the
Company, threatened or anticipated claims by or on behalf of
any Plan by any Employee or beneficiary covered under any
such Plan, or otherwise involving any such Plan (other than
routine claims for benefits).
(xiv) Except with respect to Employees listed on
Section 3.1(k) (xiv) of the Company Disclosure Schedule, no
person will be entitled to a "gross up" or other similar
payment in respect of excise taxes under Section 4999 of the
Code with respect to the transactions contemplated by this
Agreement.
(xv) To the extent that the Company or any of its
subsidiaries is deemed to be a fiduciary with respect to any
Plan that is subject to ERISA, the Company or such
subsidiary (1) during the past five years has complied with
the requirements of ERISA and the Code in the performance of
its duties and responsibilities with respect to such
employee benefit plan and (2) has not knowingly caused any
of the trusts for which it serves as an investment manager,
as defined in Section 3(38) of ERISA, to enter into any
transaction that would constitute a "prohibited transaction"
under Section 406 of ERISA or Section 4975 of the Code, with
respect to any such trusts, except for transactions that are
the subject of a statutory or administrative exemption.
(l) Labor Matters. There are no labor or collective bargaining
agreements to which the Company or any subsidiary of the Company is a
party. There is no union organizing effort pending or, the Company's
knowledge, threatened against the Company or any subsidiary of the Company.
There is no labor strike, labor dispute (other than routine employee
grievances that are not related to union Employees), work slowdown,
stoppage or lockout pending or, to the Company's knowledge, threatened
against the Company or any subsidiary of the Company. There is no material
unfair labor
31
practice or labor arbitration proceeding pending or, to the knowledge of
the Company, threatened against the Company or any subsidiary of the
Company (other than routine employee grievances). The Company and its
subsidiaries are in compliance in all material respects with all applicable
laws respecting employment and employment practices, terms and conditions
of employment and wages and hours, and are not engaged in any unfair labor
practice.
(m) Environmental Liability. Except as set forth in the Company
Filed SEC Documents and except as would not have a material adverse effect
on the Company, there are no pending or threatened legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, notices,
private environmental investigations or remediation activities or
governmental investigations of any nature (including, without limitations,
claims of alleging potential liability for investigating costs, cleanup
costs, governmental response costs, natural resources damage, property
damages, personal injuries or penalties) by any person or entity
(collectively, "Environmental Claims") or any conditions or circumstances
that could form the basis of any Environmental Claim seeking to impose on
the Company or any of its subsidiaries, or that reasonably could be
expected to result in the imposition on the Company or any of its
subsidiaries of, any liability or obligation arising under applicable
common law standards relating to pollution or protection of the
environment, human health or safety, or under any local, state or Federal
environmental statute, regulation, ordinance, decree, judgment or order
relating to pollution or protection of the environment, human health or
safety including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended pending or,
to the knowledge of the Company, threatened, against the Company or any of
its subsidiaries as a result of the transactions contemplated by this
Agreement.
(n) Intellectual Property.
(i) Section 3.1(n)(i) of the Company Disclosure
Schedule sets forth, for the Intellectual Property (as
defined below) owned by the Company or any of its
subsidiaries, a complete and accurate list of all material
U.S. and foreign (A) patents and patent applications, (B)
trademark or service ▇▇▇▇ registrations and applications,
(C) copyright registrations and applications, and (D)
Internet domain names. The Company or one of its
subsidiaries owns or has the valid right to use all material
patents and patent applications, trademarks, service marks,
trademark or service ▇▇▇▇ registrations and applications,
trade names, logos, designs, Internet domain names, slogans
and general intangibles of like nature, together with all
goodwill related to the foregoing, copyrights, copyright
registrations, renewals and applications, Software (as
defined below), technology, trade secrets and other
confidential information, know-how, proprietary processes,
formulae, algorithms, models and methodologies, licenses,
agreements and all other material proprietary rights
(collectively, the "Intellectual Property"), used in the
business of the Company as it currently is conducted.
"Software" means any and all (A) computer programs,
including any and all software implementations of
32
algorithms, models and methodologies, whether in source code or
object code, (B) databases and compilations, including any and
all data and collections of data, whether machine readable or
otherwise, (C) descriptions, flow-charts and other work product
used to design, plan, organize and develop any of the foregoing,
(D) the technology supporting and content contained on any owned
or operated Internet site(s), and (E) all documentation,
including user manuals and training materials, relating to any of
the foregoing.
(ii) All of the material Intellectual Property owned by
the Company or one of its subsidiaries is free and clear of
all Liens. The Company or one of its subsidiaries is listed
in the records of the appropriate United States, state or
foreign agency as, the sole owner of record for each
application and registration listed in Section 3.1(n)(i) of
the Company Disclosure Schedule.
(iii) All of the material registrations listed in
Section 3.1(n) (i) of the Company Disclosure Schedule are
valid, subsisting, enforceable, in full force and effect,
and have not been cancelled, expired, abandoned or otherwise
terminated and all renewal fees in respect thereof have been
duly paid. There is no pending or, to the Company's
knowledge, threatened opposition, interference or
cancellation proceeding before any court or registration
authority in any jurisdiction against the registrations and
applications listed in Section 3.1(n)(i) of the Company
Disclosure Schedule or, to the Company's knowledge, against
any other material Intellectual Property used by the Company
or its subsidiaries.
(iv) The conduct of the Company's and its subsidiaries'
business as currently conducted or planned by the Company to
be conducted does not, in any material respect, infringe
upon (either directly or indirectly such as through
contributory infringement or inducement to infringe),
dilute, misappropriate or otherwise violate any Intellectual
Property owned or controlled by any third party.
(v) To the Company's knowledge, no third party is
misappropriating, infringing, diluting, or violating any
material Intellectual Property owned by or licensed to or by
the Company or its subsidiaries and no such claims have been
made against a third party by the Company or its
subsidiaries.
(vi) Each material item of Software, which is used by
the Company or its subsidiaries in connection with the
operation of their businesses as currently conducted, is
either (A) owned by the Company or its subsidiaries, (B)
currently in the public domain or otherwise available to the
Company without the need of a license, lease or consent of
any third party, or (C) used under rights granted to the
33
Company or its subsidiaries pursuant to a written agreement,
license or lease from a third party.
(o) Insurance Matters. The Company and its subsidiaries have all
material primary, excess and umbrella policies of general liability, fire,
workers' compensation, products liability, completed operations, employers,
liability, health, bonds, earthquake and other forms of insurance providing
insurance coverage that is customary in amount and scope for other companies in
the industry in which they operate, are in full force and effect on the date
hereof and shall be kept in full force and effect by the Company through the
Effective Time. All such policies, considered collectively with other such
policies providing the same type of coverage, are sufficient for compliance in
all material respects with all requirements of law and of all requirements under
contracts or leases to which the Company is a party. With respect to all such
policies that are individually or in the aggregate material to the Company or
its subsidiaries, all premiums currently payable or previously due and payable
with respect to all periods up to and including the Effective Time have been
paid to the extent such premiums are due and payable on or prior to the date
hereof and, with respect to premiums not due or payable at or prior to the date
hereof, subject to Section 4.1 of this Agreement, all premiums due and payable
prior to the Effective Time, will have been paid prior to the Effective Time and
no notice of cancellation or termination has been received with respect to any
such policy.
(p) Information Supplied. None of the information supplied or to be
supplied by the Company in writing specifically for inclusion or incorporation
by reference in (i) the Form S-4 will, at the time the Form S-4 becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or (ii) the Proxy
Statement will, at the date it is first mailed to the Company's stockholders or
at the time of the Company Stockholders Meeting, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent specifically for inclusion or incorporation by reference in the Proxy
Statement. The Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder.
(q) Transactions with Affiliates. Except as set forth in Section 3.1(q)
of the Company Disclosure Schedule there are no outstanding amounts payable to
or receivable from, or advances by the Company or any of its subsidiaries to,
and neither the Company nor any of its subsidiaries is otherwise a creditor or
debtor to, any stockholder, director, Employee or affiliate of the Company or
any of its subsidiaries, other than as part of the normal and customary terms of
such persons' employment or service as a director with the Company or any of its
subsidiaries. Except as set forth in Section 3.1(q) or Section 3.1(k) of the
Company Disclosure Schedule neither the Company nor any subsidiary of the
Company is a party to any transaction or agreement
34
with any affiliate, stockholder, director or executive officer of the Company or
any of its subsidiaries or any material transaction or agreement with any
Employee other than executive officers.
(r) Voting Requirements. The affirmative vote at the Company
Stockholders Meeting (the "Company Stockholder Approval") of a majority of the
number of outstanding shares of Company Common Stock to approve and adopt this
Agreement is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve and adopt this Agreement and the
transactions contemplated hereby, including the Merger.
(s) Opinions of Financial Advisor. The Company has received the opinion
of ▇▇▇▇▇▇▇ Sachs, dated the date hereof, to the effect that, as of such date,
the aggregate Merger Consideration is fair from a financial point of view to the
stockholders of the Company.
(t) Brokers. Except for ▇▇▇▇▇▇▇ ▇▇▇▇▇, whose fees in connection with the
transactions contemplated hereby shall not exceed the amount set forth on
Section 3.1(t) of the Company Disclosure Schedule, no broker, investment banker,
financial advisor or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The Company has delivered to Parent complete and
correct copies of such arrangements which are set forth as part of the Company
Disclosure Schedule.
(u) Takeover Laws. The approval of this Agreement, the Securityholders
Agreement and the Merger by the Board of Directors of the Company constitutes
approval of this Agreement, the Securityholders Agreement and the Merger and the
transactions contemplated hereby for purposes of Section 203 of the DGCL. Except
for Section 203 of the DGCL (which has been rendered inapplicable), no
"moratorium", "control share", "fair price" or other antitakeover laws and
regulations of any state are applicable to the Merger or other transactions
contemplated by this Agreement.
(v) Derivative Transactions.
(i) Except as would not reasonably be expected to have
a material adverse effect on the Company, all Derivative
Transactions (as defined herein) entered into by the Company
or any of its subsidiaries were entered into in accordance
with applicable rules, regulations and policies of any
regulatory authority, and in accordance with the investment,
securities, commodities, risk management and other policies,
practices and procedures employed by the Company and its
subsidiaries, and were entered into with counter parties
believed at the time to be financially responsible and able
to understand (either alone or in consultation with their
advisers) and to bear the risks of such Derivative
Transactions; and the Company and each of its subsidiaries
have duly performed all of their obligations under the
Derivative Transactions to the
35
extent that such obligations to perform have accrued, and, to the
Company's knowledge, there are no material breaches, violations
or defaults or allegations or assertions of such by any party
thereunder.
(ii) For purposes of this Section 3.1(v), "Derivative
Transactions" means any swap transaction, option, warrant,
forward purchase or sale transaction, futures transaction,
cap transaction, floor transaction or collar transaction
relating to one or more currencies, commodities, bonds,
equity securities, loans, interest rates, credit-related
events or conditions or any indexes, or any other similar
transaction or combination of any of these transactions,
including collateralized mortgage obligations or other
similar instruments or any debt or equity instruments
evidencing or embedding any such types of transactions, and
any related credit support, collateral or other similar
arrangements related to such transactions; provided that,
for the avoidance of doubt, the term "Derivative
Transactions" shall not include any of Company Stock Options
or the LTWs.
(w) Investment Securities and Commodities.
(i) Except as would not reasonably be expected to have
a material adverse effect on the Company, each of the
Company and its subsidiaries has good title to all
securities and commodities owned by it (except those sold
under repurchase agreements or held in any fiduciary or
agency capacity), free and clear of any Lien, except to the
extent such securities or commodities are pledged in the
ordinary course of business to secure obligations of the
Company or its subsidiaries. Such securities and commodities
are valued on the books of the Company in accordance with
GAAP in all material respects.
(ii) The Company and its subsidiaries and their
respective businesses employ investment, securities,
commodities, risk management and other policies, practices
and procedures (the "Policies, Practices and Procedures")
which the Company believes are prudent and reasonable in the
context of such businesses. Prior to the date hereof, the
Company has made available to Parent in writing the material
Policies, Practices and Procedures.
(x) Loan Portfolio.
(i) Section 3.1(x)(i) of the Company Disclosure
Schedule sets forth (A) the aggregate outstanding principal
amount, as of the date hereof, of all written or oral loan
agreements, notes or borrowing arrangements (including,
without limitation, leases, credit enhancements,
commitments, guarantees and interest-bearing assets) payable
to the Company or its subsidiaries (collectively, "Loans"),
other than "non-accrual" Loans, and (B) the aggregate
outstanding principal amount, as of April 30, 2002, of all
"non-accrual" Loans. As of April 30, 2002, the
36
Company and its subsidiaries, taken as a whole, did not have
outstanding Loans and assets classified as "Other Real Estate
Owned" with an aggregate then outstanding, fully committed
principal amount in excess of $320,000,000, net of specific
reserves with respect to such Loans and assets, that were
designated by the Company as "Special Mention", "Substandard",
"Doubtful", "Loss", or words of similar import ("Criticized
Assets"). Section 3.1(x) of the Company Disclosure Schedule sets
forth (A) a summary of Criticized Assets as of April 30, 2002, by
category of Loan (e.g., commercial, consumer, etc.), together
with the aggregate principal amount of such Loans by category and
(B) each asset of the Company that, as of April 30, 2002, is
classified as "Other Real Estate Owned" and the book value
thereof.
(ii) Except as would not have a material adverse effect
on the Company, each Loan (i) is evidenced by notes,
agreements or other evidences of indebtedness which are
true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid liens and security
interests which have been perfected and (iii) is the legal,
valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws
of general applicability relating to or affecting creditors'
rights and to general equity principles. Except as would not
have a material adverse effect on the Company, all Loans
originated by the Company or its subsidiaries, and all such
Loans purchased by the Company or its subsidiaries, were
made or purchased in accordance with customary lending and
leading standards of the Company or its subsidiaries, as
applicable. Except as set forth in Section 3.1(x) of the
Company Disclosure Schedule, all such Loans (and any related
guarantees) and payments due thereunder are, and on the
Closing Date will be, free and clear of any Lien, and the
Company or its subsidiaries has complied in all material
respects, and on the Closing Date will have complied in all
material respects, with all laws and regulations relating to
such Loans.
(y) Real Property.
(i) Each of the Company and its subsidiaries has good
title free and clear of all Liens to all real property (the
"Owned Properties") owned by such entities, except for (i)
Liens for taxes not yet due and payable or contested in good
faith by appropriate proceedings, (ii) such imperfections of
title, easements and encumbrances, if any, as do not
interfere in any material respect with the use of the
property as such property is used on the date of this
Agreement or (iii) mechanics' materialmen's, workmen's,
repairmen's, warehousemen's, carrier's and other similar
Liens arising in the ordinary course of business.
(ii) A true and complete copy of each agreement
pursuant to which the Company or any of its subsidiaries
leases any real
37
property (such agreements, together with any amendments,
modifications and other supplements thereto, collectively, the
"Leases") has heretofore been made available to Parent. Each
Lease is valid, binding and enforceable against the Company or
its applicable subsidiary in accordance with its terms and is in
full force and effect. There are no existing defaults by the
Company or any of its subsidiaries, as applicable, under any of
the Leases which, in the aggregate, would result in the
termination of such Leases and a material adverse effect on the
Company. The consummation of the transactions contemplated by
this Agreement will not cause defaults under the Leases which, in
the aggregate, would result in a material adverse effect on the
Company.
(iii) The Owned Properties and the properties (the
"Leased Properties") leased pursuant to the Leases
constitute all of the real estate within which the Company
and its subsidiaries conduct their respective business
operations as of the date of this Agreement, except for
locations the loss of which would not constitute a material
adverse effect on the Company. The Owned Properties and the
Leased Properties are in compliance with all laws in all
material respects, except for any lack of compliance which
would not result in a material adverse effect on the
Company. Neither any agreement relating to the Owned
Properties nor any of the Leases requires consent of any
third party for the consummation of the transactions
contemplated hereby except for (i) such consents which will
be obtained prior to Closing, and (ii) such consents which,
if not obtained, will not, in the aggregate, result in a
material adverse effect on the Company.
(iv) A true and complete copy of each agreement
pursuant to which the Company or any of its subsidiaries
leases real property to a third party (such agreements,
together with any amendments, modifications and other
supplements thereto, collectively, the "Third Party Leases")
has heretofore been made available to Parent. Each Third
Party Lease is valid, binding and enforceable in accordance
with its terms and is in full force and effect, except that
(i) such enforceability may be subject to applicable
bankruptcy, insolvency or other similar laws now or
hereafter in effect affecting creditors' rights generally
and (ii) the availability of the remedy of specific
performance or injunction or other forms of equitable relief
may be subject to equitable defenses and would be subject to
the discretion of the court before which any proceeding
therefor may be brought. There are no existing defaults by
the tenant under any Third Party Lease which, in the
aggregate, would result in the termination of such Third
Party Leases and a material adverse effect on the Company.
The consummation of the transactions contemplated by this
Agreement will not cause defaults under the Third Party
Leases which, in the aggregate, would result in a material
adverse effect on the Company.
38
SECTION 3.2 Representations and Warranties of Parent. Except as set forth
on the Disclosure Schedule delivered by Parent to the Company prior to the
execution of this Agreement (the "Parent Disclosure Schedule") and making
reference to the particular subsection of this Agreement to which exception is
being taken, Parent represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power.
(i) Each of Parent, its subsidiaries (as defined in
Rule 1-02 of Regulation S-X, promulgated pursuant to the
Securities Act by the SEC ("significant subsidiaries")) and
Merger Sub is a corporation or other legal entity duly
organized, validly existing and in good standing (with
respect to jurisdictions which recognize such concept) under
the laws of the jurisdiction in which it is organized and
has the requisite corporate or other power, as the case may
be, and authority to carry on its business as now being
conducted except, as to subsidiaries, for those
jurisdictions where the failure to be duly organized,
validly existing and in good standing, individually or in
the aggregate, would not have a material adverse effect on
Parent. Each of Parent and its subsidiaries 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, leasing or operation of its properties makes
such qualification or licensing necessary, except for those
jurisdictions where the failure to be so qualified or
licensed or to be in good standing, individually or in the
aggregate, would not have a material adverse effect on
Parent.
(ii) Merger Sub is a newly formed corporation with no
material assets or liabilities, except for liabilities
arising under this Agreement. Merger Sub will not conduct
any business or activities other than the issuance of its
stock to Parent prior to the Merger.
(b) Capital Structure. The authorized capital stock of Parent consists
of 15,000,000,000 shares of Parent Common Stock and 30,000,000 shares of
preferred stock, par value $1.00 per share, of Parent ("Parent Authorized
Preferred Stock"), of which, as of the date hereof, 1,600,000 shares have been
designated as 6.365% Cumulative Preferred Stock, Series F ("Parent Series F
Preferred Stock"), 800,000 shares have been designated as 6.213% Cumulative
Preferred Stock, Series G ("Parent Series G Preferred Stock"), 800,000 shares
have been designated as 6.231% Cumulative Preferred Stock, Series H ("Parent
Series H Preferred Stock"), 800,000 shares have been designated as 5.864%
Cumulative Preferred Stock, Series M ("Parent Series M Preferred Stock"),
700,000 shares have been designated as Adjustable Rate Cumulative Preferred
Stock, Series Q ("Parent Series Q Preferred Stock"), 400,000 shares have been
designated as Adjustable Rate Cumulative Preferred Stock, Series R ("Parent
Series R Preferred Stock"), 250,000 shares have been designated as
Fixed/Adjustable Rate Cumulative Preferred Stock, Series V ("Parent Series V
Preferred Stock"), 5,000 shares have been designated as Cumulative Adjustable
Rate Preferred Stock, Series Y ("Parent Series Y Preferred Stock"), 987 shares
have been designated as 5.321% Cumulative Preferred Stock, Series YY ("Parent
Series YY Preferred Stock")
39
and 2,597 shares have been designated 6.767% Cumulative Preferred Stock, Series
YYY ("Parent Series YYY Preferred Stock"). At the close of business on May 6,
2002: (i) 5,477,416,254 shares of Parent Common Stock were issued and
outstanding; (ii) 331,997,699 shares of Parent Common Stock were held by Parent
in its treasury; (iii) no shares of Parent Common Stock were held by
subsidiaries of Parent; (iv) 1,600,000 shares of Parent Series F Preferred Stock
were issued and outstanding; (v) 800,000 shares of Parent Series G Preferred
Stock were issued and outstanding; (vi) 800,000 shares of Parent Series H
Preferred Stock were issued and outstanding; (vii) 800,000 shares of Parent
Series M Preferred Stock were issued and outstanding; (viii) 700,000 shares of
Parent Series Q Preferred Stock were issued and outstanding; (ix) 400,000 shares
of Parent Series R Preferred Stock were issued and outstanding ; (x) 250,000
shares of Parent Series V Preferred Stock were issued and outstanding; (xi)
2,262 shares of Parent Series Y Preferred Stock were issued and outstanding;
(xii) 987 shares of Parent Series YY Preferred Stock were issued and
outstanding; (xiii) 2,597 shares of Parent Series YYY Preferred Stock were
issued and outstanding; (xiv) approximately 976.4 million shares of Parent
Common Stock were reserved for issuance pursuant to the stock-based plans
identified in Section 3.2(b) of the Parent Disclosure Schedule (such plans,
collectively, the "Parent Stock Plans"), of which approximately 429 million
shares are subject to outstanding employee stock options or other rights to
purchase or receive Parent Common Stock granted under the Parent Stock Plans
(collectively, "Parent Employee Stock Options"); (xv) 1,116,769 shares of Parent
Common Stock are reserved for issuance pursuant to convertible securities; and
(xvi) other than as set forth above, no other shares of Parent Authorized
Preferred Stock have been designated or issued. All outstanding shares of
capital stock of Parent are, and all shares thereof which may be issued pursuant
to this Agreement or otherwise will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
Except as set forth in this Section 3.2(b) and except for changes since May 6,
2002 resulting from the issuance of shares of Parent Common Stock pursuant to
the Parent Stock Plans, Parent Employee Stock Options or Parent Convertible
Securities and other rights referred to in this Section 3.2(b), as of the date
hereof, (x) there are not issued, reserved for issuance or outstanding (A) any
shares of capital stock or other voting securities of Parent, (B) any securities
of Parent or any Parent subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or voting securities of Parent, (C) any
warrants, calls, options or other rights to acquire from Parent or any Parent
subsidiary, and any obligation of Parent or any Parent subsidiary to issue, any
capital stock, voting securities or securities convertible into or exchangeable
or exercisable for capital stock or voting securities of Parent or other
ownership interests of Parent, and (y) there are no outstanding obligations of
Parent or any Parent subsidiary to repurchase, redeem or otherwise acquire any
such securities or to issue, deliver or sell, or cause to be issued, delivered
or sold, any such securities. As of the date hereof, there are no outstanding
(A) securities of Parent or any Parent subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or other voting
securities or other ownership interests in any Parent subsidiary, (B) warrants,
calls, options or other rights to acquire from Parent or any Parent subsidiary,
and any obligation of Parent or any Parent subsidiary to issue, any capital
stock, voting securities or other ownership interests in, or any securities
convertible into or exchangeable or exercisable for any capital stock, voting
securities or ownership interests in, any Parent subsidiary or (C) obligations
of
40
Parent or any Parent subsidiary to repurchase, redeem or otherwise acquire any
such outstanding securities of Parent subsidiaries or to issue, deliver or sell,
or cause to be issued, delivered or sold, any such securities. Parent does not
own any shares of Company Common Stock.
(c) Authority; Noncontravention. Each of Parent and Merger Sub has all
requisite corporate power and authority to enter into this Agreement, and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate and shareholder action on the part of
Parent and Merger Sub, respectively. This Agreement has been duly executed and
delivered by each of Parent and Merger Sub, and, assuming the due authorization,
execution and delivery by the Company, constitutes the legal, valid and binding
obligations of Parent and Merger Sub, respectively, enforceable against Parent
and Merger Sub, respectively, in accordance with their terms except that (i)
such enforceability may be subject to applicable bankruptcy, insolvency or other
similar laws now or hereafter in effect affecting creditors' rights generally
and (ii) the availability of the remedy of specific performance or injunction or
other forms of equitable relief may be subject to equitable defenses and would
be subject to the discretion of the courts for which any proceeding therefor may
be brought. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions of this Agreement will not, conflict with, or result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of a benefit under, or result in the creation of any Lien upon any of
the properties or assets of Parent or any of its subsidiaries under, (i) the
certificate of incorporation or by-laws of Parent, (ii) the certificate of
incorporation or by-laws of the comparable organizational documents of any of
its significant subsidiaries or Merger Sub, (iii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license or similar authorization applicable to Parent or
any of its subsidiaries or their respective properties or assets or (iv) subject
to the governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or any of its subsidiaries or their respective
properties or assets, other than, in the case of clauses (ii), (iii) and (iv),
any such conflicts, violations, defaults, rights, losses or Liens that
individually or in the aggregate would not (x) have a material adverse effect on
Parent or (y) reasonably be expected to materially impair or materially delay
the ability of Parent or Merger Sub to perform its obligations under this
Agreement. No consent, approval, order or authorization of, action by, or in
respect of, or registration, declaration or filing with, any Governmental Entity
is required by or with respect to Parent or any of its subsidiaries in
connection with the execution and delivery of this Agreement by Parent and
Merger Sub or the consummation by Parent and Merger Sub of the transactions
contemplated by this Agreement, except for (1) the filing of a pre-merger
notification and report form by Parent under the HSR Act, and filing of a copy
of the application to the Federal Reserve Board pursuant to Section 7A(c)(8) of
the HSR Act; (2) the filing with the SEC of (A) the Form S-4 and the Proxy
Statement and (B) such reports under the Exchange Act as may be required in
connection with this
41
Agreement and the transactions contemplated hereby; (3) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
such filings with Governmental Entities to satisfy the applicable requirements
of the laws of states in which Parent and its subsidiaries are qualified or
licensed to do business or state securities or "blue sky" laws; (4) such filings
with and approvals of the NYSE and the Pacific Stock Exchange (the "PSX") to
permit the shares of Parent Common Stock to be issued in the Merger and under
the Company Stock Plan to be listed on the NYSE and PSX; (5) the approval of the
Federal Reserve under Section 4(j) of the Bank Holding Company Act; and (6)
filings in respect of, and approvals and authorizations of, any Governmental
Entity having jurisdiction over the consumer lending, banking, insurance or
other financial services businesses.
(d) Parent Documents. Since January 1, 1999, Parent has filed all
required reports, schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) with the SEC (the
"Parent SEC Documents"). As of their respective filing dates, (i) the Parent SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Parent SEC
Documents, and (ii) none of the Parent SEC Documents when filed (or when amended
and restated and as supplemented by subsequently filed Parent SEC Document)
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Parent included in the Parent SEC
Documents complied as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP (except, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of Parent and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and to other
adjustments described in the notes to such unaudited statements). Except (A) as
reflected in Parent's unaudited balance sheet as of March 31, 2002 or
liabilities described in any notes thereto (or liabilities for which neither
accrual nor footnote disclosure is required pursuant to GAAP) or (B) for
liabilities incurred in the ordinary course of business since March 31, 2002
consistent with past practice or in connection with this Agreement or the
transactions contemplated hereby, neither Parent nor any of its subsidiaries has
any liabilities or obligations of any nature other than liabilities or
obligations that would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on Parent.
(e) Information Supplied. None of the information supplied or to be
supplied by Parent specifically for inclusion or incorporation by reference in
(i) the Form S-4 will, at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) the
42
Proxy Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, in either
case, no representation or warranty is made by Parent with respect to statements
made or incorporated by reference therein based on information supplied by the
Company specifically for inclusion or incorporation by reference in the Form
S-4. The Form S-4 will comply as to form in all material respects with the
requirements of the Securities Act and the rules and regulations thereunder.
(f) Brokers. No broker, investment broker, financial advisor or other
person is entitled to a broker's, finder's, financial advisor's or other similar
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent.
(g) Tax Matters. Neither Parent nor any of its affiliates or
subsidiaries has taken or agreed to take any action, has failed to take any
action or knows of any fact, agreement, plan or other circumstance that could
prevent the Merger from qualifying as a "reorganization" within the meaning of
Section 368(a) of the Code.
(h) Compliance with Laws.
(i) Except as set forth in the Parent SEC Document filed publicly
available prior to the date hereof, and except as would not have a material
adverse effect on Parent, each of Parent and its subsidiaries is, and for
the last five years has been, in compliance in all material respects with
all applicable statutes, laws, regulations, ordinances, permits, rules,
judgments, orders, decrees or arbitration awards of any Governmental Entity
applicable to Parent or its subsidiaries.
(ii) Except as would not reasonably be expected to have a material
adverse effect on Parent, neither Parent nor any of its subsidiaries is
subject to any outstanding order, injunction or decree or is a party to any
written agreement, consent agreement or memorandum of understanding with,
or is a party to any commitment letter or similar undertaking to, or,
except as would not have a material adverse effect on Parent, is subject to
any order or directive by, or is a recipient of any supervisory letter from
or has adopted any resolutions at the request of any Governmental Entity
that restricts in any respect the conduct of its business or, except as
would not have a material adverse effect on Parent, that in any manner
currently relates to its capital adequacy, its policies, its management or
its business currently (each, a "Parent Regulatory Agreement"), nor has
Parent or any of its subsidiaries or affiliates (A) to its knowledge, been
advised since January 1, 2001 by any Governmental Entity that it is
considering issuing or requesting any Parent Regulatory Agreement that is
reasonably be expected to have a material adverse effect on Parent or (B)
have knowledge of any pending or threatened regulatory investigation that
would result in a material adverse effect on Parent.
43
(i) Litigation. Except as described in the Parent SEC Document filed and
publicly available prior to the date hereof, as of the date hereof there are no
pending or, to Parent's knowledge, threatened litigations, actions, suits,
proceedings, investigations or arbitrations with respect to Parent or any of its
subsidiaries or any of their respective properties that would result in a
material adverse effect on Parent.
(j) Absence of Certain Changes. Except for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby, and
except as disclosed in the Parent SEC Documents filed and publicly available
prior to the date hereof, since December 31, 2001, (A) there has not been any
material adverse change in Parent or (B) there are not, to Parent's knowledge,
any facts, circumstances or events that make it reasonably likely that Parent
will not be able to fulfill its obligations under this Agreement in all material
respects.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business by the Company. Except as set forth in
Section 4.1 of the Company Disclosure Schedule, except as otherwise expressly
contemplated by this Agreement or except as consented to by Parent in writing or
required by applicable law or regulation, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course consistent with past practice and in compliance in all material
respects with all applicable laws and regulations, pay their respective material
debts and material Taxes when due, pay or perform their other respective
material obligations when due, and, use all commercially reasonable efforts
consistent with the other terms of this Agreement to preserve intact their
current business organizations, use all commercially reasonable efforts
consistent with the other terms of this Agreement to keep available the services
of their current officers and employees and preserve their relationships with
those persons having business dealings with them, all with the goal of
preserving unimpaired their goodwill and ongoing businesses at the Effective
Time. Without limiting the generality of the foregoing, senior officers of
Parent and the Company shall meet on a reasonably regular basis to review the
financial and operational affairs of the Company and its subsidiaries, in
accordance with applicable law, and the Company shall give due consideration to
Parent's input on such matters, consistent with Section 4.5 hereof, with the
understanding that Parent shall in no event be permitted to exercise control of
the Company prior to the Effective Time. Except as expressly contemplated by
this Agreement, except as disclosed in Section 4.1 of the Company Disclosure
Schedule, or except as consented to by Parent in writing or required by
applicable law or regulation, after the date hereof the Company shall not, and
shall not permit any of its subsidiaries to:
(i) other than dividends and distributions by a direct
or indirect wholly owned subsidiary of the Company to its
parent,
44
(x) declare, set aside or pay any dividends on, make any other
distributions in respect of, or enter into any agreement with
respect to the voting of, any of its capital stock (except for
regular quarterly cash dividends not to exceed $0.10 on the
Company Common Stock and regular cash dividends on the REIT
Preferred Stock of Preferred Capital Corp. and pursuant to the
terms of the LTWs and the CALGZs and the CALGLs), (y) split,
combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in
lieu of, or in substitution for, shares of its capital stock,
except upon the exercise of Company Stock Options that are
outstanding as of the date hereof in accordance with their
present terms, or pursuant to the terms of the LTWs or pursuant
to Section 1.6 of the 1998 Merger Agreement, or (z) purchase,
redeem or otherwise acquire any shares of capital stock of the
Company or any of its subsidiaries, other securities thereof or
any rights, warrants or options to acquire any such shares or
other securities (other than the issuance of Company Common Stock
upon the exercise of Company Stock Options that are outstanding
as of the date hereof in accordance with their present terms,
pursuant to the terms of the LTWs or pursuant to Section 1.6 of
the 1998 Merger Agreement);
(ii) issue, deliver, sell, pledge or otherwise encumber
or subject to any Lien any shares of its capital stock, any
other voting securities, including, without limitation, any
restricted shares of Company Common Stock, or any securities
convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible
securities, including, without limitation, any Company Stock
Options (other than the issuance of Company Common Stock
upon the exercise of Company Stock Options that are
outstanding as of the date hereof in accordance with their
present terms, or (x) pursuant to the terms of the LTWs or
pursuant to Section 1.6(a) or (b) of the 1998 Merger
Agreement, or (y) to the extent contemplated by Section
6(c)(iii)(A) of the Securityholders Agreement, pursuant to
Section 1.6(c) of the 1998 Merger Agreement);
(iii) amend its certificate of incorporation, by-laws
or other comparable organizational documents;
(iv) (A) acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or any
equity securities of, or by any other manner, any business
or any person, or otherwise acquire or agree to acquire any
assets for consideration in excess of $1,000,000 in any one
transaction or series of related transactions or $5,000,000
in the aggregate, except for investment securities and
mortgage and automobile loans purchased in the ordinary
course of business and except for foreclosures, settlements
in lieu of foreclosure or troubled loan or debt
restructurings in the ordinary course of business
45
consistent with past practice or (B) open, close, sell or acquire
any branches;
(v) sell, lease, license, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of any
of its properties or assets other than securitizations and
other transactions in the ordinary course of business and
consistent with past practices or create any security
interest in such assets or properties;
(vi) except for borrowings under existing credit
facilities or lines of credit or refinancing of indebtedness
outstanding on the date hereof not to exceed $100,000,000
and except for the incurring of deposit liabilities in the
ordinary course of business, incur any indebtedness for
borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise become responsible for
the obligations of any person, or, other than in the
ordinary course of business, make any loans, advances or
capital contributions to, or investments in, any person
other than its wholly owned subsidiaries and as a result of
ordinary advances and reimbursements to employees and
endorsements of banking instruments;
(vii) change in any material respect its accounting
methods (or underlying assumptions), principles or practices
affecting its assets, liabilities or business, including
without limitation, any reserving, renewal or residual
method, practice or policy, in each case, in effect on the
date hereof, except as required by changes in GAAP or
regulatory accounting principles, or change in any material
respect any of its methods of reporting income and
deductions for Federal income tax purposes from those
employed in the preparation of the Federal income tax
returns of the Company for the taxable year ending December
31, 2000, except as required by changes in law or
regulation;
(viii) change in any material respects its investment
or risk management or other similar policies of the Company
or any of its subsidiaries;
(ix) make or change any material Tax election, file any
material amended Tax Return, enter into any material closing
agreement, settle or compromise any material liability with
respect to Taxes, agree to any material adjustment of any
Tax attribute, file any claim for a material refund of
Taxes, or consent to any extension or waiver of the
limitation period applicable to any material Tax claim or
assessment, provided, that for purposes of this subparagraph
(ix), "material" shall mean affecting or relating to $5
million of taxable income;
(x) create, renew or amend, or take any other action
that may result in the creation, renewal, or amendment, of
any agreement or contract or other binding obligation of the
Company or its
46
subsidiaries containing (A) any non-de-minimis restriction
on the ability of the Company and its subsidiaries, taken as
a whole, to conduct its business as it is presently being
conducted or (B) any non-de-minimis restriction on the
Company or its subsidiaries engaging in any type or activity
or business;
(xi) (A) incur any capital expenditures in an annual
aggregate amount in excess of $7,500,000 or (B) enter into
any agreement obligating the Company to spend more than
$1,000,000 annually, or $5,000,000 in the aggregate, or
undertake any material commitment or material transaction of
the type described in Section 3.1(f) of this Agreement,
other than in the ordinary course of business consistent
with past practice;
(xii) amend or otherwise modify, except in the ordinary
course of business, or knowingly violate in any material
respect the terms of, any of the Company Material Contracts
or other binding material obligations of the Company or its
subsidiaries;
(xiii) except as required by agreements or instruments
in effect on the date hereof, alter in any material respect,
or enter into any commitment to alter in any material
respect, its interest in any material corporation,
association, joint venture, partnership or business entity
in which the Company directly or indirectly holds any equity
or ownership interest on the date hereof (other than any
interest arising from any foreclosure, settlement in lieu of
foreclosure or troubled loan or debt restructuring in the
ordinary course of business consistent with past practice);
(xiv) (A) grant to any current or former director,
executive officer or other Employee of the Company or its
subsidiaries any increase in compensation, bonus or other
benefits, except for salary, wage, bonus or benefit
increases to current Employees who are not executive
officers and which are in the ordinary course of business,
consistent with past practice, (B) grant to any such current
or former director, executive officer or other Employee of
the Company any increase in severance or termination pay,
(C) enter into, or amend, or take any action to clarify any
provision of, any Plan or any employment, deferred
compensation, consulting, severance, termination or
indemnification agreement with any such current or former
director, executive officer or other Employee except as
required by applicable law or (D) modify any Company Stock
Option;
(xv) except pursuant to agreements or arrangements in
effect on the date hereof and disclosed in writing and
provided or made available to Parent and except for
compensation for service as an officer, employee or director
consistent with past practice, pay, loan or advance any
amount to, or sell, transfer or lease any
47
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
the immediate family members or associates of any of its
officers or directors other than compensation in the
ordinary course of business consistent with past practice;
(xvi) agree or consent to any material agreement or
material modifications of existing agreements with any
Governmental Entity in respect of the operations of its
business, except (i) as required by law or (ii) to effect
the consummation of the transactions contemplated hereby;
(xvii) pay, discharge, settle, compromise or satisfy
any material claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise),
including taking any action to settle or compromise any
litigation, other than any such payment, discharge,
settlement, compromise or satisfaction in the ordinary
course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of
the Company included in the Company Filed SEC Documents, or
incurred since March 31, 2002 in the ordinary course of
business consistent with past practice;
(xviii) authorize, or commit or agree to take, any of
the foregoing actions or any other action that would be
reasonably likely to prevent the Company from performing or
would be reasonably likely to cause the Company not to
perform its covenants hereunder in all material respects;
(xix) issue any broadly distributed communication of a
general nature to Employees (including general
communications relating to benefits and compensation) or
customers without the prior written approval of Parent
(which will not be unreasonably delayed or withheld), except
for communications in the ordinary course of business that
do not relate to the Merger or other transactions
contemplated hereby;
(xx) create, renew, amend or permit to expire, lapse or
terminate or knowingly take any action reasonably likely to
result in the creation, renewal, amendment, expiration,
lapse or termination of any insurance policies referred to
in Section 3.1(o), except that the Company shall be
permitted to take any such action without Parent's consent
in the event that Parent shall fail to reasonably consent to
such action; or
(xxi) knowingly take any action or knowingly fail to
take any action which would result in any of the conditions
of Article VI not being satisfied.
48
SECTION 4.2 Advice of Changes. Except to the extent prohibited by
applicable law or regulation, the Company, Parent and Merger Sub shall promptly
advise the other party orally and in writing to the extent it has knowledge of
(i) any representation or warranty made by it contained in this Agreement that
is qualified as to materiality becoming untrue or inaccurate in any respect or
any such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply in any
material respect with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement and
(iii) any change or event having, or which, insofar as can reasonably be
foreseen, could have a material adverse effect on such party or on the truth of
their respective representations and warranties or the ability of the conditions
set forth in Article VI to be satisfied; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or the conditions
to the obligations of the parties under this Agreement; provided further that a
failure to comply with this Section 4.2 shall not constitute a failure to be
satisfied of any condition set forth in Article VI unless the underlying
untruth, inaccuracy, failure to comply or satisfy, or change or event would
independently result in a failure to be satisfied of a condition set forth in
Article VI.
SECTION 4.3 No Solicitation by the Company. (a) Except as otherwise
provided in this Section 4.3, until the earlier of the Effective Time and the
date of termination of this Agreement, neither the Company, nor any of its
subsidiaries or any of the officers, directors, agents, representatives or
affiliates of it or its subsidiaries (including any investment banker, attorney
or accountant retained by it or any of its subsidiaries) shall (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate, any inquiries or the making of any proposal
which constitutes a Company Takeover Proposal (as defined below), (ii)
participate in any discussions or negotiations regarding any Company Takeover
Proposal, (iii) enter into any agreement regarding any Company Takeover Proposal
or (iv) make or authorize any statement, recommendation or solicitation in
support of any Company Takeover Proposal. If and only to the extent that (i) the
Company Stockholders Meeting shall not have occurred, (ii) the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders under applicable law, (iii) the
Company's Board of Directors concludes in good faith that such Company Takeover
Proposal constitutes a Company Superior Proposal (as defined below), (iv) such
Company Takeover Proposal was not solicited by it and did not otherwise result
from a breach of this Section 4.3(a), and (v) the Company provides prior written
notice to Parent of its decision to take such action, the Company shall be
permitted to (A) furnish information with respect to the Company and any of its
subsidiaries to such person pursuant to a customary confidentiality agreement,
(B) participate in discussions and negotiations with such person, (C) subject to
first complying with the provisions of Section 5.8(b) hereof, enter into a
Company Acquisition Agreement and (D) effect a Change in the Company
Recommendation (as defined below); provided, that at least five business days
prior to taking any actions set forth in clause (C) or (D) above, the Company's
Board of Directors provides Parent written notice advising Parent that the
Company's Board of Directors is prepared to conclude that such Company Takeover
49
Proposal constitutes a Company Superior Proposal and during such five business
day period the Company and its advisors shall have negotiated in good faith with
Parent to make adjustments in the terms and conditions of this Agreement such
that such Company Takeover Proposal would no longer constitute a Company
Superior Proposal and the Company's Board of Directors fully considers any such
adjustment and nonetheless concludes in good faith that such Company Takeover
Proposal constitutes a Company Superior Proposal. The Company, its subsidiaries
and their representatives immediately shall cease and cause to be terminated any
existing activities, discussions or negotiations with any parties with respect
to any Company Takeover Proposal.
For purposes of this Agreement, "Company Takeover Proposal" means
any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of a business that constitutes 20% or more of
the net revenues, net income or assets of the Company and its subsidiaries,
taken as a whole, or 20% or more of any class of equity securities of the
Company, any tender offer or exchange offer that if consummated would result in
any person beneficially owning 20% or more of any class of any equity securities
of the Company, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company (or any subsidiary of the Company whose business constitutes 20% or more
of the net revenues, net income or assets of the Company and its subsidiaries,
taken as a whole), other than the transactions contemplated by this Agreement.
For purposes of this Agreement, a "Company Superior Proposal" means any proposal
made by a third party (A) to acquire, directly or indirectly, including pursuant
to a tender offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, sale, lease, exchange, transfer or other
disposition (including a contribution to a joint venture), dissolution or
similar transaction, for consideration consisting of cash and/or securities,
100% of the combined voting power of the shares of the Company's capital stock
then outstanding or 100% of the net revenues, net income or assets of the
Company and its subsidiaries, taken as a whole and (B) which is otherwise on
terms which the Board of Directors of the Company determines in its good faith
judgment (after consultation with (i) either ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. or another
nationally recognized investment banking firm and (ii) outside counsel), taking
into account, among other things, all legal, financial, regulatory and other
aspects of the proposal and the person making the proposal, that the proposal,
(i) if consummated would result in a transaction that is more favorable to the
Company's stockholders than the Merger and the other transactions contemplated
hereby and (ii) is reasonably capable of being completed, including to the
extent required, financing which is then committed or which, in the good faith
judgment of the Board of Directors of the Company, is reasonably capable of
being obtained by such third party.
(b) Except as expressly permitted by this Section 4.3, neither the Board
of Directors of the Company nor any committee thereof shall (i) withdraw, modify
or qualify, or propose publicly to withdraw, modify or qualify, in a manner
adverse to Parent, the approval of the Agreement, the Merger or the Company
Recommendation (as defined in Section 5.1(d)) or take any action or make any
statement in connection with the Company Stockholders Meeting inconsistent with
such approval or Company Recommendation (collectively, a "Change in the Company
Recommendation"), (ii) approve or recommend, or propose publicly to approve or
50
recommend, any Company Takeover Proposal, or (iii) cause the Company to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement (each, a "Company Acquisition Agreement") related to any
Company Takeover Proposal. For purposes of this Agreement, a Change in the
Company Recommendation shall include any approval or recommendation (or public
proposal to approve or recommend), by the Company Board of a Company Takeover
Proposal, or any failure by the Company Board to recommend against a Company
Takeover Proposal. Notwithstanding the foregoing, the Board of Directors of the
Company, to the extent that it determines in good faith, after consultation with
outside counsel, that in light of a Company Superior Proposal it is necessary to
do so in order to comply with its fiduciary duties to the Company's stockholders
under applicable law, may terminate this Agreement solely in order to
concurrently enter into a Company Acquisition Agreement with respect to any
Company Superior Proposal, but only at a time that is after the fifth business
day following Parent's receipt of the written notice specified in Section 4.3(a)
and compliance by the Company with the terms of Sections 4.3(a) and 5.8(b).
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.3, the Company shall immediately advise
Parent orally and in writing of any request for information relating to a
Company Takeover Proposal, or of any Company Takeover Proposal, the material
terms and conditions of such request or Company Takeover Proposal and the
identity of the person making such request or Company Takeover Proposal, and
shall promptly provide a copy of any written request or Company Takeover
Proposal to Parent. The Company will keep Parent promptly informed of the status
and details (including amendments or proposed amendments) of any such request or
Company Takeover Proposal.
(d) Nothing contained in this Section 4.3 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure if, in
the good faith judgment of the Board of Directors of the Company, after
consultation with outside counsel, failure so to disclose would violate its
obligations under applicable law; provided, however, any such disclosure
relating to a Company Takeover Proposal shall be deemed to be a Change in the
Company Recommendation unless the Board of Directors of the Company reaffirms
the Company Recommendation in such disclosure.
SECTION 4.4 Certain Tax Matters. During the period from the date of this
Agreement to the Effective Time, the Company shall, and shall cause each of its
subsidiaries to: (i) timely file (taking into account any extensions of time
within which to file) all Tax Returns ("Post-Signing Returns") required to be
filed by it and such Post-Signing Returns shall be prepared in a manner
reasonably consistent with past practice; (ii) timely pay all Taxes shown as due
and payable on such Post-Signing Returns that are so filed; (iii) accrue a
reserve in its books and records and financial statements in accordance with
past practice for all Taxes payable by it for which no Post-Signing Return is
due prior to the Effective Time; and (iv) promptly notify Parent of any material
suit, claim, action, investigation, proceeding or audit (collectively,
"Actions") pending against or with respect to the Company or any of its
subsidiaries in respect of any Tax matter, including (without limitation) Tax
liabilities and refund claims.
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SECTION 4.5 Transition. Commencing following the date hereof, Parent and
the Company shall, and shall cause their respective subsidiaries to, use their
reasonable best efforts to facilitate the integration of the Company and its
subsidiaries, including the Bank, with the businesses of Parent and its
subsidiaries to be effective as of the Closing Date. Without limiting the
generality of the foregoing, from the date hereof through the Closing Date and
consistent with the performance of their day-to-day operations and the
continuous operation of the Company and its subsidiaries in the ordinary course
of business, the Company shall cause the employees and officers of the Company
and its subsidiaries, including the Bank, to use their reasonable best efforts
to provide support, including support from its outside contractors, and to
assist Parent in performing all tasks, including, without limitation, equipment
installation, reasonably required to result in a successful integration at the
Closing.
SECTION 4.6 No Fundamental Changes in the Conduct of Business by Parent.
Except as set forth in Section 4.6 of the Parent Disclosure Schedule, except as
otherwise expressly contemplated by this Agreement or except as consented to by
the Company in writing or required by applicable law or regulation, during the
period from the date of this Agreement to the Effective Time, Parent shall not,
and shall not permit any of it subsidiaries to:
(i) except as contemplated hereby, amend its
certificate of incorporation or by-laws in a manner that
would adversely affect the economic benefits of the Merger
to the holders of Company Common Stock; provided that the
authorization or issuance of preferred stock in a manner
that would not require Parent stockholder approval shall not
be deemed to violate this clause (i);
(ii) enter into any agreement to acquire all or
substantially all of the capital stock or assets of any
other person or business unless such transaction would not
materially delay or impede the consummation of the Merger;
(iii) knowingly take any action or knowingly fail to
take any action which would result in any of the conditions
of Article VI not being satisfied;
(iv) authorize, or commit or agree to take, any of the
foregoing actions or any other action that would be
reasonably likely to prevent Parent from performing or would
be reasonably likely to cause Parent not to perform its
covenants hereunder in all material respects; or
(v) directly purchase or otherwise acquire any shares
of Company Common Stock.
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ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4, Proxy Statement; Stockholders
Meeting.
(a) As promptly as practicable following the date of this Agreement,
Parent and the Company shall prepare and file with the SEC the Form S-4, in
which the Proxy Statement will be included as a prospectus. Each of Parent and
the Company shall use all reasonable efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such filing.
The Company shall use reasonable best efforts to cause the Proxy Statement to be
mailed to holders of Company Common Stock as promptly as practicable after the
Form S-4 is declared effective.
(b) If at any time prior to the Effective Time there shall occur (i) any
event with respect to the Company or any of its subsidiaries, or with respect to
other information supplied by Company for inclusion in the Form S-4 or the Proxy
Statement or (ii) any event with respect to Parent, or with respect to
information supplied by Parent for inclusion in the Form S-4 or the Proxy
Statement, in either case, which event is required to be described in an
amendment of, or a supplement, to the Form S-4 or the Proxy Statement, such
event shall be so described, and such amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the stockholders of
Company.
(c) Each of the Company and Parent shall promptly notify the other of
the receipt of any comments from the SEC or its staff or any other appropriate
government official and of any requests by the SEC or its staff or any other
appropriate government official for amendments or supplements to any of the
filings with the SEC in connection with the Merger and other transactions
contemplated hereby or for additional information and shall supply the other
with copies of all correspondence between the Company or any of its
representatives, or Parent or any of its representatives, as the case may be, on
the one hand, and the SEC or its staff or any other appropriate government
official, on the other hand, with respect thereto. The Company and Parent shall
use their respective reasonable best efforts to respond to any comments of the
SEC with respect to the Form S-4 and the Proxy Statement as promptly as
practicable. The Company and Parent shall cooperate with each other and provide
to each other all information necessary in order to prepare the Form S-4 and the
Proxy Statement, and shall provide promptly to the other party any information
such party may obtain that could necessitate amending any such document.
(d) The Company shall, as promptly as practicable after the Form S-4 is
declared effective under the Securities Act, duly call, give notice of, convene
and hold the Company Stockholders Meeting in accordance with the DGCL for the
purpose of obtaining the Company Stockholder Approval and subject to Section
4.3, the Board of Directors of the Company shall recommend to the Company's
stockholders the approval and adoption of this Agreement, the Merger and the
other transactions contemplated hereby (the "Company Recommendation"). Without
limiting the generality
53
of the foregoing, the Company agrees that its obligations pursuant to the first
sentence of this Section 5.1(d) shall not be affected by the commencement,
public proposal, public disclosure or communication to the Company of any
Company Takeover Proposal. Notwithstanding any Change in the Company
Recommendation, unless otherwise directed in writing by Parent, this Agreement
and the Merger shall be submitted to the stockholders of the Company at the
Company Stockholders Meeting for the purpose of approving the Agreement and the
Merger and nothing contained herein shall be deemed to relieve the Company of
such obligation.
(e) The Company shall coordinate and cooperate with Parent with respect
to the timing of the Company Stockholders Meeting.
SECTION 5.2 Letters of the Company's Accountants. The Company shall cause
to be delivered to Parent two letters from the Company's independent
accountants, one dated a date within two business days before the date on which
the Form S-4 shall become effective and one dated a date within two business
days before the Closing Date, each addressed to Parent, in form and substance
reasonably satisfactory to Parent and customary in scope and substance for
comfort letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
SECTION 5.3 Letters of Parent's Accountants. Parent shall cause to be
delivered to the Company two letters from Parent's independent accountants, one
dated a date within two business days before the date on which the Form S-4
shall become effective and one dated a date within two business days before the
Closing Date, each addressed to the Company, in form and substance reasonably
satisfactory to the Company and customary in scope and substance for comfort
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
SECTION 5.4 Access to Information; Confidentiality. Subject to the
Agreement, dated as of April 4, 2002 (executed as of April 8, 2002) between
Parent and the Company (the "Confidentiality Agreement"), and subject to
applicable law, the Company shall, and shall cause its subsidiaries to, afford
Parent and to the officers, employees, accountants, counsel, financial advisors
and other representatives of Parent, reasonable access during normal business
hours during the period prior to the Effective Time to all its respective
properties, books, contracts, commitments, personnel and records and, during
such period, the Company shall, and shall cause each of its subsidiaries to,
furnish promptly to Parent (a) a copy of each material report, schedule,
registration statement and other document filed by it with any Governmental
Entity and (b) all other information concerning its business, properties and
personnel as such other party may reasonably request. In addition, the Company
will deliver, or cause to be delivered, to Parent the internal or external
reports prepared by the Company and/or its subsidiaries in the ordinary course
that are reasonably required by Parent promptly after such reports are made
available to the Company's personnel. No review pursuant to this Section 5.4
shall affect any representation or warranty given by the Company to Parent.
Parent will hold, and will cause its officers, employees, accountants, counsel,
financial advisors and other representatives and affiliates to hold, any
nonpublic information in accordance with the terms of the Confidentiality
Agreement.
54
SECTION 5.5 Reasonable Best Efforts. (a) Subject to the terms and
conditions set forth in this Agreement, each of the parties hereto shall use its
reasonable best efforts (subject to, and in accordance with, applicable law) to
take promptly, or cause to be taken, all actions, and to do promptly, or cause
to be done, and to assist and cooperate with the other parties in doing, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings and the taking of all steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
by this Agreement and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement.
(b) In connection with and without limiting the foregoing, the Company
and Parent shall (i) use their reasonable best efforts to ensure that no state
takeover statute or similar statute or regulation is or becomes applicable to
this Agreement or the Merger or any of the other transactions contemplated
hereby, and (ii) if any state takeover statute or similar statute or regulation
becomes applicable to this Agreement or the Merger or any other transaction
contemplated hereby, take all action necessary to ensure that the Merger and the
other transactions contemplated by this Agreement may be consummated as promptly
as practicable on the terms contemplated hereby and otherwise to minimize the
effect of such statute or regulation on the Merger and the other transactions
contemplated hereby.
(c) In connection with and without limiting the foregoing, the Company
and Parent shall use their reasonable best efforts to effect the combination
(the "Bank Combination") of the Bank with Citibank FSB, or another banking
subsidiary of Parent, including, without limitation, the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities (including the OTS Approval) and the making of all
necessary registrations and filings and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity (including the OTS Approval).
(d) At the reasonable request of Parent, the Company and its
subsidiaries shall use their reasonable best efforts and cooperate with Parent
in order to permit all of the indebtedness outstanding under the Indenture,
dated as of August 6, 1998, between Mercury State Holdings Inc. and The Bank of
New York, as trustee (including any amendments and supplemental indentures, the
"Indenture"), to be called for redemption and redeemed as promptly as possible
following the Closing. In furtherance thereof, the Company and its subsidiaries
agree to request that The Bank of New York consent to shorten the notice period
required pursuant to Section 3.02 of the Indenture from 60 days to 30 days or
agree to accept a redemption notice that is conditioned upon the consummation of
the Merger.
55
SECTION 5.6 Company Equity-Based Incentives. (a) As of the Effective Time,
each outstanding Company Stock Option representing a right to receive Company
Common Stock upon exercise of such Company Stock Option shall be converted into
an option (an "Adjusted Option") to purchase the number of shares of Parent
Common Stock (rounded to the nearest whole number of shares of Parent Common
Stock) equal to the number of shares of Company Common Stock subject to such
Company Stock Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, at an exercise price per share (rounded to the nearest whole
cent) equal to the exercise price for each such share of Company Common Stock
subject to such Company Stock Option divided by the Exchange Ratio, and
references in each such option to the Company shall be deemed to refer to
Parent, where appropriate; provided, however, Parent shall assume the
obligations of the Company under the applicable Company Stock Plan and
agreements under which the Adjusted Option was originally granted, subject to
the adjustments required by this Section 5.6(a). The other terms of each such
Adjusted Option, and the plans under which they were issued, shall continue to
apply in accordance with their terms. Notwithstanding anything contained herein
to the contrary, with respect to the Company Stock Options granted under the
LTIP, (i) the rights with respect to LTWs attached to such Company Stock Options
shall continue in full force and effect following the Effective Time, with such
LTWs to be adjusted in accordance with Section 2.6 hereof, (ii) the exercise
price of such Company Stock Options relating to such LTWs shall be adjusted to
include the adjusted LTW exercise price in lieu of the current LTW exercise
price and (iii) such Company Stock Options to be subject to adjustment following
the Effective Time in accordance with the special LTW anti-dilution provision of
the LTIP upon the exercise of any such Company Stock Option on or after the
Triggering Event (as defined in the Warrant Agreement). Notwithstanding the
foregoing, in the case of any Company Stock Option to which Section 421 of the
Code applies by reason of its qualification as an incentive stock option under
Section 422 of the Code, the conversion formula shall be adjusted if necessary
to comply with Section 424(a) of the Code.
(b) The Company shall adopt such resolutions and take all such other
actions as may be required to permit the transactions contemplated by this
Section 5.6, including, but not limited to the conversion of shares of Company
Common Stock held or to be awarded or paid pursuant to such benefit plans,
programs or arrangements into shares of Parent Common Stock on a basis
consistent with the transactions contemplated by this Agreement.
(c) Parent shall (i) reserve for issuance the number of shares of Parent
Common Stock that will become subject to the plans referred to in this Section
5.6 and (ii) issue or cause to be issued the appropriate number of shares of
Parent Common Stock pursuant to applicable plans upon the exercise or maturation
of rights existing thereunder on the Effective Time or thereafter granted or
awarded. As soon as practicable following the Effective Time, Parent shall
prepare and file with the SEC a registration statement on Form S-8 (or other
appropriate form) registering a number of shares of Parent Common Stock
necessary to fulfill Parent's obligations under this Section 5.6.
56
(d) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of Company Stock Options appropriate notices setting
forth such holders' rights pursuant to awards granted under the Company Stock
Plans.
(e) Prior to the Effective Time, the Company shall take all such steps
as may be required to cause any dispositions of Company Common Stock or
acquisitions of Parent Common Stock (including derivative securities with
respect to Company Common Stock or Parent Common Stock) resulting from the
transactions contemplated by Article I and II or Section 5.6 of this Agreement
by each individual who is subject to the reporting requirements of Section 16(a)
of the Exchange Act with respect to the Company or by each individual, if any,
who will be so subject, immediately following the Effective Time, with respect
to Parent, to be exempt under Rule 16b-3 promulgated under the Exchange Act,
such steps to be taken in accordance with the No-Action Letter dated January 12,
1999, issued by the SEC to Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP.
SECTION 5.7 Indemnification, Exculpation and Insurance. (a) All rights to
indemnification and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time now existing in favor of the current or former
directors or officers of the Company and its subsidiaries as provided in their
respective certificates of incorporation or by-laws (or comparable
organizational documents) and any existing indemnification agreements or
arrangements of the Company and its subsidiaries shall survive the Merger and
shall continue in full force and effect in accordance with their terms, and
shall not be amended, repealed or otherwise modified for a period of six years
after the Effective Time in any manner that would adversely affect the rights
thereunder of such individuals for acts or omissions occurring at or prior to
the Effective Time.
(b) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action suit, proceeding or
investigation in which any individual who is now, or has been at any time prior
to the date of this Agreement, or who becomes prior to the Effective Time, a
director or officer of the Company or any of its subsidiaries (the "Indemnified
Parties"), is, or is threatened to be, made a party based in whole or in part
on, or arising in whole or in part out of, or pertaining to (i) the fact that he
is or was a director, officer or employee of the Company or any of its
subsidiaries or their respective predecessors or (ii) this Agreement or any of
the transactions contemplated hereby, whether in any case asserted or arising
before or after the Effective Time, the parties hereto agree to cooperate and
use their best efforts to defend against and respond thereto.
(c) For six years after the Effective Time, the Surviving Corporation
shall maintain in effect the Company's current directors' and officers'
liability insurance covering acts or omissions occurring prior to the Effective
Time with respect to those persons who are currently covered by the Company's
directors' and officers' liability insurance policy on terms with respect to
such coverage and amount no less favorable to the Company's directors and
officers currently covered by such insurance than those of such policy in effect
on the date hereof; provided, that the Surviving Corporation may substitute
therefor policies of Parent or its subsidiaries
57
(including self insurance) containing terms with respect to coverage and amount
no less favorable to such directors or officers; provided, further, that in no
event shall the Surviving Corporation be required to pay aggregate premiums for
insurance under this Section 5.7(c) in excess of 200% of the aggregate premiums
paid by the Company in 2001 on an annualized basis for such purpose and, if the
annual premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount.
(d) Parent shall cause the Surviving Corporation or any successor
thereto, whether by consolidation, merger or transfer of substantially all of
its properties or assets, to comply with its obligations under this Section 5.7.
The provisions of this Section 5.7 shall survive the Effective Time and are
intended to be for the benefit of, and shall be enforceable by, each Indemnified
Party and other person named herein and his or her heirs and representatives.
SECTION 5.8 Fees and Expenses. (a) Except as provided in this Section 5.8
or in Section 5.14, all fees and expenses incurred in connection with the
Merger, this Agreement, and the transactions contemplated by this Agreement
shall be paid by the party incurring such fees or expenses, whether or not the
Merger is consummated. Subject to Section 5.14, the Company shall not become or
agree to become liable for any fees and expenses related to work performed on
behalf of its major stockholders.
(b) (i) In the event that this Agreement is terminated by Parent
pursuant to Section 7.1(c)(ii), then, upon such termination, the Company shall
pay Parent a fee equal to $117,500,000 by wire transfer of same day funds within
two business days after such termination; furthermore, if, prior to the date
that is twelve (12) months after the date of such termination the Company
consummates a Company Takeover Proposal or enters into a Company Acquisition
Agreement (provided that, for purposes of this Section 5.8(b)(i), the percentage
referred to in the definition of Company Takeover Proposal shall be 50% or more
and any reference in such definition to any merger, consolidation, business
combination, recapitalization or substantially similar transaction involving the
Company shall mean any such transaction in which the stockholders of the Company
immediately prior to such transaction, as a group, own less than a majority of
the outstanding common stock or other ownership interests of the Company or the
surviving or resulting corporation in such transaction or, as applicable, the
publicly traded parent corporation thereof, immediately following such
transaction (and shall not include any such transaction solely with a wholly
owned subsidiary and not involving the Company), and any references to
liquidation or dissolution shall not include any such transaction not undertaken
in connection with any third-party transaction of the type contemplated above),
then the Company shall, on the date such Company Takeover Proposal is
consummated or such Company Acquisition Agreement is entered into, pay Parent a
fee equal to $117,500,000 by wire transfer of same day funds.
(ii) In the event that (A) a Pre-Termination Takeover Proposal
Event (as defined below) shall occur after the date of this Agreement and
thereafter this Agreement is terminated by either Parent or the Company
pursuant to Section 7.1(b)(ii) and (B) prior to the
58
date that is twelve (12) months after the date of such termination the
Company consummates a Company Takeover Proposal or enters into a Company
Acquisition Agreement (provided that for purposes of this Section
5.8(b)(ii), the percentage referred to in the definition of Company
Takeover Proposal shall be 50% or more and any reference in such definition
to any merger, consolidation, business combination, recapitalization or
substantially similar transaction involving the Company shall mean any such
transaction in which the stockholders of the Company immediately prior to
such transaction own less than a majority of the outstanding common stock
or other ownership interests of the Company or the surviving or resulting
corporation in such transaction immediately following such transaction (and
shall not include any such transaction solely with a wholly owned
subsidiary and not involving the Company), and any references to
liquidation or dissolution shall not include any such transaction not
undertaken in connection with any third-party transaction of the type
contemplated above), then the Company shall, on the date such Company
Takeover Proposal is consummated or such Company Acquisition Agreement is
entered into, pay Parent a fee equal to $235,000,000 by wire transfer of
same day funds.
(iii) In the event that this Agreement is terminated by the
Company pursuant to Section 7.1(d), then concurrently with such
termination, the Company shall pay to Parent a fee equal to $235,000,000 by
wire transfer of same day funds.
(iv) For purposes of this Section 5.8(b), a "Pre-Termination
Takeover Proposal Event" shall be deemed to occur if, prior to the event
giving rise to the right to terminate this Agreement, a bona fide Company
Takeover Proposal shall have been made known to the Company or any of its
subsidiaries or has been made directly to its stockholders generally or any
person shall have publicly announced an intention (whether or not
conditional) to make a Company Takeover Proposal, and such Company Takeover
Proposal or public announcement shall not have been irrevocably withdrawn
not less than five business days prior to the Company Stockholders Meeting.
The Company acknowledges that the agreements contained in this Section
5.8(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into
this Agreement; accordingly, if the Company fails promptly to pay the
amount due pursuant to this Section 5.8(b), and, in order to obtain such
payment, Parent commences a suit which results in a judgment against the
Company for the fee set forth in this Section 5.8(b), the Company shall pay
to Parent its costs and expenses (including attorneys' fees and expenses)
in connection with such suit, together with interest on the amount of the
fee at the rate on six-month U.S. Treasury obligations plus 300 basis
points in effect on the date such payment was required to be made.
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SECTION 5.9 Public Announcements. Parent and the Company will consult with
each other before issuing, and provide each other the opportunity to review,
comment upon and concur with and use reasonable efforts to agree on, any press
release or other public statements and any broadly distributed internal
communications with respect to the transactions contemplated by this Agreement,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as either party may
determine is required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange and
except for any discussions with rating agencies. The parties agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement shall be in the form heretofore agreed to by the parties.
SECTION 5.10 Affiliates. Concurrently with the execution of this Agreement
(or to the extent not practicable, as soon as practicable and in any event
within 10 business days after the date hereof), the Company shall deliver to
Parent a written agreement substantially in the form attached as Exhibit A
hereto of all of the persons who are "affiliates" of the Company for purposes of
Rule 145 under the Securities Act; all of such affiliates, who are affiliates as
of the date of this Agreement, are identified in Section 5.10 of the Company
Disclosure Schedule. Section 5.10 of the Company Disclosure Schedule shall be
updated by the Company as necessary to reflect changes from the date hereof and
the Company shall use reasonable best efforts to cause each person added to such
schedule after the date hereof to deliver a similar agreement.
SECTION 5.11 Stock Exchange Listing. Parent shall use best efforts to cause
the Parent Common Stock issuable (i) under Article II or (ii) upon exercise of
the LTWs and Adjusted Options pursuant to Section 5.6 to be approved for
issuance on the NYSE and the PSX, in each case subject to official notice of
issuance, as promptly as practicable after the date hereof, and in any event
prior to the Closing Date.
SECTION 5.12 Stockholder Litigation. Each of the Company and Parent shall
give the other the reasonable opportunity to participate in the defense of any
stockholder litigation against the Company or Parent, as applicable, and its
directors relating to the transactions contemplated by this Agreement.
SECTION 5.13 Standstill Agreements; Confidentiality Agreements. During the
period from the date of this Agreement through the Effective Time, the Company
shall not terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which it or any of its respective subsidiaries is a
party and which relates to the confidentiality or information regarding the
Company or its subsidiaries or which relate to securities of the Company. During
such period, the Company shall use reasonably best efforts to enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreement, including by using reasonable best efforts to obtain injunctions to
prevent any breaches of such agreements and to enforce specifically the terms
and provisions thereof in any court having jurisdiction.
SECTION 5.14 Conveyance Taxes. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer, real
property
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transfer gains, sales, use, transfer, value added, stock transfer and stamp
Taxes, any transfer, recording, registration and other fees or any similar Taxes
which become payable in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on or before the Effective
Time. The Company shall pay on behalf of its stockholders any such Taxes or fees
imposed by any Governmental Entity which become payable in connection with the
transactions contemplated by this Agreement for which such stockholders are
primarily liable and in no event shall Parent pay such amounts.
SECTION 5.15 Employee Benefits. (a) Parent shall, or shall cause the
Surviving Corporation and its subsidiaries to, (i) give those Employees who are,
as of the Effective Time, employed by the Company and its subsidiaries (the
"Continuing Employees") full credit for purposes of eligibility, vesting and
benefit accruals (other than for purposes of benefit accruals under any defined
benefit pension plan) under any employee benefit plans or arrangements
maintained by Parent, the Surviving Corporation or any subsidiary of Parent or
the Surviving Corporation for such Continuing Employees' service with the
Company or any subsidiary of the Company (or any predecessor entity) to the same
extent recognized by the Company and its subsidiaries, and (ii) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Continuing
Employees under any welfare plan that such employees may be eligible to
participate in after the Effective Time, other than limitations or waiting
periods that are already in effect with respect to such employees and that have
not been satisfied as of the Effective Time under any welfare plan maintained
for the Continuing Employees immediately prior to the Effective Time, and
provide credit under any such welfare plan for any copayments, deductibles and
out-of-pocket expenditures for the remainder of the coverage period during which
any transfer of coverage occurs.
(b) From and after the Effective Time and through December 31 of the
calendar year in which the Effective Time occurs (the "Continuation Period"),
Parent shall provide, or shall cause to be provided, to the Continuing Employees
compensation and employee benefit plans, programs and arrangements that are, in
the aggregate, comparable to those generally provided to such employees as of
the date hereof. From and after the expiration of the Continuation Period,
Parent shall provide, or shall cause to be provided, to the Continuing Employees
compensation and employee benefit plans, programs and arrangements that are no
less favorable than those generally provided to similarly situated employees of
Parent. Notwithstanding anything contained herein to the contrary, each
Continuing Employee whose employment is terminated during the twelve-month
period (or such longer period as may be required by the terms of the applicable
Company Severance Plan as in effect on the date hereof) following the Effective
Time shall be entitled to receive severance pay and benefits equal to the
severance pay and benefits under the applicable severance plan of the Company
listed on Section 5.15(b) of the Company Disclosure Schedule, as in effect on
the date hereof.
(c) From and after the Effective Time, Parent shall, or shall cause the
Surviving Corporation to, assume and honor all Plans (including the Litigation
Management Agreement, dated as of February 4, 1998, entered into by the Company
and
61
the other parties thereto, as amended), as in effect on the date hereof;
provided, however, nothing herein shall restrict Parent's or the Surviving
Corporation's ability to amend or terminate such Plans in accordance with their
terms.
SECTION 5.16 Tax Matters. Parent and the Company shall use reasonable best
efforts to cause the Merger to qualify as a reorganization within the meaning of
Section 368(a) of the Code and to obtain the Tax opinions set forth in Sections
6.2(d) and 6.3(c) hereof. This Agreement is intended to constitute a "plan of
reorganization" within the meaning of Treas. Reg. Sec. 1.368-2(g). Officers of
Parent, Merger Sub and the Company shall execute and deliver to Wachtell,
Lipton, ▇▇▇▇▇ & ▇▇▇▇ ("▇▇▇▇▇▇▇▇"), counsel to the Company, and ▇▇▇▇▇▇▇ ▇▇▇▇,
counsel to Parent, certificates containing appropriate representations at such
time or times as may be reasonably requested by such law firms, including the
effective date of the Form S-4 and the Closing Date, in connection with their
respective deliveries of opinions, pursuant to Sections 6.2(d) and 6.3(c)
hereof, with respect to the Tax treatment of the Merger. None of Parent, Merger
Sub or the Company shall take or cause to be taken any action which would cause
to be untrue (or fail to take or cause not to be taken any action which would
cause to be untrue) any of such certificates and representations.
SECTION 5.17 Amendment of Warrant Agreement. The Company's Board of
Directors, in accordance with Section 4.5 of the Warrant Agreement, has
determined that, following the Effective Time, by virtue of the Merger, holders
of LTWs shall be exercisable in respect of an amount in cash and shares of
Parent Common Stock as provided for in Section 2.6 of this Agreement and, in
connection therewith, the Company shall cause the Warrant Agreement to be
amended and signed by Parent with the consent of the warrant agent to so provide
and to provide for Parent's assumption of the Company's obligations thereunder
by virtue of such determination as provided in Section 2.6.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver by each of Parent and the Company on or prior to the
Closing Date of the following conditions:
(a) Stockholder Approval. The Company Stockholder Approval shall have
been obtained.
(b) Governmental and Regulatory Approvals. Other than the filing
provided for under Section 1.3 and the waiting period pursuant to the HSR Act
(which is addressed in Section 6.1(f)), all consents, approvals and actions of,
filings with and notices to any Governmental Entity required by the Company,
Parent or any of their subsidiaries under applicable law or regulation to
consummate the Merger, the Bank Combination and the other transactions
contemplated hereby, the failure of which to be obtained or made would result in
a material adverse effect on Parent's ability to conduct
62
the business in the Company in substantially the same manner as presently
conducted, shall have been obtained or made, including, without limitation,
approval of the Federal Reserve and the OTS Approval (all such approvals and the
expiration of all such waiting periods, the "Requisite Regulatory Approvals").
(c) No Injunctions or Restraints. No judgment, order, decree, statute,
law, ordinance, rule or regulation, entered, enacted, promulgated, enforced or
issued by any court or other Governmental Entity of competent jurisdiction or
other legal restraint or prohibition (collectively, "Restraints") shall be in
effect preventing the consummation of the Merger; provided, however, that each
of the parties shall have used its best efforts to prevent the entry of any such
Restraints and to appeal as promptly as possible any such Restraints that may be
entered.
(d) Form S-4. The Form S-4 shall have become effective under the
Securities Act and no stop order or proceedings seeking a stop order shall have
been entered or be pending by the SEC.
(e) Stock Exchange Listing. The shares of Parent Common Stock issuable
to the Company's stockholders (i) as contemplated by Article II or (ii) upon
exercise of the LTWs and the Adjusted Options pursuant to Section 5.6 shall have
been approved for listing on the NYSE and the PSX, subject to official notice of
issuance.
(f) HSR Act. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
SECTION 6.2 Conditions to Obligations of Parent. The obligation of Parent
to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth herein shall be true and correct at and as of the
Closing Date, as if made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such date), provided that no
representation or warranty of the Company shall be deemed untrue or incorrect
for purposes hereunder as a consequence of the existence of any fact, event or
circumstance inconsistent with such representation or warranty, unless such
fact, event or circumstance, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
of the Company, has had or would result in a material adverse effect on the
Company, disregarding for these purposes (x) any qualification or exception for,
or reference to, materiality in any such representation or warranty and (y) any
use of the terms "material," "materially," "in all material respects," "material
adverse change," "material adverse effect" or similar terms or phrases in any
such representation or warranty.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all material obligations, taken as a
63
whole, required to be performed by it at or prior to the Closing Date under this
Agreement.
(c) Regulatory Condition. No condition or requirement has been imposed
by one or more Governmental Entities in connection with any required approval by
them of the Merger or the Bank Combination that requires the Company or its
subsidiaries to be operated in a manner that would have a material adverse
effect on the Company.
(d) Tax Opinion. Parent shall have received the opinion of Skadden,
Arps, in form and substance reasonably satisfactory to Parent, dated the Closing
Date, rendered on the basis of facts, representations and assumptions set forth
in such opinion and the certificates obtained from officers of Parent, Merger
Sub and the Company, all of which are consistent with the state of facts
existing as of the Effective Time, to the effect that the Merger will qualify as
a reorganization within the meaning of Section 368(a) of the Code. In rendering
the opinion described in this Section 6.2(d), ▇▇▇▇▇▇▇ ▇▇▇▇ shall have received
and may rely upon the certificates and representations referred to in Section
5.16 hereof.
SECTION 6.3 Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent set forth herein shall be true and correct at and as of the Closing
Date, as if made at and as of such time (except to the extent expressly made as
of an earlier date, in which case as of such date), provided that no
representation or warranty of Parent shall be deemed untrue or incorrect for
purposes hereunder as a consequence of the existence of any fact, event or
circumstance inconsistent with such representation or warranty, unless such
fact, event or circumstance, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
of Parent, has had or would result in a material adverse effect on Parent,
disregarding for these purposes (x) any qualification or exception for, or
reference to, materiality in any such representation or warranty and (y) any use
of the terms "material," "materially," "in all material respects," "material
adverse change," "material adverse effect" or similar terms or phrases in any
such representation or warranty.
(b) Performance of Obligations of Parent. Parent shall have performed in
all material respects all material obligations, taken as a whole, required to be
performed by it at or prior to the Closing Date under this Agreement.
(c) Tax Opinion. The Company shall have received the opinion of
Wachtell, in form and substance reasonably satisfactory to the Company, dated
the Closing Date, rendered on the basis of facts, representations and
assumptions set forth in such opinion and the certificates obtained from
officers of Parent, Merger Sub and the Company, all of which are consistent with
the state of facts existing as of the Effective Time, to the effect that the
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Code. In rendering the tax opinion described in this
64
Section 6.3(c), Wachtell shall have received and may rely upon the certificates
and representations referred to in Section 5.16 hereof.
SECTION 6.4 Frustration of Closing Conditions. Neither Parent nor the
Company may rely on the failure of any condition set forth in Section 6.1, 6.2
or 6.3, as the case may be, to be satisfied if such failure was caused by such
party's failure to use reasonable best efforts to consummate the Merger and the
other transactions contemplated by this Agreement, as required by and subject to
Section 5.5.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, and whether before or after the Company Stockholder
Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by
the date that is twelve months following the date hereof,
provided, however, that the right to terminate this
Agreement pursuant to this Section 7.1(b) shall not be
available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of
the Merger to be consummated by such time;
(ii) if the Company Stockholder Approval shall not have
been obtained at the Company Stockholders Meeting duly
convened therefor or at any adjournment or postponement
thereof;
(iii) if any Restraint having any of the effects set
forth in Section 6.1(c) shall be in effect and shall have
become final and nonappealable; provided, that the party
seeking to terminate this Agreement pursuant to this Section
7.1(b)(iii) shall have used reasonable best efforts to
prevent the entry of and to remove such Restraint; or
(iv) if any Governmental Entity that must grant a
Requisite Regulatory Approval has denied the applicable
Requisite Regulatory Approval and such denial has become
final and nonappealable;
(c) by Parent, if (i) the Company shall have failed to make the Company
Recommendation in the Proxy Statement, (ii) the Company shall have effected a
Change in the Company Recommendation in accordance with the terms hereof, (iii)
the Company shall have effected a Change in the Company Recommendation in
violation of the terms hereof, or (iv) the Company shall have breached its
obligations under this
65
Agreement by reason of a failure to call or convene the Company Stockholders
Meeting in accordance with Section 5.1(d);
(d) by the Company in accordance with Section 4.3(b); provided, that in
order for the termination of this Agreement pursuant to this paragraph (d) to be
deemed effective, the Company shall have complied in all material respects with
all provisions of Section 4.3, including the notice provisions therein, and with
applicable requirements, including the payment of the fee, referred to in
paragraph (b)(iii) of Section 5.8;
(e) by Parent, if the Company shall have breached any of its
representations, warranties, covenants or other agreements contained in this
Agreement, which breach (i) would give rise to the failure of a condition set
forth in Section 6.2(a) or (b), and (ii) is incapable of being cured by the
Company or is not cured within 30 days of written notice thereof; or
(f) by the Company, if Parent shall have breached any of its
representations, warranties, covenants or other agreements contained in this
Agreement, which breach (A) would give rise to the failure of a condition set
forth in Section 6.3(a) or (b), and (B) is incapable of being cured by Parent or
is not cured within 30 days of written notice thereof.
The party desiring to terminate this Agreement pursuant to clause (b), (c),
(d), (e) or (f) of this Section 7.1 shall give written notice of such
termination to the other party in accordance with Section 8.2, specifying the
provision hereof pursuant to which such termination is effected.
SECTION 7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent or the Company, other than that the
provisions of Section 5.8, this Section 7.2 and Article VIII shall survive such
termination, provided, however, that nothing herein (including the payment of
any amounts pursuant to Section 5.8 hereof) shall relieve any party from any
liability for any willful breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
SECTION 7.3 Amendment. This Agreement may be amended by the parties at any
time before or after the Company Stockholder Approval; provided, however, that
after such approval, there shall not be made any amendment that by law requires
further approval by the stockholders of the Company without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of all of the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
7.3, waive compliance
66
by the other party with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Merger Sub, to
Citigroup Inc.
Corporate Law Department
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Associate General Counsel
Mergers & Acquisitions
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
67
if to the Company, to
Golden State Bancorp Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
SECTION 8.3 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person, where "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the ownership
of voting securities, by contract, as trustee or executor, or otherwise;
provided, that (x) any investment account advised or managed by such person or
one of its subsidiaries or affiliates on behalf of third parties, or (y) any
partnership, limited liability company, or other similar investment vehicle or
entity engaged in the business of making investments of which such person acts
as the general partner, managing member, manager, investment advisor, principal
underwriter or the equivalent shall not be deemed an affiliate of such person.
(b) "Closing Parent Share Value" shall have the meaning set forth in
Section 2.1(d)(iv) hereof; provided, however, if necessary to comply with any
requirements of the Securities and Exchange Commission (the "SEC"), the term
Closing Parent Share Value shall be deemed to mean the date which is the closest
in time but prior to the Closing Date which complies with such rules and
regulations.
(c) "material adverse change" or "material adverse effect" means, when
used in connection with the Company or Parent, any change, effect, event,
occurrence or state of facts that is, or would reasonably be expected to be,
materially adverse to the business, financial condition or results of operations
of such party and its subsidiaries taken as a whole, other than (i) any change,
effect, event or occurrence relating to the United States economy or financial
or securities markets in general, (ii) any change, effect, event or occurrence
relating to the financial services industry to the extent not affecting such
person to a materially greater extent than it affects other persons in
industries in which such person competes, (iv) any change, effect, event or
occurrence relating to the announcement or performance hereof and the
transactions contemplated
68
hereby (including without limitation the impact thereof on relationships with
customers, suppliers or employees), (v) any change in banking, savings
association and similar laws, rules or regulations of general applicability or
interpretations thereof by courts or governmental authorities and (vi) any
change in GAAP or regulatory accounting requirements applicable to banks,
savings associations or their holding companies generally.
(d) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
(e) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person; provided, however, that (x) any investment account advised or managed by
such person or one of its subsidiaries or affiliates on behalf of third parties,
or (y) any partnership, limited liability company, or other similar investment
vehicle or entity engaged in the business of making investments of which such
person acts as the general partner, managing member, manager, investment
advisor, principal underwriter or the equivalent shall not be deemed an
affiliate of such person.
(f) "knowledge" means, (i) with respect to the Company, the knowledge of
the individuals listed on Section 8.3(f) of the Company Disclosure Schedule and
(ii) with respect to Parent, the knowledge of Parent's executive officers.
SECTION 8.4 Interpretation. When a reference is made in this Agreement to
an Article, Section or Exhibit, such reference shall be to an Article or Section
of, or an Exhibit to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means, in the case of any agreement or instrument, such agreement or
instrument as from time to time amended, modified or supplemented, including by
waiver or consent and, in the case of statutes, such statutes as in effect on
the date of this Agreement. References to a person are also to its permitted
successors and assigns. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by
69
the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any Federal, state, local or foreign statute or
law shall be deemed to also refer to any amendments thereto and all rules and
regulations promulgated thereunder, unless the context requires otherwise.
SECTION 8.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties. A facsimile copy of a signature
page shall be deemed to be an original signature page.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter of this Agreement and (b) except for the
provisions of Section 5.7 and Sections 2 and 3 of Schedule 3.1(q) of the Company
Disclosure Schedule which shall inure to the benefit of and be enforceable by
the persons referred to therein, are not intended to confer upon any person
other than the parties any rights or remedies.
SECTION 8.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
SECTION 8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, provided, however, that Parent may
assign Merger Sub's rights and obligations, in whole or in part, under this
Agreement to Parent or any other, wholly-owned, direct subsidiary of Parent. Any
assignment in violation of the preceding sentence shall be void. Subject to the
preceding two sentences, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors
and assigns.
SECTION 8.9 Consent to Jurisdiction. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
Federal court sitting in the State of Delaware or a Delaware state court.
SECTION 8.10 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
70
SECTION 8.11 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. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.12 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
71
IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
CITIGROUP INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
GOLDEN STATE BANCORP INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman of the Board and CEO
MERCURY MERGER SUB, INC.
By /s/ ▇▇▇▇▇▇ ▇. Willumstead
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
72
EXHIBIT A
Form of Affiliate Letter
------------------------
______________, 2002
Citigroup, Inc.
Corporate Law Department
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Assistant General Counsel, M&A
Ladies and Gentlemen:
I have been advised that I may be deemed to be an "affiliate" of Golden
State Bancorp Inc., a Delaware corporation (the "Company"), as that term is
defined in Rule 145 promulgated by the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "Securities Act"). I
understand that pursuant to the terms of the Agreement and Plan of Merger dated
as of May 21, 2002 (the "Merger Agreement"), by and among Citigroup Inc., a
Delaware corporation ("Parent"), Mercury Merger Sub, Inc., a Delaware
corporation and a subsidiary of Parent ("Merger Sub") and the Company, the
Company plans to merge with and into Merger Sub (the "Merger") with Merger Sub
being the surviving corporation. Capitalized terms used herein but not otherwise
defined shall have the meanings given to such terms in the Merger Agreement.
I further understand that, as a result of the Merger, in exchange for
shares of common stock, par value $1.00 per share, of the Company ("Company
Common Stock") or upon the exercise of the Company Stock Options that will be
assumed by Parent in the Merger ("Assumed Options"), I may receive common stock,
par value $0.01 per share, of Parent ("Parent Common Stock").
I have read this letter and discussed the requirements hereof to the extent
I felt necessary with my counsel or counsel for the Company.
I represent, warrant and covenant with and to Parent that in the event I
receive any Parent Common Stock as a result of the Merger or the exercise of
Assumed Options:
1. I shall not make any sale, transfer, or other disposition of such Parent
Common Stock unless (i) such sale, transfer or other disposition has been
registered under the Securities Act, (ii) such sale, transfer or other
disposition is made in conformity with the provisions of Rule 145 under the
Securities Act (as such rule may be amended from time to time), (iii) in the
opinion of counsel in form and substance reasonably satisfactory to Parent, or
under a "no-action" letter or interpretive letter from the staff of the SEC,
such sale, transfer or other disposition will not violate or is otherwise exempt
from registration under the Securities Act, or (iii) I have the right to have
the legend set forth in Sections 3 and 4 below removed pursuant to Section 4
below.
A-1
2. I understand that Parent is under no obligation to register the sale,
transfer or other disposition of Parent Common Stock by me or on my behalf under
the Securities Act or, other than as set forth below, to take any other action
necessary in order to make compliance with an exemption from such registration
available.
3. I understand that stop transfer instructions will be given to Parent's
transfer agent with respect to the Parent Common Stock issued to me as a result
of the Merger or the exercise of Assumed Options and that there will be placed
on the certificates, if any, for such shares, or any substitutions therefor, a
legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the
Securities Act of 1933 applies. The shares represented by
this certificate may be transferred only in accordance with
the terms of a letter agreement between the registered
holder hereof and Citigroup Inc., a copy of which agreement
is on file at the principal offices of Citigroup Inc."
4. I understand that, unless the transfer by me of the Parent Common Stock
issued to me as a result of the Merger or upon the exercise of Assumed Options
has been registered under the Securities Act or such transfer is made in
conformity with the provisions of Rule 145(d) under the Securities Act, Parent
reserves the right, in its sole discretion, to place the following legend on the
certificates, if any, issued to my transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and were acquired
from a person who received such shares in a transaction to which
Rule 145 under the Securities Act of 1933 applies. The shares may
not be sold, transferred or otherwise disposed of except pursuant
to an effective registration statement under, or in accordance
with an exemption from the registration requirements of, the
Securities Act of 1933."
It is understood and agreed that the legends set forth in paragraphs (3)
and (4) above shall be removed by delivery of substitute certificates without
such legend and/or any stop transfer instructions will be lifted (A) if one year
(or such other period as may be required by Rule 145(d)(2) or any successor
thereto) shall have elapsed from the date I acquired the Parent Common Stock
received in the Merger and the provisions of Rule 145(d)(2) (or any successor
thereto) are then available to me, (B) if two years (or such other period as may
be required by Rule 145(d)(3) or any successor thereto) shall have elapsed from
the date I acquired the Parent Common Stock received in the Merger and the
provisions of Rule 145(d)(3) (or any successor thereto) are then available to me
or (C) if I shall have delivered to Parent (i) a copy of a "no-action" letter or
interpretative letter from the staff of the SEC, or an opinion of counsel in
form and substance reasonably satisfactory to Parent, to the effect that such
legend is not required for purposes of the Securities Act or (ii) a written
statement from me representing that that the Parent Common Stock represented by
such certificates are being or have been sold in
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conformity with the provisions of Rule 145(d) or pursuant to an effective
registration statement under the Securities Act.
Execution of this letter should not be considered an admission on my part
of "affiliate" status as described in the first paragraph of this letter
agreement, or as a waiver of any rights I may have to object to any claim that I
am such an affiliate on or after the date of this letter.
Very truly yours,
By: _______________________
Name:
Accepted this ____ day of
________________, 2002.
CITIGROUP INC.
By: _____________________________
Name:
Title:
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