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EXHIBIT 2
PLAN AND AGREEMENT OF MERGER AND REORGANIZATION
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________________________________________________________________________________
PLAN AND AGREEMENT OF
MERGER AND REORGANIZATION
AMONG
AEGON N.V.,
LT MERGER CORP.
AND
PROVIDIAN CORPORATION
________________________________________________________________________________
______________________________________________
DECEMBER 28, 1996
______________________________________________
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TABLE OF CONTENTS
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ARTICLE 1
THE SPIN-OFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Spin-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Amendments to the Distribution Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Further Agreements with Spinco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
PLAN OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Escheat Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Closing of Company Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Organization, Good Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Company Subsidiaries; Voting Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Authority; Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Non-Contravention; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 SEC Reports; Company Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.7 Statutory Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.8 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.11 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.12 Registration Statement, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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4.13 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.14 Collective Bargaining; Labor Disputes; Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.15 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.16 No Violation of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.17 Indebtedness for Borrowed Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.18 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.19 Real Estate Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.20 DGCL Section 203 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.21 Spin-off; Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.22 Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.23 Business Operating Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.24 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.25 Computer Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.26 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.27 Permits, Licenses and Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.28 Insurance Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.29 Threats of Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.30 Liabilities and Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.31 Separate Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.32 Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.33 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.34 Solvency of Spinco. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.35 Investigation by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
MERGER PARTNER AND SUB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 Organization, Good Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.3 Merger Partner Subsidiaries; Voting Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.4 Authority; Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.5 Non-Contravention; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.6 SEC Reports; Merger Partner Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.7 Statutory Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.8 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.9 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.11 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.12 Registration Statement, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.13 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.14 Collective Bargaining; Labor Disputes; Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.15 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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5.16 No Violation of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.17 Indebtedness for Borrowed Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.18 Environmental Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.19 Merger Partner Ownership of Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.20 Interim Operations of Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.21 Spin-off; Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.22 Business Operating Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.23 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.24 Computer Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.25 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.26 Permits, Licenses and Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.27 Liabilities and Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.28 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.29 Investigation by Merger Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 6
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; CERTAIN COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.1 Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.2 Conduct of Business Pending Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.3 Fiduciary Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.4 Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.5 Amendment to Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.6 Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.7 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.8 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.9 NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.10 Notice; Efforts to Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.11 Registration Statement; Stockholder Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.12 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.13 Press Releases; Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.14 Indemnification of Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.15 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.16 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.17 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.18 Aegon USA Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.19 Determination of Comparable Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.20 Merger Partner Exchange Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.21 Company Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.22 Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.23 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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6.24 Certain Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.25 Investment Company Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.26 Ruling Request. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 7
CONDITIONS PRECEDENT TO MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.1 Conditions to Each Party's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.2 Conditions to Obligations of Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.3 Conditions to Obligations of Merger Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 8
TERMINATION AND ABANDONMENT OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.2 Effect of Termination and Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 9
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.1 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.2 Non-Survival of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . 58
9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.4 Descriptive Headings; Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.7 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.9 Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.10 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.11 Limited Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.12 CONSENT TO JURISDICTION; SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
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PLAN AND AGREEMENT OF
MERGER AND REORGANIZATION
PLAN AND AGREEMENT OF MERGER AND REORGANIZATION (this "Agreement"),
dated as of December 28, 1996, by and among AEGON N.V., a company formed under
the laws of The Netherlands ("Merger Partner"), LT MERGER CORP., a Delaware
corporation and a wholly owned subsidiary of Merger Partner ("Sub"), and
PROVIDIAN CORPORATION, a Delaware corporation ("Company").
WHEREAS, the Board of Directors of Company has approved a plan of
distribution embodied in the form of the agreement attached hereto as Exhibit A
and to be signed concurrently with this Agreement (the "Distribution
Agreement") which distribution, subject to the terms and conditions of the
Distribution Agreement, will be effected prior to the Effective Time (as
defined in Section 2.1(a)) and pursuant to which all of the shares of capital
stock of Providian Bancorp, Inc., a Delaware corporation and wholly owned
subsidiary of Company ("Spinco"), will be distributed on a pro rata basis to
Company's stockholders as provided in the Distribution Agreement (the
"Spin-off");
WHEREAS, Merger Partner has formed Sub as a wholly owned subsidiary
corporation under the Delaware General Corporation Law (the "DGCL") for the
purpose of Sub merging with and into Company following the Spin-off pursuant to
the applicable provisions of the DGCL (the "Merger") so that Company will
continue as the surviving corporation of the Merger and will become a wholly
owned subsidiary of Merger Partner;
WHEREAS, the respective Boards of Directors of Company, Merger Partner
and Sub have approved and declared advisable the Merger, the terms and
provisions of this Agreement and the transactions contemplated hereby;
WHEREAS, the respective Boards of Directors of Merger Partner and
Company have determined that the Merger is in furtherance of and consistent
with their respective long-term business strategies and is fair to and in the
best interests of their respective stockholders;
WHEREAS, for federal income tax purposes, it is intended that (a) the
Spin-off shall qualify as a tax-free distribution within the meaning of Section
355 of the Internal Revenue Code, as amended (the "Code"), and (b) the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Code, and this Agreement is intended to be and is adopted as a plan of
reorganization; and
WHEREAS, the Merger described herein is subject to the approval of the
stockholders of Company and applicable state and federal authorities, and
satisfaction of certain other conditions described in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
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ARTICLE 1
THE SPIN-OFF
1.1 The Spin-off. Upon the terms and subject to the conditions of
the Distribution Agreement, Company shall use commercially reasonable efforts
to divest its interest in Spinco prior to the Effective Time through the
distribution of all of the outstanding shares of capital stock of Spinco on a
pro rata basis to the stockholders of Company as provided in the Distribution
Agreement.
1.2 Amendments to the Distribution Agreement. No amendments to
the Distribution Agreement shall be executed without the approval of Merger
Partner, which approval shall not be unreasonably withheld.
1.3 Further Agreements with Spinco. Unless otherwise approved by
Merger Partner, which approval shall not be unreasonably withheld, except as
contemplated by this Agreement or the Distribution Agreement or as set forth in
Schedule 1.3, neither any new agreement between Spinco and Company or any
Company Subsidiary (as defined in Section 4.3) nor any material amendment to
any existing agreements between Spinco and Company or any Company Subsidiary
which survive the Distribution Date (as defined in the Distribution Agreement)
shall be executed.
ARTICLE 2
PLAN OF MERGER
2.1 The Merger
(a) Upon the terms and subject to the conditions of this
Agreement, at the Effective Time and in accordance with the provisions of this
Agreement and the DGCL, Sub shall be merged with and into Company, which shall
be the surviving corporation (sometimes referred to hereinafter as the
"Surviving Corporation") in the Merger, and the separate corporate existence of
Sub shall cease. Subject to the provisions of this Agreement, a certificate of
merger (the "Certificate of Merger") shall be duly prepared, executed and
acknowledged by Company, on behalf of the Surviving Corporation, and thereafter
delivered to the Secretary of State of the State of Delaware, for filing, as
provided in the DGCL on the Closing Date (as defined in Section 3.1). The
Merger shall become effective immediately following the Spin-off upon the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware or at such time thereafter as is provided in the Certificate of Merger
(the "Effective Time").
(b) From and after the Effective Time, the Merger shall
have all the effects set forth in the DGCL. Without limiting the generality of
the foregoing, and subject thereto, by virtue of the Merger and in accordance
with the DGCL, all of the properties, rights, privileges, powers and franchises
of Company and Sub shall vest in the Surviving Corporation and all of the
debts, liabilities
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and duties of Company and Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
(c) The Certificate of Incorporation of Sub in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the provisions thereof and the DGCL.
(d) The Bylaws of Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until altered,
amended or repealed as provided therein, in the Certificate of Incorporation of
the Surviving Corporation and the DGCL.
(e) The officers and directors of Sub immediately prior
to the Effective Time shall be the initial officers and directors of the
Surviving Corporation, in each case until their respective successors are duly
elected and qualified.
2.2 Conversion of Shares. As of the Effective Time, by virtue of
the Merger and without any action on the part of any holder thereof:
(a) Each share of capital stock of Sub that is issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of Common Stock, par value $1 per
share, of the Surviving Corporation.
(b) All shares of common stock, par value $1 per share,
of Company ("Company Common Stock") or other capital stock of Company that are
owned by Company as treasury stock or by any wholly owned Company Subsidiary
and any shares of Company Common Stock owned by Merger Partner, Sub or any
other wholly owned Merger Partner Subsidiary (as defined in Section 5.3) shall
be canceled and retired and shall cease to exist and no stock of Merger Partner
or other consideration shall be delivered in exchange therefor.
(c) Subject to Section 2.3(c), each share of Company
Common Stock that is issued and outstanding immediately prior to the Effective
Time (other than shares to be canceled in accordance with Section 2.2(b)) shall
be converted into a right to receive a number (the "Exchange Ratio") of shares,
or fraction thereof, of voting common stock, par value of one Dutch Guilder per
share, of Merger Partner ("Merger Partner Common Stock") determined by dividing
$28.00 by the Share Price (as defined below), subject to the provisions of
Section 8.1(b)(vi) or 8.1(c)(vi), if applicable. All such shares of Company
Common Stock, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate previously representing any such shares (a "Certificate") shall
thereafter represent the right to receive that number of shares of Merger
Partner Common Stock into which such shares of Company Common Stock have been
converted. Certificates previously representing shares of Company Common Stock
shall be exchanged for certificates representing whole shares of Merger Partner
Common Stock, and cash in lieu of any fractional share, issued in consideration
therefor upon the surrender of such certificates in accordance with Section
2.3, without interest. For purposes of this Agreement, (i) the term "Share
Price" shall be equal to the Fair Market Value at the Effective
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Time of one share of Merger Partner Common Stock; provided, however, that if
such Fair Market Value at the Effective Time is less than $50.034, then the
Share Price shall be $50.034, and if such Fair Market Value at the Effective
Time is greater than $61.153, then the Share Price shall be $61.153; and (ii)
the term "Fair Market Value at the Effective Time" of one share of Merger
Partner Common Stock shall be the average during the 20 trading days
immediately preceding the last business day before the date of the Effective
Time of the average daily high and low prices per share of Merger Partner
Common Stock on the New York Stock Exchange ("NYSE").
(d) If after the date hereof and prior to the Effective
Time, Merger Partner shall have declared a stock split (including a reverse
split) of Merger Partner Common Stock or a dividend payable in Merger Partner
Common Stock or any other similar transaction, then the Exchange Ratio shall be
appropriately adjusted to reflect such stock split or dividend or similar
transaction.
(e) Each Company Stock Option (as defined in Section
6.17) and each Company SAR (as defined in Section 6.17) shall be converted in
accordance with Section 6.17.
2.3 Exchange of Certificates.
(a) As of the Effective Time, Merger Partner shall
deposit with ▇▇▇▇▇▇ Guaranty Trust Company of New York, or such other bank or
trust company designated by Merger Partner and reasonably acceptable to Company
(the "Exchange Agent"), for the benefit of the holders of shares of Company
Common Stock, for exchange in accordance with this Article 2 through the
Exchange Agent, certificates representing the shares of Merger Partner Common
Stock (such shares of Merger Partner Common Stock, together with any dividends
or distributions with respect thereto or cash deposited by Merger Partner in
accordance with this Section 2.3, being hereinafter referred to as the
"Exchange Fund") issuable pursuant to Section 2.2 in exchange for outstanding
shares of Company Common Stock, together with cash to be paid in lieu of
fractional shares. The aggregate number of shares of Merger Partner Common
Stock which shall be issuable shall be a number of such shares equal to the
Exchange Ratio multiplied by the total number of outstanding shares of Company
Common Stock as of the Effective Time, subject to adjustments for nonissuance
of fractional shares as provided herein.
(b) As soon as practicable after the Effective Time,
Merger Partner and the Surviving Corporation shall cause the Exchange Agent to
mail to each holder of record of a Certificate or Certificates (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent accompanied by a properly executed letter of
transmittal and shall be in such form and have such other provisions as Merger
Partner and Company may reasonably specify), and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Merger Partner Common Stock. Upon the surrender to the
Exchange Agent of one or more Certificates for cancellation, together with such
letter of transmittal, duly executed, the holder will be entitled to receive
certificates representing that number of whole shares of Merger Partner Common
Stock to be issued in respect of the aggregate number of such shares of Company
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Common Stock previously represented by the stock certificates surrendered based
upon the Exchange Ratio.
(c) No certificate or scrip representing fractional
shares of Merger Partner Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights as a stockholder of Merger Partner.
All fractional shares of Merger Partner Common Stock that a holder of Company
Common Stock would otherwise be entitled to receive as a result of the Merger
shall be aggregated and if a fractional share results from such aggregation,
such holder shall be entitled to receive, in lieu thereof, an amount in cash
determined by multiplying (i) the Fair Market Value at the Effective Time of
one share of Merger Partner Common Stock, by (ii) the fraction of a share of
Merger Partner Common Stock to which such holder would otherwise have been
entitled. Merger Partner shall timely make available to the Exchange Agent any
cash necessary to make payments in lieu of fractional shares as aforesaid. No
such cash in lieu of fractional shares of Merger Partner Common Stock shall be
paid to any holder of Company Common Stock until Certificates are surrendered
and exchanged in accordance with Section 2.3(a).
(d) If a certificate for Merger Partner Common Stock is
to be sent to a person other than the person in whose name the Certificates for
shares of Company Common Stock surrendered for exchange are registered, it
shall be a condition of the exchange that the person requesting such exchange
shall pay to the Exchange Agent any transfer or other taxes required by reason
of the delivery of such Certificate to a person other than the registered
holder of the Certificate surrendered, or shall establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not applicable.
(e) The cash paid and shares of Merger Partner Common
Stock issued upon the surrender of Certificates in accordance with the terms
hereof shall be deemed to have been paid and issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock.
2.4 Dividends. No dividends or other distributions that are
declared or made after the Effective Time with respect to Merger Partner Common
Stock payable to holders of record thereof after the Effective Time shall be
paid to a Company stockholder entitled to receive certificates representing
Merger Partner Common Stock until such stockholder has properly surrendered
such stockholder's Certificates. Upon such surrender, there shall be paid to
the stockholder in whose name the certificates representing such Merger Partner
Common Stock shall be issued any dividends which shall have become payable with
respect to such Merger Partner Common Stock between the Effective Time and the
time of such surrender, without interest. After such surrender, there shall
also be paid to the stockholder in whose name the certificates representing
such Merger Partner Common Stock shall be issued any dividend on such Merger
Partner Common Stock that shall have a record date subsequent to the Effective
Time and prior to such surrender and a payment date after such surrender;
provided that such dividend payments shall be made on such payment dates. In
no event shall the stockholders entitled to receive such dividends be entitled
to receive interest on such dividends. Any portion of the Exchange Fund which
remains undistributed to the stockholders of Company for six months after the
Effective Time pursuant to this Section 2.4 shall be returned by the Exchange
Agent
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to Merger Partner which shall thereafter act as Exchange Agent, subject to the
rights of holders of unsurrendered Certificates under this Article 2.
2.5 Escheat Laws. Notwithstanding any other provision of this
Article 2, none of Merger Partner, Sub, Company, the Surviving Corporation, the
Exchange Agent or any other party hereto shall be liable to any holder of
Company Common Stock for any Merger Partner Common Stock, or dividends or
distributions thereon or cash in lieu of fractional shares, delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar laws.
2.6 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of Company shall be closed and no transfer of Company
Common Stock shall thereafter be made. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall, when
accompanied by proper documentation, be exchanged for Merger Partner Common
Stock in the manner provided in this Article 2.
ARTICLE 3
CLOSING
3.1 Time and Place of Closing. Unless otherwise mutually agreed
upon in writing by Merger Partner and Company, the closing of the Merger (the
"Closing") will be held at 10:00 a.m., local time, on the later of (i) June 1,
1997, and (ii) the second business day following the date that all of the
conditions precedent specified in this Agreement have been (or can be at the
Closing) satisfied or waived by the party or parties permitted to do so (such
date being referred to hereinafter as the "Closing Date"). The place of
Closing shall be at the offices of King & Spalding, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as may be agreed between Merger
Partner and Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Merger Partner as follows
(the words "to the Knowledge of Company" or "to Company's Knowledge" and any
words of similar import shall mean that any one of the persons listed in
Exhibit B has actual knowledge of the matter):
4.1 Organization, Good Standing and Power. Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Company is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties make such qualification
or licensing necessary, except where the failure to be so qualified or licensed
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or to be in good standing would not, individually or in the aggregate, have a
Material Adverse Effect on Company (as defined below). Company has delivered
to Merger Partner complete and correct copies of its Certificate of
Incorporation and all amendments thereto to the date hereof and its Bylaws as
amended to the date hereof. As used in this Agreement, the phrase "Material
Adverse Effect on Company" means a material adverse effect on (a) the financial
condition, business or results of operations of Company and the Company
Subsidiaries on a consolidated basis or (b) the ability of Company to
consummate the transactions contemplated by this Agreement.
4.2 Capitalization. The authorized capital stock of Company as of
the date hereof consists of 300,000,000 shares of Common Stock, par value $1
per share, of which as of December 20, 1996, 93,765,999 shares were issued and
outstanding, 6,000,000 shares of Preferred Stock, par value $5 per share, of
which as of the date hereof no shares are issued and outstanding (other than
467,400 shares which are held by a Company Subsidiary), and 25,000,000 shares
of Preference Stock, par value $.01 per share, of which as of the date hereof
no shares are issued or outstanding. All outstanding shares of Company Common
Stock are, and all shares which may be issued prior to the Effective Time
pursuant to any outstanding Company Stock Options will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to any
preemptive rights. Except as set forth above, as of December 20, 1996, there
were no shares of capital stock or other equity securities of Company
outstanding, and, except as set forth in Schedule 4.2, there are no outstanding
options, warrants or rights to purchase or acquire from Company any capital
stock of Company, there are no existing registration covenants with Company
with respect to outstanding shares of Company Common Stock, and there are no
convertible securities or other contracts, commitments, agreements,
understandings, arrangements or restrictions by which Company is bound to issue
any additional shares of its capital stock or other securities.
4.3 Company Subsidiaries; Voting Trusts. Schedule 4.3 sets forth
a correct and complete list of each corporation, association, subsidiary or
other entity of which Company owns or controls, directly or indirectly, more
than 20% of the outstanding equity securities (other than equity securities
acquired in the ordinary course of business for investment purposes which
constitute more than 20% but less than 35% of the outstanding equity securities
of such issuer and which, in the case of equity securities acquired prior to
December 31, 1995, are listed in the annual statements of the Company Insurance
Subsidiaries), but excluding Spinco and any subsidiary, corporation,
association or other entity in which Company owns an indirect equity interest
exclusively through Spinco of which Spinco owns or controls, directly or
indirectly, more than 20% of the outstanding equity securities (such entities,
excluding Spinco and any entities so owned or controlled by Spinco, are
hereinafter referred to as "Company Entities"). Any Company Entity of which
Company owns or controls, directly or indirectly, more than 50% of the
outstanding equity securities is hereinafter referred to individually as a
"Company Subsidiary" and such entities are referred to collectively as the
"Company Subsidiaries." Except as disclosed in Schedule 4.3, Company owns,
directly or indirectly, the securities of each Company Entity held by Company,
free and clear of all liens, charges, pledges, security interests or other
encumbrances. All of the capital stock of each Company Subsidiary has been
duly authorized, and is validly issued, fully paid and nonassessable. There
are no outstanding options or rights to subscribe to, or any contracts or
commitments to issue or sell any shares of the capital stock or any securities
or obligations convertible into or exchangeable for, or giving any
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person any right to acquire, any shares of the capital stock of any Company
Entity to which Company or any Company Subsidiary is a party. There are no
voting trusts or other agreements or understandings with respect to the voting
of capital stock of Company or any Company Subsidiary to which Company or any
Company Subsidiary is a party. Each Company Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has the corporate power and authority
necessary for it to own or lease its properties and assets and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power and authority
would not, individually or in the aggregate, have a Material Adverse Effect on
Company. Each Company Subsidiary is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, except where the failure to be so qualified or licensed
or to be in good standing would not, individually or in the aggregate, have a
Material Adverse Effect on Company.
4.4 Authority; Enforceability. Company has the corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby, subject to the approval of this Agreement by the
stockholders of Company and approval of this Agreement and the Distribution
Agreement by insurance regulatory authorities and banking regulatory
authorities, and subject to compliance with the provisions of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). Subject to such approvals and compliance, the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Company, and this Agreement has been duly executed and delivered by Company and
constitutes the valid and binding obligation of Company, enforceable against it
in accordance with its terms, (i) except as may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) subject to general
principles of equity.
4.5 Non-Contravention; Consents.
(a) Except as set forth in Schedule 4.5(a), neither the
execution, delivery and performance by Company of this Agreement or the
Distribution Agreement, nor the consummation by Company of the transactions
contemplated hereby or the Spin-off, nor compliance by Company with any of the
provisions hereof or the Distribution Agreement, will:
(i) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or result
in a right of termination or acceleration, or the creation of any
lien, security interest, charge or encumbrance upon any of the
properties or assets of Company, under any of the terms, conditions or
provisions of, (x) its Certificate of Incorporation or Bylaws, or (y)
any note, bond, mortgage, indenture, deed of trust, license, lease,
contract, agreement or other instrument or obligation to which Company
or any of the Company Subsidiaries is a party, or by which Company or
any of the Company Subsidiaries may be bound, or to which Company or
any of the Company Subsidiaries or the properties or assets of any of
them may
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be subject, and that would, in any such event specified in this clause
(y), have, individually or in the aggregate, a Material Adverse Effect
on Company; or
(ii) subject to compliance with the statutes and
regulations referred to in Section 4.5(b), violate any valid and
enforceable judgment, ruling, order, writ, injunction, decree, or any
statute, rule or regulation applicable to Company or any of the
Company Subsidiaries or any of their respective properties or assets
where such violation would, individually or in the aggregate, have a
Material Adverse Effect on Company.
(b) Except as set forth in Schedule 4.5(b) and other than
notices, filings, authorizations, exemptions, consents or approvals, the
failure of which to give or obtain would not, individually or in the aggregate,
have a Material Adverse Effect on Company, no notice to, filing with,
authorization of, exemption by, or consent or approval of, any governmental
authority or other regulatory body is necessary for the consummation by Company
of the transactions contemplated by this Agreement.
4.6 SEC Reports; Company Financial Statements.
(a) Since January 1, 1995, Company has timely filed all
reports, registration statements, proxy statements or information statements
and all other documents, together with any amendments required to be made
thereto, required to be filed with the Securities and Exchange Commission
("SEC") under the Securities Act of 1933 (the "Securities Act") or the
Securities Exchange Act of 1934 (the "Exchange Act") (collectively, the
"Company Reports"). Company has heretofore made available to Merger Partner
true copies of all the Company Reports, together with all exhibits thereto,
that Merger Partner has requested. Included in such Company Reports are (i)
audited consolidated balance sheets of Company and its subsidiaries at December
31, 1994 and 1995 and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended, and the notes
thereto and (ii) the unaudited consolidated balance sheets of Company and its
subsidiaries at March 31, 1996, June 30, 1996 and September 30, 1996 and the
related unaudited consolidated statements of income, stockholders' equity and
cash flows for the periods then ended and the notes thereto.
(b) All of the financial statements included in the
Company Reports (which are collectively referred to herein as the "Company
Consolidated Financial Statements") fairly presented in all material respects
the consolidated financial position of Company and its subsidiaries as at the
dates mentioned and the consolidated results of operations, changes in
stockholders' equity and cash flows for the periods then ended in conformity
with generally accepted accounting principles applied on a consistent basis
(subject to any exceptions as to consistency specified therein or as may be
indicated in the notes thereto or in the case of the unaudited statements, as
may be permitted by Form 10-Q of the SEC and subject, in the case of unaudited
statements, to normal, recurring audit adjustments). As of their respective
dates, the Company Reports complied in all material respects with all
applicable rules and regulations promulgated by the SEC and did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made,
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not misleading. Except as set forth in the Company Reports, neither Company
nor any Company Subsidiary has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by generally
accepted accounting principles to be set forth on a consolidated balance sheet
of Company and its consolidated subsidiaries or in the notes thereto, other
than liabilities or obligations which would not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect on Company.
(c) Company has delivered to Merger Partner an unaudited
pro forma consolidated balance sheet of Company and the Company Subsidiaries
(specifically excluding Spinco and its subsidiaries) at September 30, 1996 and
the related unaudited pro forma consolidated statements of income and
stockholders' equity for the period then ended, and the notes thereto (the
"Spin-off Adjusted Financial Statements"). Such Spin-Off Adjusted Financial
Statements fairly presented in all material respects the consolidated pro forma
financial position of Company and the Company Subsidiaries (specifically
excluding Spinco and its subsidiaries) as at the date mentioned and the
consolidated pro forma results of operations and pro forma changes in
stockholders' equity for the period then ended in conformity with generally
accepted accounting principles applied on a consistent basis (subject to any
exceptions as to consistency specified therein or as may be indicated in the
notes thereto or as may be permitted by Form 10-Q of the SEC and subject to
normal, recurring audit adjustments).
4.7 Statutory Statements. Company has previously furnished to
Merger Partner the annual statements of each Company Subsidiary that is engaged
in the business of insurance (a "Company Insurance Subsidiary") for the years
ended December 31, 1994 and December 31, 1995, which have been filed with the
insurance regulatory authority of the jurisdiction of organization of such
Company Insurance Subsidiary, and statutory statements, where required, for
each such company for the periods ended March 31, 1996, June 30, 1996 and
September 30, 1996, and Company shall promptly furnish to Merger Partner all
statutory statements for any calendar years or quarters ending thereafter but
prior to the Effective Time. Except as set forth in Schedule 4.7, such
statutory statements present or will present fairly in all material respects
the admitted assets, liabilities and surplus of each Company Insurance
Subsidiary at the end of each of the periods then ended, and the results of its
operations and changes in its surplus for each of the periods then ended in
conformity with accounting practices prescribed or permitted by the insurance
regulatory authority of the jurisdiction of organization of such Company
Insurance Subsidiary, applied on a consistent basis as and to the extent
described in such statutory statements.
4.8 Absence of Certain Changes or Events. Except as disclosed in
Schedule 4.8 and the Company Reports and except for transactions contemplated
by this Agreement or the Distribution Agreement, since December 31, 1995,
Company and the Company Subsidiaries have conducted their business in all
material respects only in the ordinary course, and there has not been (i) any
change in the business, financial condition or results of operations of Company
and Company Subsidiaries which has had a Material Adverse Effect on Company,
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of
Company's outstanding capital stock, except regular quarterly cash dividends
with respect to the Company Common Stock, (iii) any split, combination or
reclassification of any of Company's outstanding
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capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of Company's
outstanding capital stock, (iv) (x) any granting by Company or any Company
Subsidiary to any executive officer or other employee of Company or any Company
Subsidiary of any increase in compensation, except for increases which in the
aggregate are in the ordinary course of business consistent with prior practice
or as was required under employment agreements in effect as of December 31,
1995, (y) any granting by Company or any Company Subsidiary to any such
executive officer or other employee of any increase in severance or termination
pay, except (A) for obligations which have been satisfied prior to the date
hereof, (B) for increases in the ordinary course of business in any one case
not in excess of $25,000, or (C) as was required under any employment,
severance or termination agreements in effect as of December 31, 1995 or (z)
any entry by Company or any Company Subsidiary into any new severance or
termination agreement with any such executive officer or other employee (other
than (A) for obligations which have been satisfied prior to the date hereof,
and (B) new severance or termination obligations in the ordinary course of
business in any one case not in excess of $25,000), (v) any significant change
in accounting methods, principles or practices by Company or any Company
Subsidiary materially affecting its assets, liabilities or business, except
insofar as may be appropriate to conform to changes in statutory accounting
rules or generally accepted accounting principles, or (vi) except for changes
in a manner consistent with past practice or consistent with industry
standards, any material change in the underwriting, pricing, actuarial or
investment practices or policies of any Company Business Unit (as defined
below). Notwithstanding the foregoing, the representation contained in this
Section 4.8 shall not apply to any change or development, or combination of
changes or developments, to the extent such changes and developments are the
result of adverse changes in general economic conditions, stock market
fluctuations or conditions or adverse changes in or affecting the insurance
industry generally. As used in this Agreement, the term "Company Business
Unit" shall mean the business segments of the Company identified as of the date
hereof as Providian Direct Insurance, Providian Agency Group and Providian
Capital Management.
4.9 Taxes and Tax Returns. Except as disclosed in Schedule 4.9 or
as otherwise disclosed to Merger Partner in writing:
(a) Company and the Company Subsidiaries have (i) duly
filed (or there has been filed on their behalf) with appropriate governmental
authorities all tax returns required to be filed by them, on or prior to the
date hereof, except to the extent that any failure to file would not,
individually or in the aggregate, have a Material Adverse Effect on Company,
and (ii) duly paid in full or made provisions in accordance with generally
accepted accounting principles (or there has been paid or provision has been
made on their behalf) for the payment of all taxes for all periods ending on or
prior to the date hereof, except to the extent that any failure to fully pay or
make provision for the payment of such taxes would not, individually or in the
aggregate, have a Material Adverse Effect on Company;
(b) no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any taxes or tax returns of Company or the Company Subsidiaries
wherein an adverse determination or ruling in any one such proceeding or in all
such proceedings in the aggregate would have a Material Adverse Effect on
Company;
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(c) the federal income tax returns of Company and the
Company Subsidiaries have been examined by the Internal Revenue Service ("IRS")
(or the applicable statutes of limitation for the assessment of federal income
taxes for such periods have expired) for all periods through and including
December 31, 1992, and no material deficiencies were asserted as a result of
such examinations that have not been resolved and fully paid. Neither Company
nor any of the Company Subsidiaries has granted any requests, agreements,
consents or waivers to extend the statutory period of limitations applicable to
the assessment of any taxes with respect to any tax returns of Company or any
of the Company Subsidiaries;
(d) neither Company nor any of the Company Subsidiaries
is a party to any tax sharing or material tax indemnity agreement;
(e) any amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of Company
or any Company Subsidiary who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or Company
Benefit Plan currently in effect would not be characterized as an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the Code).
In addition, Section 162(m) of the Code will not apply to any amount paid or
payable by Company or any Company Subsidiary under any contract or Company
Employee Plan currently in effect;
(f) all annuity contracts and life insurance policies
issued by a Company Insurance Subsidiary meet all definitional or other
requirements for qualification under the Code applicable (or intended to be
applicable) to such annuity contracts or life insurance policies, including,
without limitation, the following: (A) any life insurance policies meet the
requirements of Sections 101(f) or 7702 of the Code, as applicable; (B) any
annuity contracts that are intended to qualify as "annuity contracts"
(excluding contracts that are described in Section 72(s) of the Code) meet the
requirements of Section 72(s) of the Code; (C) any annuity contracts that are
intended to qualify under Sections 130, 403(a), 403(b) or 408(b) of the Code
contain all provisions required for qualification under such sections of the
Code; and (D) any annuity contracts that are marketed as, or in connection
with, plans that are intended to qualify under Sections 401, 403, 408 or 457 of
the Code comply with the requirements of such sections; except in the case of
any of the foregoing to the extent that any failure to so meet such
requirements has not and would not, individually or in the aggregate, have a
material adverse effect on (A) the financial condition, business or results of
operations of any Company Business Unit or (B) the ability of Company to
consummate the transactions contemplated by this Agreement; and
(g) as used in this Agreement, "taxes" shall include all
Federal, state, local and foreign income, property, premium, sales, excise,
employment, payroll, withholding and other taxes.
4.10 Litigation. Except as disclosed in Schedule 4.10 or in the
Company Reports, neither Company nor any Company Subsidiary is a party to any
pending or, to the Knowledge of Company, threatened claim, action, suit,
investigation or proceeding which would reasonably be expected to
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have, either individually or in the aggregate, a Material Adverse Effect on
Company. Except as disclosed in Schedule 4.10, at the date of this Agreement,
neither Company nor any Company Insurance Subsidiary has received actual notice
of any proceeding, claim or investigation pending or threatened against Company
or any Company Insurance Subsidiary before any insurance department or agency
which would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on Company. Except as disclosed in
Schedule 4.10, at the date of this Agreement there is no outstanding order,
writ, judgment, stipulation, injunction, decree, determination, award or other
decision against Company or any Company Subsidiary which, either individually
or in the aggregate, has had or would have a Material Adverse Effect on
Company.
4.11 Contracts and Commitments. Neither Company nor any Company
Subsidiary has received notice from any person alleging that Company or any
Company Subsidiary is in default under any contracts within the scope of
Section 6.21 as to which it is reasonably foreseeable that an adverse
determination would result, individually or in the aggregate, in a Material
Adverse Effect on Company.
4.12 Registration Statement, Etc. None of the information supplied
or to be supplied by Company for inclusion or incorporation by reference in (a)
the Registration Statement to be filed by Merger Partner with the SEC in
connection with the Merger Partner Common Stock to be issued in the Merger (the
"Registration Statement"), (b) the Proxy Statement (the "Proxy Statement") to
be mailed to Company's stockholders in connection with the meeting (the
"Stockholders' Meeting") to be called to consider the Merger, and (c) any other
documents to be filed with the SEC in connection with the transactions
contemplated hereby (including the Registration Statement on Form 10 or, if
applicable, Form S-1 to be filed in connection with the Spin-off) will, at the
respective times such documents are filed and at the time such documents become
effective or at the time any amendment or supplement thereto becomes effective
contain any untrue statement of a material fact, or omit to state any material
fact required or necessary in order to make the statements therein not
misleading; and, in the case of the Registration Statement, when it becomes
effective or at the time any amendment or supplement thereto become effective,
cause the Registration Statement or such supplement or amendment to contain any
untrue statement of a material fact, or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; or, in the case of the Proxy Statement, when first
mailed to the stockholders of Company, or in the case of the Proxy Statement or
any amendment thereof or supplement thereto, at the time of the Stockholders'
Meeting, cause the Proxy Statement or any amendment thereof or supplement
thereto to contain any untrue statement of a material fact, or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. All documents that Company is responsible for filing
with the SEC and any other regulatory agency in connection with the Merger will
comply as to form in all material respects with the provisions of applicable
law and any applicable rules or regulations thereunder, except that no
representation is made by Company with respect to statements made therein based
on information supplied by Merger Partner or with respect to information
concerning Merger Partner or Sub which is incorporated by reference in the
Registration Statement or the Proxy Statement.
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4.13 Employee Benefit Plans.
(a) Schedule 4.13 contains a list of each material plan,
program, arrangement, practice or contract which is maintained by Company or
any Company Subsidiary or to which Company or any Company Subsidiary is
obligated to make contributions and which provides benefits or compensation to
or on behalf of employees, including but not limited to executive arrangements
(for example, any bonus, incentive compensation, stock option, deferred
compensation, commission, severance, golden parachute or other executive
compensation plans, programs, contracts or arrangements) and "employee benefit
plans" as defined in Section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). All such plans, programs, arrangements,
practices or contracts are referred to herein as "Company Employee Plans."
Company has made available to Merger Partner the plan documents or other
writing constituting each Company Employee Plan and, if applicable, the trust,
insurance contract or other funding arrangement, the ERISA summary plan
description and the most recent Forms 5500 and annual reports for each such
plan. Company has identified those Company Employee Plans which Company
intends to satisfy the requirements of Section 401 of the Code and has made
available to Merger Partner accurate copies of the most recent favorable
determination letters for such plans.
(b) With respect to each Company Employee Plan that is
subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code:
(i) there does not exist any accumulated funding deficiency within the meaning
of Section 412 of the Code or Section 302 of ERISA, whether or not waived; (ii)
no reportable event within the meaning of Section 4043(c) of ERISA with respect
to which the 30-day notice period has not been waived has occurred before the
date of this Agreement, nor will any such event occur after the date of this
Agreement except by reason of the Spin-off; and (iii) all premiums required to
be paid to the Pension Benefit Guaranty Corporation have been timely paid in
full. There does not now exist, nor do any circumstances exist that could
result in, any Company Controlled Group Liability (as defined below) that would
be a liability of Company or any Company Subsidiary following the Effective
Time. "Company Controlled Group Liability" means any and all liabilities under
(i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971
of the Code and (iv) the continuation coverage requirements of Section 601 et
seq. of ERISA and Section 4980B of the Code, other than such liabilities that
arise solely out of, or relate solely to, the Company Employee Plans.
(c) Neither Company nor any Company Subsidiary is, or has
been, a participant in a multi-employer plan (within the meaning of ERISA
Section 3(37)). Except as set forth in Schedule 4.13, neither Company nor any
Company Subsidiary maintains or has at any time maintained a Company Employee
Plan which is subject to Title IV of ERISA. Except as set forth in Schedule
4.13, neither Company nor any Company Subsidiary is obligated to provide post
employment or retirement medical benefits or any other unfunded welfare
benefits to or on behalf of any person who is no longer an employee of Company
or any Company Subsidiary, except for health continuation coverage as required
by Section 4980B of the Code or Part 6 of Title I of ERISA.
(d) Except as set forth in Schedule 4.13, (i) each
Company Employee Plan has at all times been maintained, by its terms and in
operation, in accordance with all applicable laws, and
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(ii) each of those Company Employee Plans which are intended to be qualified
under Section 401 of the Code has at all times been maintained, by its terms
and in operation, in accordance with Section 401 of the Code, in each case
except where a failure to be so maintained would not have a Material Adverse
Effect on Company. Except as set forth in Schedule 4.13, as of December 31,
1995, neither Company nor any of the Company Subsidiaries had any liability
under any Company Employee Plan that was not reflected in the Company audited
consolidated balance sheet at December 31, 1995 or disclosed in the notes
thereto, other than liabilities which individually or in the aggregate would
not have a Material Adverse Effect on Company.
(e) Except as set forth in Schedule 4.13, to the
Knowledge of Company, no prohibited transaction has occurred with respect to
any Company Employee Plan maintained by Company or any of the Company
Subsidiaries that would result, directly or indirectly, in the imposition of an
excise tax or other liability under the Code or ERISA, except for such a tax or
other liability that would not have a Material Adverse Effect on Company.
(f) Except as set forth in Schedule 4.13, all
contributions or premium payments with respect to the Company Employee Plans
due for any period ending on or before the Effective Time have been or will be
timely paid by Company. Except as set forth in Schedule 4.13, the execution of
or performance of the transactions contemplated by this Agreement will not
create, accelerate or increase any obligations under the Company Employee Plans
which would have a Material Adverse Effect on Company.
(g) Neither Spinco nor any entity owned or controlled by
Spinco is, or has been, a participant in a multi-employer plan (within the
meaning of ERISA Section 3(37)) or has maintained or contributed to a plan that
is subject to Title IV of ERISA.
4.14 Collective Bargaining; Labor Disputes; Compliance. The only
collective bargaining agreements to which Company or any of the Company
Subsidiaries is a party are set forth in Schedule 4.14 (the "Company Collective
Bargaining Agreements"). Except as set forth in Schedule 4.14, to the
Knowledge of Company, the employees of Company and the Company Subsidiaries are
not represented by any unions other than the unions which are parties to the
Company Collective Bargaining Agreements. Except as set forth in Schedule
4.14, neither Company nor any of the Company Subsidiaries is currently, nor has
been during the past three years, the subject of any certification or
decertification organization drive. Neither Company nor any of the Company
Subsidiaries is currently, nor has been during the past three years, the
subject of any strike relating to Company or any of the Company Subsidiaries
nor, to the Knowledge of Company, is any such activity threatened. Each of
Company and each Company Subsidiary has complied with all laws relating to the
employment and safety of labor, including provisions relating to wages, hours,
benefits, collective bargaining and all applicable occupational safety and
health acts, laws and regulations except, in each case, where the failure to be
in compliance would not, individually or in the aggregate, have a Material
Adverse Effect on Company. Each of Company and the Company Subsidiaries has
complied with the terms of each collective bargaining agreement to which it is
a party or is bound, except where the failure to so comply would not have,
individually or in the aggregate, a Material Adverse Effect on Company.
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4.15 Brokers and Finders. Neither Company nor any of the Company
Subsidiaries, nor any of their respective officers, directors or employees, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or indirectly for Company or any of the Company
Subsidiaries, in connection with this Agreement or any of the transactions
contemplated hereby, except that Company has retained ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
("▇▇▇▇▇▇▇ Sachs") as its financial advisor, whose fees and expenses will be
paid by Company.
4.16 No Violation of Law.
(a) The business and operations of the Company Insurance
Subsidiaries have been conducted in compliance with all applicable statutes and
regulations regulating the business of insurance and all applicable orders and
directives of insurance regulatory authorities and market conduct
recommendations resulting from market conduct examinations of insurance
regulatory authorities (collectively, "Insurance Laws"), except where the
failure to so conduct such business and operations would not individually or in
the aggregate have a Material Adverse Effect on Company. Notwithstanding the
generality of the foregoing, except where the failure to do so would not have,
individually or in the aggregate, a Material Adverse Effect on Company and
except as set forth in Schedule 4.16, each Company Insurance Subsidiary and its
agents have marketed, sold and issued insurance products in compliance, in all
material respects, with all statutes, laws, ordinances, rules, orders and
regulations applicable to the business of such Company Insurance Subsidiary and
in the respective jurisdictions in which such products have been sold,
including, without limitation, in compliance with (i) all applicable
prohibitions against "redlining," (ii) all applicable requirements relating to
the disclosure of the nature of insurance products as policies of insurance and
(iii) all applicable requirements relating to insurance product projections.
In addition, except as set forth in Schedule 4.16, (i) there is no pending or,
to the Knowledge of Company, threatened charge by any insurance regulatory
authority that any of the Company Insurance Subsidiaries has violated, nor any
pending or, to the Knowledge of Company, threatened investigation by any
insurance regulatory authority with respect to possible violations of, any
applicable Insurance Laws where such violations would have individually or in
the aggregate a Material Adverse Effect on Company; (ii) none of the Company
Insurance Subsidiaries is subject to any order or decree of any insurance
regulatory authority relating specifically to such Company Insurance Subsidiary
(as opposed to insurance companies generally) which would have individually or
in the aggregate a Material Adverse Effect on Company; and (iii) the Company
Insurance Subsidiaries have filed all reports required to be filed with any
insurance regulatory authority on or before the date hereof as to which the
failure to file such reports would have individually or in the aggregate a
Material Adverse Effect on Company.
(b) In addition to Insurance Laws, the business and
operations of Company and the Company Subsidiaries have been conducted in
compliance with all other applicable laws, ordinances, regulations and orders
of all governmental entities and other regulatory bodies (including, without
limitation, laws, ordinances, regulations and orders relating to zoning,
environmental matters and the safety and health of employees), except where
such noncompliance, individually or in the aggregate, would not have a Material
Adverse Effect on Company. Except as set forth in Schedule 4.16, in addition
to Insurance Laws, (i) neither Company nor any Company Subsidiary has
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been charged with or, to the Knowledge of Company, is now under investigation
with respect to, a violation of any applicable law, regulation, ordinance,
order or other requirement of a governmental entity or other regulatory body,
which violations or penalties would have, individually or in the aggregate, a
Material Adverse Effect on Company, (ii) neither Company nor any Company
Subsidiary is a party to or bound by any order, judgment, decree or award of a
governmental entity or other regulatory body which has or will have,
individually or in the aggregate, a Material Adverse Effect on Company; and
(iii) Company and the Company Subsidiaries have filed all reports required to
be filed with any governmental entity or other regulatory body on or before the
date hereof as to which the failure to file such reports would result,
individually or in the aggregate, in a Material Adverse Effect on Company.
Company and the Company Subsidiaries have all permits, certificates, licenses,
approvals and other authorizations required in connection with the operation of
the business of Company and the Company Subsidiaries, except for permits,
certificates, licenses, approvals and other authorizations the failure of which
to have would not, individually or in the aggregate, have a Material Adverse
Effect on Company and except for such permits, certificates, licenses,
approvals and other authorizations required to be obtained in connection with
the consummation of the transactions contemplated hereby.
4.17 Indebtedness for Borrowed Money. Company has made available
to Merger Partner the instruments or other documents relating to all
indebtedness of Company or any Company Subsidiary for borrowed money the
principal balance of which is $10 million or more, whether such indebtedness is
direct or indirect, primary or secondary, by guarantee or otherwise.
4.18 Fairness Opinion. The Board of Directors of Company has
received an opinion dated December 28, 1996 from ▇▇▇▇▇▇▇ ▇▇▇▇▇ to the effect
that as of such date the consideration to be received by the stockholders of
Company pursuant to the Spin-off and the Merger, taken together, is fair to
such stockholders.
4.19 Real Estate Operations. Except as otherwise would not have a
Material Adverse Effect on Company:
(a) Schedules A, B, BA and D of the statutory statements
of the Company Insurance Subsidiaries for the year ended December 31, 1995
contain true and complete disclosures of all "Real Estate Owned" (Schedule A
Assets), "Mortgage Loans" (Schedule B Assets), "Partnership Interests" in
partnerships owning real estate (Schedule BA Assets) and "Credit Tenant Loans
and Industrial Revenue Bonds with Publicly Traded Borrowers" (Schedule D) owned
by the Company Insurance Subsidiaries as of December 31, 1995. All Real Estate
Owned, Mortgage Loans and Partnership Interests owned by Company or any Company
Subsidiaries are collectively hereinafter referred to as "Real Estate Assets."
All information concerning the Real Estate Assets in the statutory statements
of the Company Insurance Subsidiaries for the year ended December 31, 1995 is
true and complete in all material respects in the opinion of Company; all
values expressed in such statements fairly represent Company's opinion of the
value of the Real Estate Owned and Partnership Interests; and reserves taken in
respect of impairment to value of the Mortgage Loans are in the opinion of
Company adequate to fairly represent such impairment.
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(b) All Real Estate Assets comply with all regulations of
the applicable authorities of the domiciliary jurisdiction of the Company
Insurance Subsidiary owning such assets to qualify as "admitted assets"
pursuant to the laws and regulations of such domicile.
(c) To the Knowledge of Company without inspection or
inquiry other than the most recent property inspection report, each Real Estate
Owned asset and all activities upon, or use or occupancy of, such assets are in
material compliance with all applicable laws, including Environmental Laws (as
defined below). For each Real Estate Owned asset and commercial mortgage loan
originated since 1989, Company has obtained an environmental report covering
the environmental condition of the asset. As used in this Agreement, the term
"Environmental Laws" shall mean all state, federal and local laws and all rules
and regulations promulgated thereunder governing or in any way relating to the
generation, handling, manufacturing, treatment, storage, use, transportation,
spillage, leakage, dumping, release, discharge or disposal of any contaminant,
pollutant or hazardous or toxic substance, material or waste, or other
environmentally regulated material including, but not limited to, those
substances, materials and wastes listed in the United States Department of
Transportation Table (49 CRF 172.101) or by the Environmental Protection Agency
as a hazardous substance, material or waste or which is or becomes regulated
under any applicable local, state or federal law and all rules and regulations
promulgated thereunder, including, without limitation, any of the following
materials, wastes or substances: (i) petroleum and petroleum products, (ii)
asbestos in any form, (iii) polychlorinated biphenyls, (iv) urea formaldehyde,
(v) atmospheric radon at levels over four (4) picocuries per cubic liter, (vi)
those designated as a "hazardous substance" pursuant to Section 311 of the
Clean Water Act, 33 U.S.C. Section 1251 et seq. (33 U.S.C. Section 1321) or
listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section 1317),
(vii) those defined as a "hazardous substance" pursuant to Section 1004 of the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42
U.S.C. Section 6903), or (viii) those defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. (42 U.S.C.
Section 9601). Neither Company nor any Company Subsidiary has participated in
the management of any of the partnership properties or of the borrowers under
the Mortgage Loans or has participated in the management or operation of the
real property encumbered by any of the Mortgage Loans or any of the
improvements located on said real property. As used in this Section 4.19(c)
"participated in the management" shall have the meaning ascribed to such phrase
in the Asset Conservation, Lender Liability and Deposit Insurance Protection
Act of 1996 and "operation" shall have the meaning ascribed in 42 U.S.C. 6901
et. seq.
(d) Based solely on opinions from partnership counsel
obtained upon the acquisition of such partnership interests, all Schedule BA
assets are valid limited partnership interests in partnerships which are
legally formed.
(e) Company or a Company Subsidiary is owner of a fee
simple interest in all Real Estate Owned assets and such assets are free and
clear of prior monetary liens and encumbrances, except for Company Permitted
Liens and Encumbrances (as defined in Section 4.24), and except as disclosed in
the statutory statements.
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(f) Company or a Company Subsidiary is the sole named
insured on a policy of title insurance with respect to each of the Real Estate
Assets (other than Partnership Interests), and each of said title insurance
policies insures Company as the holder of a first priority mortgage in regard
to Mortgage Loans and as the fee simple owner in regard to Real Estate Owned.
(g) Company or the Company Subsidiary owning each
Mortgage Loan asset (hereinafter sometimes referred to as "Lender") has
possession of the original promissory note or notes creating such Mortgage Loan
debt and all other documents creating, evidencing or modifying the Mortgage
Loan or its terms and conditions. The lien associated with each Mortgage Loan
constitutes a first priority lien against the property purported to be
encumbered, subject to certain exceptions.
(h) To the Knowledge of Company, none of the Mortgage
Loans is cross-defaulted or cross-collateralized with a loan owned by Spinco.
4.20 DGCL Section 203. Assuming the accuracy of Merger Partner's
representations and warranties contained in Section 5.19, prior to the date
hereof Company has taken all appropriate actions so that the restrictions on
business combinations contained in DGCL Section 203 will not apply with respect
to or as a result of this Agreement, the Distribution Agreement, the Merger or
the Spin-off.
4.21 Spin-off; Merger. Neither Company nor any Company Subsidiary
has taken any action or failed to take any action which action or failure to
take action would jeopardize the Spin-off as a tax-free distribution within the
meaning of Section 355 of the Code or the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
4.22 Voting Requirements. The affirmative vote of the holders of a
majority of the shares of Company Common Stock with respect to this Agreement
and the Merger is the only vote of the holders of any class or series of
Company's capital stock necessary to approve this Agreement and the
transactions contemplated by this Agreement.
4.23 Business Operating Condition. Except as listed in Schedule
4.23 and except as otherwise would not have a Material Adverse Effect on
Company, all furniture, fixtures, machinery and equipment necessary to conduct
the businesses and operations of Company and the Company Insurance Subsidiaries
in substantially the same manner as such businesses and operations are carried
on currently by Company and the Company Insurance Subsidiaries are in the
possession of Company and in good working order and condition for the purposes
for which they are currently used.
4.24 Assets.
(a) Except as set forth in Schedule 4.24 or as otherwise
would not have a Material Adverse Effect on Company and except for Company
Permitted Liens and Encumbrances (as defined below), Company and/or the
Company Subsidiaries have good and valid title to all personal property
(including, without limitation, Company Investment Assets (as defined below))
that was carried as
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an asset on the Spin-off Adjusted Financial Statements or acquired in the
ordinary course of business since September 30, 1996, other than with respect
to those assets which have been disposed of in the ordinary course of business
or redeemed in accordance with their terms since such date or with respect to
statutory deposits which are subject to certain restrictions on transfer. As
used in this Agreement, "Company Permitted Liens and Encumbrances" means, as to
any assets or property, any (i) liens or encumbrances securing taxes,
assessments or other governmental charges which are not yet due or which are
being diligently contested in good faith by appropriate proceedings if adequate
reserves have been established in accordance with generally accepted accounting
principles or the statutory accounting principles and practices prescribed or
permitted by the insurance department of the state of domicile of a Company
Insurance Subsidiary, as appropriate, or, in the case of Mortgage Loans, funds
are held in escrow sufficient to discharge such liens or the borrower has
posted a bond in the amount of such lien, (ii) liens or encumbrances imposed by
law or incurred in the ordinary course of business with respect to the claims
of materialmen, mechanics, carriers, warehousemen, landlords and other Persons
(as defined below) which (A) are not yet due and payable and which do not
materially detract from the value of such property or assets or materially
impair the use thereof by Company and the Company Subsidiaries in the operation
of their respective businesses, or (B) are being diligently contested in good
faith and by proper proceedings if adequate reserves have been established with
respect thereto in accordance with generally accepted accounting principles or
the statutory accounting principles and practices prescribed or permitted by
the insurance department of the state of domicile of a Company Insurance
Subsidiary, as appropriate, and (iii) liens and encumbrances that would not,
individually or in the aggregate, have a Material Adverse Effect on Company.
As used in this Agreement "Company Investment Assets" means bonds, stocks,
mortgage loans or other investments that are carried on the books and records
of Company and the Company Insurance Subsidiaries. As used in this Agreement,
"Person" means any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental, judicial or regulatory body, business unit, division or other
entity.
(b) The annual statement of each Company Insurance
Subsidiary for the year ended December 31, 1995 sets forth a list, which list
is accurate and complete in all material respects, of all Company Investment
Assets owned by such Company Insurance Subsidiary as of December 31, 1995,
together with the cost basis book or amortized value, as the case may be, of
such Company Investment Assets as of December 31, 1995.
4.25 Computer Software. Company owns, or possesses valid license
rights to, all computer software programs that are material to the conduct of
the business of Company and the Company Insurance Subsidiaries taken as a
whole. Except as listed in Schedule 4.25, there are no infringement suits,
actions or proceedings pending or, to the Knowledge of Company, threatened
against Company or any Company Insurance Subsidiary with respect to any
software owned or licensed by Company or any Company Subsidiary, which, if
determined adversely, would have, either individually or in the aggregate, a
Material Adverse Effect on Company.
4.26 Intellectual Property. Company owns, or possesses valid
license rights to, all intellectual property that is material to the conduct of
the business of Company and the Company Insurance Subsidiaries taken as a
whole. Except as listed in Schedule 4.26, Company has not
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received any notice of any conflict with or violation or infringement of, any
asserted rights of any other Person with respect to any such intellectual
property owned or licensed by Company or any Company Insurance Subsidiary,
which, if determined adversely, would have, either individually or in the
aggregate, a Material Adverse Effect on Company.
4.27 Permits, Licenses and Franchises. Schedule 4.27 lists (i) all
jurisdictions in which each Company Insurance Subsidiary is licensed to
transact the business of insurance and (ii) the lines of business which each
Company Insurance Subsidiary is authorized to transact in each such
jurisdiction. Except as listed in Schedule 4.27, to the Knowledge of Company,
except as otherwise would not have a material adverse effect on the financial
condition, business or results of operation of any Company Business Unit taken
as a whole, neither Company nor any Company Insurance Subsidiary has engaged in
any activity which would cause revocation or suspension of any license to
transact the business of insurance and no action or proceeding looking to or
contemplating the revocation or suspension of any license to transact the
business of insurance is pending or threatened.
4.28 Insurance Business. Except as listed in Schedule 4.28 and
except as otherwise would not have a Material Adverse Effect on Company, all
policies, binders, slips, certificates, annuity contracts and participation
agreements and other agreements of insurance, whether individual or group, in
effect as of the date hereof (including all supplements, endorsements, riders
and ancillary agreements in connection therewith) that are issued by the
Company Insurance Subsidiaries (the "Company Insurance Contracts"), are, to the
extent required under applicable law, on forms approved by applicable insurance
regulatory authorities or which have been filed and not objected to by such
authorities within the period provided for objection, and such forms comply in
all material respects with the insurance statutes, regulations and rules
applicable thereto. Premium rates established by the Company Insurance
Subsidiaries that are required to be filed with or approved by insurance
regulatory authorities have been so filed or approved, the premiums charged
conform thereto in all material respects, and such premiums comply in all
material respects with the insurance statutes, regulations and rules applicable
thereto, except where the failure to be so filed or approved, or to so conform
or comply, would not, individually or in the aggregate, have a Material Adverse
Effect on Company.
4.29 Threats of Cancellation. Except as disclosed in Schedule 4.29
and except for terminations at maturity or in the ordinary course of business,
since January 1, 1996 and through the date hereof, no individual policyholder
(or individual party to a joinder agreement) which accounted for $5 million or
more in premium income and policyholder deposits for the year ended December
31, 1995 has terminated or, to the Knowledge of Company, has given written
notice of termination of, its relationship with any Company Insurance
Subsidiary.
4.30 Liabilities and Reserves.
(a) The reserves carried on the books of each Company
Insurance Subsidiary for the year ended December 31, 1995 for future insurance
policy benefits, losses, claims and similar purposes are in compliance in all
material respects with the requirements for reserves established by the
insurance departments of the state of domicile of such Company Insurance
Subsidiary, were
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determined in all material respects in accordance with generally accepted
actuarial standards consistently applied, and are fairly stated in all material
respects in accordance with sound actuarial principles. Company has delivered
to Merger Partner true, correct and complete copies of the actuarial valuation
reports delivered to the insurance department of the domiciliary state of each
Company Insurance Subsidiary for the years ended December 31, 1995 and 1994.
(b) Company has delivered to Merger Partner true,
complete and correct copies of all analyses, reports and other data prepared or
submitted by any Company Insurance Subsidiary to insurance regulatory
authorities relating to risk based capital calculations for the years ended
December 31, 1995 and 1994.
(c) Except for regular periodic assessments in the
ordinary course of business or except as set forth in Schedule 4.30(c), no
claim or assessment is pending nor, to the Knowledge of Company, threatened
against any Company Insurance Subsidiary by any state insurance guaranty
association in connection with such association's fund relating to insolvent
insurers which if determined adversely, would have, either individually or in
the aggregate, a Material Adverse Effect on Company.
4.31 Separate Accounts.
(a) Each separate account maintained by a Company
Insurance Subsidiary is listed in Schedule 4.31 (collectively, the "Company
Separate Accounts"). Except as otherwise would not, individually or in the
aggregate, have a Material Adverse Effect on Company, each Company Separate
Account is duly and validly established and maintained under the laws of its
state of formation and is either excluded from the definition of an investment
company pursuant to Section 3(c)(11) of the Investment Company Act of 1940 (the
"1940 Act") or is duly registered as an investment company under the 1940 Act.
Except as otherwise would not, individually or in the aggregate, have a
Material Adverse Effect on Company, each such Company Separate Account, if
registered, is operated in compliance with the 1940 Act, has filed all reports
and amendments of its registration statement required to be filed, and has been
granted all exemptive relief necessary for its operations as presently
conducted. Except as otherwise would not, individually or in the aggregate,
have a Material Adverse Effect on Company, the Company Insurance Contracts
under which Company Separate Account assets are held are duly and validly
issued and are either exempt from registration under the Securities Act
pursuant to Section 3(a)(2) of the Securities Act or were sold pursuant to an
effective registration statement under the Securities Act, and any such
registration statement is currently in effect to the extent necessary to allow
the appropriate Company Insurance Subsidiary to receive contributions under
such policies.
(b) Except as otherwise would not, individually or in the
aggregate, have a Material Adverse Effect on Company, to the extent required,
the assets of each Company Separate Account are adequately diversified within
the meaning of Section 817(h) of the Code.
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4.32 Funds.
(a) Each of the mutual funds presently intended to be
sponsored by a Company Insurance Subsidiary is listed on Schedule 4.32 (the
"Funds"). Except as listed on Schedule 4.32 and except as otherwise would not
have a Material Adverse Effect on Company, (i) each Fund will be duly
registered with the SEC as an open-end management investment company under the
1940 Act, (ii) each Fund will be in material compliance with the 1940 Act and
the SEC regulations promulgated thereunder, including the requirements to file
semi-annual or annual reports on N-SAR with the SEC, (iii) all shares of the
Funds will be duly registered under the Securities Act and any applicable state
securities laws, and (iv) each of the Funds will be duly incorporated and in
good standing under the laws of the state of its incorporation or will be a
validly existing business trust under the laws of the jurisdiction in which it
was formed.
(b) Except as otherwise would not have a Material Adverse
Effect on Company, Providian Investment Advisors, Inc. (the "Manager") is duly
registered under the Investment Advisers Act of 1940.
4.33 Insurance. The insurance maintained by Company and the
Company Subsidiaries insures against risks and liabilities to the extent and in
the manner reasonably deemed appropriate and sufficient by Company or such
Company Subsidiary, and the coverage provided thereunder will not be materially
and adversely affected by the Merger. Schedule 4.33 sets forth a list of the
insurance policies held by Company relating to directors' and officers'
liability insurance.
4.34 Solvency of Spinco. After giving effect to the Spin-off,
Spinco will not be insolvent and will not be rendered insolvent by the
transactions contemplated by this Agreement or the Distribution Agreement.
4.35 Investigation by Company. Company has conducted its own
independent review and analysis of the businesses, assets, condition,
operations and prospects of Merger Partner and the Merger Partner Subsidiaries
and acknowledges that Company has been provided access to the properties,
premises and records of Merger Partner and the Merger Partner Subsidiaries for
this purpose. In entering into this Agreement, Company has relied solely upon
its own investigation and analysis and the representations and warranties
contained herein, and Company:
(a) acknowledges that none of Merger Partner, the Merger
Partner Subsidiaries or any of their respective directors, officers, employees,
affiliates, agents or representatives makes any representation or warranty,
either express or implied, as to the accuracy or completeness of any of the
information provided or made available to Company or their agents or
representatives prior to the execution of this Agreement; and
(b) agrees, to the fullest extent permitted by law, that
none of Merger Partner, the Merger Partner Subsidiaries or any of their
respective directors, officers, employees, affiliates, agents or
representatives shall have any liability or responsibility whatsoever to
Company on any basis (including, without limitation, in contract or tort, under
federal or state securities laws or otherwise)
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based upon any information provided or made available, or statements made, to
Company prior to the execution of this Agreement,
except that the foregoing shall not apply (i) to the extent Merger Partner
makes the specific representations and warranties set forth in Article 5 of
this Agreement and in the Disclosure Schedules, but always subject to the
limitations and restrictions contained in this Agreement and in such Disclosure
Schedules, or (ii) to the extent Merger Partner, the Merger Partner
Subsidiaries or any of their respective directors, officers, employees,
affiliates, agents or representatives commits fraud with respect to the
information that it provides or makes available to the Company.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
MERGER PARTNER AND SUB
Each of Merger Partner and Sub hereby represents and warrants to
Company as follows (the words "to the Knowledge of Merger Partner" or "to
Merger Partner's Knowledge" and any words of similar import shall mean that any
one of the persons listed in Exhibit C has actual knowledge of the matter):
5.1 Organization, Good Standing and Power. Merger Partner is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Merger Partner is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties make such
qualification or licensing necessary, except where the failure to be so
qualified or licensed or to be in good standing would not, individually or in
the aggregate, have a Material Adverse Effect on Merger Partner (as defined
below). Merger Partner has delivered to Company complete and correct copies of
its articles or certificate of incorporation, bylaws or other organizational
documents and all amendments thereto to the date hereof. As used in this
Agreement, the phrase "Material Adverse Effect on Merger Partner" means a
material adverse effect on (a) the financial condition, business or results of
operations of Merger Partner and the Merger Partner Subsidiaries on a
consolidated basis or (b) the ability of Merger Partner or Sub to consummate
the transactions contemplated by this Agreement.
5.2 Capitalization. The authorized capital stock of Merger
Partner consists of 525,000,000 shares of Common Stock, par value of one Dutch
Guilder per share, of which as of November 30, 1996, 265,176,630 shares were
issued and outstanding, 350,000,000 shares of Preferred Stock, par value one
Dutch Guilder per share ("Merger Partner Preferred Stock"), of which as of the
date hereof 80,000,000 shares are issued and outstanding and 125,000,000 shares
of Preferred Stock convertible into Merger Partner Common Stock, par value one
Dutch Guilder per share, none of which is issued or outstanding. All
outstanding shares of Merger Partner Common Stock are, and all shares which may
be issued prior to the Effective Date pursuant to any outstanding
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stock options issued by Merger Partner will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. All of the shares of Merger Partner Common Stock to be issued in
exchange for Company Common Stock at the Effective Time in accordance with this
Agreement will be, when so issued, duly authorized, validly issued, fully paid
and nonassessable and free of preemptive rights. Except as set forth above, as
of November 30, there were no shares of capital stock or other equity
securities of Merger Partner outstanding, and, except as set forth in Schedule
5.2, there are no outstanding options, warrants or rights to purchase or
acquire from Merger Partner any capital stock of Merger Partner, there are no
existing registration covenants with Merger Partner with respect to outstanding
shares of Merger Partner Common Stock, and there are no convertible securities
or other contracts, commitments, agreements, understandings, arrangements or
restrictions by which Merger Partner is bound to issue any additional shares of
its capital stock or other securities.
5.3 Merger Partner Subsidiaries; Voting Trusts. Schedule 5.3 sets
forth a correct and complete list of each corporation, association, subsidiary
or other entity of which Merger Partner owns or controls, directly or
indirectly, more than 20% of the outstanding equity securities and which is
material to the operations of Merger Partner and its subsidiaries, taken as a
whole (such entities are hereinafter referred to as "Merger Partner Entities").
Any Merger Partner Entity of which Merger Partner owns or controls, directly or
indirectly, more than 50% of the outstanding equity securities is hereinafter
referred to individually as a "Merger Partner Subsidiary" and such entities are
referred to collectively as the "Merger Partner Subsidiaries." Except as
disclosed in Schedule 5.3, Merger Partner owns, directly or indirectly, the
securities of each Merger Partner Entity held by Merger Partner, free and clear
of all liens, charges, pledges, security interests or other encumbrances. All
of the capital stock of each Merger Partner Subsidiary has been duly
authorized, and is validly issued, fully paid and nonassessable. Except as
disclosed in Schedule 5.3, there are no outstanding options or rights to
subscribe to, or any contracts or commitments to issue or sell any shares of
the capital stock or any securities or obligations convertible into or
exchangeable for, or giving any person any right to acquire, any shares of the
capital stock of any Merger Partner Entity to which Merger Partner or any
Merger Partner Subsidiary is a party. Except as disclosed in Schedule 5.3,
there are no voting trusts or other agreements or understandings with respect
to the voting of capital stock of Merger Partner or any Merger Partner
Subsidiary to which Merger Partner or any Merger Partner Subsidiary is a party.
Each Merger Partner Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has the corporate power and authority necessary for it to
own or lease its properties and assets and to carry on its business as it is
now being conducted, except where the failure to be so organized, existing or
in good standing or to have such power and authority would not, individually or
in the aggregate, have a Material Adverse Effect on Merger Partner. Each
Merger Partner Subsidiary is duly qualified or licensed to do business and is
in good standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed or
to be in good standing would not, individually or in the aggregate, have a
Material Adverse Effect on Merger Partner.
5.4 Authority; Enforceability. Each of Merger Partner and Sub has
the corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby,
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subject to the approval of this Agreement by insurance regulatory authorities
and banking regulatory authorities and subject to compliance with the
provisions of the HSR Act. Subject to such approvals and compliance, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of each of Merger Partner and Sub (including all
necessary approvals on the part of Vereniging AEGON (the "Association")), and
this Agreement has been duly executed and delivered by Merger Partner and Sub
and constitutes the valid and binding obligation of each such party,
enforceable against it in accordance with its terms, (i) except as may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
or relating to enforcement of creditors' rights generally and (ii) subject to
general principles of equity.
5.5 Non-Contravention; Consents.
(a) Except as set forth in Schedule 5.5, neither the
execution, delivery and performance by Merger Partner or Sub of this Agreement,
nor the consummation by Merger Partner or Sub of the transactions contemplated
hereby, nor compliance by Merger Partner or Sub with any of the provisions
hereof, will:
(i) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or result
in a right of termination or acceleration, or the creation of any
lien, security interest, charge or encumbrance upon any of the
properties or assets of Merger Partner or Sub, under any of the terms,
conditions or provisions of, (x) its respective organizational
documents, or (y) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which
Merger Partner or any of the Merger Partner Subsidiaries is a party,
or by which Merger Partner or any of the Merger Partner Subsidiaries
may be bound, or to which Merger Partner or any of the Merger Partner
Subsidiaries or the properties or assets of any of them may be
subject, and that would, in any such event, specified in this clause
(y) have, individually or in the aggregate, a Material Adverse Effect
on Merger Partner; or
(ii) subject to compliance with the statutes and
regulations referred to in Section 5.5, violate any valid and
enforceable judgment, ruling, order, writ, injunction, decree, or any
statute, rule or regulation applicable to Merger Partner or any of the
Merger Partner Subsidiaries or any of their respective properties or
assets where such violation would, individually or in the aggregate,
have a Material Adverse Effect on Merger Partner.
(b) Except as set forth in Schedule 5.5 and other than
notices, filings, authorizations, exemptions, consents or approvals, the
failure of which to give or obtain would not, individually or in the aggregate,
have a Material Adverse Effect on Merger Partner, no notice to, filing with,
authorization of, exemption by, or consent or approval of, any governmental
authority or other regulatory body is necessary for the consummation by Merger
Partner or Sub of the transactions contemplated by this Agreement.
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5.6 SEC Reports; Merger Partner Financial Statements.
(a) Since January 1, 1995, Merger Partner has timely
filed all reports, registration statements, proxy statements or information
statements and all other documents, together with any amendments required to be
made thereto, required to be filed with the SEC under the Securities Act or the
Exchange Act (collectively, the "Merger Partner Reports"). Merger Partner has
heretofore made available to Company true copies of all the Merger Partner
Reports, together with all exhibits thereto, that Company has requested.
Included in such Merger Partner Reports are (i) audited consolidated balance
sheets of Merger Partner and its subsidiaries at December 31, 1994 and 1995 and
the related consolidated statements of income, stockholders' equity and cash
flows for the years then ended, and the notes thereto and (ii) the unaudited
balance sheets of Merger Partner and its subsidiaries at March 31, 1996, June
30, 1996 and September 30, 1996 and the related unaudited statements of income,
stockholders' equity and cash flows for the periods then ended and the notes
thereto, each consolidated to the extent indicated therein.
(b) All of the financial statements included in the
Merger Partner Reports (which are collectively referred to herein as the
"Merger Partner Consolidated Financial Statements") fairly presented in all
material respects the consolidated financial position of Merger Partner and its
subsidiaries as at the dates mentioned and the consolidated results of
operations, changes in stockholders' equity and cash flows for the periods then
ended in conformity with Dutch accounting principles with a reconciliation on
an annual basis to United States generally accepted accounting principles
applied on a consistent basis (subject to any exceptions as to consistency
specified therein or as may be indicated in the notes thereto or in the case of
the unaudited statements, as may be permitted by Form 6-K of the SEC and
subject, in the case of unaudited statements, to normal, recurring audit
adjustments). As of their respective dates, the Merger Partner Reports
complied in all material respects with all applicable rules and regulations
promulgated by the SEC and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except as set forth
in the Merger Partner Reports, neither Merger Partner nor any Merger Partner
Subsidiary has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by Dutch accounting principles to
be set forth on a consolidated balance sheet of Merger Partner and its
consolidated subsidiaries or in the notes thereto, other than liabilities or
obligations which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Merger Partner.
5.7 Statutory Statements. Merger Partner has previously furnished
to Company the annual statements (or equivalent statements) of each Merger
Partner Insurance Subsidiary (as defined below) that is engaged in the business
of insurance in the United States, the United Kingdom and The Netherlands for
the years ended December 31, 1994 and December 31, 1995, which have been filed
with the insurance regulatory authority of the jurisdiction of organization of
such Merger Partner Insurance Subsidiary, and statutory statements, where
required, for each such Merger Partner Insurance Subsidiary for the periods
ended March 31, 1996, June 30, 1996 and September 30, 1996, and Merger Partner
shall promptly furnish to Company all statutory statements for any calendar
years
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or quarters ending thereafter but prior to the Effective Time. As used herein,
the term "Merger Partner Insurance Subsidiary" means each Merger Partner
Subsidiary that is engaged in the business of insurance. Except as set forth
in Schedule 5.7, such statutory statements (or equivalent statements) present
or will present fairly in all material respects the admitted assets,
liabilities and surplus of each Merger Partner Insurance Subsidiary at the end
of each of the periods then ended, and the results of its operations and
changes in its surplus for each of the periods then ended in conformity with
accounting practices prescribed or permitted by the insurance regulatory
authority of the jurisdiction of organization of such Merger Partner Insurance
Subsidiary, applied on a consistent basis as and to the extent described in
such statutory statements (or equivalent statements).
5.8 Absence of Certain Changes or Events. Except as disclosed in
Schedule 5.8 and the Merger Partner Reports and except for the transactions
contemplated by this Agreement or the Distribution Agreement, since December
31, 1995, Merger Partner and the Merger Partner Subsidiaries have conducted
their business in all material respects only in the ordinary course, and there
has not been (i) any change in the business, financial condition or results of
operations of Merger Partner and the Merger Partner Subsidiaries which has had
a Material Adverse Effect on Merger Partner, (ii) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to any of Merger Partner's outstanding capital stock,
except regular cash and stock dividends with respect to its capital stock, or
(iii) any split, combination or reclassification of any of Merger Partner's
outstanding capital stock or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in substitution for shares
of Merger Partner's outstanding capital stock. Notwithstanding the foregoing,
the representation contained in this Section 5.8 shall not apply to any change
or development, or combination of changes or developments, to the extent such
changes and developments are the result of adverse changes in general economic
conditions, stock market fluctuations or conditions or adverse changes in or
affecting the insurance industry generally.
5.9 Taxes and Tax Returns. Except as disclosed in Schedule 5.9:
(a) Merger Partner and the Merger Partner Subsidiaries
have (i) duly filed (or there has been filed on their behalf) with appropriate
governmental authorities all tax returns required to be filed by them, on or
prior to the date thereof, except to the extent that any failure to file would
not, individually or in the aggregate, have a Material Adverse Effect on Merger
Partner, and (ii) duly paid in full or made provisions in accordance with Dutch
generally accepted accounting principles (or there has been paid or provision
has been made on their behalf) for the payment of all material taxes for all
periods ending through the date hereof, except to the extent that any failure
to pay or make provision for the payment of such taxes would not, individually
or in the aggregate, have a Material Adverse Effect on Merger Partner;
(b) no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any taxes or tax returns of Merger Partner or the Merger Partner
Subsidiaries wherein an adverse determination or ruling in any one such
proceeding or in all such proceedings in the aggregate would have a Material
Adverse Effect on Merger Partner;
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(c) the United States federal income tax returns of each
Merger Partner Subsidiary have been examined by the IRS (or the applicable
statutes of limitation for the assessment of federal income taxes for such
periods have expired) for all periods through and including December 31, 1987.
No deficiencies have been asserted as a result of such examinations (or as a
result of examinations by any non-United States taxing authorities) that have
not been resolved and fully paid which would have, individually or in the
aggregate, a Material Adverse Effect on Merger Partner. Neither Merger Partner
nor any Merger Partner Subsidiary has granted any requests, agreements,
consents or waivers to extend the statutory period of limitations applicable to
the assessment of any taxes with respect to any tax returns of such Merger
Partner Subsidiary; and
(d) all annuity contracts and life insurance policies
issued by a Merger Partner Insurance Subsidiary in the United States meet all
definitional or other requirements for qualification under the Code applicable
(or intended to be applicable) to such annuity contracts or life insurance
policies, including, without limitation, the following: (A) any life insurance
policies that meet the requirements of Sections 101(f) or 7702 of the Code, as
applicable; (B) any annuity contracts that are intended to qualify as "annuity
contracts" (excluding contracts that are described in Section 72(s) of the
Code) meet the requirements of Section 72(s) of the Code; (C) any annuity
contracts that are intended to qualify under Sections 130, 403(a), 403(b) or
408(b) of the Code contain all provisions required for qualification under such
sections of the Code; and (D) any annuity contracts that are marketed as, or in
connection with, plans that are intended to qualify under Sections 401, 403,
408 or 457 of the Code comply with the requirements of such sections; except in
the case of any of the foregoing to the extent that any failure to so meet such
requirements has not and would not, individually or in the aggregate, have a
material adverse effect on the financial condition, business or results of
operations of the United States operations of Merger Partner.
5.10 Litigation. Except as disclosed in Schedule 5.10 or in the
Merger Partner Reports, neither Merger Partner nor any Merger Partner
Subsidiary is a party to any pending or, to the Knowledge of Merger Partner,
threatened, claim, action, suit, investigation or proceeding which would
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect on Merger Partner. Except as disclosed in Schedule
5.10, at the date of this Agreement, neither Merger Partner nor any Merger
Partner Insurance Subsidiary has received actual notice of any proceeding,
claim or investigation pending or threatened against Merger Partner or any
Merger Partner Insurance Subsidiary before any insurance department or agency
which would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on Merger Partner. Except as disclosed in
Schedule 5.10, at the date of this Agreement there is no outstanding order,
writ, judgment, stipulation, injunction, decree, determination, award or other
decision against Merger Partner or any Merger Partner Subsidiary which, either
individually or in the aggregate, has had or would have a Material Adverse
Effect on Merger Partner.
5.11 Contracts and Commitments. Except as set forth in Schedule
5.11, neither Merger Partner nor any Merger Partner Subsidiary has received
notice from any person alleging that Merger Partner or any Merger Partner
Subsidiary is in default under any contracts, agreements, leases, commitments,
assignments in other interests which are material to Merger Partner and the
Merger
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Partner Subsidiaries as a whole as to which it is reasonably foreseeable that
an adverse determination would result, individually or in the aggregate, in a
Material Adverse Effect on Merger Partner.
5.12 Registration Statement, Etc. None of the information supplied
or to be supplied by Merger Partner for inclusion or incorporation by reference
in (a) the Registration Statement, (b) the Proxy Statement and (c) any other
documents to be filed with the SEC in connection with the transactions
contemplated hereby (including the Registration Statement on Form 10 or, if
applicable, Form S-1, to be filed in connection with the Spin-off) will, at the
respective times such documents are filed, and, in the case of the Registration
Statement, when it becomes effective, cause the Registration Statement to
contain any untrue statement of a material fact, or omit to state any material
fact necessary in order to make the statements therein not misleading, or, in
the case of the Proxy Statement, when first mailed to the stockholders of
Company, or in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Stockholders' Meeting, cause the Proxy
Statement or any amendment thereof or supplement thereto to contain any untrue
statement of a material fact, or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. All documents that Merger Partner is
responsible for filing with the SEC and any other regulatory agency in
connection with the Merger will comply as to form in all material respects with
the provisions of applicable law, except that no representation is made by
Merger Partner with respect to statements made therein based on information
supplied by Company or with respect to information concerning Company or Sub
which is incorporated by reference in the Registration Statement or the Proxy
Statement.
5.13 Employee Benefit Plans.
(a) Schedule 5.13 contains a list of each material plan,
program, arrangement, practice or contract which is maintained by Merger
Partner or any Merger Partner Subsidiary or to which Merger Partner or any
Merger Partner Subsidiary is obligated to make contributions and which provides
benefits or compensation to or on behalf of persons employed in the United
States, including but not limited to executive arrangements (for example, any
bonus, incentive compensation, stock option, deferred compensation, commission,
severance, golden parachute or other executive compensation plans, programs,
contracts or arrangements) and "employee benefit plans" as defined in Section
3(1) of ERISA. All such plans, programs, arrangements, practices or contracts
are referred to herein as "Merger Partner Employee Plans." Merger Partner has
made available to Company the plan documents or other writing constituting each
Merger Partner Employee Plan and, if applicable, the trust, insurance contract
or other funding arrangement, the ERISA summary plan description and the most
recent Forms 5500 and annual reports for each such plan. Merger Partner has
identified those Merger Partner Employee Plans which Merger Partner intends to
satisfy the requirements of Section 401 of the Code and has made available to
Company accurate copies of the most recent favorable determination letters for
such plans.
(b) With respect to each Merger Partner Employee Plan
that is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of
the Code: (i) there does not exist any accumulated funding deficiency within
the meaning of Section 412 of the Code or Section 302 of
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ERISA, whether or not waived; (ii) no reportable event within the meaning of
Section 4043(c) of ERISA with respect to which the 30-day notice period has not
been waived has occurred; and (iii) all premiums required to be paid to the
Pension Benefit Guaranty Corporation have been timely paid in full. There does
not now exist, nor do any circumstances exist that could result in, any Merger
Partner Controlled Group Liability (as defined below) that would be a liability
of Merger Partner or any Merger Partner Subsidiary following the Effective
Time. "Merger Partner Controlled Group Liability" means any and all
liabilities under (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii)
Sections 412 and 4971 of the Code and (iv) the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the Code,
other than such liabilities that arise solely out of, or relate to, the Merger
Partner Employee Plans.
(c) Neither Merger Partner nor any Merger Partner
Subsidiary is, or has been, a participant in a multi-employer plan (within the
meaning of ERISA Section 3(37)). Except as set forth in Schedule 5.13, neither
Merger Partner nor any Merger Partner Subsidiary maintains or has at any time
maintained a Merger Partner Employee Plan which is subject to Title IV of
ERISA. Except as set forth in Schedule 5.13, neither Merger Partner nor any
Merger Partner Subsidiary is obligated to provide post employment or retirement
medical benefits or any other unfunded welfare benefits to or on behalf of any
person who is no longer an employee of Merger Partner or any Merger Partner
Subsidiary, except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA.
(d) Except as set forth in Schedule 5.13, (i) each Merger
Partner Employee Plan has at all times been maintained, by its terms and in
operation, in accordance with all applicable laws, and (ii) each of those
Merger Partner Employee Plans which are intended to be qualified under Section
401 of the Code has at all times been maintained, by its terms and in
operation, in accordance with Section 401 of the Code, except where a failure
to be so maintained would not have a Material Adverse Effect on Merger Partner.
Except as set forth in Schedule 5.13, as of December 31, 1995, neither Merger
Partner nor any of the Merger Partner Subsidiaries had any liability under any
Merger Partner Employee Plan that was not reflected in the Merger Partner
audited consolidated balance sheet at December 31, 1995 or disclosed in the
notes thereto, other than liabilities which individually or in the aggregate
would not have a Material Adverse Effect on Merger Partner.
(e) Except as set forth in Schedule 5.13, to the
Knowledge of Merger Partner, no prohibited transaction has occurred with
respect to any Merger Partner Employee Plan maintained by Merger Partner or any
of the Merger Partner Subsidiaries that would result, directly or indirectly,
in the imposition of an excise tax or other liability under the Code or ERISA,
except for such a tax or other liability that would not have a Material Adverse
Effect on Merger Partner.
(f) Except as set forth in Schedule 5.13, all
contributions or premium payments with respect to the Merger Partner Employee
Plans due for any period ending on or before the Effective Time have been or
will be timely paid by Merger Partner. Except as set forth in Schedule 5.13,
the execution of or performance of the transactions contemplated by this
Agreement will not create, accelerate or increase any obligations under the
Merger Partner Employee Plans which would have a Material Adverse Effect on
Merger Partner.
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5.14 Collective Bargaining; Labor Disputes; Compliance. The only
collective bargaining agreements to which Merger Partner or any of the Merger
Partner Subsidiaries is a party with respect to persons employed in the United
States are set forth in Schedule 5.14 (the "Merger Partner Collective
Bargaining Agreements"). Except as set forth in Schedule 5.14, to the
Knowledge of Merger Partner, the employees of Merger Partner and the Merger
Partner Subsidiaries employed in the United States are not represented by any
unions other than the unions which are parties to the Merger Partner Collective
Bargaining Agreements. Except as set forth in Schedule 5.14, neither Merger
Partner nor any of the Merger Partner Subsidiaries is currently, nor has been
during the past three years, the subject of any certification or
decertification organization drive with respect to persons employed in the
United States. Neither Merger Partner nor any of the Merger Partner
Subsidiaries is currently, nor has been during the past three years, the
subject of any strike by persons employed in the United States relating to the
Merger Partner or any of the Merger Partner Subsidiaries nor, to the Knowledge
of Merger Partner, is any such activity threatened. Merger Partner and each
Merger Partner Subsidiary have complied in all material respects with all laws
relating to the employment and safety of labor, including provisions relating
to wages, hours, benefits, collective bargaining and all applicable
occupational safety and health acts, laws and regulations except, in each case,
where the failure to be in compliance would not have, individually or in the
aggregate, a Material Adverse Effect on Merger Partner.
5.15 Brokers and Finders. Neither Merger Partner nor any of the
Merger Partner Subsidiaries, nor any of their respective officers, directors or
employees, has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions, or finder's fees, and no
broker or finder has acted directly or indirectly for Merger Partner or any of
the Merger Partner Subsidiaries, in connection with this Agreement or any of
the transactions contemplated hereby, except that Merger Partner has retained
UBS Securities LLP as its financial advisor, whose fees and expenses will be
paid by Merger Partner.
5.16 No Violation of Law.
(a) The business and operations of the Merger Partner
Insurance Subsidiaries have been conducted in compliance with all applicable
Insurance Laws, except where the failure to so conduct such business and
operations would not individually or in the aggregate have a Material Adverse
Effect on Merger Partner. Notwithstanding the generality of the foregoing,
except where the failure to do so would not have, individually or in the
aggregate, a Material Adverse Effect on Merger Partner and except as set forth
in Schedule 5.16, each Merger Partner Insurance Subsidiary and its agents have
marketed, sold and issued insurance products in compliance, in all material
respects, with all statutes, laws, ordinances, rules, orders and regulations
applicable to the business of such Merger Partner Insurance Subsidiary and in
the respective jurisdictions in which such products have been sold, including,
without limitation, in compliance with (i) all applicable prohibitions against
"redlining," (ii) all applicable requirements relating to the disclosure of the
nature of insurance products as policies of insurance and (iii) all applicable
requirements relating to insurance product projections. In addition, except as
set forth in Schedule 5.16, (i) there is no pending or, to the Knowledge of
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Merger Partner, threatened charge by any insurance regulatory authority that
any of the Merger Partner Insurance Subsidiaries has violated, nor any pending
or, to the Knowledge of Merger Partner, threatened investigation by any
insurance regulatory authority with respect to possible violations of, any
applicable Insurance Laws where such violations would have individually or in
the aggregate a Material Adverse Effect on Merger Partner; (ii) none of the
Merger Partner Insurance Subsidiaries is subject to any order or decree of any
insurance regulatory authority relating specifically to such Merger Partner
Insurance Subsidiary (as opposed to insurance companies generally) which would
have individually or in the aggregate a Material Adverse Effect on Merger
Partner; and (iii) the Merger Partner Insurance Subsidiaries have filed all
reports required to be filed with any insurance regulatory authority on or
before the date hereof as to which the failure to file such reports would have
individually or in the aggregate a Material Adverse Effect on Merger Partner.
(b) In addition to Insurance Laws, the business and
operations of Merger Partner and the Merger Partner Subsidiaries have been
conducted in compliance with all other applicable laws, ordinances, regulations
and orders of all governmental entities and other regulatory bodies (including,
without limitation, laws, ordinances, regulations and orders relating to
zoning, environmental matters and the safety and health of employees), except
where such noncompliance, individually or in the aggregate, would not have a
Material Adverse Effect on Merger Partner. Except as set forth in Schedule
5.16, in addition to Insurance Laws, (i) neither Merger Partner nor any Merger
Partner Subsidiary has been charged with or, to the Knowledge of Merger
Partner, is now under investigation with respect to, a violation of any
applicable law, regulation, ordinance, order or other requirement of a
governmental entity or other regulatory body, which violations or penalties
would have, individually or in the aggregate, a Material Adverse Effect on
Merger Partner, (ii) neither Merger Partner nor any Merger Partner Subsidiary
is a party to or bound by any order, judgment, decree or award of a
governmental entity or other regulatory body which has or will have,
individually or in the aggregate, a Material Adverse Effect on Merger Partner;
and (iii) Merger Partner and the Merger Partner Subsidiaries have filed all
reports required to be filed with any governmental entity or other regulatory
body on or before the date hereof as to which the failure to file such reports
would result, individually or in the aggregate, in a Material Adverse Effect on
Merger Partner. Merger Partner and the Merger Partner Subsidiaries have all
permits, certificates, licenses, approvals and other authorizations required in
connection with the operation of the business of Merger Partner and the Merger
Partner Subsidiaries, except for permits, certificates, licenses, approvals and
other authorizations the failure of which to have would not have, individually
or in the aggregate, a Material Adverse Effect on Merger Partner and except for
such permits, certificates, licenses, approvals and other authorizations
required to be obtained in connection with the consummation of the transactions
contemplated hereby.
5.17 Indebtedness for Borrowed Money. Merger Partner has made
available to Company the instruments or other documents relating to all
indebtedness of Merger Partner or any Merger Partner Subsidiary for borrowed
money the principal balance of which is $250 million or more, whether such
indebtedness is direct or indirect, primary or secondary, by guarantee or
otherwise.
5.18 Environmental Liabilities. To the Knowledge of Merger
Partner, except as disclosed in Schedule 5.18, as of the date hereof, neither
Merger Partner nor any Merger Partner Subsidiary
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has any liability or obligation of any kind arising out of any law or
regulation relating to environmental protection, including obligations relating
to removal, remediation, clean up or improvement of any property owned by
Merger Partner or any Merger Partner Subsidiaries, which individually or in the
aggregate would have a Material Adverse Effect on Merger Partner.
5.19 Merger Partner Ownership of Company Common Stock. Merger
Partner does not "own" and has not within the past three years "owned" (as such
terms are defined in Section 203 of the DGCL), and does not "beneficially own"
(as such term is defined in the Company Rights Agreement) three percent (3%) or
more of the outstanding shares of Company Common Stock. Merger Partner agrees
to vote or cause to be voted any shares of Company Common Stock owned by it or
the Merger Partner Subsidiaries in favor of the Spin-off and the Merger.
5.20 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
5.21 Spin-off; Merger. Neither Merger Partner nor any Merger
Partner Subsidiary has taken any action or failed to take any action which
action or failure to take action would jeopardize the Spin-off as a tax-free
distribution within the meaning of Section 355 of the Code or the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
5.22 Business Operating Condition. Except as otherwise would not
have a Material Adverse Effect on Merger Partner, all furniture, fixtures,
machinery and equipment necessary to conduct the businesses and operations of
Merger Partner and the Merger Partner Insurance Subsidiaries in substantially
the same manner as such businesses and operations are carried on currently by
Merger Partner and the Merger Partner Insurance Subsidiaries are in the
possession of Merger Partner and in good working order and condition for the
purposes for which they are currently used.
5.23 Assets. Except as otherwise would not have a Material Adverse
Effect on Merger Partner and except for Merger Partner Permitted Liens and
Encumbrances (as defined below), Merger Partner and/or the Merger Partner
Subsidiaries have good and valid title to all personal property (including,
without limitation, Merger Partner Investment Assets (as defined below)) that
was carried as an asset on the Merger Partner Consolidated Financial Statements
or acquired in the ordinary course of business since September 30, 1996, other
than with respect to those assets which have been disposed of in the ordinary
course of business or redeemed in accordance with their terms since such date
or with respect to statutory deposits which are subject to certain restrictions
on transfer. As used in this Agreement, "Merger Partner Permitted Liens and
Encumbrances" means, as to any assets or property, any (i) liens or
encumbrances securing taxes, assessments or other governmental charges which
are not yet due or which are being diligently contested in good faith by
appropriate proceedings if adequate reserves have been established in
accordance with generally accepted accounting principles or the statutory
accounting principles and practices prescribed or permitted by the insurance
department of the state of domicile of a Merger Partner Insurance Subsidiary,
as appropriate, or, in the case of mortgage loans, funds are held in escrow
sufficient to
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discharge such liens or the borrower has posted a bond in the amount of such
lien, (ii) liens or encumbrances imposed by law or incurred in the ordinary
course of business with respect to the claims of materialmen, mechanics,
carriers, warehousemen, landlords and other Persons which (A) are not yet due
and payable and which do not materially detract from the value of such property
or assets or materially impair the use thereof by Merger Partner and the Merger
Partner Subsidiaries in the operation of their respective businesses, or (B)
are being diligently contested in good faith and by proper proceedings if
adequate reserves have been established with respect thereto in accordance with
generally accepted accounting principles or the statutory accounting principles
and practices prescribed or permitted by the insurance department of the state
of domicile of a Merger Partner Insurance Subsidiary, as appropriate, and (iii)
liens and encumbrances that would not, individually or in the aggregate, have a
Material Adverse Effect on Merger Partner. As used in this Agreement "Merger
Partner Investment Assets" means bonds, stocks, mortgage loans or other
investments that are carried on the books and records of Merger Partner and the
Merger Partner Insurance Subsidiaries.
5.24 Computer Software. Merger Partner owns, or possesses valid
license rights to, all computer software programs which are material to the
conduct of the business of Merger Partner and the Merger Partner Insurance
Subsidiaries taken as a whole. There are no infringement suits, actions or
proceedings pending or, to the Knowledge of Merger Partner, threatened against
Merger Partner or any Merger Partner Insurance Subsidiary with respect to any
software owned or licensed by Merger Partner or any Merger Partner Subsidiary,
which, if determined adversely, would have, either individually or in the
aggregate, a Material Adverse Effect on Merger Partner.
5.25 Intellectual Property. Merger Partner owns, or possesses
valid license rights to, all intellectual property which is material to the
conduct of the business of Merger Partner and the Merger Partner Insurance
Subsidiaries taken as a whole. Merger Partner has not received any notice of
any conflict with or violation or infringement of, any asserted rights of any
other Person with respect to any such intellectual property owned or licensed
by Merger Partner or any Merger Partner Insurance Subsidiary, which, if
determined adversely, would have, either individually or in the aggregate, a
Material Adverse Effect on Merger Partner.
5.26 Permits, Licenses and Franchises. To the Knowledge of Merger
Partner, except as otherwise would not have a Material Adverse Effect on Merger
Partner, neither Merger Partner nor any Merger Partner Insurance Subsidiary has
engaged in any activity which would cause revocation or suspension of any
license to transact the business of insurance and no action or proceeding
looking to or contemplating the revocation or suspension of any license to
transact the business of insurance is pending or threatened.
5.27 Liabilities and Reserves. The reserves carried on the books
of each Merger Partner Insurance Subsidiary for the year ended December 31,
1995 for future insurance policy benefits, losses, claims and similar purposes
are in compliance in all material respects with the requirements for reserves
established by the insurance departments of the jurisdiction of domicile of
such Merger Partner Insurance Subsidiary, were determined in all material
respects in accordance with generally
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accepted actuarial standards consistently applied, and are fairly stated in all
material respects in accordance with sound actuarial principles.
5.28 Insurance. The insurance maintained by Merger Partner and the
Merger Partner Subsidiaries insures against risks and liabilities to the extent
and in the manner reasonably deemed appropriate and sufficient by Merger
Partner or such Merger Partner Subsidiary, and the coverage provided thereunder
will not be materially and adversely affected by the Merger.
5.29 Investigation by Merger Partner. Merger Partner has conducted
its own independent review and analysis of the businesses, assets, condition,
operations and prospects of Company and the Company Subsidiaries and
acknowledges that Merger Partner has been provided access to the properties,
premises and records of Company and the Company Subsidiaries for this purpose.
In entering into this Agreement, Merger Partner has relied solely upon its own
investigation and analysis and the representations and warranties contained
herein, and Merger Partner:
(a) acknowledges that none of Company, the Company
Subsidiaries or any of their respective directors, officers, employees,
affiliates, agents or representatives makes any representation or warranty,
either express or implied, as to the accuracy or completeness of any of the
information provided or made available to Merger Partner or their agents or
representatives prior to the execution of this Agreement; and
(b) agrees, to the fullest extent permitted by law, that
none of Company, the Company Subsidiaries or any of their respective directors,
officers, employees, affiliates, agents or representatives shall have any
liability or responsibility whatsoever to Merger Partner on any basis
(including, without limitation, in contract or tort, under federal or state
securities laws or otherwise) based upon any information provided or made
available, or statements made, to Merger Partner prior to the execution of this
Agreement,
except that the foregoing shall not apply (i) to the extent Company makes the
specific representations and warranties set forth in Article 4 of this
Agreement and in the Disclosure Schedules, but always subject to the
limitations and restrictions contained in this Agreement and in the Disclosure
Schedules, or (ii) to the extent Company, the Company Subsidiaries or any of
their respective directors, officers, employees, affiliates, agents or
representatives commits fraud with respect to the information that it provides
or makes available to Company.
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ARTICLE 6
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; CERTAIN COVENANTS
6.1 Access and Information.
(a) Subject to the restrictions contained in
confidentiality agreements to which such party is subject and subject to
Section 6.1(b), upon reasonable notice, each of Company and Merger Partner
shall (and shall cause each of their respective Subsidiaries (as defined below)
to) give to the other and to the respective accountants, counsel and other
representatives of such other party reasonable access during normal business
hours throughout the period prior to the Effective Time to all of its and its
Subsidiaries' properties, books, contracts, commitments and records (including
tax returns and insurance policies) and shall permit them to consult with its
and its Subsidiaries' respective officers, employees, auditors, actuaries,
attorneys and agents; provided, however, that any such investigation or
consultation shall be conducted in such a manner as not to interfere
unreasonably with the business or operations of the other party or its
Subsidiaries. In addition, Company shall cause Spinco to provide to Merger
Partner and to Merger Partner's accountants, counsel and other representatives
reasonable access during normal business hours throughout the period prior to
the Effective Time to all records in Spinco's possession relating to the
business and operations of the Company Subsidiaries; provided, however that any
such investigation shall be conducted in such a manner as not to interfere
unreasonably with the business or operations of Spinco or its subsidiaries.
All confidential information provided pursuant to this Section 6.1 will be
subject to the Confidentiality Agreement dated as of October 28, 1996 and the
Confidentiality Agreement dated as of December 17, 1996 (the "Confidentiality
Agreements"), in each case between Company and Merger Partner. Notwithstanding
the foregoing, no party shall have access to information or documents subject
to the attorney/client privilege to the extent that providing such access
would, in the opinion of counsel to Company or Merger Partner, as the case may
be, constitute a waiver of such privilege. As used in this Agreement, the term
"Subsidiaries" shall mean (i) when used with reference to Company, the Company
Subsidiaries, and (ii) when used with reference to Merger Partner, the Merger
Partner Subsidiaries.
(b) As soon as practicable after the date of this
Agreement, Company and Merger Partner shall cooperate in good faith in an
effort to develop a plan (the "Plan") with respect to the communications with
their respective employees and the employees of their respective Subsidiaries
regarding the transactions contemplated by this Agreement and the Distribution
Agreement. Notwithstanding any other provision of this Section 6.1, neither
Merger Partner or Company, nor any of their respective Subsidiaries, nor any
employee or other representative of Merger Partner or Company, or any of their
respective Subsidiaries, shall contact or communicate with any employee of the
other party or such other party's Subsidiaries, with respect to the
transactions contemplated by this Agreement, unless pursuant to the Plan or
with the prior consent of such other party, which consent will not be
unreasonably withheld or delayed. Except pursuant to the Plan or with the
prior
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consent of the other party, which consent will not be unreasonably withheld or
delayed, neither Merger Partner or Company, nor any of their respective
Subsidiaries, nor any employee or other representative of Merger Partner or
Company, or any of their respective Subsidiaries, shall have any communication
or contact with any employee of the other party or such other party's
Subsidiaries concerning, relating to or in any way bearing upon (i) future
employment or terms or conditions of employment of such employee or any other
employee of the other party, or (ii) any closing or relocation of or reduction
in size, staff or function of any present facility of the other party.
6.2 Conduct of Business Pending Merger.
(a) Company agrees that from the date hereof to the
Effective Time, except as contemplated by this Agreement or the Distribution
Agreement or to the extent that Merger Partner shall otherwise consent in
writing (which consent will not be unreasonably withheld or delayed), Company
and the Company Subsidiaries will operate their businesses only in the ordinary
course, except where the failure to so operate their businesses will not
individually or in the aggregate be material to any of the Company Business
Units taken as a whole; and, consistent with such operation, will use
reasonable efforts consistent with past practices to preserve their business
organizations intact, to keep available to them the goodwill of their agents,
third party administrators, policyholders, customers and others with whom
business relationships exist to the end that their goodwill and ongoing
business shall not be impaired in any material respect at the Effective Time,
and will further exercise reasonable efforts to maintain their existing
relationships with their employees in general.
(b) Company agrees that from the date hereof to the
Effective Time, except as otherwise consented to by Merger Partner in writing
(which consent will not be unreasonably withheld or delayed) or as permitted,
required or contemplated by this Agreement or the Distribution Agreement, (i)
neither it nor any Company Subsidiary will change any provision of its
Certificate of Incorporation or Bylaws or similar governing documents; (ii) it
will not make, declare or pay any dividend, except regular quarterly cash
dividends with respect to the Company Common Stock (not to exceed $0.275 per
share per quarter) and regular dividends on the Company's Preferred Stock in
accordance with its terms and except in connection with the Spin-off; and (iii)
except in connection with (v) the Spin-off, (w) the exchange rights on the part
of former shareholders of Durham Corporation and Southlife Corporation who have
not tendered their shares in connection with the mergers pursuant to which such
companies were acquired, (x) the issuance of capital stock under the Company
Rights Agreement pursuant to its terms, (y) the issuance of new employee stock
options after July 31, 1997 in the ordinary course of business consistent with
past practice and (z) the issuance of shares of common stock pursuant to (A)
the exercise of presently outstanding employee stock options or new stock
options granted after July 31, 1997 as contemplated above or (B) any stock
ownership plan, 401(k) plan, dividend reinvestment plan or similar plan (which
in the case of this clause (B) does not involve in the aggregate the issuance
of more than 250,000 shares), it will not make any distribution or directly or
indirectly sell, issue, redeem, purchase or otherwise acquire, any shares of
its outstanding capital stock, change the number of shares of its authorized or
issued capital stock or issue or grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating to its
authorized or issued capital stock or any securities convertible into shares of
such stock.
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(c) Company agrees that from the date hereof to the
Effective Time it will not take or permit any Company Subsidiary to take any of
the following actions, except to the extent consented to by Merger Partner in
writing (which consent will not be unreasonably withheld or delayed) or
permitted, required or contemplated by this Agreement or the Distribution
Agreement or except as set forth in Schedule 6.2:
(i) except in the ordinary course of business, enter into
any agreement representing an obligation for indebtedness for borrowed
money or increase the principal amount of indebtedness under any
existing agreement or assume, guarantee, endorse or otherwise become
responsible for the obligations of any other individual, firm or
corporation (except a guarantee of the obligation of a Subsidiary),
except and to the extent all such obligations in the aggregate do not
exceed $10,000,000;
(ii) except in the ordinary course of business, mortgage
or pledge any of its properties or assets;
(iii) except as may be required by law or except in the
ordinary course of business, take any action to amend or terminate any
Company Employee Plan or increase the compensation of any of its
executive officers or employees (other than increases which are in the
aggregate in the ordinary course) or adopt any other material plan,
program, arrangement or practice providing new or increased benefits
or compensation to its employees, provided that this covenant shall
not apply to variable payments pursuant to Company's Management
Incentive Plan or Variable Pay Plan or to actions in the ordinary
course of business taken with respect to employees who are not
directors or officers of Company;
(iv) materially amend or cancel or agree to the material
amendment or cancellation of any agreement, treaty or arrangement
which is material to any of the Company Business Units taken as a
whole, or enter into any new material agreement, treaty or arrangement
which is material to any of the Company Business Units taken as a
whole (other than the renewal of any existing agreements, treaties or
arrangements);
(v) make any material changes in its underwriting
standards, retention limits or administrative practices with respect
to additions to (new business) or deletions from (policy terminations)
any policy master files which would have a substantive effect on such
files;
(vi) enter into any negotiation with respect to, or adopt
or amend in any material respect, any Collective Bargaining Agreement
without prior notice to the other party;
(vii) make any significant change in any accounting methods
or systems of internal accounting controls, except as may be
appropriate to conform to changes in statutory accounting rules or
generally accepted accounting principles;
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(viii) pay, loan or advance (other than the payment of
compensation, directors' fees or reimbursements of expenses in the
ordinary course of business and other than as may be required by any
agreement in effect as of the date hereof) any amount to, or sell,
transfer or lease any properties or assets (real, personal or mixed,
tangible or intangible) to, or enter into any material agreement or
arrangement with, any of its officers or directors or any "affiliate"
or "associate" of any of its officers or directors (as such terms are
defined in Rule 405 promulgated under the Securities Act);
(ix) acquire, form or commence the operations of any
business or any corporation, partnership, joint venture, marketing
arrangement, association or other business organization or division
thereof which in any case is material to any of the Company Business
Units taken as a whole;
(x) make any tax election or settle or compromise tax
liability that would reasonably be expected to have a Material Adverse
Effect on Company;
(xi) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) which are material to Company and the Company
Subsidiaries as a whole, other than the payment, discharge or
satisfaction of liabilities (i) reflected or reserved against in, or
contemplated by, the financial statements (or the notes thereto) of
Company included in the Company Reports or (ii) incurred since
December 31, 1995 in the ordinary course of business consistent with
past practice;
(xii) increase the benefits payable under the Providian
Corporation Retirement Plan (the "Retirement Plan") pursuant to the
provisions of Section 9.1 of the Retirement Plan;
(xiii) other than consistent with past practice (or
following consultation with the Merger Partner, consistent with
industry standards), materially alter the mix of Company Investment
Assets or the duration or credit quality of such assets;
(xiv) other than consistent with past practice (or
following consultation with the Merger Partner, consistent with
industry standards), materially alter the profile of its insurance
liabilities or materially alter the Company's pricing practices or
policies; or
(xv) enter into any agreement to take any of the actions
described in Section 6.2(b) or elsewhere in this Section 6.2(c).
(d) Merger Partner agrees that from the date hereof to
the Effective Time, except as contemplated by this Agreement or to the extent
that Company shall otherwise consent in writing, it will, and will cause each
Merger Partner Subsidiary to, operate its business only in the ordinary course,
except where the failure to so operate its business will not individually or in
the aggregate be material to Merger Partner and the Merger Subsidiaries taken
as a whole.
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(e) Merger Partner agrees that from the date hereof to
the Effective Time it will not take, or permit any Merger Partner Subsidiary to
take, any of the following actions, except to the extent consented to by
Company in writing (which consent will not unreasonably be withheld or delayed)
or permitted, required or contemplated by this Agreement or as set forth in
Schedule 6.2:
(i) adopt or propose any change in its governing
documents that would have any adverse impact on the transactions
contemplated by this Agreement or which would amend or modify the
terms or provisions of the capital stock of Merger Partner;
(ii) effect any combination, reclassification,
recapitalization, division or similar transaction with respect to any
class or series of capital stock of Merger Partner (other than a stock
split, stock dividend or similar transaction contemplated by Section
2.2(d));
(iii) merge or consolidate with any other Person if such
merger or consolidation could reasonably be expected to have a
material impact on the ability of Merger Partner to consummate the
transactions contemplated by this Agreement;
(iv) make, declare, set aside or pay any dividend or other
distribution with respect to shares of capital stock of Merger
Partner, except the regular declaration and payment of cash or stock
dividends with respect to the Merger Partner Common Stock (not to
exceed, in the aggregate between the date of this Agreement and the
Closing Date, $2.00 per share in cash and market value of Merger
Partner Common Stock), and the regular declaration and payment of
dividends with respect to Merger Partner Preferred Stock in accordance
with its terms;
(v) issue, sell, grant, pledge or otherwise encumber any
shares of the Merger Partner Common Stock, any other voting securities
or any securities convertible into such shares, if any such action
could, individually or in the aggregate, reasonably be expected to (A)
require the consent of the stockholders of Merger Partner, (B) delay
materially the date of mailing of the Proxy Statement such that the
Closing would be delayed past June 1, 1997, (C) if it were to occur
after such date of mailing, require an amendment of the Proxy
Statement such that the Closing would be delayed past June 1, 1997 or
(D) have a material adverse effect on the ability of Merger Partner to
consummate the transactions contemplated by this Agreement;
(vi) acquire any business or any corporation, partnership,
joint venture, association or other business organization or division
thereof, in each case if any such action could, individually or in the
aggregate, reasonably be expected to (A) be material to Merger
Partner, (B) delay materially the date of mailing of the Proxy
Statement such that the Closing would be delayed past June 1, 1997,
(C) if it were to occur after such date of mailing, require an
amendment of the Proxy Statement such that the Closing would be
delayed past June 1, 1997 or (D) have a material adverse effect on the
ability of Merger Partner to consummate the transactions contemplated
by this Agreement;
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(vii) except in the ordinary course of business, enter into
any agreement representing an obligation for indebtedness for borrowed
money or increase the principal amount of indebtedness under any
existing agreement or assume, guarantee, endorse or otherwise become
responsible for the obligations of any other individual, firm or
corporation (except a guarantee of the obligation of a Subsidiary),
except and to the extent all such obligations in the aggregate are not
material to Merger Partner;
(viii) mortgage or pledge any of its properties or assets,
except to the extent that the aggregate amount of assets subject to
such mortgages and pledges is not material to Merger Partner;
(ix) except in the ordinary course of business, materially
amend or cancel or agree to the amendment or cancellation of any
agreement, treaty or arrangement, or enter into any new agreement,
treaty or arrangement (other than the renewal of any existing
agreements, treaties or arrangements), except and to the extent that
the aggregate amount involved with respect to such agreements,
treaties or arrangements is not material to Merger Partner;
(x) pay, loan or advance (other than the payment of
compensation, directors' fees or reimbursements of expenses in the
ordinary course of business and other than as may be required by any
agreement in effect as of the date hereof) any amount to, or sell,
transfer or lease any properties or assets (real, personal or mixed,
tangible or intangible) to, or enter into any agreement or arrangement
with, any of its officers or directors or any "affiliate" or
"associate" of any of its officers or directors (as such terms are
defined in Rule 405 promulgated under the Securities Act), except and
to the extent that the aggregate amount involved with respect to such
transactions is not material to Merger Partner;
(xi) (A) prior to the twenty-fifth trading day before the
Effective Time acquire record or beneficial ownership of any shares of
Company Common Stock such that Merger Partner "beneficially owns"
three percent (3%) or more of the outstanding shares of Company Common
Stock, or (B) during the twenty-five trading days before the Effective
Time, acquire record or beneficial ownership of any shares of Company
Common Stock; or
(xii) authorize any of, or commit or agree to take any of,
the foregoing actions.
As used in this Section 6.2(e), the phrase "material to Merger
Partner" means a matter or action that would (i) have a Material Adverse Effect
on Merger Partner or (ii) involve amounts in excess of ten percent (10%) of the
assets of Merger Partner and its subsidiaries, taken as a whole, as reflected
on the consolidated balance sheet of Merger Partner and its subsidiaries at
December 31, 1995 included in the Merger Partner Reports.
(f) Company shall not, nor shall it permit any Company
Subsidiary to, nor shall it authorize or permit any officer, director or
employee of, or any investment banker, attorney or other advisor or
representative or agent of, Company or any Company Subsidiary to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any
Acquisition Proposal (as hereinafter
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defined) or (ii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Acquisition Proposal; provided,
however, that nothing contained in this Section 6.2(f) shall prohibit the Board
of Directors of Company (and its authorized representatives) from furnishing
information to, or entering into discussions or negotiations with, any person
or entity that makes an unsolicited Acquisition Proposal if, and only to the
extent that (A) the Board of Directors of Company after consultation with and
based on the advice of outside counsel, determines in good faith that in order
for the Board of Directors of Company to comply with its fiduciary duties to
stockholders under applicable law it should take such action, (B) prior to
taking such action, Company receives from such person or entity an executed
agreement in reasonably customary form relating to the confidentiality of
information to be provided to such person or entity, and (C) the Acquisition
Proposal contains an offer of consideration that is superior to the
consideration set forth herein. Notwithstanding anything in this Agreement to
the contrary, Company shall (i) promptly advise Merger Partner orally and in
writing of (A) the receipt by it (or any of the other entities or persons
referred to above) after the date hereof of any Acquisition Proposal, or any
inquiry which could reasonably be expected to lead to any Acquisition Proposal,
(B) the material terms and conditions of such Acquisition Proposal or inquiry,
and (C) the identity of the person making any such Acquisition Proposal or
inquiry, (ii) keep Merger Partner reasonably informed of the status and details
of any such Acquisition Proposal or inquiry and (iii) negotiate with Merger
Partner to make such adjustments in the terms and conditions of this Agreement
as would enable Company to proceed with the transactions contemplated herein.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the first sentence of this Section 6.2(f) by any
officer, director or employee of Company or any Company Subsidiary or any
investment banker, attorney or other advisor, representative or agent of
Company or any Company Subsidiary, whether or not such person is purporting to
act on behalf of Company or any Company Subsidiary or otherwise, shall be
deemed to be a breach of this Section 6.2(f) by Company. For purposes of this
Agreement, "Acquisition Proposal" means any bona fide proposal with respect to
a merger, consolidation, share exchange or similar transaction involving
Company or any Company Insurance Subsidiary, or any purchase of all or any
significant portion of the assets of Company or any Company Business Unit other
than the transactions contemplated hereby.
6.3 Fiduciary Duties. Except as set forth below, the Board of
Directors of Company shall not (i) withdraw or modify in a manner materially
adverse to Merger Partner, the approval or recommendation by such Board of
Directors of this Agreement or the Merger, or (ii) approve, recommend or cause
Company to enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, if Company receives an unsolicited Acquisition
Proposal and the Board of Directors of Company determines in good faith,
following consultation with and based on the advice of outside counsel, that it
is necessary to do so in order to comply with its fiduciary duties to
stockholders under applicable law, the Board of Directors may (w) withdraw or
modify its approval or recommendation of this Agreement and the Merger, (x)
approve or recommend such Acquisition Proposal, (y) cause Company to enter into
an agreement with respect to such Acquisition Proposal or (z) terminate this
Agreement pursuant to Section 8.1(b). If the Board of Directors of Company
takes any action described in clause (y) or (z) of the preceding sentence or
Merger Partner exercises its right to terminate this Agreement under Section
8.1(c) based on the Board of Directors
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of Company having taken any action described in clause (w) or (x) of the
preceding sentence, Company shall, concurrently with the taking of such action
or such termination (a "Fee Payment Event"), as applicable, pay to Merger
Partner the Section 6.4 Fee (as hereinafter defined). Notwithstanding anything
contained in this Agreement to the contrary, any action by the Board of
Directors of Company permitted by this Section 6.3 shall not constitute a
breach of this Agreement by Company.
6.4 Certain Fees. Company shall pay to Merger Partner upon demand
(i) $80 million if the Fee Payment Event occurs on or prior to the date of the
Stockholders' Meeting, or (ii) $100 million if the Fee Payment Event occurs
after the date of the Stockholders' Meeting (the "Section 6.4 Fee"), payable in
same-day funds, as liquidated damages and not as a penalty, if the Section 6.4
Fee is payable pursuant to Section 6.3. If Company fails to promptly pay to
Merger Partner any amounts due under this Section 6.4, Company shall pay the
costs and expenses (including reasonable legal fees and expenses) in connection
with any action, including the filing of any lawsuit or other legal action,
taken to collect payment, together with interest on the amount of any unpaid
fee at the publicly announced prime rate of Citibank, N.A. in effect from time
to time from the date such fee was required to be paid.
6.5 Amendment to Rights Plan. Prior to the Effective Time, the
Board of Directors of Company shall amend the 1987 Stockholder Rights Agreement
as amended on November 4, 1992 (the "Company Rights Agreement") between Company
and First Chicago Trust Company of New York, so that (i) Merger Partner will
not become an "Acquiring Person" as a result of the consummation of the
transactions contemplated by this Agreement, (ii) no "Shares Acquisition Date"
or "Distribution Date" (as such terms are defined in the Company Rights
Agreement) will occur as a result of the consummation of the transactions
contemplated by this Agreement, and (iii) all outstanding Company Common Stock
Purchase Rights (the "Company Rights") issued and outstanding under the Company
Rights Agreement will expire immediately prior to the Effective Time.
6.6 Takeover Statutes. If any "fair price," "moratorium,"
"control share acquisition," "business combination," "stockholder protection"
or similar antitakeover statute or regulation enacted under state or Federal
law shall become applicable to the Merger, the Spin-off or any of the other
transactions contemplated hereby, each of Company and Merger Partner and the
Board of Directors of each of Company and Merger Partner shall grant such
approvals and take such commercially reasonable actions as are within its
authority and consistent with its fiduciary obligations to its stockholders as
determined in good faith by such Board so that the Merger, the Spin-off and the
other transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise use commercially
reasonable efforts, subject to such fiduciary duties, to eliminate or minimize
the effects of such statute or regulation on the Merger, the Spin-off and the
other transactions contemplated hereby.
6.7 Consents. Company and Merger Partner will use commercially
reasonable efforts to obtain the written consent or approval of each and every
governmental authority and other regulatory body, including, without
limitation, each applicable banking and insurance regulatory authority, the
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consent or approval of which shall be required in order to permit Merger
Partner, Sub and Company to consummate the transactions contemplated by this
Agreement and the Distribution Agreement. Company will use commercially
reasonable efforts to obtain the written consent or approval, in form and
substance reasonably satisfactory to Merger Partner, of each person whose
consent or approval shall be required in order to permit Merger Partner, Sub
and Company to consummate the transactions contemplated by this Agreement and
the Distribution Agreement, except for any contracts of Company as to which the
failure to obtain any required written consent or approval thereunder would not
individually or in the aggregate result in a Material Adverse Effect on
Company. Merger Partner will use commercially reasonable efforts to obtain the
written consent or approval, in form and substance reasonably satisfactory to
Company, of each person whose consent or approval shall be required in order to
permit Merger Partner, Sub and Company to consummate the transactions
contemplated by this Agreement and the Distribution Agreement, except for any
contracts of Merger Partner as to which the failure to obtain any required
written consent or approval thereunder would not individually or in the
aggregate result in a Material Adverse Effect on Merger Partner.
6.8 Further Assurances. Subject to the terms and conditions
herein provided, each of the parties hereto will promptly file and prosecute
diligently the applications and related documents required to be filed by such
party with the applicable regulatory authorities in order to effect the
transactions contemplated hereby, including filings under the HSR Act
requesting early termination of the applicable waiting period and filings with
state banking and insurance authorities. Each party hereto agrees to use all
commercially reasonable efforts to take, or cause to be taken, all action and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each
corporation which is a party to this Agreement shall take all such necessary
action. Each of the parties hereto agrees to defend vigorously against any
actions, suits or proceedings in which such party is named as defendant which
seeks to enjoin, restrain or prohibit the transactions contemplated hereby or
seeks damages with respect to such transactions.
6.9 NYSE Listing. Merger Partner will use all commercially
reasonable efforts to cause to be approved for listing on the NYSE, subject to
official notice of issuance, a sufficient number of shares of Merger Partner
Common Stock to be issued in the Merger and pursuant to Company Stock Options
(as defined in Section 6.17).
6.10 Notice; Efforts to Remedy. Each party hereto shall promptly
give written notice to the other parties hereto upon becoming aware of the
impending occurrence of any event which would cause or constitute a breach of
any of the representations, warranties or covenants of such party contained in
this Agreement and shall use all commercially reasonable efforts to prevent or
promptly remedy the same. During the period from the date of this Agreement to
the Effective Time, Company and Merger Partner each shall cause one or more of
its representatives to confer on a regular and frequent basis with
representatives of the other and to report on the general status of its ongoing
operations. Company shall promptly notify Merger Partner of any material
change in each case on
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a consolidated basis in the normal course of Company's or the Company
Subsidiaries' businesses or in the operation of its or their properties and of
the receipt by Company or the Company Subsidiaries of notice of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or the receipt by Company or the
Company Subsidiaries of a notice of the institution or the threat of litigation
involving Company or any of the Company Subsidiaries which, individually or in
the aggregate, would have a Material Adverse Effect on Company, and will keep
Merger Partner fully informed with respect to such events. Merger Partner
shall promptly notify Company of any material change in each case on a
consolidated basis in the normal course of Merger Partner's or the Merger
Partner Subsidiaries' businesses or in the operation of its or their
properties, and of the receipt by Merger Partner or the Merger Partner
Subsidiaries of notice of any governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated) or
the receipt by Merger Partner or the Merger Partner Subsidiaries of a notice of
the institution or the threat of litigation involving Merger Partner or any of
the Merger Partner Subsidiaries which, individually or in the aggregate, would
have a Material Adverse Effect on Merger Partner and will keep Company fully
informed with respect to any such events.
6.11 Registration Statement; Stockholder Approvals.
(a) As soon as is reasonably practicable after the
execution of this Agreement, Merger Partner shall prepare and file with the SEC
the Registration Statement (in which the Proxy Statement will be included as a
prospectus) and Company shall prepare and file with the SEC the Proxy Statement
(which shall also include the Information Statement relating to the Spin-off).
Merger Partner shall use all commercially reasonable efforts to cause the
Registration Statement to become effective under the Securities Act as
promptly as practicable after such filing and shall take all commercially
reasonable actions required to be taken under any applicable state blue sky or
securities laws in connection with the issuance of the shares of Merger Partner
Common Stock pursuant to this Agreement. Each party hereto shall furnish all
information concerning it and the holders of its capital stock as the other
party hereto may reasonably request in connection with such actions.
(b) Company shall call a Stockholders' Meeting to be held
as soon as practicable after the date hereof for the purpose of voting upon the
Merger and this Agreement. In connection with the Stockholders' Meeting,
Company and Merger Partner shall prepare and file the Proxy Statement with the
SEC. Subject to Section 6.3, (i) Company shall mail the Proxy Statement to its
stockholders, (ii) the Board of Directors of Company shall recommend to its
stockholders the approval of the Merger and this Agreement, and (iii) Company
shall use commercially reasonable efforts to obtain such stockholder approval.
Without limiting the generality of the foregoing, Company agrees that, subject
to its right to terminate this Agreement pursuant to Section 6.3, its
obligations pursuant to this Section 6.11(b) shall not be affected by the
commencement, public proposal, public disclosure or communication to Company of
any Acquisition Proposal.
6.12 Expenses. If this Agreement is terminated for any reason
without breach by any party, each party hereto shall pay its own expenses
incident to preparing for, entering into, and carrying out this Agreement and
to consummating the Merger, except that Company and Merger Partner shall
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divide equally the following expenses: (a) the costs incurred in connection
with the printing and mailing of the Registration Statement, the Proxy
Statement and related documents; and (b) all filing or registration fees paid
by Company or Merger Partner, including state securities laws filing or
registration fees, if any.
6.13 Press Releases; Filings. Without the consent of the other
parties, none of the parties shall issue any press release or make any public
announcement with regard to this Agreement, the Distribution Agreement, the
Merger or the Spin-off or any of the transactions contemplated hereby or
thereby; provided, however, that nothing in this Section 6.13 shall be deemed
to (i) prohibit Company, Merger Partner or Spinco from making any disclosures,
press releases or announcements relating to their respective businesses or
operations, or (ii) prohibit any party hereto from making any disclosure which
its counsel deems necessary or advisable in order to fulfill such party's
disclosure obligations imposed by law or the rules of any national securities
exchange or automated quotation system. Each of Company and Merger Partner
shall promptly notify the other of each report, schedule and other document
filed by it or any of its respective Subsidiaries with the SEC and of any other
document pertaining to the transactions contemplated hereby filed with any
other governmental authorities.
6.14 Indemnification of Officers and Directors.
(a) Until such time as the applicable statute of
limitations shall have expired, the Surviving Corporation shall provide with
respect to each present or former director and officer of Company and its
subsidiaries (both present and past) (the "Indemnified Parties"), the
indemnification rights (including any rights to advancement of expenses) which
such Indemnified Parties had, whether from Company or such subsidiary,
immediately prior to the Merger, whether under the DGCL or the bylaws of
Company or such subsidiary or otherwise.
(b) Immediately following the Effective Time, Merger
Partner shall cause to be in effect the current policies of directors' and
officers' liability insurance maintained by Company or any Company Subsidiary
(provided Merger Partner may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events which
occurred at or before the Effective Time, and Merger Partner shall maintain
such coverage for a period of six years after the Effective Time; provided,
however, that in no event shall Merger Partner be required to expend pursuant
to this Section 6.14(b) on an annual basis more than an amount equal to 250% of
the current annual premiums paid by Company and the Company Subsidiaries for
such insurance and, in the event the cost of such coverage shall exceed that
amount, Merger Partner shall purchase as much coverage as possible for such
amount.
(c) This Section 6.14 shall survive the Closing and is
intended to benefit Company, the Surviving Corporation and each of the
Indemnified Parties and his or her heirs and representatives (each of whom
shall be entitled to enforce this Section 6.14 against Merger Partner or the
Surviving Corporation to the extent specified herein) and shall be binding on
all successors and assigns of Merger Partner and the Surviving Corporation.
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6.15 Tax Treatment. Merger Partner and Company agree to treat the
Spin-off as a tax-free distribution within the meaning of Section 355 of the
Code and the Merger as a reorganization within the meaning of Section 368(a) of
the Code. During the period from the date of this Agreement through the
Effective Time, unless the parties shall otherwise agree in writing, none of
Merger Partner, Company or any of their respective Subsidiaries shall knowingly
take or fail to take any action which action or failure to act would jeopardize
qualification of the Spin-off as a tax-free distribution within the meaning of
Section 355 of the Code or the Merger as a reorganization within the meaning of
Section 368(a) of the Code.
6.16 Employee Benefits.
(a) From and after the Effective Time, the Surviving
Corporation shall honor all obligations and commitments under the plans,
programs, arrangements, practices and contracts which are maintained by Company
or any of the Company Subsidiaries or to which Company or any Company
Subsidiary is obligated to make contributions and which provide benefits or
compensation to or on behalf of employees, including but not limited to
executive arrangements and "employee benefit plans" as defined in Section 3(1)
of ERISA, in each case in accordance with their terms as in effect at the
Effective Time, with only such amendments as are permitted by the terms thereof
as in effect at the Effective Time.
(b) Merger Partner shall take, and shall cause the
Surviving Corporation and its subsidiaries and all other affiliates of Merger
Partner to take, the following actions: (i) waive any limitations regarding
pre-existing conditions under any welfare or other employee benefit plan
maintained by any of them for the benefit of employees of Company or any of its
subsidiaries (the "Company Employees") or in which Company Employees
participate after the Effective Time, and (ii) for all purposes under all
compensation and benefit plans and policies applicable to employees of any of
them, treat all service by Company Employees with Company or any affiliates of
Company before the Effective Time as service with Merger Partner and its
affiliates, except to the extent such treatment would result in duplication of
benefits.
(c) From and after the Effective Time, the Surviving
Corporation shall assume all obligations of Company under Company's Management
Incentive Plan and Variable Pay Plan and shall make all payments owed by
Company pursuant to the Management Incentive Plan and the Variable Pay Plan in
respect of periods through December 31, 1996 in accordance with Company's past
practices.
(d) Effective as of the Effective Time: (i) the Pension
Trustees of the Retirement Plan shall appoint as their successors pursuant to
Section 6.1 of the Retirement Plan individuals and/or entities selected by
Merger Partner and shall resign as Pension Trustees; (ii) Section 6.1 of the
Retirement Plan shall be amended to delete the second and third sentences
thereof; (iii) Section 9.1 of the Retirement Plan shall be amended to delete
the parenthetical phrase in the first sentence thereof; and (iv) Section 13.2
of the Retirement Plan shall be amended to clarify that a merger of the
Retirement Plan with a defined benefit pension plan in accordance with Section
414(e) of the Code and all other applicable law will not be considered a
termination of the Retirement Plan for purposes
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of Section 13.12 thereof. The amendments adopted pursuant to the preceding
sentence shall be in form and substance satisfactory to Merger Partner. Before
the Effective Time, the Company and Merger Partner shall take all steps
necessary and appropriate to comply with the requirements of Section 29.14
thereof for continuation of the Retirement Plan after the Effective Time.
6.17 Stock Options.
(a) At the Effective Time, each outstanding option to
purchase shares of Company Common Stock (a "Company Stock Option") and each
outstanding stock appreciation right (a "Company SAR") issued pursuant to any
incentive or stock option program of Company (the "Company Plan"), whether
vested or unvested, shall be assumed by Merger Partner, provided that the
foregoing shall not apply to options or stock appreciation rights assumed by
Spinco pursuant to the Distribution Agreement and such options and stock
appreciation rights assumed by Spinco shall not constitute Company Stock
Options or Company SARs for purposes of this Agreement. Each Company Stock
Option shall be deemed to constitute an option to acquire, on the same terms
and conditions as were applicable under such Company Stock Option, a number of
shares of Merger Partner Common Stock equal to (x) the number of shares of
Company Common Stock covered by such Company Stock Option, multiplied by (y)
the Option Adjustment Ratio, at a price per share equal to (A) the exercise
price of such Company Stock Option immediately prior to the Spin-off,
multiplied by (B) (1) one divided by (2) the Option Adjustment Ratio; provided,
however, that in the case of any option to which Section 421 of the Code
applies by reason of its qualification under Section 422 of the Code
("incentive stock options"), the option price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise of such option
shall be determined in order to comply with Section 424(a) of the Code. For
purposes of the foregoing, the "Option Adjustment Ratio" shall mean the amount
obtained by dividing (i) the average of the daily high and low trading prices
on the New York Stock Exchange for the Company Common Stock on each of the 20
trading days prior to the ex-dividend date for the Spin-off by (ii) the average
of the daily high and low trading prices on the New York Stock Exchange for the
Merger Partner Common Stock on each of the same 20 trading days. Each holder
of a Company SAR shall be entitled to that number of stock appreciation rights
of Merger Partner ("Merger Partner SARs"), determined in the same manner as set
forth above with respect to Company Stock Options assumed by Merger Partner.
At the Effective Time, the agreements evidencing the grants of Company Stock
Options and Company SARs assumed by Merger Partner shall be amended to provide
that the right of a holder to exercise Company Stock Options and Company SARs
shall continue beyond the termination of such holder's employment, if such
holder's employment is terminated without Cause or such holder leaves
employment for Good Reason (as such terms are defined in the Company's change
of control policy as in effect immediately prior to the Effective Time or, if
applicable, such holder's employment agreement or change of control severance
agreement), until the later of (x) the second anniversary of the Effective
Time, (y) 90 days after such holder's termination of employment, and (z) the
end of the period for exercise of such Company Stock Options or Company SARs as
provided in any employment or severance agreement between the Company and such
holder.
(b) As soon as practicable after the Effective Time,
Merger Partner shall deliver to the holders of Company Stock Options and
Company SARs appropriate notices setting forth such
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holders' rights pursuant to the Company Plan and the agreements evidencing the
grants of such Company Stock Options or Company SARs, as the case may be, shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 6.17 after giving effect to the Merger and the
assumption by Merger Partner as set forth above). If necessary, Merger Partner
shall comply with the terms of the Company Plan and ensure, to the extent
required by, and subject to the provisions of, such Plan, that Company Stock
Options which qualified as incentive stock options prior to the Effective Time
continue to qualify as incentive stock options of Merger Partner after the
Effective Time.
(c) Merger Partner shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Merger
Partner Common Stock for delivery upon exercise of Company Stock Options
assumed by it in accordance with this Section 6.17. As soon as practicable
after the Effective Time, Merger Partner shall file a registration statement on
Form S-3 or Form S-8, as the case may be (or any successor or other appropriate
forms), or another appropriate form with respect to the shares of Merger
Partner Common Stock subject to such options and shall use all reasonable
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
With respect to those individuals who subsequent to the Merger will be subject
to the reporting requirements under Section 16(a) of the Exchange Act, where
applicable, Merger Partner shall administer each Company Plan assumed pursuant
to this Section 6.17 in a manner that complies with Rule 16b-3 promulgated
under the Exchange Act to the extent the Company Plan complied with such rule
prior to the Merger.
6.18 AEGON USA Guaranty. At the Closing, Merger Partner shall
cause AEGON USA, Inc. to enter into a Guaranty Agreement with Company and
Spinco in substantially the form of Exhibit D pursuant to which AEGON USA, Inc.
will guarantee the obligations of Company pursuant to Section 6.14 and Section
6.16 of this Agreement and the obligations of Company under the Distribution
Agreement and the Other Agreements (as defined in the Distribution Agreement).
6.19 Determination of Comparable Benefits. Prior to the Closing
Date, Company and Merger Partner shall work together in good faith to determine
whether the employee benefit plans and employee welfare plans currently
maintained by Company and the Company Subsidiaries for their employees are, in
the aggregate, at least as favorable as such plans currently maintained by
Merger Partner and the Merger Partner Subsidiaries, as contemplated in the
definition of "Good Reason" contained in Company's Change in Control Plan. The
determination of Company and Merger Partner, if any, shall be reduced to
writing, which shall be signed by both parties.
6.20 Merger Partner Exchange Transaction. Prior to the Closing
Date, Merger Partner shall effect, in one or more arm's length transactions
which will occur contemporaneously, (i) the purchase by Merger Partner of
approximately 8% of the currently outstanding shares of Merger Partner Common
Stock from the Association, and (ii) the sale of no more than an equivalent
number of shares of the existing class of Merger Partner Preferred Stock to the
Association. Merger Partner agrees that, except as set forth in the preceding
sentence, between the date hereof and the Closing Date Merger Partner will not
issue or sell any shares of capital stock of Merger Partner to the
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Association, except that Merger Partner may issue or sell to the Association
during such period a maximum of 500,000 shares of capital stock in connection
with other transactions.
6.21 Company Contracts. Within 28 days after the date of this
Agreement, Company shall furnish to Merger Partner access to and copies of
listings of contracts, agreements, leases, commitments, arrangements or other
instruments hereinafter described in this Section 6.21 to which the Company or
any Company Subsidiary is a party or by or to which it or any of its assets or
properties are bound except for (i) agreements, commitments, arrangements,
leases or other instruments disclosed in the Company Annual Report on Form 10-K
for the year ended December 31, 1995, (ii) the Distribution Agreement (and the
other agreements contemplated thereby), and (iii) insurance, reinsurance and
agency contracts entered into or to be entered into in the normal course of
business:
(a) contracts and other agreements with any current or
former officer, director, employee, consultant or other representative (other
than an insurance agent or broker) of Company or any Company Subsidiary
pursuant to which Company or any Company Subsidiary has ongoing obligations
calling for payments in any one year of more than $250,000 in any one case,
other than such contracts and other agreements that are terminable at will by
Company or such Company Subsidiary,
(b) contracts and other agreements for the purchase or
sale of equipment or services or to make capital expenditures (whether through
the purchase of real or personal property or otherwise), other than in the
ordinary course of business (including agreements for ordinary maintenance of
equipment), calling for a purchase price or payments in any one year of more
than $2.5 million,
(c) contracts and other agreements for the sale of any of
its assets or properties or for the grant to any Person of any preferential
rights to purchase or use any of its assets or properties in each case
involving assets or properties with a book value in excess of $2.5 million,
other than those entered into in the ordinary course of business,
(d) joint venture, partnership and marketing agreements
which are material to any of the Company Business Units taken as a whole,
(e) contracts and other agreements containing covenants
of Company or any Company Subsidiary not to compete with any Person which are
material to Company and the Company Subsidiaries as a whole or which following
the Effective Time will be material to Merger Partner and the Merger Partner
Subsidiaries taken as a whole,
(f) contracts and other agreements relating to the making
of any loan in excess of $1 million in any one case, other than Investment
Assets and Company Employee Plan loans made in the ordinary course of business
and other than intercompany loans between or among Company and/or the Company
Subsidiaries,
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(g) contracts or other agreements for or relating to
computer equipment or computer services calling for a purchase price or payment
in any one case during any one year of more than $1 million,
(h) contracts or other agreements relating to any
derivative instruments or securities or any "off-balance sheet" financing
transaction, other than those entered into in the ordinary course of business
for bona fide hedging purposes, and
(i) to the Knowledge of Company, any other contract or
other agreement whether or not made in the ordinary course of business calling
for payments in any one year of more than $2.5 million in any one case.
6.22 Agents. Within 28 days after the date of this Agreement,
Company shall furnish to Merger Partner (a) a list of Company's agents and
brokers as of the date hereof who have acted as agent or broker with respect to
insurance contracts of Company which are in force and who were paid commissions
in excess of $500,000 by any Company Insurance Subsidiary within the past
twelve months ("Significant Brokers"), (b) a list of and copies of the standard
forms of agreements between each Company Insurance Subsidiary and its insurance
agents and brokers, (c) a list of those Significant Brokers as to which such
agreements specified in clause (b) of this Section 6.22 are in effect and (d) a
list of those Significant Brokers who have entered into other agency agreements
with any Company Insurance Subsidiary that are in effect.
6.23 Litigation. Subject to the restrictions set forth in Section
6.1(a), during the period from the date hereof until the Effective Time,
Company shall, and shall cause the Company Subsidiaries to, give Merger Partner
and its representatives access to and copies of listings of claims, actions,
suits, investigations and proceedings to which Company or any Company
Subsidiary is subject, to the extent such listings are in the possession of the
Company or the Company Subsidiaries and are reasonably requested by Merger
Partner. It is understood and agreed that the provision of any such listings
shall not be deemed to modify the representations of the Company set forth in
Section 4.10.
6.24 Certain Reporting Requirements. After the Effective Time,
Merger Partner shall cause the Surviving Corporation to comply with the
reporting requirements of Section 6038B of the Code and the regulations
thereunder.
6.25 Investment Company Act. Merger Partner covenants and agrees
that it will comply in all material respects with any requirements imposed by
Section 15(f) of the 1940 Act with respect to the Manager.
6.26 Ruling Request. Prior to the filing of a request (the "Ruling
Request") for a Ruling (as defined in Section 7.1(g)) with the IRS, Company
will permit Merger Partner to review and comment on the Ruling Request and will
consult with Merger Partner regarding such Ruling Request. In addition,
Company will promptly make available for review by Merger Partner all written
correspondence that Company receives from the IRS concerning the Ruling Request
and will allow
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Merger Partner to participate in discussions with the IRS. Merger Partner
agrees to use all commercially reasonable efforts to cooperate with Company in
connection with such Ruling Request. Company shall be responsible for all
costs and expenses (including IRS user fees) relating to the Ruling Request,
except for costs and expenses relating to Merger Partner's review of the Ruling
Request and participation in such process.
ARTICLE 7
CONDITIONS PRECEDENT TO MERGER
7.1 Conditions to Each Party's Obligations. The respective
obligations of each party to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions:
(a) This Agreement and the Merger shall have been
approved and adopted by the affirmative vote or consent of the holders of at
least a majority of the outstanding shares of Company Common Stock.
(b) All consents, authorizations, orders and approvals of
(or filings or registrations with) any governmental authority or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement and the Distribution Agreement, the failure to
obtain which would prevent the consummation of the Merger or the Spin-off or
have a Material Adverse Effect on Company or a Material Adverse Effect on
Merger Partner, shall have been obtained without the imposition of any
conditions which would have, individually or in the aggregate, a Material
Adverse Effect on Company or a Material Adverse Effect on Merger Partner.
(c) All authorizations, consents, waivers and approvals
from parties to contracts or other agreements to which any of Company or Merger
Partner (or their respective Subsidiaries) is a party, or by which either is
bound, as may be required to be obtained by them in connection with the
performance of this Agreement and the Distribution Agreement, the failure to
obtain which would prevent the consummation of the Merger or the Spin-off or
have, individually or in the aggregate, a Material Adverse Effect on Company
or, individually or in the aggregate, a Material Adverse Effect on Merger
Partner, shall have been obtained.
(d) Early termination shall have been granted or
applicable waiting periods shall have expired under the HSR Act.
(e) No governmental authority or other regulatory body
(including any court of competent jurisdiction) shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of making illegal, materially
restricting or in any way preventing or prohibiting the Merger, the Spin-off or
the transactions contemplated by this Agreement or the Distribution Agreement.
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(f) The Registration Statement shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall be in effect and no
proceedings for such purpose, or under the proxy rules of the SEC pursuant to
the Exchange Act and with respect to the transactions contemplated hereby,
shall be pending before or threatened by the SEC. At the effective date of the
Registration Statement, the Registration Statement shall not contain any untrue
statement of a material fact, or omit to state any material fact necessary in
order to make the statements therein not misleading, and, at the mailing date
of the Proxy Statement and the date of the Stockholders' Meeting, the Proxy
Statement shall not contain any untrue statement of a material fact, or omit
to state any material fact necessary in order to make the statements therein
not misleading.
(g) The parties shall have received a private letter
ruling from the IRS (the "Ruling") to the effect that (i) the Spin-off will
qualify as a tax-free distribution within the meaning of Section 355 of the
Code, (ii) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, (iii) the exchange in the Merger of Company Common
Stock for Merger Partner Common Stock will not give rise to gain or loss for
federal income tax purposes to the stockholders of Company with respect to such
exchange (except to the extent of the cash received), and (iv) neither Company
nor Sub will recognize gain or loss as a consequence of the Merger.
(h) The shares of Merger Partner Common Stock to be
issued pursuant to this Agreement and pursuant to the Company Stock Options
shall have been authorized for listing on the NYSE, subject to official notice
of issuance.
(i) The Spin-off shall have been effected.
7.2 Conditions to Obligations of Company. The obligations of
Company to effect the Merger shall be subject to the satisfaction on or prior
to the Closing Date of each of the following conditions unless waived by
Company:
(a) The representations and warranties of Merger Partner
set forth in this Agreement shall be true and correct in all material respects
at and as of the date of this Agreement and at and as of the Closing Date as
though made at and as of the Closing Date, except to the extent such
representations and warranties (i) speak as of a specified date and except to
the extent contemplated or permitted by this Agreement; or (ii) are already
qualified by materiality, in which event such representations and warranties
shall be true and correct in all respects.
(b) Merger Partner and Sub each shall have performed in
all material respects all covenants and agreements required to be performed by
them under this Agreement at or prior to the Closing Date.
(c) Merger Partner shall furnish Company with a
certificate of its appropriate officers as to compliance with the conditions
set forth in Sections 7.2(a) and (b).
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(d) Company shall have received a letter addressed to
Company, dated the Closing Date, from a nationally recognized appraisal firm,
which letter shall be in form and substance reasonably satisfactory to Company
and shall support the conclusions that, after giving effect to the Merger and
the Spin-off, Company will not be insolvent and will not be rendered insolvent
by the transactions contemplated hereby or by the Distribution Agreement, will
not be left with unreasonably small capital with which to engage in their
businesses and will not have incurred debts beyond its ability to pay such
debts as they mature.
(e) Company shall have received from ▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇
letters dated (i) the effective date of the Registration Statement and (ii) the
Closing Date, with respect to certain financial information regarding Merger
Partner included in the Registration Statement, in each case in form and
substance reasonably satisfactory to Company and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.
(f) Company shall have received opinions, dated the
Closing Date, of the General Counsel of Merger Partner and the General Counsel
of AEGON USA, Inc., in form and substance reasonably satisfactory to Company,
with respect to the matters set forth in Exhibit E.
7.3 Conditions to Obligations of Merger Partner. The obligations
of Merger Partner to effect the Merger shall be subject to the satisfaction on
or prior to the Closing Date of each of the following conditions unless waived
by Merger Partner:
(a) The representations and warranties of Company set
forth in this Agreement shall be true and correct in all material respects at
and as of the date of this Agreement and at and as of the Closing Date as
though made at and as of the Closing Date, except to the extent such
representations and warranties (i) speak as of a specified date and except to
the extent contemplated or permitted by this Agreement or the Distribution
Agreement; and (ii) are already qualified by materiality, in which event such
representations and warranties shall be true and correct in all respects.
(b) Company shall have performed in all material respects
all covenants and agreements required to be performed by it under this
Agreement at or prior to the Closing Date.
(c) Company shall furnish Merger Partner with a
certificate of its appropriate officers as to compliance with the conditions
set forth in Sections 7.3(a) and (b).
(d) Merger Partner shall have received from Ernst & Young
LLP letters dated (i) the date of the Proxy Statement and (ii) the Closing
Date, with respect to certain financial information regarding Company included
in the Proxy Statement, in each case in form and substance reasonably
satisfactory to Merger Partner and customary in scope and substance for letters
delivered by independent public accountants in connection with proxy statements
similar to the Proxy Statement.
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(e) Company shall have used commercially reasonable
efforts to cause each person who Company believes, at the time the Merger is
submitted to a vote of the stockholders of Company, is an "affiliate" for
purposes of Rule 145 under the Securities Act, to deliver to Merger Partner on
or prior to the Closing Date a written agreement in terms satisfactory to
Merger Partner, that such person will not offer to sell, transfer or otherwise
dispose of any of the shares of Merger Partner Common Stock issued to such
person pursuant to the Merger, except in accordance with the applicable
provisions of Rule 145, and except in other transactions that are not in
violation of the Securities Act. Exhibit F sets forth a list of those persons
who the Company believes, at the date hereof, are "affiliates" for purposes of
Rule 145 under the Securities Act.
(f) Merger Partner shall have received an opinion, dated
the Closing Date, of King & Spalding, counsel to Company, in form and substance
reasonably satisfactory to Merger Partner, with respect to the matters set
forth in Exhibit G.
ARTICLE 8
TERMINATION AND ABANDONMENT OF THE MERGER
8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the approval by the
stockholders of Company:
(a) by the mutual written consent of Merger Partner and
Company;
(b) by Company if:
(i) the Merger is not consummated on or before August 31,
1997 (or such later date as shall have been approved by Merger Partner
and Company), unless the failure of such occurrence shall be due to
the failure of Company to perform or observe the covenants, agreements
and conditions hereof to be performed or observed by it at or before
the Effective Time;
(ii) events occur which render impossible the satisfaction
of one or more of the conditions set forth in Sections 7.1 and 7.2 and
such conditions are not waived by Company, unless the failure of such
occurrence shall be due to the failure of Company to perform or
observe the covenants, agreements and conditions hereof to be
performed or observed by it at or before the Effective Time;
(iii) Company is enjoined or restrained by any governmental
authority or other regulatory body (including any court), such
injunction or restraining order prevents the performance by Company of
its obligations hereunder and such injunction shall not have been
withdrawn by the earlier to occur of the date 60 days after the date
on which such injunction was first issued or August 31, 1997;
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(iv) the Board of Directors of Company shall have
exercised any of its rights set forth in Section 6.3;
(v) the stockholders of Company do not approve this
Agreement and the Merger at the Stockholders' Meeting; or
(vi) the Fair Market Value at the Effective Time of one
share of Merger Partner Common Stock (assuming the Effective Time were
to occur on the Closing Date) would be less than $44.475, unless
Merger Partner agrees in such event that the Exchange Ratio shall be
determined by dividing $24.889 by the Fair Market Value at the
Effective Time of one share of Merger Partner Common Stock.
(c) by Merger Partner if:
(i) the Merger is not consummated on or before August 31,
1997 (or such later date as shall have been approved by Company and
Merger Partner), unless the failure of such occurrence shall be due to
the failure of Merger Partner or Sub to perform or observe the
covenants, agreements and conditions hereof to be performed or
observed by them at or before the Effective Time;
(ii) events occur which render impossible the satisfaction
of one or more of the conditions set forth in Sections 7.1 and 7.3 and
such conditions are not waived by Merger Partner, unless the failure
of such occurrence shall be due to the failure of Merger Partner or
Sub to perform or observe the covenants, agreements and conditions
hereof to be performed or observed by them at or before the Effective
Time;
(iii) Merger Partner is enjoined or restrained by any
governmental authority or other regulatory body (including any court),
such injunction or restraining order prevents the performance by
Merger Partner of its obligations hereunder and such injunction shall
not have been withdrawn by the earlier to occur of the date 60 days
after the date on which such injunction was first issued or August 31,
1997;
(iv) the stockholders of Company do not approve this
Agreement and the Merger at the Stockholders' Meeting;
(v) the Board of Directors of Company shall have
withdrawn or materially modified in a manner adverse to Merger Partner
its recommendation of this Agreement and the Merger or the Board of
Directors shall have approved or recommended another Acquisition
Proposal; or
(vi) the Fair Market Value at the Effective Time of one
share of Merger Partner Common Stock (assuming the Effective Time were
to occur on the Closing Date) would be greater than $66.713, unless
the Company agrees in such event that the Exchange Ratio shall
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be determined by dividing $30.545 by the Fair Market Value at the
Effective Time of one share of Merger Partner Common Stock.
8.2 Effect of Termination and Abandonment. In the event of the
termination and abandonment of this Agreement under Section 8.1, this Agreement
shall become void and have no effect, without any liability on the part of any
party or its directors, officers or stockholders except (i) as provided in the
third sentence of Section 6.1(a), and in Sections 6.4 and 6.12 and (ii) to the
extent that such termination results from the willful breach by any party
hereto of any material representation, warranty or covenant hereunder.
ARTICLE 9
MISCELLANEOUS
9.1 Waiver and Amendment. Any term or provision of this Agreement
may be waived in writing at any time by the party which is, or whose
stockholders are, entitled to the benefits thereof, and any term or provision
of this Agreement may be amended or supplemented at any time by action of the
respective Boards of Directors (or its authorized representative) of Merger
Partner or Company without action of the stockholders, whether before or after
the Stockholders' Meeting; provided, however, that after approval of the
stockholders of Company no such amendment shall reduce the amount or change the
form of the consideration to be delivered to Company's stockholders as
contemplated by this Agreement or otherwise materially adversely affect the
interests of such stockholders unless such amendment is approved by Company's
stockholders. No amendment to this Agreement shall be effective unless it has
been executed by Company, Merger Partner and Sub.
9.2 Non-Survival of Representations, Warranties and Agreements.
Except for the agreements contained in Sections 2.2, 2.3, 2.4, 2.5, 2.6, 6.8,
6.14, 6.15, 6.16, 6.17, 6.18, 6.24 and 6.25 and Article 9 and the
representations and warranties contained in Sections 4.35 and 5.29, none of the
representations, warranties and agreements of Company, Merger Partner or Sub in
this Agreement, or in any instrument or certificate delivered pursuant to this
Agreement, shall survive the Merger nor shall their respective stockholders,
directors or officers have any liability to the other after the Effective Time
on account of any breach of warranty or failure or the incorrectness of any of
the representations or warranties contained herein or in any certificate or
other instrument delivered pursuant to this Agreement. The sole right and
remedy arising from a misrepresentation or breach of warranty, from the failure
of any of the conditions of the Merger to be met, or from the failure to
perform any promise or discharge any obligation in this Agreement shall be
termination of this Agreement by the aggrieved party and the remedies provided
in Section 8.2.
9.3 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally, telecopied (if confirmed) or sent by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
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If to Company:
Providian Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
King & Spalding
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Mr. E. ▇▇▇▇▇▇▇ ▇▇▇▇▇, II
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Merger Partner:
(via mail):
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ J. Storm
Telecopy No.: (▇▇-▇▇) ▇▇▇-▇▇▇▇
(via hand delivery):
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ J. Storm
Telecopy No.: (▇▇-▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Merger Sub:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
9.4 Descriptive Headings; Interpretation. The descriptive
headings are for convenience of reference only and shall not control or affect
the meaning or construction of any provision of this Agreement. When a
reference is made in this Agreement to Sections, such reference shall be to a
Section of this Agreement unless otherwise indicated. The phrase "made
available" in this Agreement shall mean that the information referred to has
been made available if requested by the party to whom such information is to be
made available. The phrases "the date of this Agreement", "the date hereof",
and terms of similar import, unless the context otherwise requires, shall be
deemed to refer to December 28, 1996. Notwithstanding anything to the contrary
contained in this Agreement or in any of the Schedules, any information
disclosed on one Schedule shall be deemed to be disclosed in all Schedules
provided that the context makes clear that such information relates to the
other Schedule or Schedules. Certain information set forth in the Schedules is
included solely for informational purposes and may not be required to be
disclosed pursuant to this Agreement. As between Company or Merger Partner, as
applicable, and third parties, the disclosure of any information shall not be
deemed to constitute an acknowledgment that such information is required to be
disclosed in connection with the representations and warranties made by Company
and in this Agreement. The foregoing two sentences shall nevertheless not
affect the rights or obligations of Company or Merger Partner as set forth
herein. In addition, it is understood and agreed that the inclusion of
information in any Disclosure Schedule which is not required to be disclosed in
such Schedule shall not give rise to any inference that any comparable
information is required to be
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disclosed and shall not give rise to any breach by a party due to the failure
to disclose comparable information which is also otherwise not required to be
disclosed.
9.5 Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement. This Agreement shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other parties, it
being understood that the parties need not sign the same counterpart.
9.6 Entire Agreement. This Agreement and the Confidentiality
Agreements contain the entire agreement between Merger Partner, Sub and Company
with respect to the Merger, and supersede all prior arrangements or
understandings with respect to the subject matter hereof. Except as otherwise
contemplated in the covenants listed in Section 9.2 (which covenants shall be
enforceable by the person or persons affected thereby following the Effective
Time), this Agreement is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
9.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD
TO ANY APPLICABLE CONFLICTS OF LAW PROVISIONS THEREOF).
9.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions be consummated as originally
contemplated to the fullest extent possible.
9.9 Enforcement of Agreement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
9.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the preceding
sentence, this Agreement will
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be binding upon, inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns.
9.11 Limited Liability. Notwithstanding any other provision of
this Agreement or the Distribution Agreement, no stockholder, director,
officer, affiliate or representative of Company or Merger Partner shall have
any personal liability in respect of or relating to the covenants, obligations,
representations or warranties of such party under this Agreement or the
Distribution Agreement or in respect of any certificate delivered with respect
hereto or thereto, except to the extent that such person or entity has engaged
in fraud with respect to such matters. Except as set forth in the preceding
sentence, to the fullest extent legally permissible, each of Company and Merger
Partner, for itself and its stockholders, directors, officers and affiliates,
waives and agrees not to seek to assert or enforce any such liability that any
such person otherwise might have pursuant to applicable law.
9.12 CONSENT TO JURISDICTION; SERVICE OF PROCESS.
(a) EACH PARTY IRREVOCABLY CONSENTS AND AGREES THAT ANY
LEGAL ACTION, SUIT OR PROCEEDING BY OR AGAINST IT WITH RESPECT TO ITS RIGHTS,
OBLIGATIONS OR LIABILITIES UNDER THIS AGREEMENT OR ANY OTHER AGREEMENT EXECUTED
IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT BY SUCH PARTY ONLY IN THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE OR, IF (BUT ONLY IF)
SUCH COURT DOES NOT HAVE SUBJECT MATTER JURISDICTION OVER SUCH ACTION, SUIT OR
PROCEEDING (INCLUDING, WITHOUT LIMITATION, CLAIMS FOR INTERIM RELIEF,
COUNTERCLAIMS, ACTIONS WITH MULTIPLE DEFENDANTS AND ACTIONS IN WHICH SUCH PARTY
IS IMPLED). EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT THAT
IT MAY HAVE TO A JURY TRIAL IN ANY LEGAL ACTION, SUIT OR PROCEEDING WITH
RESPECT TO, OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
AGREEMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT.
(b) MERGER PARTNER HEREBY IRREVOCABLY DESIGNATES CT
CORPORATION SYSTEM (IN SUCH CAPACITY, THE "PROCESS AGENT"), WITH AN OFFICE AT
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ AS ITS DESIGNEE, APPOINTEE AND
AGENT TO RECEIVE, FOR AND ON ITS BEHALF SERVICE OF PROCESS IN SUCH JURISDICTION
IN ANY LEGAL ACTION OR PROCEEDINGS WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
AGREEMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT, AND SUCH SERVICE SHALL BE
DEEMED COMPLETE UPON DELIVERY THEREOF TO THE PROCESS AGENT, PROVIDED THAT IN
THE CASE OF ANY SUCH SERVICE UPON THE PROCESS AGENT, THE PARTY EFFECTING SUCH
SERVICE SHALL ALSO DELIVER A COPY THEREOF TO MERGER PARTNER IN THE MANNER
PROVIDED IN SECTION 9.3. MERGER PARTNER SHALL TAKE ALL SUCH ACTION AS MAY BE
NECESSARY TO CONTINUE SAID APPOINTMENT IN FULL FORCE AND EFFECT OR TO APPOINT
ANOTHER AGENT SO
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THAT MERGER PARTNER WILL AT ALL TIMES HAVE AN AGENT FOR SERVICE OF PROCESS FOR
THE ABOVE PURPOSES IN DELAWARE. IN THE EVENT OF THE TRANSFER OF ALL OR
SUBSTANTIALLY ALL OF THE ASSETS AND BUSINESS OF THE PROCESS AGENT TO ANY OTHER
CORPORATION BY CONSOLIDATION, MERGER, SALE OF ASSETS OR OTHERWISE, SUCH OTHER
CORPORATION SHALL BE SUBSTITUTED HEREUNDER FOR THE PROCESS AGENT WITH THE SAME
EFFECT AS IF NAMED HEREIN IN PLACE OF CT CORPORATION SYSTEM. MERGER PARTNER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED AIRMAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS
SET FORTH IN THIS AGREEMENT, SUCH SERVICE OF PROCESS TO BE EFFECTIVE UPON
ACKNOWLEDGMENT OF RECEIPT OF SUCH REGISTERED MAIL. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW. MERGER PARTNER EXPRESSLY ACKNOWLEDGES THAT THE FOREGOING
WAIVER IS INTENDED TO BE IRREVOCABLE UNDER THE LAWS OF THE ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ OF AMERICA.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its respective duly authorized
officers, all as of the date first above written.
AEGON N.V.
By: /s/ ▇▇▇▇▇▇. ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Member of Executive Board
LT MERGER CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
PROVIDIAN CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
Title: Chairman of the Board and
Chief Executive Officer
71
MERGER AGREEMENT LIST OF SCHEDULES AND EXHIBITS
-----------------------------------------------
SCHEDULES
---------
1.3 Further Agreements with Spinco
4.2 Capitalization
4.3 Company Subsidiaries; Voting Trusts
4.5(a) Non-Contravention; Consents -- Violations, Conflicts, Etc.
4.5(b) Non-Contravention and Consents -- Government Notices, Consents and
Approvals
4.7 Statutory Statements
4.8 Absence of Certain Changes or Events
4.9 Taxes and Tax Returns
4.10 Litigation
4.13 Employee Benefit Plans
4.14 Collective Bargaining
4.16 No Violation of Law
4.23 Business Operating Condition
4.24 Assets
4.25 Computer Software
4.26 Intellectual Property
4.27 Permits, Licenses and Franchises
4.28 Insurance Business
4.29 Threats of Cancellation
4.30(c) Guaranty Assessment Projections by State
4.31 Separate Accounts Registered under the 1940 Act; Non-Registered
Separate Accounts
4.32 Funds
4.33 D&O Insurance
5.2 Capitalization
5.3 Aegon N.V. Subsidiaries
5.5 Aegon N.V. or Sub Non-Contravention
5.7 Aegon N.V. Statutory Statements
5.8 Absence of Certain Changes or Events
5.9 Taxes and Tax Returns
5.10 Litigation
5.11 Contracts and Commitments
5.13 Employee Benefit Plans
5.14 Collective Bargaining
5.16 No Violation of Law
5.18 Environmental Liabilities
6.2 Conduct of Business
72
EXHIBITS
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A Agreement and Plan of Distribution between Providian
Corporation and Providian Bancorp, Inc.
B List of Persons Relevant to Definition of "Knowledge of
Company"
C List of Persons Relevant to Definition of "Knowledge of Merger
Partner"
D Guarantee Agreement between Aegon USA, Inc., Providian
Corporation and Providian Bancorp, Inc.
E Opinion Matters to be Addressed by Counsel to Merger Partner
F List of Affiliates for Purposes of Section 7.3(c)
G Opinion Matters to be Addressed by Counsel to Company