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EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
UNITED PARCEL SERVICE, INC.
FIRST INTERNATIONAL BANCORP, INC.
AND
STAG MERGER COMPANY, INC.
DATED AS OF JANUARY 15, 2001
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TABLE OF CONTENTS
Page
1. THE MERGER............................................................1
1.1. Merger...........................................................1
1.2. Effective Time...................................................1
1.3. Effect of Merger.................................................2
1.4. Additional Actions...............................................2
1.5. Tax Consequences.................................................2
2. CONVERSION OF SHARES..................................................2
2.1. Conversion of Shares.............................................2
2.2. Escrow Shares....................................................3
2.3. Assumption of Employee and Director Stock Options................3
2.4. Exchange of Certificates.........................................5
2.5. Closing of Target's Transfer Books...............................7
2.6. Changes in Parent Common Stock...................................7
3. REPRESENTATIONS AND WARRANTIES OF PARENT..............................8
3.1. Corporate Organization...........................................8
3.2. Authority........................................................8
3.3. Capitalization...................................................8
3.4. Information in Disclosure Documents, Registration Statement,
Etc. ............................................................9
3.5. Consents and Approvals; No Violation.............................9
3.6. Reports.........................................................10
3.7. Financial Statements............................................10
3.8. Absence of Certain Changes or Events............................11
3.9. Tax Treatment...................................................11
3.10. Fees............................................................11
3.11. Litigation......................................................11
3.12. Parent Action...................................................11
3.13. Disclosure Letter...............................................11
4. REPRESENTATIONS AND WARRANTIES OF TARGET.............................11
4.1. Corporate Organization..........................................11
4.2. Authority.......................................................12
4.3. Capitalization..................................................12
4.4. Subsidiaries....................................................13
4.5. Information in Disclosure Documents, Registration Statement,
Etc. ...........................................................13
4.6. Consents and Approvals; No Violation............................13
4.7. Reports.........................................................14
4.8. Financial Statements............................................15
4.9. Taxes...........................................................16
4.10. Officers and Employees..........................................17
4.11. Employee Plans..................................................18
4.12. Labor Relations.................................................21
4.13. Material Contracts..............................................23
4.14. Absence of Certain Changes or Events............................24
4.15. Litigation......................................................24
4.16. Compliance with Laws, Orders, Guarantee Programs................24
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4.17. Agreements with Bank Regulators, Etc............................25
4.18. Target Ownership of Stock.......................................26
4.19. Fees............................................................26
4.20. Target Action...................................................26
4.21. Vote Required...................................................26
4.22. Material Interests of Certain Persons...........................26
4.23. Intellectual Property...........................................27
4.24. Interest Rate Risk Management Instruments.......................27
4.25. Insurance.......................................................27
4.26. Real Property and Environmental Matters.........................28
4.27. Rescission of Repurchases.......................................30
4.28. Allowances For Possible Loan Losses.............................30
4.29. Tax Treatment...................................................31
4.30. Call Reports....................................................31
4.31. Disclosure Letter...............................................32
5. COVENANTS............................................................32
5.1. Acquisition Proposals...........................................32
5.2. Interim Operations of Target....................................34
5.3. Employee Matters................................................36
5.4. Access and Information..........................................37
5.5. Certain Filings, Consents and Arrangements......................38
5.6. State Takeover Statutes.........................................39
5.7. Indemnification and Insurance...................................39
5.8. Additional Agreements...........................................40
5.9. Publicity.......................................................40
5.10. Preparation of the Registration Statement and the Proxy
Statement; Target Meeting.......................................40
5.11. Stock Exchange Listings.........................................41
5.12. Shareholder Litigation..........................................41
5.13. Tax-free Reorganization Treatment...............................41
5.14. Letter from Target's Accountants................................42
5.15. Expenses........................................................42
5.16. Adverse Action..................................................42
5.17. Standstill Agreements; Confidentiality Agreements...............42
5.18. Affiliates......................................................42
5.19. Dividends.......................................................43
5.20. Exemption from Liability Under Section 16(b)....................43
5.21. Target Stock Options/Registration Statements on Form S-8........43
5.22. Calculation of Net Book Value...................................43
5.23. Reserved........................................................44
5.24. Calculation of Escrow Balance...................................44
5.25. Calculation of Escrow Shares....................................44
5.26. Repayment of Stockholder Loans..................................45
5.27. Deposit Sale....................................................45
6. CLOSING MATTERS......................................................46
6.1. The Closing.....................................................46
6.2. Documents and Certificates......................................46
7. CONDITIONS...........................................................46
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7.1. Conditions to Each Party's Obligations to Effect the Merger.....46
7.2. Conditions to Obligation of Target to Effect the Merger.........47
7.3. Conditions to Obligation of Parent to Effect the Merger.........48
8. MISCELLANEOUS........................................................50
8.1. Termination.....................................................50
8.2. Expense Reimbursement...........................................52
8.3. Non-Survival of Representations, Warranties and Agreements......53
8.4. Waiver and Amendment............................................53
8.5. Entire Agreement................................................53
8.6. Applicable Law..................................................53
8.7. Certain Definitions.............................................53
8.8. Descriptive Headings............................................59
8.9. Notices.........................................................59
8.10. Counterparts....................................................60
8.11. Assignment......................................................60
8.12. Severability....................................................60
8.13. Void............................................................60
Exhibits
Exhibit A -- Form of Voting Agreement
Exhibit B -- Form of Affiliate Agreement
Exhibit C -- Form of Escrow and Indemnity Agreement
INDEX TO DEFINED TERMS
Term Section
145 Affiliate 5.18(a)
Acquisition Transaction 5.1
ADA 4.12(i)
ADEA 4.12(i)
Affiliate 8.7(a)
Agreement First Paragraph
AIG Insurance Policy 4.16(b)
Allowance 4.28
Amendments 5.3(b)
Applicable Benefit Laws 4.11(b)
BHC Act 4.1
Break-up Fee 8.2(a)
Burdensome Condition 7.1(c)
Calculation Date 5.22
CBD 4.7
Certificate 2.4(a)
Certificate of Merger 1.2
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Class A Common Stock 3.3
Closing 6.1
Closing Date 6.1
Code Recitals
Commission 3.4
Confidentiality Agreement 5.4
Consents 7.1(c)
Constituent Corporations 1.2
Control 8.7(a)
Costs 5.7(a)
Deposit Acquirors 5.27(a)
Deposit Assumption 5.27(a)
Deposit Assumption Agreement 5.27(a)
Deposit Sale Agreement 5.19(b)
DGCL 1.1
Effective Time 1.2
Employee/Consulting Agreements 4.10
Environmental Law 4.26(a)(i)
ERISA Affiliate Plan 8.7(i)
ERISA 8.7(h)
Escrow 2.2(a)
Escrow and Indemnity Agreement 2.2(a)
Escrow Calculations 5.24
Exchange Act 3.5
Exchange Agent 2.4(a)
Exchange Fund 2.4(a)
Ex-Im 4.16(b)
FDIA 4.17
FDIC 4.7
Federal Reserve Board 4.7
FLSA 4.12(i)
FMLA 4.12(i)
GAAP 3.7
Governmental Entity 3.5
Group 8.7(j)
Hazardous Substance 4.26(a)(ii)
HSR Act 3.5
Indemnified Party 5.7(a)
Insurance Amount 5.7(b)
Interim Financial Statements 4.8
Interim Reports 5.2(j)
IRS 4.11
Labor laws 4.12(g)
Market Price 8.7(q)
Material Adverse Effect 8.7(r)
Merger Recitals
Merger Consideration 8.7(s)
NLRB 4.12(a)
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New Option 2.3(a)
ORE 4.28
OSHA 4.12(k)
Parent First Paragraph
Parent Common Stock 3.3
Parent Disclosure Letter 3.13
Parent SEC Reports 3.6
Parent Stock Option Plans 3.3(e)
PBGC 4.11
PCBs 4.26(a)(ii)
Per Share Merger Consolidation 8.7(u)
Per Share Stock Consideration 8.7(y)
Person 8.7(x)
Preferred Stock 3.3
Proxy Statement 3.4
Real Properties 4.26(a)(iii)
Required Regulatory Changes 5.2(h)
Recommended Regulatory Changes 4.17(b)
Regulatory Changes 5.2(h)
Registration Statement 3.4
Regulatory Approval 8.7(y)
Regulatory Financial Statements 4.30
SBA 4.16(b)
Securities Act 3.4
Silvers Agreement 7.3(d)
SROs 4.7
Stockholder Loan 5.26
Sub First Paragraph
Subsidiary 8.7(dd)
Surviving Corporation 1.3(a)
Target First Paragraph
Target Benefit Plan 8.7(gg)
Target Common Stock Recitals
Target Contracts 4.13
Target Disclosure Letter 4.29
Target Employee Plans 4.11
Target Insurance Policies 4.25
Target Intellectual Property 4.23
Target Leases 4.26(f)
Target Meeting 5.10(b)
Target Option 2.3(a)
Target Preferred Stock 4.3
Target Real Properties 4.26(e)
Target SEC Reports 4.7
Target Subsidiaries 4.4
Tax 4.9(a)
Tax Return 4.9(b)
USDA 4.16(b)
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WARN 4.12(n)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of January 15, 2001
("AGREEMENT"), is made by and among UNITED PARCEL SERVICE, INC., a Delaware
corporation ("PARENT"), FIRST INTERNATIONAL BANCORP, INC., a Delaware
corporation ("TARGET"), and STAG MERGER COMPANY, INC., a Delaware corporation
and a wholly owned subsidiary of Parent ("SUB").
WHEREAS, Parent and Target have each determined that it is in the best
interests of their respective shareholders for Sub to merge with and into Target
upon the terms and subject to the conditions set forth in this Agreement (the
"MERGER"), so that Target will continue as the surviving corporation of the
Merger and will become a wholly owned subsidiary of Parent;
WHEREAS, the respective Boards of Directors of Parent, Target and Sub have
approved and declared advisable the Merger, the terms and provisions of this
Agreement and the transactions contemplated hereby;
WHEREAS, the Board of Directors of Target has determined that the Merger
is in furtherance of and consistent with its long-term business strategies and
is fair to and in the best interests of its stockholders;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "CODE"), and this Agreement is
intended to be and is adopted as a plan of reorganization for purposes of
Section 368 of the Code; and
WHEREAS, as a condition to, and contemporaneously with, the execution of
this Agreement, certain holders of Target's common stock, $.10 par value per
share (the "TARGET COMMON STOCK"), have entered into voting agreements in the
form attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
1. THE MERGER
1.1. Merger. Subject to the terms and conditions of this Agreement, the
Certificate of Merger (as defined in Section 1.2) and the DGCL (as hereinafter
defined) at the Effective Time (as defined in Section 1.2), Sub will be merged
with and into Target in accordance with the applicable provisions of the
Delaware General Corporation Law ("DGCL") and the separate corporate existence
of Sub will thereupon cease.
1.2. Effective Time. As soon as practicable after satisfaction or
waiver of all conditions to the Merger, Sub and Target (the "CONSTITUENT
CORPORATIONS") shall cause a Certificate of Merger complying with the
requirements of the DGCL to be filed with the Secretary of State of the State of
Delaware ("CERTIFICATE OF MERGER"). The Merger will become effective upon the
filing of the Certificate of Merger, or at such later time as shall be specified
in such filing ("EFFECTIVE TIME").
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1.3. Effect of Merger. The Merger will have the effects specified in
the DGCL. Without limiting the generality of the foregoing:
(a) Target will be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "SURVIVING CORPORATION") and
will continue to be governed by the laws of the State of Delaware, and the
separate corporate existence of Target and all of its rights, privileges,
powers and franchises, public as well as private, and all its debts,
liabilities and duties as a corporation organized under the DGCL, will
continue unaffected by the Merger.
(b) The Certificate of Incorporation and Bylaws of Target in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until amended in
accordance with applicable law.
(c) The directors and officers of Sub immediately prior to the
Effective Time will be the directors and officers, respectively, of the
Surviving Corporation, from and after the Effective Time, until their
successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the terms
of the Surviving Corporation's Certificate of Incorporation and Bylaws and
the DGCL.
1.4. Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable to
(i) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Target, or (ii) otherwise carry out the purposes of this
Agreement, Target and its officers and directors shall be deemed to have granted
to the Surviving Corporation an irrevocable power of attorney to execute and
deliver all such deeds, assignments or assurances in law or any other acts as
are necessary or desirable to (y) vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of Target or (z) otherwise carry
out the purposes of this Agreement, in all cases consistent with the terms of
this Agreement.
1.5. Tax Consequences. It is intended that the Merger shall constitute
a reorganization within the meaning of Section 368(a) of the Code and that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
2. CONVERSION OF SHARES
2.1. Conversion of Shares.
(a) Subject to Section 2.4(h), at the Effective Time, each share of
Target Common Stock that is issued and outstanding immediately prior to
the Effective Time (other than shares of Target Common Stock owned by
Parent or any direct or indirect wholly-owned subsidiary of Parent) shall
be automatically canceled, retired and converted into the right to receive
the Per Share Stock Consideration (as defined in Section 8.7);
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(b) each share of Target Common Stock that is issued and outstanding
immediately prior to the Effective Time and that is owned by Parent or any
direct or indirect wholly-owned subsidiary of Parent shall be
automatically canceled and retired; and
(c) each share of capital stock of Sub that is issued and
outstanding immediately prior to the Effective Time shall be automatically
converted into and become one fully paid and nonassessable share of common
stock, par value $.10 per share, of the Surviving Corporation.
2.2. Escrow Shares.
(a) Prior to the Effective Time, Parent, the Escrow Agent and the
Stockholder Representative shall enter into the Escrow and Indemnity
Agreement in the form attached hereto as Exhibit C (the "ESCROW AND
INDEMNITY AGREEMENT") to establish an escrow of certain shares of Parent
Common Stock to fund certain indemnification obligations of the
Stockholders of Target (the "ESCROW"). Approval of this Agreement by the
Stockholders of Target at the Target Meeting shall constitute approval of
(i) the establishment of the Escrow contemplated by the Escrow and
Indemnity Agreement, (ii) the appointment of the Escrow Agent and the
Stockholder Representative and (iii) the actions taken by the Stockholder
Representative and the Escrow Agent in accordance with this Agreement and
the Escrow and Indemnity Agreement, as the case may be.
(b) As soon as practicable after the Effective Time, and in any
event within five (5) business days after the Effective Time, the Escrow
Shares (plus a proportionate share of any additional shares of Parent
Common Stock as may be issued with respect to the Escrow Balance upon any
stock splits, stock dividends or other recapitalizations effected by
Parent following the Effective Time), without any act of any Stockholder
of Target, will be deposited in the Escrow with the Escrow Agent, such
deposit to be governed by the terms set forth in the Escrow and Indemnity
Agreement. The portion of the Escrow Shares applicable to each Stockholder
of Target shall be in proportion to the aggregate number of shares of
Parent Common Stock which such holder would otherwise be entitled under
Section 2.1. The Escrow Shares shall be held by the Escrow Agent and
distributed to Parent or the former Stockholders of Target in accordance
with the terms of the Escrow and Indemnity Agreement.
(c) The right to receive the Escrow Shares pursuant to the Escrow
and Indemnity Agreement (i) shall not be transferable by the Stockholders
of the Target otherwise than (A) by will or (B) by the laws of descent and
distribution and (ii) shall not be represented by any form of certificate
or instrument. The books and records of Parent shall reflect the fact that
the Stockholders of Target are the beneficial owners of the Escrow Shares,
subject to the Escrow and Indemnity Agreement.
2.3. Assumption of Employee and Director Stock Options.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of any holder of an option, each option granted by
Target to purchase
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shares of Target Common Stock (any such option to purchase shares of
Target Common Stock being referred to herein as a "TARGET OPTION") under
the Target's 2000 Stock Option Plan that is outstanding and unexercised,
whether vested or unvested, immediately prior to the Effective Time shall
terminate and to the extent that the Per Share Merger Consideration
exceeds the option price per share of such Target Option, the Parent shall
deliver promptly after the Effective Time, and in any event within five
(5) business days after the Effective Time, a cash payment to the optionee
equal to the product of (i) the excess of the value of the Per Share
Merger Consideration over the option price and (ii) the number of
unexercised shares of Target Common Stock subject to such Target Option.
(b) At the Effective Time, by virtue of the Merger and without any
action on the part of any holder of an option, with respect to each Target
Option granted under the Target's Amended and Restated 1996 Stock Option
Plan that is outstanding and unexercised, whether vested or unvested,
immediately prior to the Effective Time, and with respect to each Target
Option listed in Schedule 4.3(d) hereto that is outstanding and
unexercised, whether vested or unvested, immediately prior to the
Effective Time, Parent shall cause to be granted to each such optionee an
option under the Parent Incentive Compensation Plan (each, a "NEW OPTION")
to purchase such number of shares of Class A Common Stock at an exercise
price determined as provided below (and otherwise having a duration equal
to the remaining duration of each such Target Option and other terms and
conditions as each such Target Option except that such New Option shall
also provide for its exercise using shares of Class A Common Stock
pursuant to the terms of the Parent Incentive Compensation Plan whether or
not such Target Option provided for its exercise with Target Common
Stock). The number of shares of Class A Common Stock to be subject to the
New Option and the exercise price per share under the New Option shall be
determined as follows:
(i) the number of shares of Class A Common Stock to be subject
to the New Option shall be equal to the product (rounded down to the
nearest whole share) of (x) the number of shares of Target Common
Stock subject to the Target Option, and (y) the fraction (rounded to
four decimal places) obtained by dividing (1) the Per Share Merger
Consideration by (2) the Market Price; and
(ii) the exercise price per share of Class A Common Stock
under the New Option shall be equal to the result (rounded up to the
nearest penny) of (x) the exercise price per share of Target Common
Stock under the Target Option, divided by (y) the fraction (rounded
to four decimal places) obtained by dividing (1) the Per Share
Merger Consideration by (2) the Market Price.
(c) At the Effective Time, by virtue of the Merger and without any
action on the part of any holder of an option, with respect to each Target
Option granted under the Target's 1994 Incentive Stock Option Plan that is
outstanding and unexercised, whether vested or unvested, immediately prior
to the Effective Time, Parent shall cause to be granted to each such
optionee a New Option to purchase such number of shares of Class A Common
Stock which shall be intended to qualify as an incentive stock option
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under Section 422 of the Code, at such exercise price determined in
accordance with Section 2.3(b), provided, however, that if the methodology
described in Section 2.3(b) above would result in the New Option being
treated as a nonqualified stock option instead of an incentive stock
option, then the method for determining the number of shares of Class A
Common Stock subject to such New Option and the option price of such New
Option shall be the method that is consistent with the requirements of
Section 424(a) of the Code.
2.4. Exchange of Certificates.
(a) Prior to the Effective Time, Parent shall designate an exchange
agent (the "EXCHANGE AGENT") in connection with the Merger pursuant to an
exchange agent agreement providing for, among other things, the matters
set forth in this Section 2.4. At or prior to the Effective Time, Parent
shall deposit, or cause to be deposited, with the Exchange Agent, for the
benefit of the holders of Certificates (as hereinafter defined), (i) a
sufficient number of shares of Parent Common Stock to satisfy Parent's
obligations pursuant to Section 2.1 and (ii) cash in lieu of fractional
shares (such cash and certificates for shares of Parent Common Stock being
hereinafter referred to as the "EXCHANGE FUND") to be issued in exchange
for outstanding shares of Target Common Stock in accordance with the terms
of Section 2.4(h). Except as set forth herein, from and after the
Effective Time, each holder of a certificate that immediately prior to the
Effective Time represented outstanding shares of Target Common Stock
("CERTIFICATE") shall be entitled to receive in exchange therefor, upon
surrender thereof to the Exchange Agent, the Per Share Stock Consideration
for each share of Target Common Stock so represented by the Certificate
surrendered by such holder thereof (less the number of shares of Parent
Common Stock deposited in the Escrow applicable to such holder pursuant to
Section 2.2), together with any dividends or other distributions as
provided in Section 2.4(e). The certificates representing shares of Parent
Common Stock issued in exchange for outstanding shares of Target Common
Stock shall be properly issued and countersigned and executed and
authenticated, as appropriate.
(b) Promptly after the Effective Time, and, in any event, within
five (5) business days thereafter, Parent shall cause the Exchange Agent
to mail to each record holder of a Certificate a notice and letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificate shall pass, only upon proper delivery
of the Certificate to the Exchange Agent) advising such holder of the
effectiveness of the Merger and the procedures to be used in effecting the
surrender of the Certificate in exchange for the Per Share Stock
Consideration. Target shall have the right to review both the letter of
transmittal and the instructions prior to the Effective Time and provide
reasonable comments thereon. Upon surrender to the Exchange Agent of a
Certificate, together with such letter of transmittal duly executed and
completed in accordance with the instructions thereon, and such other
documents as may reasonably be requested, the Exchange Agent shall
promptly deliver to the person entitled thereto (i) a certificate
representing that number of whole shares of Parent Common Stock to which
such holder of Target Common Stock shall have become entitled pursuant to
the provisions of Section 2.1 (less the number of shares of Parent Common
Stock deposited in the Escrow applicable to such holder pursuant to
Section 2.2), and (ii) a check in the amount of cash in lieu of fractional
shares, if any, which such holder has the right to
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receive pursuant to the provisions of Section 2.4(h) in respect of the
Certificate surrendered by such holder thereof, and such Certificate shall
forthwith be canceled.
(c) If delivery of all or part of the Per Share Stock Consideration
is to be made to a person other than the person in whose name a
surrendered Certificate is registered, it shall be a condition to such
delivery or exchange that the Certificate surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer and that the
person requesting such delivery or exchange shall have paid any transfer
and other taxes required by reason of such delivery or exchange in a name
other than that of the registered holder of the Certificate surrendered or
shall have established to the reasonable satisfaction of the Exchange
Agent that such tax either has been paid or is not payable.
(d) Subject to Section 2.4(e), until surrendered and exchanged in
accordance with this Section 2.4, each Certificate shall, after the
Effective Time, represent solely the right to receive the Per Share Stock
Consideration, multiplied by the number of shares of Target Common Stock
evidenced by such Certificate, together with any dividends or other
distributions as provided in Section 2.4(e), and shall represent no other
rights. From and after the Effective Time, Parent and Surviving
Corporation shall be entitled to treat such Certificates that have not yet
been surrendered for exchange as evidencing the ownership of the aggregate
Per Share Stock Consideration into which the shares of Target Common Stock
represented by such Certificates may be converted, notwithstanding any
failure to surrender such Certificates. Three hundred sixty (360) days
following the Effective Time, the Exchange Agent shall deliver to the
Surviving Corporation any shares of Parent Common Stock and any funds
(including any interest received with respect thereto) in the Exchange
Fund that have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to Parent (subject to
abandoned property, escheat or other similar laws) with respect to the Per
Share Stock Consideration, cash in lieu of fractional shares and unpaid
dividends and distributions thereon (as determined in accordance with
Section 2.4(e)) deliverable or payable upon due surrender of their
Certificates. Neither Exchange Agent nor any party hereto shall be liable
to any holder of shares of Target Common Stock for any Per Share Stock
Consideration (or dividends, distributions or interest with respect
thereto) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) Whenever a dividend or other distribution is declared by Parent
on the Parent Common Stock, the record date for which is at or after the
Effective Time, the declaration shall include dividends or other
distributions on all shares issuable pursuant to this Agreement (without
interest thereon), provided that no dividends or other distributions
declared or made with respect to Parent Common Stock shall be paid to the
holder of any unsurrendered Certificate with respect to the share(s) of
Parent Common Stock represented thereby unless and until the holder of
such Certificate shall surrender such Certificate in accordance with this
Section 2.
(f) If any Certificate shall have been lost, stolen or destroyed,
the Exchange Agent shall deliver in exchange for such lost, stolen or
destroyed certificate, upon the making of an affidavit of that fact by the
holder thereof in form satisfactory to the Exchange Agent, the Per Share
Stock Consideration, as may be required pursuant to
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this Agreement; provided, however, that the Exchange Agent may, in its
sole discretion and as a condition precedent to the delivery of the Per
Share Stock Consideration to which the holder of such Certificate is
entitled as a result of the Merger, require the owner of such lost, stolen
or destroyed certificate to deliver a bond in such sum as it may direct as
indemnity against any claim that may be made against Target, Parent, the
Surviving Corporation or the Exchange Agent or any other party with
respect to the certificate alleged to have been lost, stolen or destroyed.
(g) Holders of unsurrendered Certificates will not be entitled to
vote at any meeting of Parent stockholders.
(h) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Parent Common
Stock shall be issued upon the surrender for exchange of a Certificate or
Certificates. No dividends or distributions of Parent shall be payable on
or with respect to any fractional share and any such fractional share
interest will not entitle the owner thereof to vote or to any rights of
stockholders of Parent. In lieu of any such fractional shares, holders of
Certificates otherwise entitled to fractional shares shall be entitled to
receive promptly from the Exchange Agent a cash payment in an amount equal
to the fraction of such share of Parent Common Stock to which such holder
would otherwise be entitled multiplied by the Market Price (as defined in
Section 8.7). Payments of any cash in lieu of fractional shares shall be
made without interest thereon.
2.5. Closing of Target's Transfer Books. Immediately after the
Effective Time, the stock transfer books of Target shall be closed. In the event
of a transfer of ownership of Target Common Stock which is not registered in the
transfer records of Target, the Per Share Stock Consideration to be distributed
pursuant to this Agreement may be delivered to a transferee (less the number of
Shares of Parent Common Stock deposited in the Escrow applicable to the holder
of such shares of Parent Common Stock at the Effective Time pursuant to Section
2.2), if a Certificate is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by payment of any
applicable stock transfer taxes. Parent and the Exchange Agent shall be entitled
to rely upon the stock transfer books of Target to establish the identity of
those persons entitled to receive the Per Share Stock Consideration specified in
this Agreement for their shares of Target Common Stock, which books shall be
conclusive with respect to the ownership of such shares. In the event of a
dispute with respect to the ownership of any such shares, the Surviving
Corporation and the Exchange Agent shall be entitled to deposit any Per Share
Stock Consideration represented thereby in escrow with an independent party and
thereafter be relieved with respect to any claims to such Per Share Stock
Consideration.
2.6. Changes in Parent Common Stock. If, between the date of this
Agreement and the Effective Time, the shares of Parent Common Stock shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or if a stock
dividend thereon shall be declared with a record date within said period, the
Per Share Stock Consideration shall be adjusted accordingly.
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15
3. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby represents and
warrants to Target that:
3.1. Corporate Organization. Each of Parent and Sub is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified to do business as a foreign
corporation in each jurisdiction in which its ownership or lease of property or
the nature of the business conducted by it makes such qualification necessary,
except for such jurisdictions in which the failure to be so qualified would not
have a Material Adverse Effect (as defined in Section 8.7). Parent has the
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as it is now being conducted. Parent has
heretofore made available to Target true and complete copies of its certificate
of incorporation and bylaws, as amended to date.
3.2. Authority. Each of Parent and Sub has the requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly approved by the Board of Directors of Parent and Sub and no other corporate
proceedings on the part of Parent or Sub are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly executed and delivered by, and constitutes the valid and binding
obligation of, each of Parent and Sub enforceable against each of them in
accordance with its terms, except as enforceability thereof may be limited by
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceedings may be brought.
3.3. Capitalization. As of the date hereof, the authorized capital
stock of Parent consists of 4,600,000,000 shares of Class A Common Stock par
value $.01 per share (the "CLASS A COMMON STOCK"), 5,600,000,000 shares of Class
B Common Stock par value $.01 per share (the "PARENT COMMON STOCK") and
200,000,000 shares of preferred stock (the "PREFERRED STOCK"). As of the close
of business on December 31, 2000:
(a) 935,873,745 shares of Class A Common Stock were duly authorized,
validly issued and outstanding, fully paid and nonassessable;
(b) 198,819,384 shares of Parent Common Stock were duly authorized,
validly issued and outstanding, fully paid and nonassessable;
(c) no shares of Preferred Stock were issued and outstanding;
(d) no shares of Class A Common Stock, Parent Common Stock or
Preferred Stock were held in Parent's treasury; and
(e) 29,314,802 shares of Class A Common Stock were reserved for
issuance upon exercise of employee stock options under Parent's various
stock option plans (the "PARENT STOCK OPTION PLANS").
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16
Except as set forth in this Section 3.3, there are no outstanding subscriptions,
options, warrants, rights, convertible securities or any other agreements or
commitments of any character relating to the issued or unissued capital stock or
other securities of Parent obligating Parent to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock of Parent or
obligating Parent to grant, extend or enter into any subscription, option,
warrant, right, convertible security or other similar agreement or commitment.
Except as provided in this Agreement, there are no voting trusts or other
agreements or understandings to which Parent or any Parent subsidiary is a party
with respect to the voting of the capital stock of Parent. All of the shares of
Parent Common Stock issuable in exchange for Target Common Stock at the
Effective Time in accordance with this Agreement and all of the shares of Class
A Common Stock issuable upon exercise of New Options will be, when so issued,
duly authorized, validly issued, fully paid and nonassessable and will not be
subject to preemptive rights.
3.4. Information in Disclosure Documents, Registration Statement, Etc.
None of the information with respect to Parent provided by Parent for inclusion
in (i) the Registration Statement to be filed with the Securities and Exchange
Commission (the "COMMISSION") by Parent on Form S-4 under the Securities Act of
1933, as amended (the "SECURITIES ACT"), for the purpose of registering the
shares of Parent Common Stock to be issued in the Merger (the "REGISTRATION
STATEMENT") and (ii) any proxy statement of Target ("PROXY STATEMENT") required
to be mailed to Target's Stockholders in connection with the Merger will, in the
case of the Proxy Statement or any amendments or supplements thereto, at the
time of the mailing of the Proxy Statement and any amendments or supplements
thereto, and at the time of the Target Meeting (as defined in Section 5.10(b)),
or, in the case of the Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement will comply as to form in all material
respects with the provisions of the Securities Act and the rules and regulations
promulgated thereunder.
3.5. Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by Parent and Sub nor the consummation by Parent and
Sub of the transactions contemplated hereby will (a) conflict with or result in
any breach of any provision of its certificate of incorporation or bylaws, (b)
violate, conflict with, constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in the
creation of any lien or other encumbrance upon any of the properties or assets
of Parent or any Significant Subsidiary of Parent under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Parent or
any Significant Subsidiary of Parent is a party or to which it or any of Parent
or any of Parent's Significant Subsidiary's properties or assets are subject,
except for such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens or other encumbrances, which, either
individually or in the aggregate, will not have a Material Adverse Effect, (c)
constitute or result in a violation of any law, rule, ordinance or regulation or
judgment, decree, order, award or governmental or non-governmental permit or
license to which Parent is subject, except for the consents, approvals and
notices set forth below and except for such violations which, either
individually or in the aggregate, will not have a Material Adverse Effect, or
(d) require any consent, approval, authorization or permit of or from, or filing
with or
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notification to, any court, governmental authority or other regulatory or
administrative agency or commission ("GOVERNMENTAL ENTITY"), except (i) pursuant
to the Securities Act and the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), (ii) filing the Certificate of Merger, (iii) filings required
under the securities or blue sky laws of the various states, (iv) the filing of,
and approval by the Connecticut Commissioner of, an Acquisition Statement
pursuant to Conn. Gen. Statutes Section 36a-184 and such other filings, notices,
reports and other matters as may be required in connection therewith, (v) for
those required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), (vi) filings pursuant to the rules of the New York
Stock Exchange, (vii) filings and approvals pursuant to any applicable state
takeover law, or (viii) consents, approvals, authorizations, permits, filings or
notifications which, if not obtained or made will not, individually or in the
aggregate, have a Material Adverse Effect.
3.6. Reports. Since January 1, 1998, Parent, and its predecessor,
United Parcel Service of America, Inc., has timely filed all reports,
registrations and statements, together with any required amendments thereto,
that it was required to file with the Commission under Sections 12(b), 12(g),
13(a) or 14(a) of the Exchange Act, including, but not limited to Forms 10-K,
Forms 10-Q and proxy statements ("PARENT SEC REPORTS"), and all other reports
and statements required to be filed by Parent, or such predecessor, including,
without limitation, any report or statement required to be filed pursuant to
laws, rules or regulations of the United States, any state, or any Governmental
Entity, and has paid all fees and assessments due and payable in connection
therewith, except where the failure to file such report, registration or
statement, or to pay such fees and assessments, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
As of their respective dates, the Parent SEC Reports complied in all material
respects with the requirements of the Commission 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 to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.7. Financial Statements. The audited consolidated financial
statements of Parent included in Parent's annual report on Form 10-K as filed
with the Commission for the year ended December 31, 1999, and the unaudited
interim financial statements of Parent as of and for the nine months ended
September 30, 2000 included in the quarterly report on Form 10-Q as filed with
the Commission, have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and fairly present, in all material
respects, the consolidated financial position of Parent and Parent's
consolidated Subsidiaries as of the dates thereof and the results of their
operations and cash flows for the periods then ended, subject, in the case of
the unaudited interim financial statements, to normal year-end and audit
adjustments and any other adjustments described therein, and are derived from
the books and records of Parent and Parent's consolidated Subsidiaries, which
are complete and accurate in all material respects. There exist no liabilities
of Parent and its consolidated Subsidiaries, contingent or otherwise, of a type
required to be disclosed in accordance with GAAP, except (i) as disclosed in the
Parent SEC Reports, (ii) for liabilities incurred since the latest date of the
Parent SEC Reports in the ordinary course of business, and (iii) for liabilities
which, either individually or in the aggregate, have not had and could not
reasonably be expected to have a Material Adverse Effect.
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18
3.8. Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, since December 31, 1999, Parent and its Significant Subsidiaries have
conducted their business only in the ordinary course or as disclosed in any
Parent SEC Reports, and, except as may be disclosed in any Parent SEC Reports,
there has not been any change or event having a Material Adverse Effect on
Parent.
3.9. Tax Treatment. Parent has not taken or agreed to take any action
that could reasonably be expected to cause the Merger to fail to qualify as a
reorganization under Section 368(a) of the Code.
3.10. Fees. Except for the fees paid and payable to Goldman, Sachs &
Co., neither Parent nor any of Parent's Subsidiaries has paid or will become
obligated to pay any fee or commission to any broker, finder or intermediary in
connection with the transactions contemplated by this Agreement.
3.11. Litigation. There is no claim, suit, action, proceeding or
investigation pending, or, to the knowledge of Parent, threatened, against, or
affecting Parent or any Significant Subsidiary of Parent that has had or could
reasonably be expected to have, a material and adverse effect on Parent's or
Sub's ability to execute and deliver this Agreement or consummate the
transactions contemplated herein.
3.12. Parent Action. The Board of Directors of Parent (at a meeting
duly called, constituted and held) has by the requisite vote of all directors
present (a) determined that the Merger is advisable and in the best interests of
Parent and its stockholders and (b) approved this Agreement and the transactions
contemplated by this Agreement.
3.13. Disclosure Letter. Prior to the execution and delivery of this
Agreement, Parent has delivered to Target a schedule (the "PARENT DISCLOSURE
LETTER") setting forth, among other things, items the disclosure of which is
necessary or appropriate either in response to an express disclosure requirement
contained in a provision hereof or as an exception to Parent's representations
or warranties contained in Section 3 or to Parent's covenants contained in
Section 5; provided, however, that notwithstanding anything in this Agreement to
the contrary, the mere inclusion of an item in the Parent Disclosure Letter as
an exception to a representation or warranty shall not be deemed an admission by
a party that such item represents a material exception or material fact, event
or circumstance or that such item has had or could reasonably be expected to
have a Material Adverse Effect with respect to Parent or any of its
Subsidiaries.
4. REPRESENTATIONS AND WARRANTIES OF TARGET. Target hereby represents and
warrants to Parent that:
4.1. Corporate Organization. Target is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified to do business as a foreign corporation in each
jurisdiction in which its ownership or lease of property or the nature of the
business conducted by it makes such qualification necessary, except for such
jurisdictions in which the failure to be so qualified have not had, and could
not reasonably be expected to have, a Material Adverse Effect. Target is
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended (the "BHC ACT"). Target has the
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requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as it is now being conducted. Target has
heretofore made available to Parent true and complete copies of its certificate
of incorporation and bylaws, as amended to date.
4.2. Authority. Target has the requisite corporate power and authority
to execute and deliver this Agreement and, except for any required approval of
Target's Stockholders, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated herein have been duly approved by the Board of
Directors of Target and no other corporate proceedings on the part of Target are
necessary to authorize this Agreement or to consummate the transactions so
contemplated, subject only to approval by the Stockholders of Target as
described in Section 5.10(b) of this Agreement. This Agreement has been duly
executed and delivered by, and constitutes the valid and binding obligation of
Target, enforceable against Target in accordance with its terms, except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and other similar laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceedings may be brought.
4.3. Capitalization. As of the date hereof, the authorized capital
stock of Target consists of 12,000,000 shares of Target Common Stock and
2,000,000 shares of preferred stock, $.10 par value per share ("TARGET PREFERRED
STOCK"). As of the close of business on January 12, 2001, (i) 8,283,223 shares
of Target Common Stock were duly authorized, validly issued and outstanding,
fully paid and nonassessable, (ii) 9,283,512 shares of Target Common Stock would
have been issued and outstanding if all outstanding stock options had been
exercised as of the date hereof, and (iii) no shares of Target Preferred Stock
were issued or outstanding. Except as set forth in this Section 4.3 or as set
forth in the Target Disclosure Letter, there are no shares of capital stock of
Target authorized, issued or outstanding and there are no outstanding
subscriptions, options, warrants, rights, convertible securities or any other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of Target, obligating Target to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of capital
stock of Target or obligating Target to grant, extend or enter into any
subscription, option, warrant, right, convertible security or other similar
agreement or commitment. Except as set forth in the Target Disclosure Letter,
there are no voting trusts or other agreements or understandings to which Target
or any of Target's Subsidiaries is a party with respect to the voting of the
capital stock of Target. As of the date of this Agreement:
(a) there were outstanding under the 1994 Incentive Stock Option
Plan options to purchase 116,188 shares of Target Common Stock, which have
a weighted average exercise price of $4.27;
(b) there were outstanding under the Amended and Restated 1996 Stock
Option Plans options to purchase 847,851 shares of Target Common Stock,
which have a weighted average exercise price of $9.31;
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20
(c) there were outstanding under the 2000 Stock Option Plan options
to purchase 8,250 shares of Target Common Stock which have a weighted
average exercise price of $8.69; and
(d) there were 28,000 options outstanding which were previously
granted to those individuals, in the amounts, at the exercise prices and
exercise periods described in Section 4.3 of the Target Disclosure Letter.
4.4. Subsidiaries. Section 4.4 of the Target Disclosure Letter sets
forth the name and state of incorporation of each Subsidiary of Target
(including all Subsidiaries that are not consolidated with Target for financial
reporting purposes) (collectively, the "TARGET SUBSIDIARIES"). Each of the
Target Subsidiaries is a bank, a corporation or other business entity duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization and is duly qualified
to do business as a foreign corporation or foreign business entity in each
jurisdiction in which its ownership or lease of property or the nature of the
business conducted by it makes such qualification necessary, except for such
jurisdictions in which the failure to be so qualified has not had, and could not
be reasonably expected to have, a Material Adverse Effect. Each of the Target
Subsidiaries has the requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its businesses as they are now
being conducted. Except as set forth in the Target Disclosure Letter, all
outstanding shares of capital stock of each Target Subsidiary is owned by Target
or another Target Subsidiary and are validly issued, fully paid and
nonassessable, are not subject to preemptive rights and are owned free and clear
of all liens, claims and encumbrances. There are no outstanding subscriptions,
options, warrants, rights, convertible securities or any other agreements or
commitments of any character relating to the issued or unissued capital stock or
other securities of any Target Subsidiary obligating any Target Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold additional
shares of its capital stock or obligating any Target Subsidiary to grant, extend
or enter into any subscription, option, warrant, right, convertible security or
other similar agreement or commitment.
4.5. Information in Disclosure Documents, Registration Statement, Etc.
None of the information with respect to Target or any Target Subsidiary provided
by Target for inclusion in the Proxy Statement or the Registration Statement
will, in the case of the Proxy Statement or any amendments or supplements
thereto, at the time of the mailing of the Proxy Statement and any amendments or
supplements thereto, and at the time of the Target Meeting (as defined in
Section 5.10(b)), or, in the case of the Registration Statement, at the time it
becomes effective, contain any untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
promulgated thereunder. Target has heretofore made available to Parent true and
complete copies of the certificate of incorporation (or articles of
organization) and bylaws of each Target Subsidiary, as amended to date.
4.6. Consents and Approvals; No Violation. Except as set forth in the
Target Disclosure Letter, neither the execution and delivery of this Agreement
by Target nor the consummation by Target of the transactions contemplated hereby
will:
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(a) conflict with or result in any breach of any provision of the
certificate of incorporation or bylaws of Target or any Target Subsidiary,
(b) violate, conflict with, constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in the
creation of any lien or other encumbrance upon any of the properties or assets
of Target or any Target Subsidiary under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Target or any Target
Subsidiary is a party or to which they or any of their respective properties or
assets are subject, except for such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens or other encumbrances, which,
either individually or in the aggregate, have not had, and could not be
reasonably expected to have, a Material Adverse Effect,
(c) constitute or result in a violation of any law, rule, ordinance or
regulation or judgment, decree, order, award or governmental or non-governmental
permit or license to which Target or any Target Subsidiary is subject, except
for the consents, approvals and notices set forth below and except for such
violations which, either individually or in the aggregate, have not had, and
could not be reasonably expected to have, a Material Adverse Effect,
(d) assuming that all required notice filings are made in accordance with
such loan guaranty programs, affect Target's or any Target Subsidiary's status
as a "lender," "certified lender" or "preferred lender" under any of the SBA,
USDA or Ex-Im (each as defined in Section 4.16(b)) loan or loan guarantee
programs, or
(e) require any consent, approval, authorization or permit of or from, or
filing with or notification to, any Governmental Entity, except (i) pursuant to
the Exchange Act and the Securities Act, (ii) for the filing of the Certificate
of Merger, (iii) for filings required under the securities or blue sky laws of
the various states, (iv) for the applications, notices, reports and other
filings required to be made in connection with obtaining the Regulatory
Approvals, (v) for the applications, notices, reports and other filings required
to be made in connection with Target's satisfaction of the condition set forth
in Section 7.3(i), (vi) filings and approvals pursuant to any applicable state
takeover law, (vii) for those required by the HSR Act, (viii) pursuant to the
rules of the NASDAQ, (ix) filings, notices, and approvals set forth in Section
4.6 of the Target Disclosure Letter or (x) consents, approvals, authorizations,
permits, filings or notifications which, if not obtained or made will not,
individually or in the aggregate, have a Material Adverse Effect.
4.7. Reports. Except as set forth in Section 4.7 of the Target
Disclosure Letter, since December 31, 1996, Target and each Target Subsidiary
have timely filed all reports, registrations and statements, together with any
required amendments thereto, that they were required to file with (i) the
Commission under Section 12(b), 12(g), 13(a) or 14(a) of the Exchange Act,
including, but not limited to Forms 10-K, Forms 10-Q and proxy statements
("TARGET SEC REPORTS"), (ii) the Board of Governors of the Federal Reserve
System (the "FEDERAL RESERVE BOARD"), (iii) the Federal Deposit Insurance
Corporation ("FDIC"), (iv) the Connecticut Banking Department (the "CBD"), (v)
any other Governmental Entity, and (iv) any self regulated organization (an
"SRO"), and all other reports and statements required to be filed by Target and
the Target Subsidiaries, including, without limitation, any report or statement
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required to be filed pursuant to laws, rules or regulations of the United
States, any state, or any Governmental Entity, and have paid all fees and
assessments due and payable in connection therewith, except where the failure to
file such report, registration or statement, or to pay such fees and
assessments, either individually or in the aggregate, has not had, and could not
reasonably be expected to have, a Material Adverse Effect. As of their
respective dates, the Target SEC Reports complied with the requirements of the
Commission in all material respects, 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 to make the statements therein, in light of the circumstance under
which they were made, not misleading.
4.8. Financial Statements. The audited consolidated financial
statements of Target included in Target's annual report on Form 10-K as filed
with the Commission for the year ended December 31, 1999, and the unaudited
interim financial statements of Target (the "INTERIM FINANCIAL STATEMENTS") as
of and for the nine months ended September 30, 2000, included in a quarterly
report on Form 10-Q as filed with the Commission, have been prepared in
accordance with GAAP applied on a consistent basis and consistent with past
practices (except as may be indicated therein or in the notes thereto) and
fairly present, in all material respects, the consolidated financial position of
Target and the Target Subsidiaries as of the dates thereof and the results of
their operations and cash flows for the periods then ended, subject, in the case
of the unaudited interim financial statements, to normal year-end and audit
adjustments and any other adjustments described therein, and are derived from
the books and records of Target and the Target Subsidiaries, which are complete
and accurate in all material respects and have been maintained in all material
respects in accordance with applicable laws and regulations. The audited and
unaudited consolidated financial statements of Target to be included in Target's
reports on Forms 10-K and 10-Q, respectively, to be filed with the Commission
for the years and quarters ending between the date hereof and the Effective Time
(if any) will be prepared in accordance with GAAP applied on a consistent basis
and consistent with past practices (except as may be indicated therein or in the
notes thereto) and will fairly present, in all material respects, the
consolidated financial position of Target and the Target Subsidiaries as of the
dates thereof and the results of their operations and cash flows for each
applicable period, subject, in the case of the unaudited financial statements to
be filed with Forms 10-Q, to normal year-end and audit adjustments and any other
adjustments described therein, and will be derived from the books and records of
Target and the Target Subsidiaries, which will be complete and accurate in all
material respects and will have been maintained in all material respects in
accordance with applicable laws and regulations. There exist no liabilities of
Target and the Target Subsidiaries, contingent or otherwise of a type required
to be disclosed in accordance with GAAP, except (i) as disclosed in the Target
SEC Reports or (ii) for liabilities which, either individually or in the
aggregate, have not had, and could not reasonably be expected to have, a
Material Adverse Effect. Target's reserve for possible loan losses as shown in
its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
2000 was adequate, within the meaning of GAAP and safe and sound banking
practices.
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4.9. Taxes.
(a) "TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Code Section 59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or
other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
(b) "TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
(c) Each of the Target and Target Subsidiaries has filed all Tax
Returns that it was required to file except where the failure to file any
such returns will not, or could not reasonably be expected to,
individually or in the aggregate, (i) result in the imposition of any
material tax or material penalty or (ii) materially limit the Target's or
any Target Subsidiary's ability to conduct its business in any
jurisdiction. All such Tax Returns were correct and complete in all
material respects. All Taxes owed by any of the Target and Target
Subsidiaries (whether or not shown on any Tax Return) have been paid. None
of the Target and Target Subsidiaries currently is the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever
been made or, to Target's knowledge, threatened by an authority in a
jurisdiction where any of the Target and Target Subsidiaries does not file
Tax Returns that it is or may be subject to taxation in that jurisdiction.
There are no security interests on any of the assets of any of the Target
or Target Subsidiaries that arose in connection with any failure (or
alleged failure) to pay any Tax.
(d) Each of the Target and Target Subsidiaries has withheld and paid
all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party except where the failure to withhold
such amounts will not, or could not reasonably be expected to,
individually or in the aggregate, (i) result in the imposition of any
material tax or material penalty or (ii) materially limit the Target's or
any Target Subsidiary's ability to conduct its business in any
jurisdiction.
(e) Except as set forth in Section 4.9(e) of the Target Disclosure
Letter, there is no dispute or claim concerning any Tax liability of any
of the Target and Target Subsidiaries raised or, to the knowledge of
Target, threatened by any authority in writing. Section 4.9(e) of the
Target Disclosure Letter lists all income Tax Returns filed with respect
to any of the Target and Target Subsidiaries for taxable periods ended on
or after December 31, 1993, indicates those income Tax Returns that have
been audited, and indicates those income Tax Returns that currently are
the subject of audit. Target and Target Subsidiaries have made available
to Parent correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed
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against or agreed to by any of the Target and Target Subsidiaries since
December 31, 1993.
(f) None of the Target and Target Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
(g) None of the Target and Target Subsidiaries has filed a consent
under Section 341(f) of the Code concerning collapsible corporations. None
of the Target and Target Subsidiaries has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of
the Code during the applicable period specified in Section
867(c)(1)(A)(ii) of the Code. Each of the Target and Target Subsidiaries
has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal
income Tax within the meaning of Section 6662 of the Code. None of the
Target and Target Subsidiaries is a party to any Tax allocation or sharing
agreement. None of the Target and Target Subsidiaries (A) has been a
member of an affiliated group filing a consolidated federal income Tax
Return (other than a group the common parent of which was the Target) or
(B) has any liability for the Taxes of any Person (other than any of the
Target and Target Subsidiaries) under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(h) The unpaid Taxes of the Target and Target Subsidiaries did not,
as of September 30, 2000, exceed the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the
balance sheet (disregarding any notes thereto) included in the Target's
unaudited interim financial statements as of and for the nine months ended
September 30, 2000 included in the Form 10-Q as filed with the Commission.
4.10. Officers and Employees. Section 4.10 of the Target Disclosure
Letter contains a true and complete list, as of the date hereof, of all of the
(a) officers, (b) employees (whether full-time, part-time or otherwise) and (c)
consultants or independent contractors of each of the Target and each Target
Subsidiary, in each case, specifying, by individual, their position, annual
salary, hourly wages, consulting or other independent contractor fees, date of
birth, date of hire, social security number, home address, work location, length
of service, hours of service, tax withholding history, other amounts paid,
benefits provided and any other information reasonably requested by Parent.
Section 4.10 of the Target Disclosure Letter contains a true and complete list
of all holders of any options, warrants or other rights to purchase Target
Common Stock or Target Preferred Stock specifying the type of options, warrant
or other right, the class of security for which it may be exercised, the number
of shares of such class of security, the exercise price, the expiration date,
the vesting provisions, and the number of shares of such class of security with
respect to which such option has been exercised. Target has made available to
Parent true, correct and complete copies of each option agreement in respect of
the options listed in Section 4.10 of the Target Disclosure Letter. Except as
set forth in Section 4.10 of the Target Disclosure Letter, none of the Target or
the Target Subsidiaries is a party to or bound by any contracts, consulting
agreements, termination or severance agreements, change of control agreements or
any other agreements respecting the terms and conditions of employment or of an
independent contract relationship in respect to any officer, former officer,
employee or former
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employee, consultant or independent contractor (collectively, the
"EMPLOYEE/CONSULTING AGREEMENTS"). Target has made available to Parent true,
correct and complete copies of each such Employee/Consulting Agreement. Target
has made available to Parent true, correct and complete copies of all
confidentiality agreements between Target or any Target Subsidiary and an
officer, employee, or former employee, consultant or independent contractor of
Target or any Target Subsidiary. None of the Target and the Target Subsidiaries
has received a claim from any Governmental Entity within the last six (6) years
to the effect that Target or any Target Subsidiary has improperly classified as
an independent contractor any person named in the Target Disclosure Letter. None
of the Target and Target Subsidiaries has made any commitments to any such
officers, employees or former employees, consultants or independent contractors
with respect to compensation, promotion, retention, termination, severance or
similar matters in connection with the transactions contemplated by this
Agreement or otherwise. Except as set forth in Section 4.10 of the Target
Disclosure Letter, all officers and employees of the Target and Target
Subsidiaries are active on the date hereof.
4.11. Employee Plans.
(a) Section 4.11 of the Target Disclosure Letter contains a true and
complete list of each Target Benefit Plan sponsored, maintained or
contributed to by any Target or Target Subsidiary within the last six (6)
calendar years. Each Target Benefit Plan currently in effect is identified
as a "current plan" on the Target Disclosure Letter and any special tax
status enjoyed by such plan is noted on the Target Disclosure Letter.
(b) With respect to each current Target Benefit Plan identified on
the Target Disclosure Letter, Target has heretofore made available to
Parent true and complete copies of the plan documents and any amendments
thereto (or if the plan is not written, a written description thereof),
any related trust or other funding vehicle, annual reports required to be
filed with any Governmental Entity with respect to such plan, actuarial
reports, funding and financial information returns and statements
contracts with any parties providing services or insurance to such plan,
all material internal memoranda regarding such plans, copies of material
correspondence with all Governmental Entities, plan summaries or summary
plan descriptions, summary annual reports, booklets and personnel manuals
and any other reports or summaries required under ERISA, the Code and all
other applicable laws, regulations, orders or other legislative,
administrative or judicial promulgations, including those of a
jurisdiction outside the United States of America ("APPLICABLE BENEFIT
LAWS"), the most recent determination letter received from the Internal
Revenue Service with respect to each such plan intended to qualify under
Section 401 of the Code and such other documentation with respect to any
Target Benefit Plan as is reasonably requested by Parent.
(c) Except as set forth in Section 4.11(c) of the Target Disclosure
Letter, Target and Target Subsidiaries have maintained all employee data
necessary to administer each Target Benefit Plan, including data required
to be maintained under Sections 107 and 209 of ERISA, and such data is
true and correct in all material respects and is maintained in a usable
form.
(d) No Target Benefit Plan or ERISA Affiliate Plan (as defined in
Section 8.7(i)) is or was subject to Title IV of ERISA or Section 412 of
the Code, nor is
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any Target Benefit Plan or ERISA Affiliate Plan a "multiemployer pension
plan", as defined in Section 3(37) of ERISA, or subject to Section 302 of
ERISA. Neither the Target, a Target Subsidiary, an ERISA Affiliate nor a
predecessor in interest of any of them has or has had an obligation to
make contributions or reimburse another employer, either directly or
indirectly, including through indemnification or otherwise, for making
contributions to a plan that is or was subject to Title IV of ERISA.
(e) Each Target Benefit Plan has been established, qualified,
invested, operated and administered in accordance in all material respects
with its terms and in compliance in all material respects with all
Applicable Benefit Laws and in accordance in all material respects with
all understandings, written or oral, between the Target and each Target
Subsidiary and their respective current or former employees, directors,
officers, consultants, independent contractors, contingent workers or
leased employees, as applicable. None of the Target or Target Subsidiaries
has incurred, and no facts exist which reasonably could be expected to
result in any liability to any Target or Target Subsidiary with respect to
any Target Benefit Plan or any ERISA Affiliate Plan, including without
limitation, any liability, tax, penalty or fee under ERISA, the Code or
any Applicable Benefit Law (other than to pay premiums, contributions or
benefits in the ordinary course).
(f) There are no outstanding material defaults or violations by any
party to any Target Benefit Plan. No taxes, penalties or fees are owing
under any Target Benefit Plan.
(g) No fact or circumstance exists that could adversely affect the
tax-exempt status of a Target Benefit Plan that is intended to be
tax-exempt. Further, each Target Benefit Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code and the trusts maintained
thereunder that are intended to be exempt from taxation under Section
501(a) of the Code has received a favorable determination or other letter
indicating that it is so qualified.
(h) The assets of each Target Benefit Plan are reported at their
fair market value on the financial statements of each such plan.
(i) Except as set forth in Section 4.11(i) of the Target Disclosure
Letter, no Target Benefit Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for
current or former employees, directors, officers, consultants, independent
contractors, contingent workers or leased employees (or any of their
dependents, spouses or beneficiaries) of a Target or Target Subsidiary or
any predecessor in interest of such Target or Target Subsidiary for
periods extending beyond their retirement or other termination of service,
other than continuation coverage mandated by any Applicable Benefit Law
and only to the extent required under such law.
(j) All contributions or premiums required to be made by any Target
or Target Subsidiary under the terms of each Target Benefit Plan or by
Applicable Benefit Laws have been made in a timely fashion in all material
respects in accordance with Applicable Benefit Laws and the terms of the
Target Benefit Plan. Each Target Benefit Plan is fully funded or fully
insured on both an ongoing and termination or wind-
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up basis, pursuant to the actuarial assumptions set forth in Section
4.11(j) of the Target Disclosure Letter.
(k) Except as set forth in Section 4.11(k) of the Target Disclosure
Letter, no insurance policy or any other contract or agreement affecting
any Target Benefit Plan requires or permits a retroactive increase in
premiums or payments due thereunder. Except as set forth in Section
4.11(k) of the Target Disclosure Letter, the level of insurance reserves
under each insured Target Benefit Plan is reasonable and sufficient to
provide for all incurred but unreported claims.
(l) There have been no improper withdrawals, applications or
transfers of assets from any Target Benefit Plan or the trusts or other
funding media relating thereto, and neither the Target or Target
Subsidiaries nor any of their agents has been in breach of any fiduciary
obligation with respect to the administration of any Target Benefit Plan
or the trusts or other funding media relating thereto.
(m) A Target or Target Subsidiary has the right under the terms of
each Target Benefit Plan and under Applicable Benefit Law to amend,
revise, merge or terminate such plan (or its participation in such plan)
or transfer the assets of such plan to another arrangement, plan or fund
at any time exclusively by action of such Target or Target Subsidiary, and
no additional contributions would be required to properly effect such
termination.
(n) Except as set forth in Section 4.11(n) of the Target Disclosure
Letter, the execution, delivery and performance of, and consummation of
the transactions contemplated by, this Agreement will not (i) entitle any
current or former employee, director, officer, consultant, independent
contractors, contingent worker or leased employee (or any of their
dependents, spouses or beneficiaries) of Target or any Target Subsidiary
to severance pay, unemployment compensation or any other payment, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such individual.
(o) None of the Target or Target Subsidiaries has made any payments,
is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate Target or any Target Subsidiary
to make any payments that will not be deductible for federal income tax
purposes by reason of Section 280G of the Code.
(p) There are no pending, anticipated, or, to Target's knowledge,
threatened claims, investigations, examinations, audits or other
proceedings or actions by, against, involving, or on behalf of any Target
Benefit Plan, by any current or former employee, director, officer,
consultant, independent contractors, contingent worker or leased employee
(or any of their dependents, spouses or beneficiaries) of Target or any
Target Subsidiary or any predecessor in interest covered under such Target
Benefit Plan, by any Governmental Entities or otherwise involving any such
Target Benefit Plan (other than routine claims for benefits) and there
exists no state of facts which after notice or lapse of time or both
reasonably could be expected to give rise to any such claim,
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investigation, examination, audit or other proceeding or to affect the
registration of any Target Benefit Plan required to be registered.
4.12. Labor Relations.
(a) The employees of any of the Target and each Target Subsidiary
have not been, and currently are not, represented by a labor organization
or group which was either certified or voluntarily recognized by any labor
relations board, including, without limitation, the United States National
Labor Relations Board ("NLRB");
(b) No Target or Target Subsidiary is or has been a signatory to a
collective bargaining agreement with any trade union, labor organization
or group;
(c) No representation election petition or application for
certification has been filed by employees of any Target or Target
Subsidiary or is pending with the NLRB and no union organizing campaign or
other attempt to organize or establish a labor union, employee
organization or labor organization or group involving employees of any
Target or Target Subsidiary has occurred, is in progress or is threatened;
(d) None of the Target or Target Subsidiaries has engaged in any
unfair labor practice and there is no pending or, to the knowledge of
Target, threatened labor board proceeding of any kind, including any such
proceeding against any Target or Target Subsidiary or any trade union,
labor union, employee organization or labor organization representing
Target or any Target Subsidiary's employees;
(e) No grievance or arbitration demand or proceeding, whether or not
filed pursuant to a collective bargaining agreement, has been threatened,
filed or is pending against Target or any Target Subsidiary;
(f) No labor dispute, walk out, strike, slowdown, hand billing,
picketing, work stoppage (sympathetic or otherwise), or other "concerted
action" (as such terms are understood under federal and state labor laws)
involving the employees of Target or any Target Subsidiary has occurred,
is in progress or has been threatened;
(g) No breach of contract and/or denial of fair representation claim
has been filed or is pending or threatened against Target or any Target
Subsidiary and/or any trade union, labor union, employee organization or
labor organization representing Target or any Target Subsidiary's
employees;
(h) No claim, complaint, charge or investigation for unpaid wages,
bonuses, commissions, employment withholding taxes, penalties, overtime or
other compensation, benefits, child labor or record keeping violations has
been filed or is pending or threatened against Target or any Target
Subsidiary under the Fair Labor Standards Act, Davis-Bacon Act,
Walsh-Healey Act, or Service Contract Act or any other federal, state,
local, provincial or foreign law, regulation or ordinance;
(i) No discrimination and/or retaliation claim, complaint, charge or
investigation has been filed or is pending or threatened against Target or
any Target Subsidiary under the 1866 or 1964 Civil Rights Acts, the Equal
Pay Act, the Age
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Discrimination in Employment Act ("ADEA"), the Americans with Disabilities
Act ("ADA"), the Family and Medical Leave Act ("FMLA"), the Fair Labor
Standards Act ("FLSA"), ERISA or any other federal law or comparable state
fair employment practices act or foreign law, including any provincial law
regulating discrimination in the workplace;
(j) If any Target or Target Subsidiary is a federal or state
contractor obligated to develop and maintain an affirmative action plan,
no discrimination claim, show cause notice, conciliation proceeding,
sanction or debarment proceeding has been threatened or filed or is
pending with the Office of Federal Contract Compliance Programs or any
other federal agency or any comparable state or foreign agency or court
and no desk audit or on-site review is in progress;
(k) No citation has been issued by the Occupational Safety and
Health Administration ("OSHA") against Target or any Target Subsidiary and
no notice of contest, claim, complaint, charge, investigation or other
administrative enforcement proceeding involving Target or any Target
Subsidiary has been filed or is pending or threatened against Target or
any Target Subsidiary under OSHA or before any provincial or federal
occupational safety and health ministry or department pursuant to any
other applicable law relating to occupational safety and health;
(l) No workers' compensation or retaliation claim, complaint, charge
or investigation has been filed or is pending or, to the knowledge of
Target, threatened against Target or any Target Subsidiary;
(m) No investigation or citation of Target or any Target Subsidiary
has occurred and no enforcement proceeding has been initiated or is
pending or, to the knowledge of Target, threatened under federal or
foreign immigration law;
(n) None of the Target or Target Subsidiaries has taken any action
that would constitute a "mass layoff", "mass termination" or "plant
closing" within the meaning of the Worker Adjustment and Retraining
Notification Act ("WARN") or any similar provincial law or otherwise
trigger notice requirements or liability under any federal, local, state
or foreign plant closing notice or collective dismissal law;
(o) No wrongful discharge, retaliation, libel, slander or other
claim, complaint, charge or investigation that arises out of the
employment relationship between Target or any Target Subsidiary and its
respective employees has been filed or is pending or, to the knowledge of
Target, threatened against Target or any Target Subsidiary under any
applicable law;
(p) Each of the Target and Target Subsidiaries has maintained and
currently maintains adequate insurance as required by applicable law with
respect to workers' compensation claims and unemployment benefits claims;
(q) Each of the Target and Target Subsidiaries is in compliance in
all material respects with all applicable laws, regulations and orders and
all contracts or collective bargaining agreements governing or concerning
labor relations, union and
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collective bargaining, conditions of employment, employment discrimination
and harassment, pay equity, wages, hours or occupational safety and
health, and all record keeping, filing and record retention requirements
thereunder, including, without limitation, ERISA, the Immigration Reform
and Control Act of 1986, the National Labor Relations Act, the Civil
Rights Acts of 1866 and 1964, the Equal Pay Act, ADEA, ADA, FMLA, WARN,
OSHA, the Davis-Bacon Act, the Walsh-Healy Act, the Service Contract Act,
Executive Order 11246, FLSA and the Rehabilitation Act of 1973 and all
regulations under such acts, each as amended (collectively, the "LABOR
LAWS");
(r) None of the Target or Target Subsidiaries are liable for any
liabilities, judgements, decrees, orders, arrearage of wages or taxes,
fines or penalties for failure to comply with any of the Labor Laws;
(s) Target has provided Parent with a copy of the policy of each of
the Target and Target Subsidiaries for providing leaves of absence under
the FMLA and Section 4.12(s) of the Target Disclosure Letter identifies
each employee who is eligible to request FMLA leave and the amount of FMLA
leave utilized by each such employee during the current leave year; each
employee who will be on FMLA leave at the Closing Date and his or her job
title and description, salary and benefits; each employee who has
requested FMLA leave to begin after the Closing Date; a description of the
leave requested; and a copy of all notices provided to such employee
regarding that leave; and
(t) Each of the Target and Target Subsidiaries has paid or accrued,
as required by GAAP, all current assessments under workers' compensation
legislation, and none of the Target or Target Subsidiaries have been
subject to any special or penalty assessment under such legislation which
has not been paid.
4.13. Material Contracts. Except as set forth in Section 4.13 of the
Target Disclosure Letter or disclosed in the Target SEC Reports, neither Target
nor any Target Subsidiary is a party to or bound by any (a) loan servicing
agreements; (b) credit insurance policy; (c) agreements or arrangements for the
purchase or sale of any material assets (otherwise than in the ordinary course
of business); (d) agreements with the FDIC, Federal Reserve Board, CBD, SBA,
USDA, Ex-Im (each as defined in Section 4.16(b)), (e) agreements with any
foreign government or agency, any other federal or state agency or any SRO; (f)
contracts or agreements containing covenants limiting the freedom of Target or
any Target Subsidiary or any other Affiliate of Target, to engage in any line of
business or to compete with any entity; (g) any joint venture, partnership or
similar agreement; (h) exchange traded or over-the-counter swap, forward,
future, option, cap, floor or collar financial contract, or any other interest
rate or foreign currency protection contract; (i) agreement providing for
aggregate payments to any director, officer, or consultant or former officer,
directors or consultant of Target or any Target Subsidiary in any calendar year
in excess of $50,000, (j) material agreement, indenture or other instrument
relating to the borrowing of money by Target or any Target Subsidiary, the
guarantee by Target or any Target Subsidiary of any such obligation (other than
trade payables and instruments relating to transactions entered into in the
ordinary course of business), or the sale, securitization or servicing of loans
or loan portfolios of Target or any Target Subsidiary; (k) leases regarding real
or personal property; (l) master agency agreement (or similar agreement or
arrangement); (m) other contract or agreement or amendment thereto that, for
purposes of this clause (m), would be required to be filed as an exhibit to a
Form 10-K filed by Target with the Commission
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as of the date of this Agreement (collectively, the "TARGET CONTRACTS"). Neither
Target nor any Target Subsidiary is in breach or default under any Target
Contract, which default or breach has had or could reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect, and
there has not occurred any event that with the lapse of time or the giving of
notice or both would constitute such a default.
4.14. Absence of Certain Changes or Events. Except for any liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, since December 31, 1999, Target and its subsidiaries have conducted
their business only in the ordinary course or as disclosed in any Target SEC
Reports, and there has not been (1) any change or event that has had, or that
could reasonably be expected to have, a Material Adverse Effect on Target or any
Target Subsidiary, (2) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock, or property) with respect to any
of Target's capital stock, other than dividends declared and paid in the
ordinary course of business consistent with past practice, (3) any split,
combination or reclassification of any of Target's capital stock or any
substitution for shares of Target's capital stock, except for issuances of
Target's Common Stock upon the exercise of options awarded prior to the date
hereof in accordance with the Target Option Plans, (4) except as set forth in
Section 4.14 of the Target Disclosure Letter (A) any granting by Target or any
Target Subsidiary, to any current or former director, executive officer or other
key employee of Target or any Target Subsidiary of any increase in compensation,
bonus or other benefits, except for normal increases in the ordinary course of
business or as were required under any Employment/Consulting Agreements listed
in Section 4.10 of the Target Disclosure Letter, (B) any granting by Target or
any Target Subsidiary, to any such current or former director, executive officer
or key employee of any increase in severance or termination pay, or (C) any
entry by Target or any Target Subsidiary, into, or any amendment of, any
employment, deferred compensation, consulting, severance, termination or
indemnification agreement with any such current or former director, executive
officer or key employee, (5) except insofar as may have been disclosed in the
Target SEC Reports or required by GAAP, any change in accounting methods,
principles or practices by Target or any Target Subsidiary, materially affecting
its assets, liabilities or business or (6) except insofar as may have been
disclosed in the Target SEC Reports, any tax election that individually or in
the aggregate, has had, or could reasonably be expected to have, a Material
Adverse Effect.
4.15. Litigation. Except as set forth in the Target Disclosure Letter,
there is no claim, suit, action, proceeding or investigation pending, or, to the
knowledge of Target, threatened, against or affecting Target or any Target
Subsidiary which, either individually or in the aggregate, has had, or could be
reasonably expected to have, a Material Adverse Effect, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator, outstanding or, to the knowledge of Target, threatened against
Target or any Target Subsidiary which, either individually or in the aggregate,
has had, or could reasonably be expected to have, a Material Adverse Effect.
4.16. Compliance with Laws, Orders, Guarantee Programs.
(a) Except as disclosed in the Target SEC Reports filed by Target with
the Commission prior to the date of this Agreement, the businesses of
Target and the Target Subsidiaries are not being conducted in violation of
any law, ordinance, regulation, judgment, order, decree, writ, injunction,
license or permit of any
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Governmental Entity (including, without limitation, in the case of Target
Subsidiaries that are banks, all statutes, rules and regulations pertaining
to the conduct of the banking business and the exercise of trust powers),
except for violations which have not had, and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect. No investigation or review by any Governmental Entity with respect
to Target or any Target Subsidiary is pending or, to the knowledge of
Target threatened, nor has any Governmental Entity indicated an intention
to conduct the same, in each case other than those the outcome of which
have not had, and could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
(b) Target and each applicable Target Subsidiary is an approved
"lender," "certified lender" or "preferred lender" as the case may be,
under and pursuant to the loan guarantee programs of the United States
Small Business Administration (the "SBA"), the United States Department of
Agriculture (the "USDA"), and the Export-Import Bank of the United States
("EX-IM"). Target and Target Subsidiaries have complied in all material
respects at all times with the applicable provisions of Target's and Target
Subsidiaries' loan guarantee insurance policy with AIG and any other
insurers (collectively, the "AIG INSURANCE POLICY"). Target and all Target
Subsidiaries have at all times complied, in all material respects, with the
rules and regulations of the loan and loan guarantee programs of each of
the SBA, the USDA, and Ex-Im. All loans originated by Target or any Target
Subsidiary pursuant to or guaranteed by any of the SBA, USDA or Ex-Im were
made pursuant to all applicable SBA, USDA or Ex-Im (as the case may be)
rules and regulations and met all applicable underwriting criteria
necessary to qualify for the loan or loan guarantee programs of the SBA,
USDA or Ex-Im (as the case may be). All loans made or originated by Target
under or pursuant to loan or loan programs of the SBA, USDA or Ex-Im have
been made on standard loan documents approved if required by the
appropriate agency. All loans originated by Target or any Target Subsidiary
pursuant to, guaranteed by or insured by the AIG Insurance Policy were made
pursuant to the AIG Insurance Policy and met all applicable underwriting
criteria thereunder.
(c) Except as set forth in Section 4.16(c) of the Target Disclosure
Letter, neither Target nor any Target Subsidiary has received notice
denying or limiting all or any portion of any guarantee or insurance for
any loan pursuant to the SBA, USDA or Ex-Im loan or loan guarantee programs
or pursuant to the AIG Insurance Policy.
4.17. Agreements with Bank Regulators, Etc.
(a) Except as set forth in Section 4.17(a) of the Target Disclosure
Letter, neither Target nor any Target Subsidiary is a party to any written
agreement or memorandum of understanding with, or a party to any commitment
letter, board resolution or similar undertaking to, or is subject to any
order or directive by, or is a recipient of any extraordinary supervisory
letter from, the Federal Reserve Board, FDIC or any Governmental Entity
which restricts materially the conduct of its business, or in any manner
relates to its capital adequacy, its credit or reserve policies or its
management, nor has Target been advised by the Federal Reserve Board, FDIC
or any Governmental Entity that it is contemplating issuing or requesting
(or is considering the appropriateness of issuing or requesting) any such
order, decree, agreement,
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memorandum of understanding, extraordinary supervisory letter, commitment
letter or similar submission.
(b) Except as set forth in Section 4.17(b) of the Target Disclosure
Letter there have been no suggested or recommended changes to, or methods
of reporting with respect to, Target's or any Target Subsidiary's books and
records, financial statements, Regulatory Financial Statements (as
hereinafter defined) or Interim Reports (as hereinafter defined) made by
any federal or state bank examiner in charge of such examination (or more
senior federal or state bank regulatory officials) or other regulatory
authority (any such being a "RECOMMENDED REGULATORY CHANGE") that (i) are
currently pending or have not been withdrawn or abandoned and (ii) have not
been implemented in the books and records, financial statements, Regulatory
Financial Statements, or Interim Reports, as appropriate, of the Target or
such Target Subsidiary as suggested or recommended.
Target knows of no reason why the regulatory approvals referred to in Section
4.6(d) and Section 7 would not be obtained.
4.18. Target Ownership of Stock. As of the date of this Agreement, neither
Target, Target Subsidiaries nor any of its Affiliates (i) beneficially owns,
directly or indirectly, or (ii) are parties to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of,
Parent Common Stock (other than held in trust accounts, managed accounts or in
any similar manner as trustee or in a fiduciary capacity), which in the
aggregate, represent 5% or more of the outstanding shares of Parent Common
Stock.
4.19. Fees. Except for fees paid and payable to J.P. Morgan and Keefe,
Bruyette & Woods, neither Target nor any Target Subsidiary has paid or will
become obligated to pay any fee or commission to any broker, finder or
intermediary in connection with the transactions contemplated by this Agreement.
4.20. Target Action. The Board of Directors of Target (at a meeting duly
called, constituted and held) has, by the requisite vote of all directors
present, (a) determined that the Merger is advisable and in the best interests
of Target and Target's Stockholders, (b) approved this Agreement and the
transactions contemplated hereby, including the Merger, and (c) directed that
the Merger be submitted for consideration by Target's Stockholders at the Target
Meeting. Target has taken all steps necessary to exempt (i) the execution of
this Agreement, (ii) the Merger and (iii) the transactions contemplated hereby
and thereby from, (x) any statute of the State of Delaware that purports to
limit or restrict business combinations or the ability to acquire or to vote
shares, and (y) any applicable provision of Target's certificate of
incorporation or bylaws containing change of control or anti-takeover
provisions.
4.21. Vote Required. The affirmative vote of holders of a majority of the
outstanding shares of Target Common Stock entitled to vote thereon is the only
vote of the holders of any class or series of Target capital stock necessary to
approve this Agreement and the transactions contemplated by the Agreement.
4.22. Material Interests of Certain Persons. Except as disclosed in
Target's Proxy Statement for its 2000 Annual Meeting of Stockholders or as set
forth in the Target
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Disclosure Letter, no officer or director of Target or any Target Subsidiary, or
any associate of any such officer or director, has any material interest in any
material contract or property (real or personal), tangible or intangible, used
in or pertaining to the business of Target or any Target Subsidiary. Except as
set forth in Section 4.22 of the Target Disclosure Letter and except for
commercial loans made in the ordinary course and except for the Target 401(k)
plan loans, neither Target nor any Target Subsidiary has made any loans to any
officer or director of Target or any Target Subsidiary, or any associate of any
such officer or director, or to any holder or beneficial owner of five percent
(5%) or more of the outstanding shares of Target Common Stock.
4.23. Intellectual Property. Section 4.23 of the Target Disclosure Letter
sets forth a list of all trademarks, service marks and trade names (including
any registrations or applications for registration of any of the foregoing)
(collectively, the "TARGET INTELLECTUAL PROPERTY") owned by Target or used in
the business of Target and the Target Subsidiaries and, in the case of each such
item of Target Intellectual Property not owned by Target or any Target
Subsidiary, sets forth the name of the owner thereof and a description of the
agreement or other contract under which Target or the Target Subsidiaries have a
right to use such Target Intellectual Property. Neither Target nor any Target
Subsidiary has received any notice of infringement of or conflict with, and, to
Target's knowledge, there are no infringements of or conflicts with, the rights
of others with respect to the use of any Target Intellectual Property. Neither
the execution nor delivery of this Agreement nor the consummation of the
transactions contemplated hereby shall adversely affect the right of the Target
or any Target Subsidiary to use its name currently as used in its business in
any location where Target or any such Target Subsidiary conducts its business.
4.24. Interest Rate Risk Management Instruments. Except as have not had and
could not reasonably be expected to have, a Material Adverse Effect, all
interest rate swaps, caps, floors and option agreements and other interest rate
risk management arrangements, whether entered into for the account of Target or
any Target Subsidiary for the account of a customer of Target or a Target
Subsidiary, were entered into in the ordinary course of business and, to
Target's knowledge, in accordance with prudent banking practices and applicable
rules, regulations and policies of any Governmental Entity and with
counterparties believed to be financially responsible at the time and are legal,
valid and binding obligations of Target or any Target Subsidiary enforceable in
accordance with their terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally and the availability of equitable remedies), and are in full force and
effect. Except as have not, and could not reasonably be expected to have, a
Material Adverse Effect, Target and each of the Target Subsidiaries have duly
performed all of their obligations thereunder to the extent that such
obligations to perform have accrued, and, to Target's knowledge, there are no
breaches, violations or defaults or allegations or assertions of such by any
party thereunder.
4.25. Insurance. Section 4.25 of the Target Disclosure Letter contains a
complete and correct list of all insurance policies currently maintained by
Target or any Target Subsidiary, (the "TARGET INSURANCE POLICIES"). With respect
to each Target Insurance Policy, Section 4.25 of the Target Disclosure Letter
specifies (i) the insurer, (ii) the amount of and nature of coverage, (iii) the
risk insured against, (iv) the deductible amount (if any) and (v) the date
through which coverage will continue by virtue of premiums already paid. Target
and Target
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Subsidiaries currently have in effect insurance coverage with reputable insurers
which, in respect of amounts, premiums, types and risks insured, constitutes
reasonable coverage against all risks customarily insured against by bank
holding companies and their subsidiaries comparable in size and operations to
Target and the Target Subsidiaries. Neither Target nor any Target Subsidiary has
reached or exceeded its policy limits for any insurance policies in effect as of
the date hereof. There are no self-insurance arrangements affecting the Target
or any Target Subsidiary. With respect to each Target Insurance Policy:
(a) neither Target nor any Target Subsidiary has received written
notice of any pending or threatened cancellation or material premium
increase (retroactive or otherwise) with respect thereto;
(b) to Target's knowledge, the policy is legal, valid, binding,
enforceable and in full force and effect;
(c) the policy will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms through the Closing Date
and following the consummation of the transactions contemplated herein;
(d) neither Target, any Target Subsidiary, nor, to the knowledge of
Target, any other party to any Target Insurance Policy is in breach or
default (including with respect to the payment of premiums or giving of
notices), and no event has occurred which, with notice, lapse of time or
both, would constitute such a breach or default, or permit termination,
modification, or acceleration, under such policy;
(e) no party has repudiated any provision thereof;
(f) there are no pending claims against such insurance as to which
insurers are defending under reservation of rights or have denied
liability; and
(g) there exists no claim under such insurance policy that has not
been properly filed by the Target or any Target Subsidiary.
4.26. Real Property and Environmental Matters.
(a) For purposes of this Agreement, the following terms shall have the
indicated meanings:
(i) "ENVIRONMENTAL LAW" means any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, determination, judgment,
decree, injunction or agreement with any Governmental Entity relating
to the (1) health, protection, preservation, containment or
restoration of the environment including, without limitation, air,
water vapor, surface water, groundwater, drinking water supply,
surface soil, subsurface soil, wetlands, plant and animal life or any
other natural resource, conservation, and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous
Substances. The term "Environmental Law" includes without limitation
the Comprehensive Environmental Response, Compensation
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and Liability Act, as amended, 42 U.S.C. Section 9601, et seq.; the
Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
9601(2)(D); the Resource Conservation and Recovery Act, as amended, 42
U.S.C. Section 6901, et seq.; the Clean Air Act, as amended, 42 U.S.C.
Section 7401, et seq.; the Federal Water Pollution Control Act, as
amended by the Clean Water Act, 33 U.S.C. Section 1251, et seq.; the
Toxic Substances Control Act, as amended, 15 U.S.C. Section 9601, et
seq.; the Emergency Planning and Community Right to Know Act, 42
U.S.C. Section 11001, et seq.; the Safe Drinking Water Act, 42 U.S.C.
Section 300f, et seq.; and all comparable state and local laws,
ordinances, rules, regulations respecting the interpretation or
enforcement of same.
(ii) "HAZARDOUS SUBSTANCE" means (i) any hazardous wastes, toxic
chemicals, materials, substances or wastes as defined by or for the
purposes of any Environmental Law; (ii) any "oil", as defined by the
Clean Water Act, as amended from time to time, and regulations
promulgated thereunder (including crude oil or any fraction thereof
and any petroleum products or derivatives thereof); (iii) any
substance, the presence of which is prohibited, regulated or
controlled by any applicable federal, state or local laws,
regulations, statutes or ordinances now in force or hereafter enacted
relating to waste disposal or environmental protection with respect to
the exposure to, or manufacture, possession, presence, use,
generation, storage, transportation, treatment, release, emission,
discharge, disposal, abatement, cleanup, removal, remediation or
handling of any such substance; (iv) any asbestos or
asbestos-containing materials, polychlorinated biphenyls ("PCBS") in
the form of electrical equipment, fluorescent light fixtures with
ballasts, cooling oils or any other form, urea formaldehyde or
atmospheric radon; (v) any solid, liquid, gaseous or thermal irritant
or contaminant, such as smoke, vapor, soot, fumes, alkalis, acids,
chemicals, pesticides, herbicides, sewage, industrial sludge or other
similar wastes; (vi) industrial, nuclear or medical by-products; (vii)
any lead based paint or coating and (viii) any underground storage
tank(s).
(iii) "REAL PROPERTIES" means any real property, interest in real
property, improvements, appurtenances, rights and personal property
attendant thereto, which is owned, leased as a landlord or a tenant,
licensed as a licensor or licensee, managed or operated or upon which
is held a mortgage, deed of trust, deed to secure debt or other
security interest by Target or any Target Subsidiary whether directly,
as an agent, as trustee or other fiduciary or otherwise.
(b) Neither Target nor any Target Subsidiary is in violation of or has
any liability, absolute or contingent, in connection with or under any
Environmental Law which could reasonably be expected to result in the
imposition of any liability which could have a Material Adverse Effect.
(c) None of the Real Properties of Target or any Target Subsidiary is
in violation of or has any liability, absolute or contingent, under any
Environmental Law which could reasonably be expected to result in the
imposition of any liability which could have a Material Adverse Effect.
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(d) There are no actions, suits, demands, notices, claims,
investigations or proceedings pending or, to the knowledge of Target,
threatened relating to any Real Properties including, without limitation
any notices, demand letters or requests for information from any federal or
state environmental agency relating to any such liability under or
violation of Environmental Law which could reasonably be expected to result
in the imposition of any liability which could have a Material Adverse
Effect.
(e) Section 4.26(e) of the Target Disclosure Letter sets forth a true,
correct and complete list of all Real Properties owned or leased by Target
or any Target Subsidiary (collectively, the "TARGET REAL PROPERTIES") and
all Real Properties owned by Target or any Target Subsidiary at any time
during the last five (5) years. Target and each Target Subsidiary has good
and marketable title to, or a valid leasehold interest in, all of the
Target Real Properties and all personal properties or assets reflected on
the balance sheet contained in the Interim Financial Statements or acquired
after September 30, 2000 (other than assets disposed of since September 30,
2000 in the ordinary course of business consistent with past practices) in
each case free and clear of all title defects, liens, encumbrances and
restrictions except for (i) liens, encumbrances or restrictions which
secure indebtedness described in the Target SEC Reports, (ii) liens for
Taxes accrued but not yet payable, (iii) liens arising as a matter of law
in the ordinary course of business with respect to obligations incurred
after September 30, 2000 provided that the obligations secured by such
liens are not delinquent and (iv) liens which do not materially impair the
value or use of any such asset. Each of the Target Real Properties, and
each building and improvement located thereon, is, and has at all times
been, in compliance in all material respects with all applicable federal,
state and local laws, rules, regulations, ordinances and statutes,
including those relating to zoning, building, land use, health and safety,
fire, air sanitation and noise control. The improvements on the Target Real
Property are (x) in good operating condition, (y) in a state of good
maintenance and repair, ordinary wear and tear excepted, and (z) adequate
and suitable for the purposes for which they are presently being used.
(f) Section 4.26(e) of the Target Disclosure Letter sets forth a true,
correct and complete list of all leases (including all amendment,
modifications or extensions thereof) for all Target Real Properties leased
by Target or any Target Subsidiary (collectively, the "TARGET LEASES").
Neither Target nor any Target Subsidiary has sent or received any written
notice of any default under any of the Target Leases. Neither Target nor
any Target Subsidiary has breached or is in default under any material
covenant, agreement, term or condition of or contained in any Target Lease
and there has not occurred any event that with the lapse of time or the
giving of notice or both would constitute such a default or breach.
4.27. Rescission of Repurchases. Except as set forth in Section 4.27 of
the Target Disclosure Letter, all share repurchase programs previously
authorized by the Board of Directors of Target (if any) have been revoked by
resolution duly adopted on or prior to the date hereof.
4.28. Allowances For Possible Loan Losses. The allowance for possible
loan or credit losses, including any allowances or reserves for losses on ORE
(as hereinafter defined)
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and other collateral taken in satisfaction, or partial satisfaction of a debt
previously contracted (the "ALLOWANCE") shown on the consolidated balance sheets
of Target included in the most recent Regulatory Financial Statements dated
prior to the date of this Agreement was, and the Allowance shown on the
consolidated balance sheets of Target included in the Regulatory Financial
Statements as of dates subsequent to the execution of this Agreement and as of
the Closing Date will be, as of the dates thereof, in the reasonable opinion of
management of Target adequate (within the meaning of GAAP and applicable
regulatory requirements or guidelines) to provide for all known and reasonably
anticipated losses relating to or inherent in the loan and lease portfolios
(including accrued interest receivables and ORE reserves) of Target and other
extensions of credit (including letters of credit and commitments to make loans
or extend credit) by Target and the Target Subsidiaries as of the dates thereof.
Neither Target nor any Target Subsidiary has any loan or other extension of
credit which has been (or should have been in management's reasonable opinion)
classified as "Other Assets Especially Mentioned," "Substandard," "Doubtful" or
"Loss," or similar classifications, that were not classified in Target's or any
Target Subsidiary's most recent report of examination. Section 4.28 of the
Target Disclosure Letter also lists all loans or extensions of credit that are
included on Target's or any Target Subsidiary's "watch list." The net book value
of Target's or any Target Subsidiary's assets acquired through foreclosure in
satisfaction of problem loans ("ORE") is carried on the balance sheet of the
Regulatory Financial Statements at fair value at the time of acquisition less
estimated selling costs which approximate the net realizable value of the ORE in
accordance with the American Institute of Certified Public Accountants'
Statement of Position 92-3.
4.29. Tax Treatment. Neither Target nor any Target Subsidiary has taken
or agreed to take any action that could reasonably be expected to cause the
Merger to fail to qualify as a reorganization under Section 368(a) of the Code.
4.30. Call Reports. Except as set forth in Section 4.30 of the Target
Disclosure Letter, all Call Reports, Federal Reserve FRY-6 Reports, and FRY-9C
Reports, including any amendments thereto, filed with the Federal Reserve Board,
the FDIC, CBD or any other federal or state Governmental Entity for the years
ending December 31, 1998 and 1999 and thereafter, together with any
correspondence with any of the Federal Reserve Board, the FDIC, CBD or any other
federal or state Governmental Entity concerning the aforesaid financial
statements and reports (the "REGULATORY FINANCIAL STATEMENTS"):
(a) were prepared from the books and records of Target and each Target
Subsidiary;
(b) were prepared, in all material respects, in accordance with
regulatory accounting principles consistently applied;
(c) present in all material respects Target's and each Target
Subsidiary's financial condition and the results of its operations, changes
in stockholder's equity and cash flows at the relevant dates thereof and
for the periods covered thereby; and
(d) contain and reflect all adjustments and accruals necessary for the
accurate presentation (in all material respects) of Target's and each
Target Subsidiary's
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financial condition and the results of Target's and each Target
Subsidiary's operations and cash flow for the period covered by such
financial statements (subject to any normal recurring year end adjustments
that are not material).
4.31. Disclosure Letter. Prior to the execution and delivery of this
Agreement, Target has delivered to Parent a disclosure letter (the "TARGET
DISCLOSURE LETTER") setting forth, in the appropriate section of the Target
Disclosure Letter, items the disclosure of which is necessary or appropriate
either in response to an express disclosure requirement contained in a
corresponding section of this Agreement or as an exception to Target's
representations or warranties contained in the corresponding section of this
Agreement; provided, however, that notwithstanding anything in this Agreement to
the contrary, the mere inclusion of an item in the Target Disclosure Letter as
an exception to a representation or warranty shall not be deemed an admission by
a party that such item represents a material exception or material fact, event
or circumstance or that such item has had or could reasonably be expected to
have a Material Adverse Effect with respect to Target. At any time up to the
date which is the tenth (10th) business day prior to the Closing Date, Target
may supplement or amend the Target Disclosure Letter with respect to facts or
circumstances first existing or occurring after the date hereof which, if
existing or occurring on or prior to the date hereof, would have been required
to be set forth or described in the Target Disclosure Letter or which is
necessary to correct any information in the Agreement or the Target Disclosure
Letter in order to make any of the representations and warranties of Target
contained in Section 4 true and correct when made and true and correct as of the
Effective Time as if made on and as of such time. No such supplement or
amendment to the Target Disclosure Letter shall have any effect for the purpose
of determining satisfaction of the closing condition set forth in Section 7.3(b)
of this Agreement if the facts or circumstances disclosed in such supplement or
amendment, individually or in the aggregate, (x) would so materially and
adversely impact the economic or business benefits to Parent of the transactions
contemplated by this Agreement that, had such facts or circumstances been known,
Parent would not, in its reasonable judgment, have entered into this Agreement
or (y) would impose on Parent or any of its Subsidiaries (including Target or
any Target Subsidiary) any substantial limitations or conditions on the
businesses and activities engaged in by Parent or any such Subsidiary that would
not be applicable in the absence of such facts or circumstances. The delivery by
Target of a supplement or amendment to the Target Disclosure Letter in
accordance with this Section 4.31 shall relieve Target of any liability,
regardless of whether or not the transactions contemplated hereby are
consummated, for a breach of a representation or warranty contained in Section 4
which, without the disclosure of the facts and circumstances in such supplement
or amendment, would not be true and correct when made or true and correct as of
the Effective Time as if made on and as of such time; provided that regardless
of whether or not the transactions contemplated hereby are consummated, the
delivery by Target of a supplement or amendment to the Target Disclosure Letter
pursuant to this Section 4.31 shall not, subject to the provisions of Section
8.2, relieve Target of any liability for a breach by Target of any covenant or
agreement of Target contained in this Agreement.
5. COVENANTS
5.1. Acquisition Transactions. Target shall not, nor shall it permit
any Target 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, Target or any Target Subsidiary to, directly or
indirectly, (i) solicit, initiate, encourage or facilitate the submission of
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any proposal relating to or involving an Acquisition Transaction (as hereinafter
defined) or (ii) enter into, encourage or facilitate any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to encourage or facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, or constitute an effort to facilitate, any proposal relating to or involving
an Acquisition Transaction; provided, however, that nothing contained in this
Section 5.1 shall prohibit the Board of Directors of Target from furnishing
information to, or entering into discussions or negotiations with, any person or
entity that makes an unsolicited, written bona fide proposal regarding an
Acquisition Transaction if, and only to the extent that (A) the Board of
Directors of Target concludes in good faith, after consultation with and based
upon the advice of outside counsel, that it is required to furnish such
information or enter into such discussions or negotiations in order to comply
with its fiduciary duties to Target's stockholders under applicable law, (B)
prior to taking such action, Target receives from such person or entity an
executed confidentiality agreement and an executed standstill agreement, each in
reasonably customary form (provided that such agreement is at least as limiting
as any such agreement between Parent and Target), and (C) the Board of Directors
of Target concludes in good faith that there is a reasonable likelihood that
such Acquisition Proposal constitutes or is reasonably likely to result in a
Superior Proposal (as hereinafter defined). Notwithstanding anything in this
Agreement to the contrary, Target shall (i) immediately advise Parent orally and
in writing of (A) the receipt by it (or any of the other entities or persons
referred to above) of any proposal regarding an Acquisition Transaction, or any
inquiry which could reasonably be expected to lead to any such proposal, (B) the
material terms and conditions of such proposal or inquiry (whether written or
oral), and (C) the identity of the person making any such proposal or inquiry,
(ii) keep Parent reasonably informed of the status and details of any such
proposal or inquiry, and (iii) negotiate in good faith with Parent to make such
adjustments in the terms and conditions of this Agreement such that such
Acquisition Proposal would no longer constitute a Superior Proposal. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in the first sentence of this Section 5.1 by any officer or director
of Target or any Target Subsidiary or any investment banker, attorney or other
advisor, representative or agent of Target or any Target Subsidiary, acting on
behalf of or at the request of the Board of Directors of Target, shall be deemed
to be a breach of this Section 5.1 by Target. Target shall immediately terminate
and cease any and all discussions, negotiations and/or contacts with any other
person or entity which may exist relating to or involving an Acquisition
Transaction. For purposes of this Agreement, "ACQUISITION TRANSACTION" means any
tender offer, exchange offer, merger, consolidation, share exchange, joint
venture, business combination or similar transaction involving Target or any
Target Subsidiary, or any purchase of all or substantially all of the assets of
Target or any Target Subsidiary. For purposes of this Agreement, "SUPERIOR
PROPOSAL" means a bona fide written Acquisition Proposal which the Board of
Directors of Target concludes in good faith, after consultation with its
financial advisors and legal advisors, taking into account all legal, financial,
regulatory and other aspects of the proposal and the person making the proposal
(including any break-up fees, expense reimbursement provisions and conditions to
consummation), (i) is more favorable to the Stockholders of Target from a
financial point of view, than the transactions contemplated by this Agreement
and (ii) is fully financed or reasonably capable of being fully financed and
otherwise reasonably capable of being completed on the terms proposed. Nothing
contained in this Section 5.1 shall prohibit the Target or its Board of
Directors from taking and disclosing to Target's stockholders a position with
respect to a tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the
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Exchange Act or from making such disclosure to the Target's stockholders which,
in the judgment of the Board of Directors as determined in good faith and as
advised in writing by outside counsel, may be required under applicable law.
5.2. Interim Operations of Target. During the period from the date of
this Agreement to the Effective Time, except as specifically contemplated by
this Agreement, set forth in the Target Disclosure Letter or as otherwise
approved expressly in writing by Parent:
(a) Target shall, and shall cause each of the Target Subsidiaries
to, conduct their respective businesses only in, and not take any
action except in, the ordinary course of business consistent with past
practice. Target shall use all commercially reasonable efforts to
preserve intact the business organization of Target and each of the
Target Subsidiaries, to keep available the services of its and their
present officers and key employees and to preserve the goodwill of
those having business relationships with Target or the Target
Subsidiaries. Other than in the ordinary course of business consistent
with past practice, Target shall not (i) incur any indebtedness for
borrowed money (it being understood and agreed that incurrence of
indebtedness in the ordinary course of business shall include, without
limitation, purchases of federal funds, borrowings pursuant to
existing lines of credit, sales of certificates of deposit and
entering into repurchase agreements), (ii) assume, guarantee, endorse
or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity, or
(iii) make any loan or advance.
(b) Target shall not and shall not permit any Target Subsidiary
to make any change or amendment to their respective certificates' (or
articles) of incorporation, charter or bylaws (or comparable governing
instruments) in a manner that would materially and adversely affect
either party's ability to consummate the Merger or the economic
benefits of the Merger to either party.
(c) Target shall not, and shall not permit any Target Subsidiary
to, (i) issue or sell any shares of capital stock or any other
securities of any of them (other than (A) pursuant to outstanding
exercisable stock options granted pursuant to one of the Target Option
Plans or pursuant to outstanding exercisable stock awards reflected in
the Target Disclosure Letter, or (B) pursuant to the terms of 401(k)
plans of Target and any Target Subsidiary in effect as of the date
hereof), (iii) issue any securities convertible into or exchangeable
for, or options, warrants to purchase, scrip, rights to subscribe for,
calls or commitments of any character whatsoever relating to, (iii)
enter into any contract, understanding or arrangement with respect to
the issuance of, any shares of capital stock or any other securities
of any of them (other than pursuant to the Target Option Plans) or
(iv) enter into any arrangement or contract with respect to the
purchase or voting of shares of Target's or any Target Subsidiary's
capital stock, or adjust, split, combine or reclassify any of their
capital stock or other securities or make any other changes in
Target's or any Target Subsidiary's capital structures. Neither Target
nor any Target Subsidiaries shall grant any additional stock options
except for up to an aggregate of 25,000 options granted by Target for
new hires or promotions.
(d) Target shall not, and shall not permit any Target Subsidiary
to, declare, set aside, pay or make any dividend or other distribution
or payment (whether in
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cash, stock or property) with respect to, or purchase or redeem, any
shares of the capital stock of any of them other than dividends paid
in the ordinary course of business consistent with past practice and
dividends paid by any Target Subsidiary to Target or another Target
Subsidiary with respect to its capital stock between the date hereof
and the Effective Time.
(e) Target shall not, and shall not permit any Target Subsidiary
to, acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any person.
(f) Target shall not, and shall not permit any Target Subsidiary
to, sell, lease, license, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of any material properties or assets
(including securitizations), other than in the ordinary course of
business consistent with past practice; it being understood that
Target and the Target Subsidiaries shall be permitted to sell or
participate whole loans, portions of loans, and investments to third
parties and into Target's or such Target Subsidiary's warehouse and
commercial paper facilities, provided that all such sales or
participations shall be in the ordinary course of business .
(g) Except as set forth in the Target Disclosure Letter or as
otherwise provided in this Agreement, Target shall not, and shall not
permit any Target Subsidiary to, (i) adopt or amend (except as
required by law or contractual obligations described in the Target SEC
Reports or Target Disclosure Letter) any Target Benefit Plan,
Employee/Consulting Agreement or any other bonus, profit sharing,
compensation, severance, termination, stock option, pension,
retirement, deferred compensation, employment or other employee
benefit agreements, trusts, plans, funds or other arrangements for the
benefit or welfare of any current or former director, officer or
employee, (ii) except for normal merit increases and bonuses paid or
accrued in the ordinary course of business consistent with past
practice, increase the compensation or fringe benefits of any
director, officer or employee, (iii) pay any benefit not required by
any Target Benefit Plan or Employee/Consulting Agreement (including,
without limitation, the granting of stock options or stock
appreciation rights), (iv) loan or advance any moneys or funds to any
director, officer or employee, (v) take any action or grant any
benefit not required under the terms of any Target Benefit Plan or
Employee/Consulting Agreement or (vi) enter into any contract,
agreement, commitment or arrangement (oral or written) to do any of
the foregoing.
(h) Target shall (i) inform Parent of any Recommended Regulatory
Change or any changes to the Target Parties' books and records,
financial statements, Regulatory Financial Statements, or Interim
Reports required by any state or federal examiner or other regulatory
authority (any such change being a "REQUIRED REGULATORY CHANGE" and
together with the Recommended Regulatory Changes, the "REGULATORY
CHANGES") and, to the extent permitted by applicable law, provide
Parent with copies of any report or similar correspondence describing
any Recommended Regulatory Change or Required Regulatory Change; (ii)
diligently pursue with the appropriate federal or state examiner or
other regulatory authority the resolution of any objections regarding
any Recommended Regulatory Changes; (iii) promptly implement all
Required Regulatory Changes to the extent required after taking the
steps required in clause (ii); and (iv)
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consult with Parent on and keep Parent reasonably informed with
respect to all such Regulatory Changes and the Target Parties'
proposed actions with respect thereto.
(i) Target shall consult Parent and shall keep Parent reasonably
informed with respect to Target's operations, including without
limitation Target's capital plans and access to capital sources, and
shall consult with Parent prior to implementing any capital plan.
(j) Target and each Target Subsidiary shall timely file all Call
Reports, Federal Reserve FRY-6 Reports, and FRY-9C Reports required to
be filed by Target or any Target Subsidiary (the "INTERIM REPORTS")
and shall promptly provide Parent with copies of each such Interim
Report. All such Interim Reports shall:
(i) be prepared from the books and records of Target and
each Target Subsidiary;
(ii) be prepared in all material respects in accordance with
regulatory accounting principles consistently applied;
(iii) present in all material respects Target's and each
Target Subsidiary's financial condition and the results of its
operations, changes in stockholder's equity and cash flows at the
relevant dates thereof and for the period covered thereby; and
(iv) contain and reflect all adjustments and accruals
necessary for the accurate presentation (in all material
respects) of Target's and each Target Subsidiary's financial
condition and the results of Target's and each Target
Subsidiary's operations and cash flow for the period covered by
such financial statements.
(k) Target shall not, and shall not permit any Target Subsidiary
to, authorize, or commit or agree (orally or in writing) to take, any
actions contrary to or prohibited by those set forth in clauses (a)
through (j) of this Section 5.2.
Subject to the provisions of Sections 5.2(a) through 5.2(k) above, nothing
contained herein shall give Parent the right to control or direct the operations
of Target or any Target Subsidiary prior to the Effective Time.
5.3. Employee Matters.
(a) Target shall terminate or shall cause each Target
Subsidiary to terminate, the Target 401(k) plan effective immediately
prior to the Closing, to cease all further contributions to such plan with
respect to pay periods beginning on and after the Closing Date (other than
as required to repay loans made thereunder) and to cease making any
additional loans to participants under the Target 401(k) plan effective as
of the termination of such plan and shall provide written resolutions
reasonably satisfactory to Parent authorizing the same, and a copy of such
resolutions shall be delivered to Parent prior to the Closing Date.
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(b) From and after the date hereof, Target and each Target
Subsidiary shall use their respective best efforts to enter into
amendments to the employment agreements (in the form set forth in Section
5.3 of the Target Disclosure Letter (the "AMENDMENTS") with each officer
or employee of Target (other than Brett N. Silvers and Leslie A.
Galbraith) that has an employment agreement (or similar agreement) with
Target or any Target Subsidiary, amending such employment agreements. From
and after the date hereof, Target shall use its best efforts to retain all
employees of any Target Subsidiary as of the date hereof.
(c) From and after the Effective Time, Parent agrees to
provide the employees of Target and the Target Subsidiaries (the "TARGET
EMPLOYEES") who remain employed by Target through and after the Effective
Time (collectively, the "TRANSFERRED TARGET EMPLOYEES") with the types and
levels of employee benefits maintained by Parent for similarly situated
employees of Parent in the same business unit with Target. Parent shall
continue to maintain Target plans (other than stock based plans or the
Target 401(k) plan), including Target's "Team Incentive Program" and
"Annual Incentive Plan," each of which shall remain in place through 2001
(provided that Parent may modify applicable targets and measures under
such plans), or provide other transition coverage until the Target
Employees are permitted to participate in Parent's plans. To the extent
that the Target Employees are permitted to participate in the Parent's
plans, Parent will treat, and cause its vacation and other paid time off,
flexible benefit (including medical, dental, life insurance and
disability) and 401(k) plans to treat, the service of Target Employees
with Target or any Target Subsidiary as service rendered to Parent for
purposes of eligibility to participate, vesting and for other appropriate
benefits under such plans. The service of Target Employees with Target or
any Target Subsidiary shall not be considered as service rendered for
Parent for any purposes of any defined benefit plan sponsored by Parent.
Without limiting the foregoing, Parent shall not treat any Transferred
Target Employee as a "new" employee for purposes of any exclusions under
any health or similar plan of Parent for employee for purposes of any
exclusions under any health or similar plan of Parent for a pre-existing
medical condition, and will make appropriate arrangements with its
insurance carrier(s) to ensure such result. Following the Effective Time,
except as otherwise contemplated herein, Parent shall cause Target or such
appropriate Target Subsidiaries to honor in accordance with their terms
all individual employment agreements, consulting agreements, and severance
agreements set forth in the Target Disclosure Letter, each as may be
amended by the Amendments pursuant to Section 7.3(g).
5.4. Access and Information. Upon reasonable notice, each of the
parties shall (and shall cause each of the parties' subsidiaries to) afford to
the other parties and their representatives (including, without limitation,
directors, officers and employees of the parties and their affiliates, and
counsel, accountants and other professionals retained) such access throughout
the period prior to the Effective Time, at reasonable times, to the books,
records (including, without limitation, tax returns and work papers of
independent auditors), properties, personnel of such party and its subsidiaries
and to such other information as any party may reasonably request; provided,
however, that no party shall be required to provide access to any such
information if the providing of such access (i) would be reasonably likely, in
the written opinion of counsel, to result in the loss or impairment of any
privilege generally recognized under law
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with respect to such information or (ii) would be precluded by any law,
ordinance, regulation, judgment, order, decree, license or permit of any
Governmental Entity. The parties hereto will use reasonable efforts to make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentences apply. All information furnished by one
party to any of the others in connection with this Agreement or the transactions
contemplated hereby shall be kept confidential by such other party in accordance
with the terms of the letter dated November 28, 2000, from Target to United
Parcel Service General Services Corporation and the letter dated September 29,
2000 from United Parcel Service General Services Corporation to Target
(collectively, the "CONFIDENTIALITY AGREEMENT").
5.5. Certain Filings, Consents and Arrangements.
(a) The parties hereto shall cooperate with each other and use
their commercially reasonable efforts to promptly prepare and file all
necessary documentation, to effect all applications, notices, petitions
and filings, and to obtain as promptly as practicable all permits,
consents, approvals and authorizations of all third parties and
Governmental Entities which are necessary or advisable to consummate the
transactions contemplated by this Agreement (including without limitation
the Merger). Target and Parent shall have the right to review in advance,
and to the extent practicable each will consult the other on, in each case
subject to applicable laws relating to the exchange of information, all
the information relating to Target Parties or Parent, as the case may be,
and any of their respective Subsidiaries, which appears in any filing made
with, or written materials submitted to, any third party or any
Governmental Entity in connection with the transactions contemplated by
this Agreement. In exercising the foregoing right, each of the parties
hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to
consummate the transactions contemplated by this Agreement and each party
will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein. Parent and Target
shall promptly furnish each other with copies of written communications
received by Parent or Target Parties, as the case may be, or any of their
respective Subsidiaries or Affiliates from, or delivered by any of the
foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
(b) Parent and Target shall (i) as promptly as practicable
after the date hereof, with each of Parent and Target using their
commercially reasonable efforts to make a prompt filing, make such filings
as may be required by the HSR Act with respect to the transactions
contemplated hereby, (ii) respond promptly to inquiries from the
Department of Justice and the Federal Trade Commission in connection with
such filings, (iii) file or cause to be filed as promptly as practicable
with the Department of Justice and Federal Trade Commission any
supplemental information that may be requested pursuant to the HSR Act,
and (iv) seek the earliest possible termination or waiver of the waiting
period under such statute. Each of Parent and Target shall promptly inform
each other of any material communication made to, or received by such
party from, the Federal Trade Commission, the Antitrust Division of the
Department of Justice or any other Governmental Authority.
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(c) Notwithstanding anything in this Section 5.5, Parent shall
not be obligated to consent to or approve any Burdensome Condition.
5.6. State Takeover Statutes. Target shall take all reasonable steps to
(i) exempt Target and the Merger by action of Target's Board of Directors or
otherwise from any law or statute that purports to limit or restrict business
combinations or the ability to acquire or to vote shares and (ii) upon the
request of Parent, assist in any challenge by Parent to the applicability to the
Merger of any such law or statute.
5.7. Indemnification and Insurance.
(a) From and after the Effective Time, Parent shall indemnify,
defend and hold harmless the present and former directors and officers
of Target and the Target Subsidiaries (each, an "INDEMNIFIED PARTY")
against all costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities
(collectively, "COSTS") incurred in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of actions or omissions
occurring at or prior to the Effective Time, which is based upon or
relates to such Indemnified Party's capacity as a director or officer,
to the fullest extent that such persons are permitted to be
indemnified under Target's certificate of incorporation and bylaws as
in effect on the date hereof, as supplemented by the agreements
referred to in Section 5.7(a) of the Target Disclosure Letter, except
as may be limited by the DGCL.
(b) Parent shall cause the persons serving as officers and
directors of Target immediately prior to the Effective Time to be
covered for a period of six years from the Effective Time by the
directors' and officers' liability insurance policy maintained by
Target on the date hereof (provided that Parent may substitute
therefor policies of at least the same coverage and amounts containing
terms and conditions which are not less advantageous than such policy)
with respect to acts or omissions occurring prior to the Effective
Time which were committed by such officers and directors in their
capacity as such; provided, however, that in no event shall Parent be
required to provide greater insurance coverage than the provided by
the current terms, conditions, and limitations of the policy currently
maintained by Target and to expend, on any annual basis, more than
200% of the current amount expended by Target (the "INSURANCE AMOUNT")
to maintain or procure insurance coverage, and further provided that
if Parent is unable to maintain or obtain the insurance called for by
this Section 5.7(b), Parent shall use all reasonable efforts to obtain
as much comparable insurance as is available for the Insurance Amount.
(c) In the event Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to
the extent necessary, proper provision shall be made so that the
successors and assigns of Parent assume the obligations set forth in
this section.
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(d) The provisions of this Section 5.7 are intended to be for the
benefit of, and enforceable by, each Indemnified Party and his or her
heirs and representatives, and nothing herein shall affect any
indemnification rights that any Indemnified Party and his or her heirs
and representatives may have under the certificate of incorporation or
by-laws of Target or any of Target Subsidiaries, any contract or
applicable law.
5.8. Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its commercially reasonable
efforts to take promptly, or cause to be taken promptly, all actions and to do
promptly, or cause to be done promptly, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement,
including using its commercially reasonable efforts to obtain all necessary
actions or non-actions, extensions, waivers, consents and approvals from all
applicable Governmental Entities, effecting all necessary registrations,
applications and filings (including, without limitation, filings under any
applicable state securities laws) and obtaining any required contractual
consents and regulatory approvals including the Regulatory Approvals.
5.9. Publicity. The initial press release announcing this Agreement
shall be a joint press release approved by both Parent and Target and,
thereafter, Target and Parent shall consult with each other in issuing any press
releases or otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any Governmental Entity or
with any national securities exchange with respect thereto.
5.10. Preparation of the Registration Statement and the Proxy
Statement; Target Meeting.
(a) As soon as practicable following the date of this Agreement,
Target and Parent shall prepare the Proxy Statement and the
Registration Statement and (i) Target shall file the Proxy Statement
with the Commission and (ii) Parent shall file the Registration
Statement with the Commission. Each of Target and Parent shall use all
commercially reasonable efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable
after such filing and Target shall use all commercially reasonable
efforts to cause the Proxy Statement to be mailed to Target's
Stockholders as promptly as practicable after clearance of the Proxy
Statement by the Commission; provided that the Registration Statement
declared effective and Proxy Statement mailed to the Stockholders
shall reflect the audited financial statements of Parent and Target
for the year ended December 31, 2000. Parent shall also take any
action (other than qualifying to do business in any jurisdiction in
which it is not now so qualified or to file a general consent to
service of process) required to be taken under any applicable state
securities laws in connection with the issuance of Parent Common Stock
in the Merger and Target shall furnish Parent all information
concerning Target and the holders of its capital stock and shall take
any action as Parent may reasonably request in connection with any
such action. If at any time prior to the Effective Time any
information relating to Target or Parent or any of their respective
Affiliates, officers or directors, should be discovered by Target or
Parent which should be set forth in an amendment or supplement to any
of the Registration Statement or the Proxy Statement, so that any of
such documents would not include any misstatement of a material fact
or omit to state any material fact necessary to make the statements
therein, in light of the
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circumstances under which they were made, not misleading, Target or
Parent (as the case may be) shall promptly notify the other and shall
cooperate in the filing of any appropriate amendment or supplement
describing such information with the Commission and, to the extent
required, any dissemination thereof to the stockholders of Target or
Parent.
(b) Except as provided below, Target shall, as soon as
practicable following the date of clearance of the Proxy Statement by
the Commission, duly call, give notice of, convene and hold a meeting
of its Stockholders (the "TARGET MEETING") for the purpose of
approving this Agreement, and the Board of Directors of Target (i)
shall recommend to its Stockholders the approval and adoption of this
Agreement, the Merger and the other transactions contemplated hereby,
(ii) shall use all reasonable efforts to solicit such approval and
adoption, (iii) shall not recommend or present for Stockholder
consideration in any manner any other Acquisition Transaction, and
(iv) shall not withdraw or modify in any manner the approval or
recommendation by the Board of Directors of Target of this Agreement
or the Merger; provided, however, that nothing in this Section 5.10(b)
shall prohibit the Board of Directors of Target from withdrawing or
modifying in a manner adverse to Parent its recommendation to the
Stockholders or recommending any other Acquisition Transaction if
Target is not in breach of, and has not breached, in any material
respect any of the provisions of Section 5.1, Target receives an
unsolicited, written bona fide proposal regarding an Acquisition
Transaction, and as a result of such proposal (A) the Board of
Directors of Target concludes in good faith that it is required to
take such action, but only after consultation with outside counsel and
only if Target's Board of Directors concludes that the failure to take
such action would result in a substantial risk that the Board of
Directors would violate any fiduciary duties of the Target Board to
Target Stockholders under applicable law, and (B) the proposal
regarding the Acquisition Transaction constitutes a Superior Proposal.
(c) Target shall use all commercially reasonable efforts to hold
the Target Meeting as soon as practicable after the date hereof and
will not adjourn or postpone the Target Meeting, other than for the
absence of a quorum.
5.11. Stock Exchange Listings. Parent shall cause to be listed on the
New York Stock Exchange, upon official notice of issuance, the Parent Common
Stock to be issued pursuant to the Merger.
5.12. Stockholder Litigation. Each of Target and Parent shall give the
other the reasonable opportunity to participate in the defense of any
stockholder litigation against Target or Parent, as applicable, and its
directors relating to the transactions contemplated by this Agreement.
5.13. Tax-free Reorganization Treatment. None of Parent, Sub or Target
(i) shall knowingly take or cause to be taken any action, whether before or
after the Effective Time, which would disqualify the Merger as a
"reorganization" within the meaning of Section 368 of the Code, or (ii) shall
file any return or take any position inconsistent with the treatment of the
Merger as a reorganization described in Section 368(a) of the Code. Each of
Parent, Sub and
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Target shall comply with the record-keeping and information reporting
requirements set forth in Treas. Reg. Section 1.368-3.
5.14. Letter from Target's Accountants. Target shall use all
commercially reasonable efforts to cause to be delivered to Parent two letters
from Target's independent accountants, one dated a date within two business days
before the date on which the Registration Statement shall become effective and
one dated a date within two business days before the Closing Date, each
addressed to Parent, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements similar to the
Registration Statement.
5.15. Expenses. Except as otherwise provided in Section 8.2 and the
Escrow and Indemnity Agreement, each party shall bear all expenses incurred by
it in connection with this Agreement and the transactions contemplated hereby,
except that if this Agreement is terminated in accordance with Section 8 hereof,
the printing expenses, Commission filing and registration fees and filing fees
required pursuant to the HSR Act shall be shared equally between Target and
Parent.
5.16. Adverse Action. During the period from the date of this Agreement
through the Effective Time, except as expressly contemplated by this Agreement,
neither party will, and will not permit any Subsidiary to, without the written
consent of the other party (which consent will not be unreasonably withheld or
delayed) knowingly take any action that (x) would, or would be reasonably likely
to result in (a) any of its representations and warranties set forth in the
Agreement being or becoming untrue in any material respect, (b) any of the
conditions to the Merger set forth in Section 7 not being satisfied or (c) a
material violation of any provision of the Agreement except, in each case, as
may be required by applicable law or applicable regulatory requirements and (y)
has, or could reasonably be expected to have, a Material Adverse Effect. Each
party shall promptly notify the other party in writing of any action taken by it
in reliance on the foregoing exception, unless such notification would be
prohibited by applicable law.
5.17. Standstill Agreements; Confidentiality Agreements. During the
period from the date of this Agreement through the Effective Time, Target shall
not terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which it or any of its respective Subsidiaries is a
party (other than the Confidentiality Agreement). During such period, Target
shall enforce, to the fullest extent permitted under applicable law, the
provisions of any such agreement, including by obtaining injunctions to prevent
any breaches of such agreements and to enforce specifically the terms and
provisions thereof in any court having jurisdiction.
5.18. Affiliates.
(a) Prior to the Effective Time, Target shall identify to Parent all
persons who were, at the time of the Target Meeting, "affiliates" (the "145
AFFILIATES") (as that term is used in sections (c) and (d) of Rule 145
promulgated pursuant to the Securities Act) of Target, including without
limitation, all those persons subject to the reporting requirements of Rule
16(a) of the Exchange Act.
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(b) Target shall use its commercially reasonable efforts to obtain and
deliver, prior to the Effective Time, an agreement, in the form of Exhibit
B, from each of the 145 Affiliates.
5.19. Dividends. After the date of this Agreement, each of Parent and
Target shall coordinate with the other the declaration of any dividends in
respect of Parent Common Stock and Target Common Stock and the record dates and
payment dates relating thereto, it being the intention of the parties hereto
that holders of Target Common Stock shall not receive two dividends, or fail to
receive one dividend, for any quarter with respect to their shares of Target
Common Stock and any shares of Parent Common Stock any such holder receives in
exchange therefor in the Merger. Nothing contained in this Section shall be
construed to confer on either party any right to disapprove any dividend
proposed to be declared and paid by the other party or to establish the amount
or terms thereof.
5.20. Exemption from Liability Under Section 16(b). Provided that
Target delivers to Parent the Section 16 Information in a timely fashion, the
Board of Directors of Parent, or a committee of Non-Employee Directors thereof
(as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act),
shall adopt a resolution providing that the receipt by the Target Insiders of
Class A Common Stock in exchange for shares of Target Common Stock, and of
options on Parent Common Stock upon conversion of options on Target Common
Stock, in each case pursuant to the transactions contemplated hereby and to the
extent such securities are listed in the Section 16 Information, are intended to
be exempt from liability pursuant to Section 16(b) under the Exchange Act.
"SECTION 16 INFORMATION" shall mean information accurate in all material
respects regarding the Target Insiders, the number of shares of Target Common
Stock held by each such Target Insider and expected to be exchanged for Parent
Common Stock in the Merger, and the number and description of the options on
Target Common Stock held by each such Target Insider and expected to be
converted into options on Class A Common Stock in connection with the Merger.
"TARGET INSIDERS" shall mean those officers and directors of Target who are
subject to the reporting requirements of Section 16(a) of the Exchange Act and
who are listed in the Section 16 Information.
5.21. Target Stock Options/Registration Statements on Form S-8. Parent
shall reserve for issuance the number of shares of Class A Common Stock that
will be issuable upon exercise of Target Stock Options assumed pursuant to
Section 2.3 hereof. On the Closing Date, Parent shall file with the SEC one or
more registration statements on Form S-8 for the shares of Class A Common Stock
issuable with respect to Target Stock Options and will maintain the
effectiveness of such registration statements for so long as any of such options
or other rights remain outstanding.
5.22. Calculation of Net Book Value.
(a) As promptly as practicable after the date on which all conditions
to the closing of the transactions contemplated hereby in Sections 7.1
(other than Section 7.1(g)), 7.2 and 7.3 are satisfied or waived, and in
any event within ten business days thereafter, Target shall provide to
Parent a certificate of the Chief Executive Officer and Chief Financial
Officer of Target certifying the Net Book Value of Target as of the last
day of the calendar month end preceding the date on which such conditions
to closing are satisfied or waived (the "CALCULATION DATE") with supporting
calculations and other
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information used by Target to calculate the Net Book Value of Target as of
the Calculation Date. Target shall also provide such other information as
Parent shall reasonably require to confirm the accuracy of Target's
calculation of the Net Book Value as of the Calculation Date.
(b) If Parent proposes no modifications to Target's calculation of Net
Book Value, within ten business days after delivery of the certificate
referred to in (a), the Net Book Value of Target as certified by Target
shall be the Net Book Value of Target used to calculate the Merger
Consideration hereunder.
(c) If, within ten business days after delivery of the certificate
referred to in (a), Parent proposes modifications to Target's calculation
of Net Book Value in excess of $1,000,000 in the aggregate, Parent and
Target shall use their commercially reasonable efforts to resolve any such
proposed modifications as promptly as practicable. If despite such
commercially reasonable efforts any such proposed modifications are not
resolved within three business days, Target shall send Parent written
notice that it has either (i) agreed to engage the New York, New York
office of Arthur Andersen, LLP (the "ACCOUNTING FIRM") to determine whether
any such proposed modifications to Target's calculation of Net Book Value
shall be made or (ii) elected to terminate this Agreement pursuant to
Section 8.1(g).
(d) If Target agrees to engage the Accounting Firm in accordance with
Section 5.22(c), Parent and Target shall use their commercially reasonable
efforts to cause the Accounting Firm to resolve any such proposed
modifications as promptly as practicable and in any event within ten
business days after the delivery of the notice referred to in (c). The
determination by the Accounting Firm shall be final and conclusive. The Net
Book Value calculated by Target (as modified as provided herein) shall be
the Net Book Value of Target used to calculate the Merger Consideration
5.23. Reserved.
5.24. Calculation of Escrow Balance. As promptly as practicable after
the Calculation Date, Target shall provide to Parent a written certification
from the Chief Executive Officer and Chief Financial Officer of Target of the
(i) Escrow Balance and (ii) Closing Date ALLL (as defined in the Escrow and
Indemnity Agreement) (collectively, the "ESCROW CALCULATIONS") with supporting
calculations and other information used by Target to calculate the Escrow
Calculations; provided that for purposes of this Section 5.24 the Closing Date
ALLL shall be the ALLL determined pursuant to Section 5.22. Target shall also
provide such other information as Parent shall reasonably request to confirm the
accuracy of Target's calculation of the Escrow Balance. The Escrow Calculations
proposed by Target (as modified by any changes proposed by Parent acceptable to
Target) shall be (x) the Escrow Balance for purposes of Section 2.2 hereof and
(y) the Closing Date ALLL for purposes of the Escrow and Indemnity Agreement.
5.25. Calculation of Escrow Shares. As promptly as practicable after
the Calculation Date and prior to the Closing Date, Parent shall provide to
Target its certified calculation of the Escrow Shares based on the Escrow
Calculations calculated in accordance with Section 5.24, with supporting
calculations and other information used by Parent to calculate the
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Escrow Shares. Parent shall also provide such other information as Target shall
reasonably request to confirm the accuracy of Parent's calculation of the Escrow
Shares. The Escrow Shares certified by Parent (as modified by any changes
proposed by Parent acceptable to Target) shall be the Escrow Shares for purposes
of Section 2.2 hereof and the Escrow and Indemnity Agreement.
5.26. Repayment of Stockholder Loans. Target shall cause each and all
of the loans or advances made to Brett N. Silvers (the "STOCKHOLDER LOAN") to be
satisfied and discharged in accordance with a method detailed in Section 5.26 of
the Target Disclosure Letter.
5.27. Deposit Sale.
(a) As soon as practicable following the execution and delivery of
this Agreement, Target shall cause the Bank to diligently seek one or more
"insured banks" (within the meaning of the FDIC Act) to acquire in the
aggregate all of the Bank's deposit liabilities (the "DEPOSIT ACQUIRORS"
and the "DEPOSIT ASSUMPTION", respectively) and to execute and deliver to
the Deposit Acquirors one or more purchase and assumption agreements and
such other documentation necessary to complete the Deposit Assumption, in
each case containing terms as are customary in the context of similar
transactions, including, without limitation, customary representations and
warranties, closing conditions, and indemnities. Such purchase and
assumption agreements and other documentation are herein referred to as the
"DEPOSIT ASSUMPTION AGREEMENTS."
(b) All terms and conditions of the Deposit Assumption and the Deposit
Assumption Agreements shall be reasonably satisfactory to Parent in its
reasonable discretion and shall, in any event:
(i) provide for the assumption by the Deposit Acquirors of all
(and not less than all) of the deposit liabilities of the Bank that
shall be existing on the date the Deposit Assumption is consummated;
(ii) authorize the Bank to furnish copies of the Deposit
Assumption Agreements to the CBD, the FDIC, the Board of Governors of
the Federal Reserve System, the Federal Reserve Bank of Boston and
Parent (and Target hereby agrees to cause the Bank to furnish such
copies to such persons);
(iii) require the Deposit Acquiror to prepare and file with the
appropriate bank regulatory authorities such applications and other
filings as may be required in the circumstances for the consummation
of the Deposit Assumption, including an appropriate application under
the Bank Merger Act (12 U.S.C. Section 1828(c));
(iv) require the Deposit Acquiror to furnish to the Bank, and
authorize the Bank to furnish to the CBD, the FDIC, the Board of
Governors of the Federal Reserve System, the Federal Reserve Bank of
Boston and Parent, copies of all such applications and filings (and
Target hereby agrees to cause Bank to furnish such copies to such
persons); and
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(v) if determined by Parent, in its reasonable discretion, to be
necessary to obtain any Regulatory Approval or to satisfy any
conditions set forth in Section 7, require the Deposit Acquiror,
immediately upon the consummation of the Deposit Assumption (with time
being of the essence), to furnish to the CBD, the FDIC, the Board of
Governors of the Federal Reserve System and the Federal Reserve Bank
of Boston (with copies to the Bank and to Parent) a certificate
meeting the requirements of 12 C.F.R. Part 307.1 and such other
evidence of the consummation of the Deposit Assumption as any of such
persons may request without undue burden upon the Deposit Acquiror.
(c) In addition, Target shall cause the Bank to furnish to the CBD,
the FDIC, the Board of Governors of the Federal Reserve System and the
Federal Reserve Bank of Boston (with copies to Parent) such certificates or
other evidences of the consummation of the Deposit Assumption as any of
such persons may request to establish that the Bank has ceased to be an
"insured bank" (within the meaning of the FDIC Act) and a "bank" within the
meaning of the BHC Act.
6. CLOSING MATTERS
6.1. The Closing. Unless this Agreement shall have been terminated and
the Merger herein contemplated shall have been abandoned pursuant to Section 8.1
and subject to the satisfaction or waiver of the conditions set forth in Section
7, the consummation of the Merger shall take place as promptly as practicable
(and in any event within three business days) after satisfaction or waiver of
the conditions set forth in Section 7, at a closing (the "CLOSING") to be held
at the offices of King & Spalding, 191 Peachtree Street, Atlanta, Georgia,
unless another date, time or place is agreed to by Parent and Target.
6.2. Documents and Certificates. Parent and Target shall, on or prior
to Closing, execute and deliver all such instruments, documents or certificates
as may be reasonably necessary or advisable, on the advice of counsel, for the
consummation at the Closing of the transactions contemplated by this Agreement
to occur as soon as practicable.
7. CONDITIONS
7.1. Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) The Merger shall have been approved and adopted by the
requisite vote of the holders of Target Common Stock.
(b) The Parent Common Stock issuable in the Merger shall have
been authorized for listing on the New York Stock Exchange, upon
official notice of issuance.
(c) All authorizations, consents, orders or approvals of, and all
expirations of waiting periods imposed by, any Governmental Entity
(including without limitation those required to obtain the Regulatory
Approvals) (collectively, "CONSENTS") which are necessary for the
consummation of the Merger (other than immaterial
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Consents, the failure to obtain which would not be materially adverse
to the business of the Surviving Corporation) shall have been obtained
or shall have occurred and shall be in full force and effect at the
Effective Time; provided, however, that none of the preceding Consents
shall be deemed obtained if (i) it shall have imposed any condition or
requirement which would so materially and adversely impact the
economic or business benefits to Parent or Target of the transactions
contemplated by this Agreement that, had such condition or requirement
been known, such party would not, in its reasonable judgment, have
entered into this Agreement or (ii) such Consent causes the ownership
of Target and the Target Subsidiaries by Parent, after the Effective
Time, to impose on Parent or any of its Subsidiaries (including Target
or any Target Subsidiary) any limitations or conditions on the
businesses and activities engaged in by Parent or any such Subsidiary
that would not be applicable in the absence of such ownership (any
such condition or limitation described in clause (i) or (ii) being
referred to herein as a "Burdensome Condition"); provided, however,
that none of those conditions and requirements set forth in Section
7.1 of the Target Disclosure Letter hereto shall constitute a
Burdensome Condition for any purpose under this Agreement.
(d) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act. No stop order
suspending the effectiveness of the Registration Statement shall have
been issued by the Commission and remain in effect.
(e) No temporary restraining order, preliminary or permanent
injunction or other order by any federal or state court in the United
States which prevents the consummation of the Merger shall have been
issued and remain in effect.
(f) All applicable waiting periods with respect to any
"Notification and Report Form for Certain Mergers and Acquisitions"
filed by Parent, Target or any of their "ultimate parent entities" in
compliance with the HSR Act pursuant to the transactions contemplated
hereby shall have passed, or early termination of such waiting periods
shall have been granted.
(g) The Net Book Value of Target as of the Calculation Date shall
have been determined in accordance with Section 5.22.
7.2. Conditions to Obligation of Target to Effect the Merger. The
obligation of Target to effect the Merger shall be subject to the fulfillment or
waiver at or prior to the Effective Time of the additional following conditions:
(a) Parent and Sub shall have performed in all material respects
all covenants contained in this Agreement required to be performed by
each of them at or prior to the Effective Time.
(b) The representations and warranties of Parent contained in
Section 3 shall be true and correct when made and shall be true and
correct, in all material respects, as of the Effective Time as if made
at and as of such time (other than those representations and
warranties that are qualified as to materiality or similar language,
which shall be true and correct in all respects as of the Effective
Time, as if made at and
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as of such time), except for representations and warranties relating
to a time or times other than the Effective Time which were or will be
true and correct, in all material respects, at such time or times.
(c) Parent shall have furnished Target a certificate dated the
date of the Closing, signed by the Chief Executive Officer and Chief
Financial Officer of Parent that the conditions set forth in Sections
7.2(a) and 7.2(b) have been satisfied.
(d) The Registration Statement contemplated by Section 5.10(a),
registering at least the number of shares of Parent Common Stock
necessary to satisfy Parent's obligations under Section 2.1 and 2.2,
shall have been declared effective by the Commission under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission and no
proceedings for such purpose shall have been initiated or threatened
by the Commission. Parent shall have reserved for issuance the number
of shares of Parent Common Stock necessary to satisfy Parent's
obligations under Section 2.1(c).
(e) No event or events shall have occurred that has had, or could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect with respect to Parent or any Significant
Subsidiary.
(f) Target shall have received an opinion of Bingham Dana LLP,
special counsel to Target, dated the Closing Date, substantially to
the effect that (i) the Merger will qualify as a reorganization within
the meaning of Section 368(a) of the Code, and (ii) no gain or loss
will be recognized by stockholders of Target who exchange all of their
Target Common Stock solely for Parent Common Stock pursuant to the
Merger, except with respect to cash, if any, received in lieu of a
fractional share interest in Parent Common Stock. In rendering its
opinion, such counsel shall be entitled to require and rely upon
representations contained in certificates of the officers of Target,
Parent and Sub. If Bingham Dana LLP shall fail to deliver such
opinion, the condition set forth in this Section 7.2(f) may be
satisfied, at the option of Parent, by an opinion of King & Spalding.
(g) Parent shall have loaned or otherwise provided or caused to
be provided or otherwise assisted Target in procuring, each in such as
manner as the parties shall have agreed, sufficient funds to fund the
deposit sale contemplated by Section 7.3(f) hereof on terms described
in Section 7.2(g) of the Parent Disclosure Letter.
7.3. Conditions to Obligation of Parent to Effect the Merger. The
obligation of Parent to effect the Merger shall be subject to the fulfillment or
waiver at or prior to the Effective Time of the additional following conditions:
(a) Target shall have performed in all material respects its
covenants contained in this Agreement required to be performed at or
prior to the Effective Time.
(b) The representations and warranties of Target contained in
Section 4 shall be true and correct when made and shall be true and
correct, in all material respects, as of the Effective Time as if made
at and as of such time (other than those
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representations and warranties that are qualified as to materiality or
similar language, which shall be true and correct in all respects as
of the Effective Time, as if made at and as of such time), except for
representations and warranties relating to a time or times other than
the Effective Time which were or will be true and correct, in all
material respects, at such time or times.
(c) Target shall have furnished Parent a certificate dated the
date of the Closing signed by the Chief Executive Officer and Chief
Financial Officer of Target that the conditions set forth in Sections
7.3(a) and 7.3(b) have been satisfied.
(d) Target and Brett N. Silvers shall have entered into an
agreement, in a form and substance reasonably satisfactory to Parent,
terminating the registration rights agreement, employment agreement,
and related agreements between Brett N. Silvers and the Company (the
"SILVERS AGREEMENT").
(e) Target, Nancy W. Silvers, and the Silvers Family Trust shall
have entered into an agreement, in a form and substance reasonably
satisfactory to Parent terminating all of Nancy W. Silvers' and the
Silvers Family Trust's registration or similar rights.
(f) Target shall have, and shall have caused each Target
Subsidiary to have, sold and transferred all existing deposits
(including all certificates of deposits) on terms and conditions
reasonably acceptable to Parent and the FDIC shall have provided to
the Federal Reserve Board, the Federal Reserve Bank of Boston and
Parent such evidence as any of them may require (or in the case of
Parent, may reasonably require) to demonstrate that, at the Effective
Time, all such Target Subsidiaries have ceased to be an "insured bank"
within the meaning of the Federal Deposit Insurance Act of 1940, as
amended (the "FDIC ACT") and no Target Subsidiary shall be an "insured
bank" within the meaning of the FDIC Act.
(g) First International Bank (a wholly owned subsidiary of
Target) shall have entered into a retention agreement (the "RETENTION
AGREEMENTS"), substantially in the form set forth in Section 7.3(g) of
the Target Disclosure Schedule, with each of Leslie Galbraith and
Brett N. Silvers and Amendments with not less than 70% of those other
officers or employees of Target that have an employment agreement (or
similar agreement) with Target or any Target Subsidiary as of the date
hereof, and such Retention Agreements and Amendments shall, on the
Effective Time, be in full force and effect.
(h) No event or events shall have occurred that have had, or
could reasonably be expected to have, individually or in the aggregate
a Material Adverse Effect with respect to Target or any Target
Subsidiary.
(i) At the Effective Time, no Target Subsidiary shall be a "bank"
within the meaning of the BHC Act, and Target shall have ceased to be
a "bank holding company" within the meaning of the BHC Act.
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(j) Parent, Escrow Agent and Stockholder Representative shall
have executed and delivered the Escrow and Indemnity Agreement.
(k) Parent shall have received from each 145 Affiliate an
agreement in the form of Exhibit B attached hereto.
(l) Target shall have caused the Stockholder Loan to be satisfied
in accordance with Section 5.26 and the Chief Financial Officer of
Target shall deliver a certificate, on behalf of Target, certifying
the amount of the Shareholder Loan satisfied through the redemption or
surrender of Target Common Stock.
(m) At the Effective Time, at least 70% of those persons who have
employment agreements with Target or any Target Subsidiary on the date
hereof shall be employed by Target or any Target Subsidiary.
(n) Parent and Sub shall have received a written notice pursuant
to Conn. Gen. Statutes Section 36a-185 of the Connecticut
Commissioner's intent not to disapprove the Merger or the consummation
of the other transactions contemplated herein. In addition, Parent,
shall have received such assurances as it may reasonably require that:
(i) neither Target nor any Target Subsidiary will be
required to be or become an "insured institution" under the FDIC
Act at any time following the consummation of the Merger;
(ii) the minimum capital requirements to be applicable to
Target for the period immediately following the consummation of
the Merger will not exceed those specified in Section 7.3(n)(ii)
of the Parent Disclosure Letter;
(iii) following the consummation of the Merger, the
regulatory obligations of Parent and its Subsidiaries with
respect to compliance with the regulations of the CDB, shall be
limited to (A) furnishing to the CDB copies of the reports
required to be filed by Parent under the Exchange Act and (B)
ensuring that Target will comply with all capital requirements
applicable to it; and
(iv) the ownership of Target and the Target Subsidiaries by
Parent will not impose on Parent and its Subsidiaries (other than
Target) any Burdensome Condition.
8. MISCELLANEOUS
8.1. Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval by the stockholders of both
Target and Parent:
(a) by mutual consent of the Board of Directors of Parent and the
Board of Directors of Target set forth in a written instrument;
(b) by either Parent or Target if (i) the Merger shall not have
been consummated on or before August 31, 2001, provided, however, that
the right to
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terminate this Agreement pursuant to this Section 8.1(b)(i) shall not
be available to any party that is in material breach of its
obligations under this Agreement or whose failure to fulfill any of
its obligations contained in this Agreement has been the cause of, or
resulted in, the failure of the Merger to have occurred on or prior to
the aforesaid date or (ii) any court or other Governmental Entity
having jurisdiction over a party hereto shall have issued an order
enjoining, restraining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable;
(c) by either Parent or Target if the conditions specified in
Section 7.1 have not been met or waived by the other at such time as
such condition can no longer be satisfied provided, however, that the
right to terminate this Agreement pursuant to this Section 8.1(c)
shall not be available to any party that is in material breach of its
obligations under this Agreement or whose failure to fulfill any of
its obligations contained in this Agreement has been the cause of, or
resulted in, the failure of the condition or conditions to be
satisfied;
(d) by Parent, if the Board of Directors of Target withdraws, or
modifies in any manner, the approval or recommendation by such Board
of Directors of this Agreement or the Merger or approves an
Acquisition Transaction, or by either Parent or Target if the Board of
Directors of Target approves, recommends or causes Target to enter
into any agreement with respect to any Acquisition Transaction that
constitutes a Superior Proposal;
(e) by Target if any of the conditions specified in Section 7.2
has not been met by Parent or waived by Target at such time as such
condition can no longer be satisfied provided, however, that Target's
right to terminate this Agreement pursuant to this Section 8.1(e)
shall not be available if Target is in material breach of its
obligations under this Agreement or its failure to fulfill any of its
obligations contained in this Agreement has been the cause of, or
resulted in, the failure of the condition or conditions to be
satisfied;
(f) by Parent if any of the conditions specified in Section 7.3
has not been met by Target or waived by Parent at such time as such
condition can no longer be satisfied provided, however, that Parent's
right to terminate this Agreement pursuant to this Section 8.1(f)
shall not be available if Parent is in material breach of its
obligations under this Agreement or its failure to fulfill any of its
obligations contained in this Agreement has been the cause of, or
resulted in, the failure of the condition or conditions to be
satisfied;
(g) by Target in accordance with Section 5.22; or
(h) by Parent for Target's failure to call, give notice of,
convene and hold the Target Meeting in accordance with Section
5.10(b).
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8.2. Expense Reimbursement.
(a) In order to induce Parent to enter into this Agreement and to
reimburse and compensate Parent for its time, expenses and lost
opportunity costs of pursuing the Merger and seeking to consummate the
transactions contemplated by this Agreement, Target will make a cash
payment to Parent of an amount equal to (x) three million five hundred
thousand dollars ($3,500,000) plus (y) all out-of-pocket expenses and
fees actually incurred by Parent (including without limitation fees
and expenses payable to all legal, accounting, financial and other
professional advisors) relating to the Merger or the transactions
contemplated by this Agreement (provided that in no event shall such
fees and expenses described in clause (y) exceed $1,000,000) (the
"BREAK-UP FEE") if:
(i) Parent terminates this Agreement pursuant to Section
8.1(d) or pursuant to Section 8.1(h);
(ii) Target terminates this Agreement pursuant to Section
8.1(d) or pursuant to Section 8.1(g); or
(iii) Parent or Target terminates this Agreement pursuant to
Section 8.1(c) because this Agreement was not approved at the
Target Meeting, but only if, (A) at the time of the Target
Meeting and at the time of termination there shall have been
announced and not withdrawn an Alternative Transaction, and (B)
within one year of the date of termination, an Alternative
Transaction is closed, in which case such fee shall be payable on
the closing date of such Alternative Transaction.
(b) Any payment required by this Section 8.2 must be paid by
Target to Parent (by wire transfer of immediately available funds to
an account designated by such party) within one (1) business day after
demand by such party.
(c) The parties agree that the agreements contained in this
Section 8.2 are an integral part of the transactions contemplated by
this Agreement. The parties acknowledge and agree that damages upon
termination of the Agreement in the circumstances referred to in
Section 8.2(a) are not reasonably ascertainable and the payment
pursuant to Section 8.2(a) constitutes liquidated damages and not a
penalty. The payment pursuant to Section 8.2(a) shall not relieve
Target from liability for any breach of its representations,
warranties, covenants or agreements contained in this Agreement and
Parent may pursue any remedies available to it at law or in equity,
including recovery of such damages to which it may be entitled, if
such breach by Target of its representations, warranties, covenants or
agreements contained in this Agreement is a result of or arises out of
the willful or intentional misconduct of Target, any Target
Subsidiary, or any of their respective officers or directors.
Notwithstanding anything to the contrary contained in this Agreement, (i) in
addition to any amounts paid or payable pursuant to this Section 8.2, Target
shall pay Parent the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken by Parent to collect the Break-up Fee, together with
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interest on the unpaid amount at the publicly announced prime rate of Citibank,
N.A. from the date such amount was required to be paid hereunder and (ii) each
party hereto shall have liability for such party's breach of its
representations, warranties, covenants or agreements contained in this Agreement
and the other party may pursue any remedies available to it at law or in equity,
including recovery of such damages to which it may be entitled, if, but only if,
such breach of such party's representations, warranties, covenants or agreements
contained in this Agreement is a result of or arises out of the willful or
intentional misconduct of such party, any of such party's Subsidiaries, or any
of their respective officers or directors.
8.3. Non-Survival of Representations, Warranties and Agreements.
(a) The representations, warranties, covenants and agreements in
the this Agreement shall survive the Closing and the consummation of
the transactions contemplated herein, subject to the limitations on
claims arising out of or related to such representations, warranties,
covenants, and agreements in the Escrow and Indemnity Agreement
provided that Sections 1.4, 2.1 through 2.5, 5.3, 5.4, 5.7 and 5.13
and this Section 8.3 shall survive consummation of this transactions
contemplated hereby to the extent contemplated by such Sections.
(b) The representations, warranties, covenants and agreements in
this Agreement will terminate upon termination of this Agreement
pursuant to Section 8.1; provided, however, that Section 5.15, the
last sentence of Section 5.4 and all of Section 8.2 will in all events
survive any termination of this Agreement.
8.4. Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party which is, or whose stockholders are, entitled to
the benefits thereof, and this Agreement may be amended or supplemented at any
time, provided that no amendment will be made after Target's Stockholders
approve the Merger which reduces or changes the form of the Per Share Stock
Consideration without further Stockholder approval. No such waiver, amendment or
supplement will be effective unless in a writing which makes express reference
to this Section 8.4 and is signed by the party or parties sought to be bound
thereby.
8.5. Entire Agreement. This Agreement together with the Escrow and
Indemnity Agreement, the Voting Agreements and Confidentiality Agreement,
contain the entire agreement among Parent and Target with respect to the Merger
and the other transactions contemplated hereby and thereby, and supersedes all
prior agreements among the parties with respect to such matters.
8.6. Applicable Law. This Agreement will be governed by and construed
in accordance with the laws of the State of Delaware.
8.7. Certain Definitions. When used in this Agreement, the following
terms shall have the following meanings.
(a) "Affiliate", "associate" and "significant subsidiary" shall
have the respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect
on the date hereof.
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(b) "Allowance for Loan and Lease Losses" or "ALLL" means, as of
any calculation date, the Target Parties' Allowance for Loan and Lease
Losses solely with respect to the remaining balance of the Closing
Date Portfolio determined in accordance with the Current Methodology,
Prevailing Regulatory Requirements and GAAP.
(c) "Bank" means First International Bank, a Connecticut state
bank and trust company.
(d) "Closing Date Price" shall equal the average of the per share
4:00 p.m. closing prices on the New York Stock Exchange of the Parent
Common Stock for the 20 consecutive trading days ending at the end of
the third trading day immediately preceding the Closing Date.
(e) "Connecticut Commissioner" means the Connecticut Banking
Commissioner.
(f) "Control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management or policies of a person, whether through the
ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise.
(g) "Current Methodology" means the methodology of Target Parties
for the calculation of Non-Performing Assets, Risk Rating and the ALLL
as outlined in Bank's Credit Policy Manual and the October 12, 2000
Memorandum to the Audit Committee of Target Re: "Adequacy of the
Allowance for Loan (and Lease) Losses as of September 30, 2000", as
such methodology is in effect on September 30, 2000.
(h) "Employee Benefit Plan" shall mean with respect to any Person
each plan, fund, program, agreement, arrangement or scheme, including,
but not limited to each plan, fund, program, agreement, arrangement or
scheme maintained or required to be maintained under the laws of a
jurisdiction outside the United States of America, in each case, that
is at any time sponsored or maintained or required to be sponsored or
maintained by such Person or to which such Person makes or has made,
or has or has had an obligation to make, contributions providing for
employee benefits or for the remuneration, direct or indirect, of the
employees, former employees, directors, officers, consultants,
independent contractors, contingent workers or leased employees of
such Person or the dependents of any of them (whether written or
oral), including, without limitation, each deferred compensation,
bonus, incentive compensation, pension, retirement, stock purchase,
stock option and other equity compensation plan, "welfare" plan
(within the meaning of Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), determined without regard
to whether such plan is subject to ERISA); each "pension" plan (within
the meaning of Section 3(2) of ERISA, determined without regard to
whether such plan is subject to ERISA); each severance plan or
agreement, health, vacation, summer hours, supplemental unemployment
benefit, hospitalization insurance, medical, dental, legal and each
other employee benefit plan, fund, program, agreement or arrangement.
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(i) "ERISA Affiliate Plan" shall mean each Employee Benefit Plan
sponsored or maintained or required to be sponsored or maintained at
any time by any Person (whether incorporated or unincorporated), that
together with Target or any Target Subsidiary would be deemed a
"single employer" within the meaning of Section 414 of the Code, (an
"ERISA AFFILIATE"), or to which such ERISA Affiliate makes or has
made, or has or has had an obligation to make, contributions at any
time.
(j) "Escrow Agent" means Citibank, N.A., a national banking
association.
(k) "Escrow Balance" means an amount determined as of the
Calculation Date equal to the greater of (i) $8,000,000 or (ii) the
aggregate principal balance of Non-Performing Assets held by the
Target Parties as of the Calculation Date.
(l) "Escrow Shares" means the number of shares to be held in the
Escrow determined on the Closing Date by dividing the Escrow Balance
by the Closing Date Price.
(m) "Guaranteed or Insured Portion" of any Loan or Non-Performing
Asset means as of any date of calculation that amount of the principal
balance of any Loan or Non-Performing Asset (or portion thereof) which
as of such date is either guaranteed as to repayment under a Qualified
Agency Guaranty in effect as of such date or insured as to repayment
under a Qualified Insurance Policy in effect as of such date.
(n) "Group" shall have the meaning ascribed to such term in
Section 13(d) of the Exchange Act, as in effect on the date hereof.
(o) "Knowledge of Target" and words of similar import shall mean
all facts known by those officers or directors of Target or Target
Subsidiaries set forth in Section 8.7(p) of the Target Disclosure
Letter after due inquiry and diligence with respect to the matters at
hand.
(p) "Loan" means each loan and lease held by the Target Parties
as of the Closing Date, including uncancelled commitments and
contingent exposures thereunder.
(q) "Market Price" shall equal (i) $57.68, if the Closing Date is
on or before July 31, 2001 or (ii) the Closing Date Price, if the
Closing Date is after July 31, 2001.
(r) "Material Adverse Effect" means an event, change or
occurrence which has a material negative impact on the financial
condition, businesses, prospects or results of operations of Target
and its subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, as the case may be, or the ability of
Target or Parent, as the case may be, to consummate the transactions
contemplated hereby provided, however, that Material Adverse Effect
shall not be deemed to include the impact of (a) changes after the
date hereof in interest rates, (b) changes after the date hereof in
GAAP, (c) changes after the date hereof in general economic conditions
in the United States or in
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other markets in which Target or Parent, as the case may be, is
engaged in business, (d) the effects of the Merger and compliance by
Parent and Target with the provisions of this Agreement on the
business, financial condition or results of operations of Target or
Parent, (e) any change after the date hereof in the market price or
trading volume of Target Common Stock or Parent Common Stock, or (f)
any changes or effects as a result of the announcement of the Merger
or any of the other transactions contemplated herein.
(s) "Merger Consideration" shall equal
(i) $76,328,627, if the Closing Date is on or before July
31, 2001;
(ii) the product of 1,323,311.84 and the Closing Date Price,
if the Closing Date is after July 31, 2001, and the Closing Date
Price is between $51.91 and $63.45 inclusive;
(iii) $83,961,489.62, if the Closing Date is after July 31,
2001 and the Closing Date Price is greater than $63.45; or
(iv) $68,695,764.24, if the Closing Date is after July 31,
2001 and the Closing Date Price is less than $51.91;
minus (A) that amount of Stockholder Loans satisfied through the
redemption or surrender of Target Common Stock and (B) if, but only
if, the Minimum Net Worth exceeds Net Book Value by more than
$1,000,000, the amount that Minimum Net Worth exceeds Net Book Value.
(t) "Minimum Net Worth" shall mean $58,904,000.
(u) "Net Book Value" shall mean that amount, determined in
accordance with Section 5.22 hereof, equal to (x) the total assets of
Target as of the Calculation Date minus (y) the total liabilities of
Target as of the Calculation Date, determined in accordance with GAAP
consistently applied and consistent with prior practices provided that
in all cases Net Book Value shall be computed consistent with
Prevailing Regulatory Requirements even if such Prevailing Regulatory
Requirements are inconsistent with GAAP or prior practice. For
purposes of calculating Net Book Value, (i) there shall be excluded
the effect on Net Book Value of the exercise of Target Options
outstanding as of September 30, 2000, between September 30, 2000 and
the Calculation Date; and (ii) any and all director, officer or
employee compensation, bonus, and remuneration and all expenses and
costs of the Merger and any other transactions contemplated herein, to
the extent not actually paid prior to the Effective Time, shall be
included as a part of the liabilities of Target as of the Calculation
Date.
(v) "Non-Performing Assets" means as of any date of calculation
the sum of the aggregate principal balance of all Loans, Other Real
Estate Owned, and Other Assets Owned of Target held by the Target
Parties that as of such calculation date are classified on the books
and records of the Target Parties as Non-Performing Assets in
accordance with the Current Methodology and Prevailing Regulatory
Requirements,
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which shall include, but not be limited to, (a) the aggregate
principal balance of all Loans that as of such calculation date are 90
or more days past due as to principal or interest or are otherwise
deemed to be Non-Performing Assets, determined as a result of a
compelling business reason or in accordance with the Current
Methodology and Prevailing Regulatory Requirements and (b) Guaranteed
or Insured Portions of such assets to the extent of the amount of any
repair required by, or claim denied by, sponsoring agencies under
guarantee programs or insurance policies as a result of actions of a
Target Party prior to the Closing Date. For the avoidance of doubt,
except as otherwise referred to in (b) above, Non-Performing Assets
shall not include the Guaranteed or Insured Portion of any
Non-Performing Assets.
(w) "Per Share Merger Consideration" shall mean that amount per
share of Target Common Stock determined by dividing the Merger
Consideration by the number of shares of Target Common Stock issued
and outstanding immediately prior to the Effective Time.
(x) "Person" means an individual, corporation, partnership,
association, trust or unincorporated organization.
(y) "Per Share Stock Consideration" shall mean that number of
shares of Parent Common Stock equal to the product of (A) 1.00 and (B)
the fraction (rounded to four decimal places) obtained by dividing (1)
the Per Share Merger Consideration by (2) the Market Price.
(z) "Prevailing Regulatory Requirements" means (i) all federal
and state regulatory or statutory requirements applicable to the
Target Parties on the Closing Date (including without limitation all
Required Regulatory Changes), (ii) all Recommended Regulatory Changes
adopted by the Target Parties, (iii) all Required Regulatory Changes,
and (iv) all federal and state regulatory requirements applicable to
the Target Parties based on regulatory examinations being conducted as
of the Closing Date the results of which are unknown on the Closing
Date.
(aa) "Qualified Agency Guaranty" means in respect of any Loan, a
guaranty issued with respect to such Loan by (i) the SBA, pursuant to
SBA Loan Guarantee Agreement Forms 750 or 750B each dated July 1,
1999, (ii) the USDA pursuant to the applicable loan note guarantee or
(iii) Ex-Im Bank pursuant to the Master Guarantee Agreement for short
and medium term loans dated September 11, 1995, as amended; the Medium
Term Express Credit Program Agreement dated July 10, 2000; or the
Working Capital Guarantee Program Delegated Authority Letter Agreement
CT DA-99-002 as supplemented by the "Super" Delegated Authority Letter
dated January 3, 2001, as applicable, each as amended or replaced from
time to time.
(bb) "Qualified Insurance Policy" means in respect of any Loan an
insurance policy issued with respect to such Loan by AIG or Lloyds of
London.
(cc) "Regulatory Approval" shall refer to the fact that:
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(i) the Connecticut Commissioner shall have approved the
indirect acquisition of Target by Parent and the direct
acquisition by Target by Sub without imposition of any Burdensome
Condition;
(ii) to the extent required by any agreement, contract, or
understanding to which Target or any Target Subsidiary is a party
or by any applicable federal or state law, statute, rule, or
regulation, the SBA, the USDA, and Ex-Im shall have approved the
indirect acquisition of Target by Parent or have provided
assurances satisfactory to Parent that such approvals will be
forthcoming;
(iii) the SBA, the USDA and Ex-Im Bank shall each have
confirmed that the consummation of the transactions contemplated
herein will not affect Target's status as a "lender," "certified
lender" or "preferred lender" under each such agency's loan or
loan guarantee programs; and
(iv) Target has obtained such consents and approvals
satisfactory to Parent, in its sole discretion, ensuring that
consummation of the transactions contemplated herein will not
cause Parent or any Affiliate of Parent (including, without
limitation, Target and each Target Subsidiary) to become or
continue to be subject to regulation under the Bank Holding
Company Act of 1956, as amended or any other federal banking
statute.
(dd) "Risk Rating" means, as of any calculation date, risk
ratings assigned in accordance with the Bank's current risk rating
system as documented in Section J.3 of the Bank's Credit Policy Manual
dated February 1, 2000 and definitions of risk ratings in Prevailing
Regulatory Requirements.
(ee) "Stockholder Representative" shall mean that person
designated in the Escrow and Indemnity Agreement.
(ff) "Subsidiary" of Target, Parent or any other person means,
except where the context otherwise requires, any corporation,
partnership, trust or similar association of which Target, Parent or
any other person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or indirectly,
more than 50% of the capital stock or other equity interests, the
holders of which are generally entitled to vote for the election of
the board of directors or other governing body of such corporation.
(gg) "Target Benefit Plan" shall mean each Employee Benefit Plan
sponsored or maintained or required to be sponsored or maintained at
any time by Target or any Target Subsidiary or to which Target or any
Target Subsidiary makes or has made, or has or has had an obligation
to make, contributions at any time.
(hh) "Target Parties" means collectively Target, the Bank and all
Unconsolidated Affiliates.
-58-
66
(ii) "Unconsolidated Affiliates" means all directly or indirectly
owned subsidiaries of Target whose financial results are not accounted
for on a consolidated basis by Target for financial reporting purposes
including, but not limited to, FNBNE Funding Corp., FIB Holdings, Inc.
and FIB Funding Corp.
8.8. Descriptive Headings. The descriptive headings contained in this
Agreement are for convenience and reference only and will not affect in any way
the meaning or interpretation of this Agreement. Unless the context of this
Agreement expressly indicates otherwise, (i) any singular term in this Agreement
will include the plural and any plural term will include the singular and (ii)
the term section or schedule will mean a section or schedule of or to this
Agreement.
8.9. Notices. All notices, consents, requests, demands and other
communications hereunder will be in writing, signed by or on behalf of the party
making the same, will specify the Sections under this Agreement pursuant to
which it is given or being made and will be delivered personally or sent by
registered or certified mail (return receipt requested) or by UPS Next Day Air
(with evidence of delivery and postage and other fees prepaid) as follows:
If to Target:
First International Bancorp, Inc.
280 Trumbull Street
Hartford, CT 06130
Attn: Brett N. Silvers
With a copy to:
Bingham Dana
150 Federal Street,
Boston, MA 02110-1726
Attn: Neal J. Curtin
If to Parent or Sub:
United Parcel Service, Inc.
55 Glenlake Parkway NE
Atlanta, GA 30328
Attn: David Mounts
-59-
67
With copies to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30338
Attn: John D. Capers, Jr.
and
United Parcel Service, Inc.
55 Glenlake Parkway, N.E.
Atlanta, GA 30328-3498
Attn: Legal Department -- Cathy Harper
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section 8.9. Any such notice communication or
delivery will be deemed to be given or made (a) on the date of delivery if
delivered in person, (b) on the first business day after delivery to a UPS
customer service representative or (c) on the fifth business day after it is
mailed by registered or certified mail.
8.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original but all of which
together will constitute but one agreement.
8.11. Assignment. This Agreement is not intended to nor will it confer
upon any other person (other than the parties hereto) any rights or remedies.
Without the prior written consent of the other parties to this Agreement,
neither Parent, Target nor Sub shall assign any rights or delegate any
obligations under this Agreement. Any such purported assignment or delegation
made without prior consent of the other parties hereto shall be null and void.
8.12. 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 terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party hereto. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
8.13. Void. Notwithstanding anything in this Agreement to the contrary,
this Agreement shall become void ab initio and shall be immediately of no force
and effect if and upon the determination by a Governmental Entity having
authority to make such determination that the execution of this Agreement or
adherence by Target to one or more of the covenants contained in Section 5
(without giving effect to the Merger) causes Parent or any Affiliate of Parent
to be a "bank holding company" or a "bank" within the meaning of the BHC Act or
subject to any federal or state banking, thrift or similar regulations.
-60-
68
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
UNITED PARCEL SERVICE, INC.
/s/ Joseph R. Moderow
------------------------------------
By: Joseph R. Moderow
Title: Senior Vice President
STAG MERGER COMPANY, INC.
/s/ Robert J. Bernabucci
------------------------------------
By: Robert J. Bernabucci
Title: President
FIRST INTERNATIONAL
BANCORP, INC.
/s/ Brett N. Silvers
------------------------------------
By: Brett N. Silvers
Title: Chairman and Chief Executive
Officer
69
EXHIBIT A
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of January ___, 2001 (the "AGREEMENT")
is by and between _______________ (the "STOCKHOLDER") and United Parcel
Service, Inc. (the "PARENT") and Stag Merger Company, Inc., a Delaware
corporation ("SUBSIDIARY") and together with Parent the "GRANTEE").
WHEREAS, Parent, Subsidiary and First International Bancorp, Inc.
("TARGET") have, contemporaneously with the execution of this Agreement, entered
into an Agreement and Plan of Merger, dated as of January 15, 2001 (the "MERGER
AGREEMENT"), pursuant to which Subsidiary will be merged with and into Target
(the "MERGER");
WHEREAS, Stockholder is the owner, both beneficially and of record, of
________ shares of Target's common stock, $.001 par value per share (the "COMMON
STOCK") (such shares, together with any other shares of Common Stock or other
voting capital stock of Target or rights with respect thereto acquired (either
beneficially or of record) by Stockholders after the date hereof whether upon
the exercise of options or warrant or conversion of convertible securities or
otherwise, being referred to herein as the "VOTING AGREEMENT SHARES");
WHEREAS, as a condition to the willingness of Grantee to enter into the
Merger Agreement, Grantee has required that the Stockholder agree, and in order
to induce Grantee to enter into the Merger Agreement, the Stockholder has
agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, the parties hereto expressly agree as follows:
1. DEFINITIONS. Capitalized terms used but not otherwise defined in
this Agreement shall have the meanings ascribed to such terms in the Merger
Agreement.
2. RESTRICTIONS ON TRANSFER AND CONVERSION.
2.1 No Transfers. The Stockholder hereby covenants and agrees that
the Stockholder shall not, except as otherwise consented to in writing by
Grantee (such consent being within Grantee's sole, absolute and unfettered
discretion), prior to the termination of this Agreement, (a) either directly or
indirectly, offer or otherwise sell, assign, pledge, hypothecate, transfer,
exchange, tender, dispose of or grant an option to dispose of any Voting
Agreement Shares or any interest therein, or enter into any agreement, contract
or understanding (oral or written) to do any of the foregoing, or (b) take any
action which would have the effect of preventing or disabling the Stockholder
from performing the Stockholder's obligations under this Agreement; provided,
however, that Stockholder shall be permitted to transfer Voting Agreement Shares
(i) by will or by operation of law, in which case this Agreement shall bind the
transferee, (ii) pursuant to any pledge agreement, subject to the pledgee
agreeing in writing to be bound by the terms of this Agreement, (iii) in
connection with estate and tax planning purposes,
70
including transfers to relatives, trusts and charitable organizations, subject
to the transferee agreeing in writing to be bound by the terms of this
Agreement, or (iv) to any other stockholder of Target who has executed a voting
agreement substantially similar to this Agreement.
2.2 Inquiries or Proposals. From the date of this Agreement to
termination hereof, Stockholder shall not, directly or indirectly, through any
officer, director, employee, representative or agent (a) solicit, initiate, or
encourage any inquiries or proposals that constitute or could reasonably be
expected to lead to an Acquisition Transaction, or (b) engage in negotiations or
discussions concerning, or provide any non-public information to any person or
entity relating to, any Acquisition Transaction.
3. STOCKHOLDER'S RIGHTS. Except as may be limited by this Agreement, the
Stockholder shall, as to the Voting Agreement Shares, possess and be entitled to
exercise all of the Stockholder's rights and powers of every kind as the
beneficial owner thereof, including the right to vote the Voting Agreement
Shares and the right to take part in, or give or withhold consent to, any
corporate or stockholders' action with respect to which such Voting Agreement
Shares are entitled to be voted.
4. VOTING AGREEMENT.
4.1 Voting Agreement. The Stockholder has revoked or terminated any
proxies, voting agreements or similar arrangements previously given or entered
into with respect to the Voting Agreement Shares and hereby fully and
irrevocably agrees to: (a) appear at any stockholders' meeting of Target held
with respect to the Merger or otherwise cause the Voting Agreement Shares to be
counted as present at such meeting for purposes of establishing a quorum, (b)
vote or consent (or cause to be voted or consented) all of the Voting Agreement
Shares in favor of the adoption and approval of the Merger Agreement and
consummation of the Merger and any other action required in furtherance thereof;
and (c) vote or consent (or cause to be voted or consented) all of the Voting
Agreement Shares against any Acquisition Transaction (other than the Merger).
Nothing in this Agreement shall limit or restrict a Stockholder's ability to act
or vote in such Stockholder's capacity as an officer or director of Target in
any manner such Stockholder so chooses.
4.2 Stockholder Authority. The Stockholder may vote on all issues
that come before any meeting of stockholders of Target, other than those
specified in Section 4.1, in such Stockholder's sole discretion, provided that
such vote is not inconsistent with the purposes of this Agreement or the
transactions contemplated by the Merger Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder hereby represents and warrants to Grantee as follows:
5.1 Due Execution. This Agreement has been duly and validly executed
and delivered by the Stockholder and constitutes a legal, valid and binding
agreement of the Stockholder enforceable against the Stockholder in accordance
with its terms, except that the enforcement hereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
71
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
5.2. No Conflicts. The execution and delivery of this Agreement by
the Stockholder does not, and the performance of this Agreement by the
Stockholder will not, result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the Voting Agreement Shares pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Stockholder is a party or by which the Stockholder or
the Voting Agreement Shares are bound or affected, except, in the case of each
of the foregoing, for any such conflicts, violations, breaches, defaults or
other occurrences which would not prevent or materially delay the performance by
the Stockholder of its obligations under this Agreement or the transactions
contemplated by the Merger Agreement or hereby.
5.3 Record Ownership. The Stockholder is the beneficial and record
owner of the Voting Agreement Shares and has the right to vote or direct the
voting of the Voting Agreement Shares. The Stockholder has not appointed or
granted any proxy or entered into any voting agreement or similar arrangement,
which proxy, voting agreement or other arrangement is in effect on the date
hereof or will be effective at any time while this Agreement remains in effect,
with respect to the Voting Agreement Shares.
6. TERMINATION. This Agreement shall terminate upon the earliest to
occur of (i) the termination of the Merger Agreement in accordance with its
terms, or (ii) the Effective Time.
7. MISCELLANEOUS.
7.1. Waiver and Amendment. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto. No waiver will be effective
unless in a writing which makes express reference to this Section 7.1 and is
signed by the party or parties sought to be bound thereby.
7.2 Entire Agreement. This Agreement contain the entire agreement
among Parent, Subsidiary and Stockholder with respect to the transactions
contemplated hereby, and supersedes all prior agreements among the parties with
respect to such matters.
7.3 Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware.
7.4 Descriptive Headings. The descriptive headings contained in this
Agreement are for convenience and reference only and will not affect in any way
the meaning or interpretation of this Agreement. Unless the context of this
Agreement expressly indicates otherwise, (i) any singular term in this Agreement
will include the plural and any plural term will
72
include the singular and (ii) the term section or schedule will mean a section
or schedule of or to this Agreement.
7.5 Notices. All notices, consents, requests, demands and other
communications hereunder will be in writing, signed by or on behalf of the party
making the same, will specify the Sections under this Agreement pursuant to
which it is given or being made and will be delivered personally or sent by
registered or certified mail (return receipt requested) or by UPS Next Day Air
(with evidence of delivery and postage and other fees prepaid) as follows:
If to Parent or Sub:
------------------------
------------------------
------------------------
------------------------
------------------------
With copies to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30338
Attn: John D. Capers, Jr.
and
United Parcel Service, Inc.
55 Glenlake Parkway, N.E.
Atlanta, GA 30328-3498
Attn: Legal Department -- Cathy Harper
If to Stockholder:
------------------------
------------------------
------------------------
------------------------
------------------------
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section 7. Any such notice communication or
delivery will be deemed to be given or made (a) on the date of delivery if
delivered in person, (b) on the first business day after delivery to a UPS
customer service representative or (c) on the fifth business day after it is
mailed by registered or certified mail.
73
7.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original but all of which
together will constitute but one agreement.
7.6 Assignment This Agreement is not intended to nor will it confer
upon any other person (other than the parties hereto) any rights or remedies.
Without the prior written consent of the other parties to this Agreement, no
party may assign any rights or delegate any obligations under this Agreement.
Any such purported assignment or delegation made without prior consent of the
other parties hereto shall be null and void.
7.7 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 terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party hereto. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
7.8 Parties in Interest. All covenants and agreements contained
herein shall be binding upon and inure to the benefit of the Stockholder or
Grantee, whichever is applicable under the terms hereof. Nothing in this
Agreement, whether express or implied, shall be construed to give to any person,
other than the Stockholder or Grantee, any legal or equitable right, remedy or
claim under or in respect of this Agreement (and any covenants, conditions or
provisions contained herein).
7.9. Specific Performance. Each party acknowledges that its
obligations hereunder are unique, and agrees that the other shall have the
right, in addition to any other rights it may have at law, to specific
performance or equitable relief by way of injunction if it shall fail to perform
any of its obligations hereunder.
7.10. Forum Selection. Each of the parties hereto (i) consents to
submit to the personal jurisdiction of any Federal Court located in the State of
New York or any New York state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated hereby, (ii) agrees that such
party will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court and (iii) agrees that such party
will not bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a Federal court sitting in the State
of New York or a New York state court.
74
IN WITNESS WHEREOF, each of the parties hereto have executed this
Agreement, or caused this Agreement to be duly executed, as of the date hereof.
[STOCKHOLDER]
----------------------------------
UNITED PARCEL SERVICE, INC.
By:_______________________________
Name:
Title:
STAG MERGER COMPANY, INC.
By:_______________________________
Name:
Title:
75
3
EXHIBIT B
TARGET AFFILIATE AGREEMENT
United Parcel Service, Inc.
55 Glenlake Parkway, NE
Atlanta, GA 30328
Gentlemen:
Pursuant to the terms of the Agreement and Plan of Merger dated as of
January 15, 2001 (the "MERGER AGREEMENT") by and among United Parcel Service,
Inc., a Delaware corporation ("PARENT"), First International Bancorp, Inc., a
Delaware corporation ("TARGET"), and Stag Merger Company, Inc., a Delaware
corporation and wholly-owned subsidiary of Parent ("SUB"), Sub will be merged
with and into Target, with Target continuing as the surviving corporation (the
"MERGER"). Capitalized terms used in this letter without definition shall have
the meanings assigned to them in the Merger Agreement.
I have been advised that I may be deemed to be an "affiliate" of Target,
as the term "affiliate" is used in sections (c) and (d) of Rule 145 of the rules
and regulations (the "RULES AND REGULATIONS") promulgated pursuant to the
Securities Act.
As a result of the Merger, I may receive shares of Parent Common Stock in
exchange for shares of Target Common Stock owned by me as of the Effective Date.
1. I hereby represent, warrant and covenant to Parent that in the event I
receive my Parent Common Stock as a result of the Merger:
(a) I shall not make any sale, transfer or other disposition of the
Parent Common Stock in violation of the Securities Act or the Rules and
Regulations.
(b) I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
Parent Common Stock, to the extent I felt necessary, with my counsel or
counsel for Target.
(c) I have been advised that the shares of Parent Common Stock to be
issued to me pursuant to the Merger have been registered with the
Commission under the Securities Act in a Registration Statement on Form
S-4. However, I have also been advised that, (i) because, at the time the
Merger is submitted for a vote of the stockholders of Target, I may be
deemed to be an affiliate of Target and (ii) because the
76
sale or distribution by me of the Parent Common Stock has not been
registered under the Securities Act, I may not sell, transfer or otherwise
dispose of the Parent Common Stock issued to me in the Merger unless (x)
such sale, transfer or other disposition is made in conformity with the
volume and other limitations of Rule 145 promulgated by the SEC under the
Securities Act, (y) such sale, transfer or other disposition has been
registered under the Securities Act, or (z) in the written opinion of
counsel reasonably acceptable to Parent, such sale, transfer or other
disposition is otherwise exempt from registration under the Securities
Act.
(d) I understand that except as provided for in the Merger
Agreement, Parent is under no obligation to register the sale, transfer or
other disposition of the Parent Common Stock by me or on my behalf under
the Securities Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
(e) I also understand that there will be placed on the certificates
for the Parent Common Stock issued to me, or any substitutions therefor, a
legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT DATED ________ __, 2001 BETWEEN THE
REGISTERED HOLDER HEREOF AND UNITED PARCEL SERVICE, INC., A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
PARENT.
(f) I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145 or pursuant to a registration
statement, Parent reserves the right to put the following legend on the
Certificates issued to my transferee:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THESE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT
WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE
2
77
MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933.
2. It is understood and agreed that certificates with the legends set
forth in paragraphs (1)(e) and (f) above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from the
date the undersigned acquired the Parent Common Stock received in the Merger and
the provisions of Rule 145(d)(2) are then applicable to the undersigned, (ii)
two years shall have elapsed from the date the undersigned acquired the Parent
Common Stock in the Merger and the provisions of Rule 145(d)(3) are then
applicable to the undersigned, or (iii) Parent has received either an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to Parent,
or a "no-action" letter obtained by the undersigned from the staff of the
Commission, which no action letter shall be reasonably satisfactory to Parent,
to the effect that the restrictions imposed by Rule 144 and 145 under the
Securities Act no longer apply to the undersigned.
Very truly yours,
__________________________
Agreed and accepted, this __ day of __________, 2001.
UNITED PARCEL SERVICE, INC.
By:_________________________
Name:
Title:
3
78
4
EXHIBIT C
ESCROW AND INDEMNITY AGREEMENT
THIS ESCROW AND INDEMNITY AGREEMENT (the "AGREEMENT"), dated as of the
____ day of ____________, 2001, is entered into by and among United Parcel
Service, Inc., a Delaware corporation ("PARENT"), ____________, an individual
resident of the State of ____________, as the Stockholder Representative, and
Citibank, N.A., a national banking association, as the escrow agent (the "ESCROW
AGENT"). Parent, Stockholder Representative and Escrow Agent shall be sometimes
referred to herein as a "PARTY" and collectively as the "PARTIES".
RECITALS
WHEREAS, Parent, Target and Sub are parties to the Agreement and Plan of
Merger Agreement (the "MERGER AGREEMENT"), dated as of January 15, 2001,
pursuant to which Sub will be merged with and into Target (the "MERGER") with
Target being the Surviving Corporation;
WHEREAS, each Stockholder of Target will receive shares of Parent Common
Stock in connection with the Merger;
WHEREAS, Section 2.2 of the Merger Agreement provides for certain shares
of Parent Common Stock to be deposited in escrow as security for certain
indemnity obligations of the Stockholders described herein;
WHEREAS, as a condition to and in contemplation of the Merger, Parent and
the Stockholders have agreed to enter into this Agreement pursuant to Section
7.3(i) of the Merger Agreement and as a material inducement to Parent to enter
into the Merger Agreement and consummate the transactions contemplated therein;
and
WHEREAS, Parent and Stockholder Representative desire that the Escrow
Agent act as escrow agent in accordance with the terms hereof, and the Escrow
Agent is willing to act in such capacity;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein and in the Merger Agreement, the Parties,
intending to be legally bound, hereby agree as follows:
AGREEMENT
1. DEFINITIONS. Capitalized terms used in this Agreement that are
not defined herein shall have the meanings given such terms in the Merger
Agreement. When used in this Agreement, the following terms shall have the
following meanings.
79
1.1. "ARBITRATOR" means a "Big 5" accounting firm mutually
agreeable to Parent and Stockholder Representative.
1.2. "CLAIMS PERIOD" shall have the meaning set forth in
Section 6.2 hereof.
1.3. "CLOSING DATE" means the date hereof.
1.4. "CLOSING DATE ALLL" shall be equal to the amount as of the
Calculation Date of the ALLL solely with regard to the remaining balance of the
Closing Date Loan Portfolio determined in accordance with the Current
Methodology, Prevailing Regulatory Requirements, and GAAP.
1.5. "CLOSING DATE PORTFOLIO" means the Direct Exposure and, without
duplication, the Non-Performing Assets, included in the books and records of the
Target Parties as of the Closing Date.
1.6. "DIRECT EXPOSURE" means as of any date of calculation the
aggregate principal balance of all Loans and Non-Performing Assets as of such
date to the extent not sold, participated or securitized as of such date, but
does not include Guaranteed or Insured Portions, except for Direct Exposure
Adjustments with respect thereto.
1.7. "DIRECT EXPOSURE ADJUSTMENTS" means as of any date of
calculation the aggregate portion of any Guaranteed or Insured Portion
(including any uninsured portion of a Loan or Non-Performing Asset which may
have been sold or participated) for which repair is required by, or a claim has
been denied by, an issuer of a Qualifying Agency Guaranty or Qualifying
Insurance Policy or for any filed and unresolved claims.
1.8. "DISBURSEMENT DATE" means the date within sixty (60) days
following the Escrow Measurement Date on which the remaining balance of the
Escrow Shares is delivered to the Stockholders pursuant to Section 5.2.
1.9. "EFFECTIVE TAX RATE" means 39%.
1.10. "ESCROW AGENT" means Citibank, N.A., a national banking
association.
1.11. "ESCROW CHARGE" means an amount determined as of the Escrow
Measurement Date, calculated on an after tax basis using Target's Effective Tax
Rate, equal to (x) the Target Parties' ALLL on the Escrow Measurement Date (the
"ESCROW MEASUREMENT DATE ALLL") minus (y) the Target Parties' ALLL on the
Calculation Date (the "CALCULATION DATE ALLL"), plus (z) cumulative net
charge-offs by the Target Parties during the period from the Calculation Date
through the Escrow Measurement Date in accordance with the Current Methodology,
the Prevailing Regulatory Requirements and GAAP. The CEO of Target shall certify
on the Closing Date that the Calculation Date ALLL was determined in accordance
with the Current Methodology, Prevailing Regulatory Requirements and GAAP.
1.12. "ESCROW MEASUREMENT DATE" means the last day of the twelfth
full calendar month following the Closing Date.
2
80
1.13. "ESCROW MEASUREMENT DATE ALLL" with respect to the Closing
Date Loan Portfolio shall be determined as follows:
(a) The Escrow Measurement Date ALLL shall be determined in a
manner consistent with the Current Methodology, Prevailing Regulatory
Requirements and GAAP.
(b) Prior to the Escrow Measurement Date, the risk ratings for
the Direct Exposure of the Target Parties expected to be in effect on the
Escrow Measurement Date may be reviewed by an independent examiner. The
risk ratings shall be assigned in accordance with the Target's current
risk rating system as documented in Section J.3 of the Target's Credit
Policy Manual dated February 1, 2000 and definitions of loan risk ratings
in Prevailing Regulatory Requirements.
(c) The independent examiner shall be selected from the
schedule of examiners attached hereto as Schedule 1.13(c). The review by
the independent examiner of the then-remaining Loans and Non-Performing
Assets in the Closing Date Portfolio shall be commenced no more than
forty-five (45) days prior to the Escrow Measurement Date. The final risk
ratings, as rendered by the independent examiner, after review and
discussion with management, shall be utilized in establishing the Escrow
Measurement Date ALLL.
(d) The loss allocation percentages used to determine the
Escrow Measurement Date ALLL shall be calculated based on the Current
Methodology and Prevailing Regulatory Requirements.
(e) Any Loan that is renewed after the Closing Date shall not
be included in the Closing Date Portfolio for purposes of determining the
Escrow Measurement Date ALLL, with the exception of Loans that are either
(i) directed to be renewed by the issuer of a Qualified Agency Guaranty or
the Qualified Insurance Policy or (ii) Loans that are questioned or
questionable with respect to collectability at the time of renewal and the
renewal is part of a workout strategy to maximize repayment of principal
and interest.
provided that, notwithstanding anything herein to the contrary, (i) in no event
will the Escrow Measurement Date ALLL be less than 120% of the Non-Performing
Assets as of the Escrow Measurement Date, excluding the Guaranteed or Insured
Portion of Non-Performing Assets as of the Escrow Measurement Date, (ii) Parent
may choose to establish higher reserves for its accounting purposes, but the
Escrow Measurement Date ALLL will be calculated consistent with the Current
Methodology, Prevailing Regulatory Requirements and GAAP and (iii) even if the
Commission, Federal Reserve, FDIC, CDB or other regulatory authorities, with or
without jurisdiction, publish or propose rules with regard to the establishment
of loan loss allowances after the Closing Date, the above detailed methodology
will be utilized to determine the Escrow Measurement Date ALLL.
1.14. "FINAL CALCULATIONS" means the Preliminary Calculations as
finally determined pursuant to Section 7.3.
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1.15. "INDEMNIFIED PARTIES" means the Escrow Agent and each
director, officer, employee, shareholder, attorney, agent and Affiliate of the
Escrow Agent.
1.16. "INDEMNITY CLAIM" shall mean a claim to the right of
payment pursuant to Section 6.2(a).
1.17. "INTERIM ESCROW MEASUREMENT DATE" means the last day of each
month end after the Closing Date until the month end immediately preceding the
Escrow Measurement Date.
1.18. "MERGER ADJUSTMENT CLAIM" shall mean a claim for the
adjustment of the Merger Consideration pursuant to Section 7.3.
1.19. "NEW SHARES" means any shares of Parent Common Stock or other
equity securities issued or distributed by Parent with respect the Escrow Shares
after the date hereof.
1.20. "NOTIONAL ALLL" means a "notional" Escrow Measurement Date
ALLL.
1.21. "PARENT INDEMNIFIED PARTIES" means Parent, the Surviving
Corporation and each of their respective Subsidiaries, Affiliates, officers,
directors, employees, agents and representatives and each of the heirs,
executors, successors and assigns of any of the foregoing.
1.22. "PARENT LOSSES" means any and all claims, liabilities,
obligations, losses, costs, expenses, penalties, fines and judgments (at equity
or at law, including statutory and common) and damages whenever arising or
incurred (including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses).
1.23. "PRELIMINARY CALCULATIONS" means Parent's calculation of the
Escrow Measurement Date ALLL and each Notional ALLL along with supporting work
papers.
1.24. "STOCKHOLDERS" means the former Stockholders of Target who
are the beneficial owners of a pro rata portion of the Escrow Shares.
1.25. "TARGET'S ALLL" means as of any date of calculation, Target's
estimate of uncollectible amounts from its loans and leases, which estimate is
used to reduce the book value of loans and leases shown on the books and records
of Target Parties to equal the amount that is expected to be collected by
Target.
2. APPOINTMENT OF ESCROW AGENT. Parent and Stockholder Representative
hereby appoint and designate the Escrow Agent as escrow agent to receive, hold
and distribute the Escrow Shares in accordance with the terms of this Agreement.
The Escrow Agent hereby accepts its appointment as the escrow agent and agrees
to hold, administer and disburse the Escrow Shares in accordance with the terms
of this Agreement.
3. ESTABLISHMENT OF ESCROW.
3.1. Establishment of Escrow Shares. As soon as practicable after
the Effective Time, and in any event within five (5) business days thereafter,
Parent shall deposit in
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escrow with the Escrow Agent a certificate representing the Escrow Shares (plus
a proportionate share of any additional shares of Parent Common Stock as may be
issued with respect to the Escrow Shares upon any stock splits, stock dividends
or other recapitalization effected by Parent following the Effective Time). The
Escrow Shares shall be registered in the name of the Stockholder Representative,
as representative of the Stockholders. The name, address, taxpayer
identification and percentage interest of the Escrow Shares of each Stockholder
are set forth in Annex A attached hereto (for each Stockholder its "PERCENTAGE
INTEREST").
3.2. Investment of Escrow Shares. The Escrow Agent shall have
no obligation to pay interest on or to invest or reinvest the Escrow Shares.
4. CLAIMS AGAINST THE ESCROW.
4.1. Indemnification Claims. In the event that a Parent Indemnified
Party shall have an Indemnity Claim, Parent shall promptly send written notice
of such Indemnity Claim to the Escrow Agent, which notice shall certify that
Parent has delivered a copy of such Indemnity Claim to the Stockholder
Representative. Parent and the Stockholder Representative shall resolve all
Indemnity Claims in accordance with Section 6. Upon receipt of an Indemnity
Claim, the Escrow Agent shall set aside a number of Escrow Shares having an
aggregate value (determined at the Closing Date Price) equal to the amount of
such Indemnity Claim and, subject to Section 12.7 hereof, shall hold and
disburse such number of Escrow Shares only in accordance with (a) the joint
written instructions of Parent and the Stockholder Representative or (b) a final
non-appealable order of a court of competent jurisdiction; provided, that, until
such time as any such Indemnity Claim shall have been resolved in accordance
with this Agreement, the Stockholder Representative shall continue to be the
record owner of such shares and the Stockholders shall continue to be the
beneficial owners of such shares.
4.2. Merger Adjustment Claims. If after the determination of the
Calculation Date ALLL in the Final Calculations, Parent desires to make a Merger
Adjustment Claim, Parent shall promptly send written notice of such Merger
Adjustment Claim to the Escrow Agent, which notice shall certify that Parent has
delivered a copy of such Merger Adjustment Claim to the Stockholder
Representative. Parent and the Stockholder Representative shall resolve all
Merger Adjustment Claims in accordance with Section 7. Upon receipt of a Merger
Adjustment Claim, the Escrow Agent shall set aside a number of Escrow Shares
having an aggregate value (determined at the Closing Date Price) equal to the
amount of such Merger Adjustment Claim and, subject to Section 12.7 hereof,
shall hold and disburse such number of Escrow Shares only in accordance with (a)
the joint written instructions executed by Parent and the Stockholder
Representative delivered promptly upon the determination of the Final
Calculations in accordance with Section 7, (b) a certified letter addressed to
Escrow Agent from the Arbitrator announcing its determination of the Final
Calculation in accordance with Section 7 or (c) a final non-appealable order of
a court of competent jurisdiction; provided, that, until such time as the Final
Calculations shall have been determined in accordance with this Agreement, the
Stockholder Representative shall continue to be the record owner of such shares
and the Stockholders shall continue to be the beneficial owner of such shares.
4.3. Escrow Share Value. For purposes of determining the number of
Escrow Shares to be transferred to any Parent Indemnified Party in connection
with the satisfaction of an
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Indemnity Claim or to Parent in connection with the satisfaction of a Merger
Adjustment Claim in accordance with Section 7, each Escrow Share shall be valued
at the Closing Date Price with the number of Escrow Shares actually transferred
being rounded to the nearest whole.
5. RELEASE OF ESCROW SHARES.
5.1. Release of Escrow Shares. The Escrow Shares shall be released
from escrow, in whole or in part, in accordance with the provisions of Section 4
and this Section 5. If any such release requires a release of less than all of
the Escrow Shares then held in escrow, the Escrow Agent shall deliver the
certificate representing the Escrow Shares then in escrow and an accompanying
stock power of the Stockholder Representative to Parent who shall issue and
return to the Escrow Agent a new certificate representing the number of Escrow
Shares that are to continue to be held by the Escrow Agent in the name of the
Stockholder Representative.
5.2. Release on Disbursement Date. On the Disbursement Date, subject
to Section 11.4, the Escrow Agent shall distribute to each Stockholder a number
of shares corresponding to its Percentage Interest of the remaining balance of
the Escrow Shares less (a) its Percentage Interest of the number of shares equal
to the aggregate amount of any unresolved Indemnity Claims against the Escrow
Shares of which the Escrow Agent has received written notice during the Claims
Period and (b) its Percentage Interest of the number of shares equal to any
unresolved Merger Adjustment Claim. Escrow Agent shall use commercially
reasonable efforts to send to the Stockholders set forth in Annex A attached
hereto their pro rata portion of the Escrow Shares in the number and to the
addresses set forth in Annex A as promptly as practicable. Any remaining Escrow
Shares held by the Escrow Agent after the Disbursement Date with respect to an
unresolved Indemnity Claim or an unresolved Merger Adjustment Claim shall
continue to be held and not released to any Party except pursuant to this
Agreement or pursuant to a final non-appealable order of a court of competent
jurisdiction.
6. INDEMNIFICATION OBLIGATIONS OF STOCKHOLDERS.
6.1. Indemnification by Stockholders. Subject to Section 12.7
hereof, each Stockholder shall, severally, in proportion to their Percentage
Interest, indemnify and hold harmless the Parent Indemnified Parties from,
against and in respect of any and all Parent Losses arising out of or relating
to:
(a) any breach or inaccuracy of any representation or warranty
of Target set forth in the Merger Agreement or in any certificate (except
for the certificate delivered by Target pursuant to Section 5.22(a) of the
Merger Agreement, if, but only if, such inaccuracy is corrected by an
adjustment to Net Book Value in accordance with Section 5.22) or other
document delivered by Target pursuant to the Merger Agreement;
(b) any breach of or noncompliance by Target with any covenant
or agreement of Target contained in the Merger Agreement or in any
certificate or other document delivered by Target pursuant to the Merger
Agreement; or
(c) any fraud, willful misconduct or bad faith of Target
in connection with the Merger Agreement.
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6.2. Indemnification Procedure.
(a) Promptly after receipt by a Parent Indemnified Party of
notice by a third party of any complaint or the commencement of any audit,
investigation, action or proceeding with respect to which such Parent
Indemnified Party may be entitled to receive payment from the Stockholders
for any Parent Losses, such Parent Indemnified Party will notify the
Stockholder Representative, promptly following the Indemnified Party's
receipt of such complaint or of notice of the commencement of such audit,
investigation, action or proceeding; provided, however, that the failure
to so notify the Stockholder Representative will relieve the Stockholders
from liability under this Agreement with respect to such claim only if,
and only to the extent that, such failure to notify the Stockholder
Representative materially prejudices the interests of the Stockholders.
The Stockholder Representative will have the right, upon written notice
delivered to the Indemnified Party within twenty (20) days thereafter
assuming full responsibility for any Parent Losses resulting from such
audit, investigation, action or proceeding, to assume the defense of such
audit, investigation, action or proceeding, including the employment of
counsel reasonably satisfactory to the Parent Indemnified Party and the
payment of the fees and disbursements of such counsel. In the event,
however, that the Stockholder Representative declines or fails to assume
the defense of the audit, investigation, action or proceeding on the terms
provided above or to employ counsel reasonably satisfactory to the Parent
Indemnified Party, in either case within such twenty-day period, then such
Parent Indemnified Party may employ counsel to represent or defend it in
any such audit, investigation, action or proceeding and the Stockholders
will pay the reasonable fees and disbursements of such counsel as
incurred; provided, however, that the Stockholders will not be required to
pay the fees and disbursements of more than one counsel for all Parent
Indemnified Parties in any jurisdiction in any single audit,
investigation, action or proceeding. In any audit, investigation, action
or proceeding with respect to which indemnification is being sought
hereunder, the Parent Indemnified Party or the Stockholders, whichever is
not assuming the defense of such action, will have the right to
participate in such matter and to retain its own counsel at such Party's
own expense. The Stockholder Representative or the Parent Indemnified
Party, as the case may be, will at all times use reasonable efforts to
keep the Stockholder Representative or the Parent Indemnified Party, as
the case may be, reasonably apprised of the status of the defense of any
matter the defense of which they are maintaining and to cooperate in good
faith with each other with respect to the defense of any such matter.
(b) No Parent Indemnified Party may settle or compromise any
claim or consent to the entry of any judgment with respect to which
indemnification is being sought hereunder without the prior written
consent of the Stockholder Representative, unless either (i) the
Stockholder Representative fails to assume and maintain the defense of
such claim pursuant to Section 6.2(a) or (ii) such settlement, compromise
or consent includes an unconditional release of the Stockholders from all
liability arising out of such claim. The Stockholder Representative may
not, without the prior written consent of any Parent Indemnified Party,
settle or compromise any claim or consent to the entry of any judgment
with respect to which indemnification is being sought hereunder unless
such settlement, compromise or consent (x) includes an unconditional
release of the Parent Indemnified Party from all liability arising out of
such claim, (y) does not contain any
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admission or statement suggesting any wrongdoing or liability on behalf of
the Parent Indemnified Party and (z) does not contain any equitable order,
judgment or term which in any manner affects, restrains or interferes, in
any material respect, with the business of the Parent Indemnified Party or
any of the Parent Indemnified Party's Affiliates.
(c) In the event a Parent Indemnified Party claims a right to
payment pursuant to this Agreement, such Parent Indemnified Party will
promptly send written notice of such claim to the Stockholder
Representative. Such notice will specify the basis for such claim. As
promptly as practicable after the Parent Indemnified Party has given such
notice, such Parent Indemnified Party and the Stockholder Representative
will establish the merits and amount of such claim (by mutual agreement,
litigation, arbitration or otherwise).
6.3. Claims Period. The claims period under this Agreement shall
begin on the date hereof and terminate on the Disbursement Date (the "CLAIMS
PERIOD"). Notwithstanding the foregoing, if, prior to the close of business on
the Disbursement Date, an Indemnifying Party shall have been properly notified
of an Indemnity Claim hereunder and such Indemnity Claim shall not have been
finally resolved or disposed of at such date, such Indemnity Claim shall
continue to survive and shall remain a basis for indemnity hereunder until such
claim is finally resolved or disposed of in accordance with the terms hereof.
6.4. Limit on Liability. Notwithstanding anything to the contrary in
the Merger Agreement or this Agreement, the Indemnity Claims of the Parent
Indemnified Parties hereunder shall be payable solely from, and shall be
enforceable solely against, the escrow created hereunder including the Escrow
Shares and other property and funds in the escrow, it being specifically
understood and agreed that no Stockholder shall have any personal liability to a
Parent Indemnified Party for any Indemnity Claim and that the Parent Indemnified
Parties shall look solely to the escrow created hereunder including the Escrow
Shares and other property and funds in the escrow for payment or satisfaction of
any and all Indemnity Claims.
6.5. Investigations. The representations and warranties of Target
contained in the Merger Agreement or in any certificate or other document
delivered by Target pursuant to the Merger Agreement and the rights to
indemnification set forth in this Section 6 will not be deemed waived or
otherwise affected by any investigation made by any Parent, Indemnified Party,
or their respective employees, officers, directors, agents or representatives.
6.6. Exclusive Remedies. To the maximum extent permitted by law, the
indemnities set forth in this Agreement shall be the exclusive remedies of the
Parent Indemnified Parties for all Parent Losses arising out of or related to
(i) any breach or inaccuracy of any representation or warranty of Target set
forth in the Merger Agreement or in any certificate or other document delivered
by Target pursuant to the Merger Agreement, (ii) any breach of or noncompliance
by Target with any covenant or agreement of Target contained in the Merger
Agreement or in any certificate or other document delivered by Target pursuant
to the Merger Agreement or (iii) any fraud, willful misconduct or bad faith of
Target in connection with the Merger Agreement, and the Parent Indemnified
Parties shall not be entitled to any other indemnification rights or other
remedies of any nature whatsoever with respect thereto, all of which are hereby
waived.
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7. POST-CLOSING ADJUSTMENT TO MERGER CONSIDERATION.
7.1. Post-Closing Adjustment. The Merger Consideration received by
the Stockholders pursuant to the Merger Agreement in connection with the Merger
shall be reduced by an amount equal to the lesser of (x) the Escrow Balance (as
such amount may be reduced as a result of indemnification claims made pursuant
to Section 6 hereof) and (y) the Escrow Charge.
7.2. Determination of Post-Closing Adjustment. As promptly as
possible after each Interim Escrow Measurement Date, Parent will calculate a
Notional ALLL as of such Interim Escrow Measurement Date for its internal
accounting purposes. The Notional ALLL on each Interim Escrow Measurement Date
shall be equal to 120% of the aggregate principal balance of Non-Performing
Assets on such Interim Escrow Measurement Date. On each Interim Escrow
Measurement Date, Parent shall calculate a "notional" drawdown by Parent from
the escrow account equal to the difference, calculated on an after tax basis, at
the Effective Tax Rate, between (x) the Notional ALLL calculated on such Interim
Escrow Measurement Date and (y) the Notional ALLL calculated on the last day of
the month end immediately prior to such Interim Escrow Measurement Date, plus
cumulative charge-offs by the Bank of Non-Performing Assets between the Closing
Date or last Interim Escrow Measurement Date (as the case may be) and such
Interim Escrow Measurement Date, provided that, this Section 7.2 shall not
authorize Parent to drawdown all or any portion of the Escrow Balance based on
the "notional" drawdown calculated pursuant to this Section 7.2. Parent shall
promptly deliver to the Stockholder Representative each of the "notional"
drawdown calculations prepared pursuant to this Section 7.2.
7.3. Final Resolution of Post-Closing Adjustment.
(a) As promptly as practicable following the Escrow
Measurement Date but, in any event, within thirty (30) days following the
Escrow Measurement Date, Parent will determine the Escrow Measurement Date
ALLL in accordance with Section 1.13 and shall deliver to the Stockholder
Representative the Preliminary Calculations.
(b) The Stockholder Representative shall have thirty (30)
calendar days following receipt of the Preliminary Calculations during
which to notify Parent in writing of any dispute of any item contained in
the Preliminary Calculations, which notice shall set forth in reasonable
detail the basis for such dispute. If the Stockholder Representative does
not notify Parent of any dispute within such thirty (30) calendar-day
period, the Preliminary Calculations shall be deemed to be the Final
Calculations. Parent and the Stockholder Representative shall cooperate in
good faith to resolve any dispute as promptly as possible, and upon such
resolution, the Final Calculations shall be prepared in accordance with
the agreement of Parent and the Stockholder Representative.
(c) If Parent and Stockholder Representative are unable to
resolve any dispute regarding the Preliminary Calculations within fifteen
(15) calendar days (or such longer period as Parent and the Stockholder
Representative shall mutually agree in writing) of notice of a dispute,
Parent and Stockholder Representative shall engage the Arbitrator to
resolve all issues having a bearing on such dispute and such resolution
shall be final and binding on Parent and the Stockholder Representative.
The Arbitrator shall
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use commercially reasonable efforts to complete its work within thirty
(30) calendar days of its engagement. The expenses of the Arbitrator shall
be paid as expenses of the escrow in accordance with Section 10.6.
8. TERM. This Agreement shall be terminated (a) upon disbursement or
release of all Escrow Shares by the Escrow Agent in accordance with this
Agreement or (b) upon disbursement of the entire balance of the Escrow Shares by
the Escrow Agent into a court of competent jurisdiction in accordance with the
terms hereof. This Agreement shall not otherwise be terminated.
9. VOTING RIGHTS; DIVIDENDS.
9.1. Voting Rights. The Stockholder Representative, as the
registered owner of the Escrow Shares, shall vote the Escrow Shares on all
matters on which the stockholders of Parent are required or permitted to vote in
accordance with this Section 9. The Stockholder Representative agrees that [HE]
will vote the Escrow Shares in accordance with the written directions of their
respective beneficial owners. In the absence of such directions, the Stockholder
Representative need not vote such Escrow Shares. The Stockholder Representative
need not furnish proxy information or other documents provided to the
Stockholder Representative by Parent to the beneficial owners of the Escrow
Shares.
9.2. Dividends. Any New Shares in respect of shares of Parent Common
Stock which have not been released from escrow shall be added to and considered
part of the Escrow Shares. New Shares issued in respect of shares of Parent
Common Stock which have been released from the Escrow Shares shall not be added
to or considered part of the Escrow Shares but shall be distributed to the
record holders of such Escrow Shares. Cash dividends paid on Parent Common Stock
shall not become part of the escrow hereunder but shall be distributed directly
to the beneficial holders of the Escrow Shares on the record date set for any
such dividend. The Parties agree that any dividend income earned on the Escrow
Shares shall be recognized as income by the Stockholders for federal, state and
local tax purposes.
10. ESCROW AGENT.
10.1. Duties. In performing its duties under this Agreement or upon
the claimed failure to perform its duties hereunder, the Escrow Agent shall have
no liability except for the Escrow Agent's willful misconduct or gross
negligence. The Escrow Agent's sole responsibility shall be for the safekeeping
and disbursement of the Escrow Shares in accordance with the terms of this
Agreement. The duties, responsibilities and obligations of the Escrow Agent
shall be limited to those expressly set forth herein and no duties,
responsibilities or obligations shall be inferred or implied. The Escrow Agent
shall not be subject to, nor required to comply with, any other agreement
between or among any or all of the Parties or to which any Party is a party,
even though reference thereto may be made herein, or to comply with any
direction or instruction (other than those contained herein or delivered in
accordance with this Agreement) from any Party or an entity acting on its
behalf. The Escrow Agent shall not be required to expend or risk any of its own
funds or otherwise incur any financial or other liability in the performance of
any of its duties hereunder. The Escrow Agent shall not be liable for any action
taken or omitted or for any loss or injury resulting from its actions or its
performance or lack of performance of its
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duties hereunder in the absence of gross negligence or willful misconduct on its
part. In no event shall the Escrow Agent be liable (i) for acting in accordance
with or relying upon any instruction, notice, demand, certificate or document
from any Party that the Escrow Agent shall in good faith believe to be genuine,
(ii) for any indirect, consequential, punitive or special damages, regardless of
the form of action and whether or not any such damages were foreseeable or
contemplated, (iii) for the acts or omissions of its nominees, correspondents,
designees, agents, subagents or subcustodians (not resulting from its gross
negligence or willful misconduct), (iv) for the investment or reinvestment of
any cash held by it hereunder, in each case in good faith, in accordance with
the terms hereof, including without limitation any liability for any delays (not
resulting from its gross negligence or willful misconduct) in the investment or
reinvestment of the Escrow Shares, or any loss of interest incident to any such
delays, or (v) for an amount in excess of the value of the Escrow Shares, valued
as of the date of deposit, but only to the extent of direct money damages. The
Escrow Agent may consult legal counsel selected by it in the event of any
dispute or question as to the construction of any of the provisions hereof or of
any other agreement or of its duties hereunder, and shall incur no liability and
shall be fully protected from any liability whatsoever in acting in accordance
with the opinion or instruction of such counsel. Parent and the Stockholders,
jointly and severally, shall promptly pay, upon demand, the reasonable fees and
expenses of any such counsel. The Escrow Agent shall have no obligations or
responsibilities in connection with the Merger Agreement, or any other agreement
between any other Parties to the Merger Agreement, other than this Agreement.
The Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity or the
service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that any person purporting
to give receipt or advice to make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so. The
Escrow Agent shall not be responsible in any respect for the form, execution,
validity, value or genuineness of documents or securities deposited hereunder,
or for any description therein, or for the identity, authority or rights of
persons executing or delivering or purporting to execute or deliver any such
document, security or endorsement. The Escrow Agent shall not be called upon to
advise any party as to the wisdom in selling or retaining or taking or
refraining from any action with respect to any securities or other property
deposited hereunder. The Escrow Agent shall not be under any duty to give the
Escrow Shares held by it hereunder any greater degree of care than it gives its
own similar property and shall not be required to invest any funds held
hereunder except as directed in this Agreement. Uninvested funds held hereunder
shall not earn or accrue interest.
If at any time the Escrow Agent is served with any judicial or
administrative order, judgment, decree, writ or other form of judicial or
administrative process which in any way affects the Escrow Shares (including but
not limited to orders of attachment or garnishment or other forms of levies or
injunctions or stays relating to the transfer of the Escrow Shares), the Escrow
Agent is authorized to comply therewith in any manner it or legal counsel of its
own choosing deems appropriate; and if the Escrow Agent complies with any such
judicial or administrative order, judgment, decree, writ or other form of
judicial or administrative process, the Escrow Agent shall not be liable to any
of the Parties or to any other person or entity even though such order,
judgment, decree, writ or process may be subsequently modified or vacated
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or otherwise determined to have been without legal force or effect.
10.2. Indemnification of Escrow Agent.
(a) Generally. From and at all times after the date of this
Agreement, Parent and the Stockholders, jointly and severally, shall, to
the fullest extent permitted by law and to the extent provided herein,
indemnify and hold harmless the Indemnified Parties against any and all
actions, claims (whether or not valid), losses, damages, liabilities,
costs and expenses of any kind or nature whatsoever (including, without
limitation, reasonable attorneys' fees, costs and expenses) incurred by or
asserted against any of the Indemnified Parties from and after the date
hereof, whether direct, indirect or consequential, as a result of or
arising from or in any way relating to any claim, demand, suit, action or
proceeding (including any inquiry or investigation) by any person, whether
threatened or initiated, asserting a claim for any legal or equitable
remedy against any person under any statute or regulation, including, but
not limited to, any federal or state securities laws, or under any common
law or equitable cause or otherwise, arising from or in connection with
the negotiation, preparation, execution, performance or failure of
performance of this Agreement or any transactions contemplated herein,
whether or not any such Indemnified Party is a party to any such action,
proceeding, suit or the target of any such inquiry or investigation;
provided, however, that no Indemnified Party shall have the right to be
indemnified hereunder for any liability finally determined by a court of
competent jurisdiction, subject to no further appeal, to have resulted
solely from the gross negligence or willful misconduct of such Indemnified
Party. If any such action or claim shall be brought or asserted against
any Indemnified Party, such Indemnified Party shall promptly notify Parent
and the Stockholder Representative in writing, and such Indemnified Party
shall assume the defense thereof, including the employment of counsel;
provided, however, that such counsel shall be reasonably acceptable to
Parent and the Stockholder Representative and Parent and the Stockholder
Representative shall be entitled to participate in such defense. Parent
and the Stockholders shall be responsible for the expenses of the counsel
referred to in the foregoing sentence. All such fees and expenses payable
by Parent and the Stockholders pursuant to the foregoing sentence shall be
paid from time to time as incurred, both in advance of and after the final
disposition of such action or claim. All of the foregoing losses, damages,
costs and expenses of the Indemnified Parties shall be payable by Parent
and the Stockholders, jointly and severally, upon demand by such
Indemnified Party. Such Indemnified Party may not settle or compromise any
claim or consent to the entry of judgment with respect to which
indemnification is being sought from Parent and the Stockholders hereunder
without the prior written consent of Parent and the Stockholder
Representative. The obligations of Parent and the Stockholders under this
Section 8.2(a) shall survive any termination of this Agreement and the
resignation or removal of the Escrow Agent.
(b) Effect of Indemnification. The Parties agree that neither
the payment by Parent or the Stockholders of any claim by the Escrow Agent
for indemnification hereunder nor the disbursement of any amounts to the
Escrow Agent from the Escrow Shares in respect of a claim by the Escrow
Agent for indemnification shall impair, limit, modify, or affect, as
between Parent and the Stockholders, the respective rights and obligations
of Parent, on the one hand, and the Stockholder
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Representative, on the other hand, under this Agreement. Parent and the
Stockholders agree among themselves that any obligation for
indemnification under this Section 10.2 shall be borne by the one of them
responsible for causing the loss, damage, liability, cost or expense
against which the Escrow Agent is entitled to indemnification, the
causation to be determined by mutual agreement, arbitration (if both
Parent and the Stockholder Representative agree in writing to submit the
dispute to arbitration) or litigation.
10.3. Disputes.
(a) In the event of any ambiguity or uncertainty hereunder or
in any notice, instruction or other communication received by the Escrow
Agent hereunder, the Escrow Agent may, in its sole discretion, refrain
from taking any action other than retain possession of the Escrow Shares,
unless the Escrow Agent receives written instructions, signed by all
Parties, which eliminates such ambiguity or uncertainty.
(b) In the event of any dispute between or conflicting claims
by or among the Parties and/or any other person or entity with respect to
any Escrow Shares, the Escrow Agent shall be entitled, in its sole
discretion, to refuse to comply with any and all claims, demands or
instructions with respect to such Escrow Shares so long as such dispute or
conflict shall continue, and the Escrow Agent shall not be or become
liable in any way to the Parties for failure or refusal to comply with
such conflicting claims, demands or instructions. The Escrow Agent shall
be entitled to refuse to act until, in its sole discretion, either (i)
such conflicting or adverse claims or demands shall have been determined
by a final order, judgment or decree of a court of competent jurisdiction,
which order, judgment or decree is not subject to appeal, or settled by
agreement between the conflicting parties as evidenced in a writing
satisfactory to the Escrow Agent or (ii) the Escrow Agent shall have
received security or an indemnity satisfactory to it sufficient to hold it
harmless from and against any and all losses which it may incur by reason
of so acting. Any court order, judgment or decree shall be accompanied by
a legal opinion by counsel for the presenting party, satisfactory to the
Escrow Agent, to the effect that said order, judgment or decree represents
a final adjudication of the rights of the parties by a court of competent
jurisdiction, and that the time for appeal from such order, judgment or
decree has expired without an appeal having been perfected. The Escrow
Agent shall act on such court order and legal opinions without further
question. The Escrow Agent may, in addition, elect, in its sole
discretion, to commence an interpleader action or seek other judicial
relief or orders as it may deem, in its sole discretion, necessary. The
costs and expenses (including reasonable attorneys' fees and expenses)
incurred in connection with such proceeding shall be paid by, and shall be
deemed a joint and several obligation of, the Parties.
(c) The Escrow Agent shall have no responsibility for the
contents of any writing of the arbitrators or any third party contemplated
herein as a means to resolve disputes and may conclusively rely without
any liability upon the contents thereof.
10.4. Resignation of Escrow Agent. The Escrow Agent may resign from
the performance of its duties hereunder at any time by giving ten (10) days'
prior written notice to Parent and Stockholder Representative or may be removed,
with or without cause, by Parent and
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the Stockholder Representative, acting jointly, at any time by the giving of ten
days' prior written notice to the Escrow Agent. Such resignation or removal
shall take effect upon the appointment of a successor escrow agent as provided
herein. Upon any such notice of resignation or removal, Parent and Stockholder
Representative, acting jointly, shall appoint a successor escrow agent
hereunder, which shall be a commercial bank, trust company or other financial
institution with a combined capital and surplus in excess of $100,000,000,
unless otherwise agreed by Parent and Stockholder Representative. Upon the
acceptance in writing of any appointment as the Escrow Agent hereunder by a
successor escrow agent, such successor escrow agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Escrow Agent, and the retiring Escrow Agent shall be discharged from
its duties and obligations under this Agreement, but shall not be discharged
from any liability for actions taken as Escrow Agent hereunder prior to such
succession in accordance with Section 10. After any retiring Escrow Agent's
resignation or removal, the provisions of this Escrow Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Escrow Agent under this Escrow Agreement.
10.5. Receipt. By its execution and delivery of this Agreement,
the Escrow Agent acknowledges receipt of the Escrow Shares.
10.6. Fees. Parent and the Stockholders shall compensate the Escrow
Agent for its services hereunder in accordance with Annex B attached hereto and,
in addition, shall reimburse the Escrow Agent for all of its reasonable
out-of-pocket expenses, including attorneys' fees, travel expenses, telephone
and facsimile transmission costs, postage (including UPS Next Day Air), copying
charges and the like. All of the compensation and reimbursement obligations set
forth in this Section 10.6 shall be payable upon demand by the Escrow Agent and,
with respect to the Escrow Agent, shall be a joint and several obligation of
Parent and the Stockholders. The obligations of Parent and the Stockholders
under this Section 10.6 shall survive any termination of this Agreement and the
resignation or removal of the Escrow Agent. As between Parent and the
Stockholders, the costs to verify and administer the escrow, to make all
required calculations and to satisfy any claims for indemnification by Escrow
Agent pursuant to Section 10.2 hereof will be borne pro-rata by the Escrow
Shares and the Parent based on the ratio of Escrowed Shares released from the
escrow and the total Escrowed Shares at the Closing Date. Parent shall pay that
portion of such expenses equal to the ratio determined by dividing the number of
Escrow Shares released to the Stockholders, from the escrow by the total
Escrowed Shares at the Closing Date and the remaining expenses will be borne by
the Escrow Shares. Parent will advance all such costs, subject to reimbursement
from the escrow on the escrow release date for any portion of such costs
required to be paid from the escrow.
11. STOCKHOLDER REPRESENTATIVE.
11.1. Power and Authority. Upon approval of the Merger by the
stockholders of Target, the Stockholder Representative shall be irrevocably
constituted and appointed as the true and lawful agent and attorney-in-fact of
each Stockholder with full powers of substitution to act in the name, place and
stead of each Stockholder and such Stockholder's successors with respect to the
transactions contemplated by this Agreement, as the same may from time to time
be amended, and to do or refrain from doing all such further acts and things,
and to execute all such documents, as the Stockholder Representative shall deem
necessary or appropriate in connection
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with any of the transactions contemplated hereby. All actions taken by the
Stockholder Representative hereunder shall be binding upon each Stockholder and
such Stockholder's successors as if expressly ratified and confirmed in writing
by each of them. Without limiting the generality of the foregoing, the
Stockholder Representative shall have full power and authority, on behalf of all
Stockholders and their successors, to interpret all the terms and provisions of
this Agreement, to dispute or fail to dispute any Merger Adjustment Claim or
Indemnity Claim, to negotiate and compromise any dispute which may arise under
this Agreement, to sign any releases or other documents with respect to any such
dispute, to authorize payments to be made with respect thereto, and to retain
such counsel and consultants as appropriate and necessary to carry out [HIS]
duties under this Agreement. The appointment of the Stockholder Representative
shall be deemed coupled with an interest and shall be irrevocable, and Parent
and any other person may conclusively and absolutely rely, without inquiry, upon
any action of the Stockholder Representative as the act of the Stockholders in
all matters referred to in this Agreement or any other documents contemplated
hereby.
11.2. Acts and Omissions. The Stockholder Representative shall act
for the Stockholders on all of the matters set forth in this Agreement in any
manner that the Stockholder Representative considers appropriate in [HIS] sole
discretion, and the Stockholder Representative shall not be responsible to any
Stockholder (or to Parent or the Surviving Corporation or any other Party) for
any loss or damage any Stockholder may suffer by reason of the performance by
the Stockholder Representative of his duties under this Agreement, other than
loss or damage arising from willful violation of law or gross negligence in the
performance of his duties under this Agreement.
11.3. Resignation; Successors. Any Stockholder Representative, or
any successor hereafter appointed, may resign and shall be discharged of his
duties hereunder upon the appointment of a successor Stockholder Representative
as hereinafter provided. In case of such resignation, or in the event of the
death or inability to act of any Stockholder Representative, a successor shall
be named by a majority of the Stockholders; provided however, that if for any
reason no successor has been appointed within fifteen (15) days, any Stockholder
shall have the right to petition the court of competent jurisdiction for
appointment of the successor Stockholder Representative. Each such successor
Stockholder Representative shall have all the power, authority, rights and
privileges hereby conferred upon an original Stockholder Representative, and the
term "Stockholder Representative" as used herein shall be deemed to include each
such successor Stockholder Representative.
11.4. Indemnification of Stockholder Representative.
(a) Generally. From and at all times after the date of this
Agreement, the Stockholders, severally, in proportion to their Percentage
Interest, shall, to the fullest extent permitted by law and to the extent
provided herein, indemnify and hold harmless the Stockholder
Representative against any and all actions, claims (whether or not valid),
losses, damages, liabilities, costs and expenses of any kind or nature
whatsoever (including, without limitation, reasonable attorneys' fees,
costs and expenses) incurred by or asserted against the Stockholder
Representative from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way relating to
any claim, demand, suit, action or proceeding (including any inquiry or
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investigation) by any person, whether threatened or initiated, asserting a
claim for any legal or equitable remedy against any person under any
statute or regulation, including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation,
execution, performance or failure of performance of this Agreement or any
transactions contemplated herein, whether or not the Stockholder
Representative is a party to any such action, proceeding, suit or the
target of any such inquiry or investigation; provided, however, that the
Stockholder Representative shall not have the right to be indemnified
hereunder for any liability finally determined by a court of competent
jurisdiction, subject to no further appeal, to have resulted solely from
the gross negligence or willful misconduct of the Stockholder
Representative. If any such action or claim shall be brought or asserted
against the Stockholder Representative, the Stockholder Representative
shall promptly notify Parent and the Stockholders in writing, and the
Stockholder Representative shall assume the defense thereof, including the
employment of counsel; provided, however, that such counsel shall be
reasonably acceptable to Parent and the Stockholders and Parent and the
Stockholders shall be entitled to participate in such defense. The
Stockholders shall be responsible for the expenses of the counsel referred
to in the foregoing sentence. All of the foregoing losses, damages, costs
and expenses of the Stockholder Representative shall be payable by the
Stockholders and satisfied only out of the Escrow Shares and only
subsequent to the Escrow Measurement Date and satisfaction of all claims
made by any and all Parent Indemnified Parties pursuant to this Agreement
to the extent that, and only to the extent that, any portion of the Escrow
Shares remain in the escrow after all claims by all Parent Indemnified
Parties under this Agreement are finally determined by a court of
competent jurisdiction and are subject to no further appeal. The
Stockholder Representative may not settle or compromise any claim or
consent to the entry of judgment with respect to which indemnification is
being sought from the Stockholders hereunder without the prior written
consent of Parent. The obligations of the Stockholders under this Section
11.4 shall survive any termination of this Agreement and the resignation
or removal of the Stockholder Representative.
(b) Effect of Indemnification. The Parties agree that neither
the payment by the Stockholders of any claim by the Stockholder
Representative for indemnification hereunder nor the disbursement of any
amounts to the Stockholder Representative from the Escrow Shares
subsequent to the Escrow Measurement date in respect of a claim by the
Stockholder Representative for indemnification shall impair, limit,
modify, or affect, as between Parent and the Stockholders, the respective
rights and obligations of Parent, on the one hand, and the Stockholder
Representative, on the other hand, under this Agreement.
12. MISCELLANEOUS.
12.1. Descriptive Headings. The descriptive headings contained in
this Agreement are for convenience and reference only and will not affect in any
way the meaning or interpretation of this Agreement. Unless the context of this
Agreement expressly indicates otherwise, (i) any singular term in this Agreement
will include the plural and any plural term will
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include the singular and (ii) the term section or annex will mean a section or
schedule of or to this Agreement.
12.2. Notices. All notices, consents, requests, demands and other
communications hereunder will be in writing, signed by or on behalf of the party
making the same, will specify the Sections under this Agreement pursuant to
which it is given or being made and will be delivered personally or sent by
registered or certified mail (return receipt requested) or by UPS Next Day Air
(with evidence of delivery and postage and other fees prepaid) as follows:
If to Escrow Agent:
------------------------
------------------------
------------------------
------------------------
------------------------
With a copy to:
------------------------
------------------------
------------------------
------------------------
------------------------
If to Parent:
United Parcel Service, Inc.
55 Glenlake Parkway NE
Atlanta, GA 30328
Attn: David Mounts
With a copies to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30338
Attn: John D. Capers, Jr.
and
United Parcel Service, Inc.
55 Glenlake Parkway, N.E.
Atlanta, GA 30328-3498
Attn: Legal Department -- Cathy Harper
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If to the Stockholder Representative:
------------------------
------------------------
------------------------
------------------------
------------------------
With a copy to:
------------------------
------------------------
------------------------
------------------------
------------------------
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section 12.2 Any such notice communication or
delivery will be deemed to be given or made (a) on the date of delivery if
delivered in person, (b) on the first business day after delivery to a UPS
customer service representative or (c) on the fifth business day after it is
mailed by registered or certified mail.
12.3. Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed to be an original but all of
which together will constitute but one agreement.
12.4. Assignment. This Agreement is not intended to nor will it
confer upon any other person (other than the Parties hereto) any rights or
remedies. Without the prior written consent of the other Parties to this
Agreement, no Party shall assign any rights or delegate any obligations under
this Agreement. Any such purported assignment or delegation made without prior
consent of the other Parties hereto shall be null and void.
12.5. 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 terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any Party. Upon any such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the Parties will negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated by this Agreement are consummated to the extent
possible.
12.6. 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).
12.7. Limitation on Claims. Notwithstanding anything in this
Agreement to the contrary, (i) the Stockholders shall not be liable for
indemnification for any Parent Losses
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pursuant to Section 6 hereof and shall not adjust the Merger Consideration
pursuant to Section 7 unless and until the aggregate of all such indemnification
claims and adjustments to Merger Consideration exceeds $1,000,000, at which time
the Stockholders shall be liable for all such indemnification claims and
adjustments to Merger Consideration and (ii) Parent Indemnified Parties shall
not be entitled to any indemnification claim pursuant to Section 6 hereof to the
extent, but only to the extent, that the Parent Indemnified Parties shall have
recovered amounts pursuant to Section 7 hereof or to the extent that the Merger
Consideration shall have been reduced pursuant to Sections 5.22 and 8.7(s) of
the Merger Agreement. Parent acknowledges that a disbursement of Escrow Shares
in accordance with this Agreement shall be the sole and exclusive means by which
Indemnity Claims and Merger Adjustment Claims shall be paid under this
Agreement.
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IN WITNESS WHEREOF, the Parties have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
UNITED PARCEL SERVICE, INC.
____________________________________________
By:
Title:
[ESCROW AGENT]
____________________________________________
By:
Title:
____________________________________________
___________, AS STOCKHOLDER REPRESENTATIVE