Exhibit 2.01
Execution Copy
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CITIGROUP INC.,
MERCURY MERGER SUB, INC.
AND
GOLDEN STATE BANCORP INC.
DATED AS OF MAY 21, 2002
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER.....................................................................................1
SECTION 1.1 The Merger.......................................................................1
SECTION 1.2 Closing..........................................................................2
SECTION 1.3 Effective Time...................................................................2
SECTION 1.4 Effects of the Merger............................................................2
SECTION 1.5 Certificate of Incorporation and By-laws of the Surviving
Corporation......................................................................2
SECTION 1.6 Directors and Officers...........................................................2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES.............................................................................................3
SECTION 2.1 Effect on Capital Stock..........................................................3
SECTION 2.2 Proration........................................................................6
SECTION 2.3 Election and Exchange Procedures.................................................7
SECTION 2.4 Certain Adjustments.............................................................12
SECTION 2.5 Shares of Dissenting Stockholders...............................................12
SECTION 2.6 Litigation Tracking Warrants....................................................12
ARTICLE III REPRESENTATIONS AND WARRANTIES..............................................................13
SECTION 3.1 Representations and Warranties of the Company...................................13
SECTION 3.2 Representations and Warranties of Parent........................................39
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS....................................................44
SECTION 4.1 Conduct of Business by the Company..............................................44
SECTION 4.2 Advice of Changes...............................................................49
SECTION 4.3 No Solicitation by the Company..................................................49
SECTION 4.4 Certain Tax Matters.............................................................51
SECTION 4.5 Transition......................................................................52
SECTION 4.6 No Fundamental Changes in the Conduct of Business by Parent.....................52
ARTICLE V ADDITIONAL AGREEMENTS.........................................................................53
SECTION 5.1 Preparation of the Form S-4, Proxy Statement; Stockholders Meeting..............53
SECTION 5.2 Letters of the Company's Accountants............................................54
SECTION 5.3 Letters of Parent's Accountants.................................................54
SECTION 5.4 Access to Information; Confidentiality..........................................54
SECTION 5.5 Reasonable Best Efforts.........................................................55
SECTION 5.6 Company Equity-Based Incentives.................................................56
SECTION 5.7 Indemnification, Exculpation and Insurance......................................57
SECTION 5.8 Fees and Expenses...............................................................58
SECTION 5.9 Public Announcements............................................................60
SECTION 5.10 Affiliates......................................................................60
SECTION 5.11 Stock Exchange Listing..........................................................60
SECTION 5.12 Stockholder Litigation..........................................................60
SECTION 5.13 Standstill Agreements; Confidentiality Agreements...............................60
SECTION 5.14 Conveyance Taxes................................................................60
SECTION 5.15 Employee Benefits...............................................................61
SECTION 5.16 Tax Matters.....................................................................62
SECTION 5.17 Amendment of Warrant Agreement..................................................62
ARTICLE VI CONDITIONS PRECEDENT.........................................................................62
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger......................62
SECTION 6.2 Conditions to Obligations of Parent.............................................63
SECTION 6.3 Conditions to Obligations of the Company........................................64
SECTION 6.4 Frustration of Closing Conditions...............................................65
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...........................................................65
SECTION 7.1 Termination.....................................................................65
SECTION 7.2 Effect of Termination...........................................................66
SECTION 7.3 Amendment.......................................................................66
SECTION 7.4 Extension; Waiver...............................................................66
ARTICLE VIII GENERAL PROVISIONS.........................................................................67
SECTION 8.1 Nonsurvival of Representations and Warranties...................................67
SECTION 8.2 Notices.........................................................................67
SECTION 8.3 Definitions.....................................................................68
SECTION 8.4 Interpretation..................................................................69
SECTION 8.5 Counterparts....................................................................70
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries..................................70
SECTION 8.7 Governing Law...................................................................70
SECTION 8.8 Assignment......................................................................70
SECTION 8.9 Consent to Jurisdiction.........................................................70
SECTION 8.10 Headings........................................................................70
SECTION 8.11 Severability....................................................................71
SECTION 8.12 Enforcement.....................................................................71
INDEX OF DEFINED TERMS
Term .........
- ----
Page
1998 Merger Agreement....................................................6
Actions.................................................................53
Adjusted Option.........................................................57
Adjustment Event........................................................12
affiliate............................................................70, 3
Aggregate Cash Amount....................................................4
Aggregate Company Share Amount...........................................4
Aggregate Parent Share Amount............................................5
Agreement................................................................1
Assumed Options..........................................................1
Bank....................................................................14
Bank Combination........................................................57
CALGLs..................................................................15
CALGZs..................................................................15
Cash Consideration.......................................................4
Cash Election............................................................3
Cash Election Shares.....................................................4
Certificate of Merger....................................................2
Change in the Company Recommendation....................................52
Closing..................................................................2
Closing Date.............................................................2
Closing Parent Share Value...........................................5, 70
Closing Transaction Value................................................5
Code.....................................................................1
Company..................................................................1
Company Acquisition Agreement...........................................52
Company Common Stock.....................................................1
Company Disclosure Schedule.............................................14
Company Filed SEC Documents.............................................20
Company Finance Subsidiaries............................................24
Company Material Contracts..............................................20
Company Preferred Stock.................................................15
Company Recommendation..................................................55
Company Regulatory Agreement............................................22
Company SEC Documents...................................................18
Company Stock Certificates...............................................8
Company Stock Options...................................................16
Company Stock Plans.....................................................15
Company Stockholder Approval............................................36
Company Stockholders Meeting.............................................1
Company Superior Proposal...............................................51
Company Takeover Proposal...............................................51
Confidentiality Agreement...............................................56
Continuation Period.....................................................63
Continuing Employees....................................................63
control.................................................................70
Derivative Transactions.................................................37
DGCL.....................................................................1
Dissenting Shares.......................................................12
Effective Time...........................................................2
Election.................................................................8
Election Deadline........................................................9
Employee................................................................20
Environmental Claims....................................................33
ERISA...................................................................29
ERISA Affiliate.........................................................29
Excess Option Shares.....................................................4
Exchange Act............................................................18
Exchange Agent...........................................................8
Exchange Fund...........................................................10
Exchange Ratio...........................................................6
Exchangeable Shares......................................................6
Federal Reserve.........................................................18
Finance Laws............................................................24
Ford Parties.............................................................6
Form of Election.........................................................8
Form S-4................................................................18
GAAP....................................................................19
Governmental Approvals..................................................18
Governmental Entity.....................................................18
Holder...................................................................8
HSR Act.................................................................18
Indemnified Parties.....................................................59
Indenture...............................................................57
Instruments of Indebtedness.............................................19
Intellectual Property...................................................33
IRS.....................................................................26
knowledge...............................................................71
Leased Properties.......................................................39
Leases..................................................................39
Letter of Transmittal...................................................12
Liens...................................................................15
LTWs....................................................................13
Major Shareholder.......................................................16
material................................................................48
material adverse change.................................................71
material adverse effect.................................................71
Merger...................................................................1
Merger Agreement.........................................................1
Merger Consideration.....................................................6
Merger Sub...............................................................1
Non-Election Shares......................................................4
NYSE.....................................................................5
Other Company Documents.................................................23
OTS Approval............................................................18
Owned Properties........................................................38
Parent...................................................................1
Parent Authorized Preferred Stock.......................................40
Parent Common Stock...................................................4, 1
Parent Disclosure Schedule..............................................40
Parent Employee Stock Options...........................................41
Parent Regulatory Agreement.............................................45
Parent SEC Documents....................................................43
Parent Series F Preferred Stock.........................................40
Parent Series G Preferred Stock.........................................40
Parent Series H Preferred Stock.........................................40
Parent Series M Preferred Stock.........................................40
Parent Series Q Preferred Stock.........................................40
Parent Series R Preferred Stock.........................................41
Parent Series V Preferred Stock.........................................41
Parent Series Y Preferred Stock.........................................41
Parent Series YY Preferred Stock........................................41
Parent Series YYY Preferred Stock.......................................41
Parent Stock Certificate................................................10
Parent Stock Plans......................................................41
PBGC....................................................................31
PCC.....................................................................28
Per Share Amount.........................................................6
Permits.................................................................22
person..................................................................71
Plans...................................................................29
Policies, Practices and Procedures......................................37
Post-Signing Returns....................................................53
Pre-Termination Takeover Proposal Event.................................61
Proxy Statement.........................................................18
PSX.....................................................................43
REIT Preferred Stock....................................................15
Requisite Regulatory Approvals..........................................65
Restraints..............................................................65
SEC..................................................................71, 1
Securities Act.......................................................18, 1
Securityholders Agreement................................................1
Shortfall Number.........................................................7
significant subsidiaries................................................40
Skadden Arps.............................................................2
Software................................................................33
Stock Consideration......................................................4
Stock Conversion Number..................................................6
Stock Election...........................................................4
Stock Election Number....................................................7
Stock Election Shares....................................................4
subsidiary..............................................................71
Surviving Corporation....................................................2
Tax.....................................................................28
Tax Return..............................................................29
Taxes...................................................................28
Third Party Leases......................................................39
Title IV Plans..........................................................29
Wachtell................................................................64
Warrant Agreement.......................................................15
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
May 21, 2002, by and among CITIGROUP INC., a Delaware corporation ("Parent"),
GOLDEN STATE BANCORP INC., a Delaware corporation (the "Company"), and MERCURY
MERGER SUB, INC., a Delaware corporation and a subsidiary of Parent ("Merger
Sub").
WHEREAS, each of Parent, Merger Sub and the Company desire
to enter into a transaction whereby the Company will merge with and into
Merger Sub (the "Merger"), with Merger Sub being the surviving corporation,
upon the terms and subject to the conditions set forth in this Agreement,
whereby each issued and outstanding share of common stock, par value $1.00 per
share, of the Company ("Company Common Stock"), will be converted into the
right to receive the Merger Consideration (as defined in Section 2.1(d));
WHEREAS, the respective Boards of Directors of Parent,
Merger Sub and the Company have each approved this Agreement and the Merger
(as defined below) in accordance with the General Corporation Law of the State
of Delaware (the "DGCL") and determined that the Merger is advisable, and
Parent has adopted this Agreement and the Merger as the parent of Merger Sub;
WHEREAS, concurrently with the execution of this Agreement,
and as an inducement to Parent to enter into this Agreement, Parent and
certain stockholders of the Company have entered into a Securityholders
Agreement, dated as of the date hereof (the "Securityholders Agreement"),
providing, among other things, that such stockholders will vote, or cause to
be voted, at the meeting of the Company's stockholders to be called for the
purpose of voting on the adoption of this Agreement (the "Company Stockholders
Meeting") all of the shares of Company Common Stock owned by them (except as
otherwise provided in such Securityholders Agreement) in favor of the Merger;
and
WHEREAS, for Federal income tax purposes, it is intended
that the Merger will qualify as a reorganization under the provisions of
Section 368(a) of the United States Internal Revenue Code of 1986, as amended
(the "Code"), and that this Agreement be, and is hereby, adopted as a plan of
reorganization for purposes of Sections 354 and 361 of the Code.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, and
intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the DGCL, the Company
shall be merged with and into Merger Sub at the Effective Time. Following the
Effective Time, Merger Sub shall be the surviving corporation (the "Surviving
Corporation"), shall become a direct, wholly owned subsidiary of Parent and
shall succeed to and assume all of the rights and obligations of the Company
in accordance with the DGCL.
SECTION 1.2 Closing. Subject to the satisfaction or waiver of all of
the conditions to closing contained in Article VI hereof, the closing of the
Merger (the "Closing") will take place at 4:00 p.m. on a date to be specified
by the parties (the "Closing Date"), which shall be no later than the second
business day after satisfaction or waiver of the conditions set forth in
Article VI (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions), unless another time or date is agreed to by the parties hereto.
The Closing will be held at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP ("Skadden Arps"), Four Times Square, New York, New York 10036 or at
such other location as is agreed to by the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this
Agreement, at the Closing, the parties shall cause the Merger to be
consummated by filing a certificate of merger (the "Certificate of Merger")
executed in accordance with the relevant provisions of the DGCL and shall make
all other filings or recordings required under the DGCL to effectuate the
Merger. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware, or
at such subsequent date or time as Parent and the Company shall agree and
specify in the Certificate of Merger (the time the Merger becomes effective
being hereinafter referred to as the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects
set forth in Section 259 of the DGCL.
SECTION 1.5 Certificate of Incorporation and By-laws of the Surviving
Corporation. The certificate of incorporation and the by-laws of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the certificate
of incorporation and the by-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law, except that the
name of the Merger Sub shall be amended as of the Effective Time to a name
designated by Parent prior to the Company Stockholders Meeting.
SECTION 1.6 Directors and Officers. The directors of Merger Sub
shall, from and after the Effective Time, become the directors of the
Surviving Corporation until their successors shall have been duly elected,
appointed or qualified or until their earlier death, resignation or removal in
accordance with the certificate of incorporation and the by-laws of the
Surviving Corporation. The officers of the Company shall, from and after the
Effective Time, become the officers of the Surviving Corporation until their
successors shall have been duly elected, appointed or qualified or until their
earlier death, resignation or removal in accordance with the certificate of
incorporation and the by-laws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of
common stock, par value $.01 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable share of common stock, par value $.01 per share,
of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of Company Common
Stock that is owned by the Company shall automatically be cancelled and
retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor. Each share of Company Common Stock owned by Merger Sub or a
subsidiary of Parent or Merger Sub shall be converted pursuant to the Merger
as provided in Section 2.1(c) and Section 2.2. Notwithstanding Section 2.1(c)
and Section 2.2, each share of Company Common Stock owned by Parent or a
subsidiary of the Company shall be converted into Parent Common Stock (as
defined below).
(c) Conversion of Company Common Stock. Subject to the provisions of
this Article II, each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares cancelled and
retired pursuant to Section 2.1(b) hereof and Dissenting Shares (as defined in
Section 2.5 hereof)) shall be converted, at the election of the holder
thereof, in accordance with the procedures set forth in Section 2.3 below and
subject to Sections 2.2 and 2.4, into the right to receive the following:
(i) for each share of Company Common Stock with respect to
which an election to receive cash has been effectively made and not
revoked or lost, pursuant to Section 2.3 (a "Cash Election"), the
right to receive in cash from Parent an amount equal to the Per Share
Amount (as defined below) (the "Cash Consideration") (collectively,
"Cash Election Shares");
(ii) for each share of Company Common Stock with respect to
which an election to receive common stock, par value $.01 per share,
of Parent ("Parent Common Stock") has been effectively made and not
revoked or lost, pursuant to Section 2.3 (a "Stock Election"), the
right to receive from Parent the fraction of a share of Parent Common
Stock as is equal to the Exchange Ratio (as defined below) (the
"Stock Consideration") (collectively, the "Stock Election Shares");
and
(iii) for each share of Company Common Stock other than
shares as to which a Cash Election or a Stock Election has been
effectively made and not revoked or lost, pursuant to Section 2.3
(collectively, "Non-Election Shares"), the right to receive from
Parent such Stock Consideration and/or Cash Consideration as is
determined in accordance with Section 2.2(b).
(d) Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "Aggregate Cash Amount" means 40% of the product of (x)
the Aggregate Company Share Amount, less the number of outstanding
shares of Company Common Stock cancelled pursuant to Section 2.1(b)
hereof (but excluding from such reduction the 16,433,269 treasury
shares as of May 17, 2002 and treasury shares arising after May 17,
2002 in connection with the exercise of Company Stock Options after
May 17, 2002) and (y) $41.00; provided, however, that if, at the
Effective Time, the aggregate number of shares of Company Common
Stock issuable upon exercise of then outstanding Company Stock
Options (as defined below) exceeds the difference between (A)
5,361,680 less (B) the aggregate number of shares of Company Common
Stock issued upon exercise of Company Stock Options after May 17,
2002 and prior to the Effective Time (such excess being referred to
herein as the "Excess Option Shares"), then the "Aggregate Cash
Amount" shall be reduced by the product of (A) the Excess Option
Shares and (B) an amount equal to the excess of $41.00 over the
weighted average exercise price of the Excess Stock Options (if
separately identifiable or, if not, the outstanding Company Stock
Options) at the Effective Time.
(ii) "Aggregate Company Share Amount" shall equal
136,041,431 shares of Company Common Stock; provided, however, that
the Aggregate Company Share Amount shall be increased (A) by virtue
of the issuance of any shares of Company Common Stock upon the
exercise from and after May 17, 2002 and prior to the Effective Time
of Company Stock Options outstanding on May 17, 2002 and (B) upon the
issuance prior to the Effective Time of any shares of Company Common
Stock (x) pursuant to Section 1.6(a) or (b) of the 1998 Merger
Agreement, or (y) to the extent contemplated by Section 6(c)(iii)(A)
of the Securityholders Agreement, pursuant to Section 1.6(c) of the
1998 Merger Agreement or (z) pursuant to the terms of the LTWs, in
each case on the basis of one additional share of Company Common
Stock for each share so issued; provided, further, that the
"Aggregate Company Share Amount" shall in no event exceed 146,773,293
shares of Company Common Stock plus any shares of Company Common
Stock issued prior to the Effective Time pursuant to the terms of the
LTWs (as such term is defined is Section 2.6 of this Agreement) or
pursuant to Section 1.6(a) or (b) of the 1998 Merger Agreement.
(iii) "Aggregate Parent Share Amount" shall be equal to
71,204,085 shares of Parent Common Stock; provided, however, that the
"Aggregate Parent Share Amount" shall be increased (x) by virtue of
the issuance of any shares of Company Common Stock upon the exercise
prior to the Effective Time of Company Stock Options outstanding on
May 17, 2002 and (y) upon the issuance prior to the Effective Time of
any shares of Company Common Stock issuable (x) pursuant to Section
1.6(a) or (b) of the 1998 Merger Agreement, or (y) to the extent
contemplated by Section 6(c)(iii)(A) of the Securityholders
Agreement, pursuant to Section 1.6(c) of the 1998 Merger Agreement or
(z) pursuant to the terms of the LTWs, and shall be decreased in the
event any shares of Company Common Stock are cancelled pursuant to
Section 2.1(b) hereof, other than the 16,433,269 treasury shares as
of May 17, 2002 and treasury shares arising after May 17, 2002 in
connection with the exercise of Company Stock Options after May 17,
2002, in each case on a basis of .5234 additional shares of Parent
Common Stock for each share of Company Common Stock so issued or
cancelled; provided, further that the "Aggregate Parent Share Amount"
shall in no event exceed 76,821,142 shares of Parent Common Stock
plus any additional shares issuable in respect of shares of Company
Common Stock issued prior to the Effective Time pursuant to the terms
of the LTWs or pursuant to Section 1.6(a) or (b) of the 1998 Merger
Agreement.
(iv) "Closing Parent Share Value" means the arithmetic
average of the 4:00 p.m. Eastern Time closing sales prices of Parent
Common Stock reported on the New York Stock Exchange (the "NYSE")
Composite Tape for the five consecutive trading days immediately
preceding but not including the second trading day prior to the
Closing Date.
(v) "Closing Transaction Value" means the sum of (A) the
Aggregate Cash Amount and (B) the product obtained by multiplying the
Aggregate Parent Share Amount by the Closing Parent Share Value.
(vi) "Exchange Ratio" means that fraction of a share of
Parent Common Stock as shall be obtained by dividing the Per Share
Amount by the Closing Parent Share Value.
(vii) "Exchangeable Shares" means the aggregate number of
shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time, rounded to the nearest one-thousandth of
a share.
(viii) "1998 Merger Agreement" means the Agreement and Plan
of Reorganization, by and among the Company, GS Financial
Corporation, First Nationwide (Parent) Holdings Inc., First
Nationwide Holdings Inc., First Gibraltar Holdings Inc., and Hunter's
Glen/Ford, LTD., dated as of February 4, 1998, as amended and
supplemented.
(ix) "Per Share Amount" means the amount obtained by
dividing the Closing Transaction Value by the number of Exchangeable
Shares.
(x) "Ford Parties" means Gerald J. Ford, Hunter's Glen/Ford,
Ltd. and Turtle Creek Revocable Trust.
The Cash Consideration and Stock Consideration are sometimes
referred to herein collectively as the "Merger Consideration."
SECTION 2.2 Proration.
(a) Notwithstanding any other provision contained in this Agreement,
the total number of shares of Company Common Stock to be converted into Stock
Consideration pursuant to Section 2.1(c) (the "Stock Conversion Number") shall
be equal to the quotient obtained by dividing (x) the Aggregate Parent Share
Amount by (y) the Exchange Ratio. All of the other shares of Company Common
Stock shall be converted into Cash Consideration (in each case, excluding
shares of Company Common Stock to be canceled as provided in Section 2.1(b)
and Dissenting Shares).
(b) Within five business days after the later to occur of the
Election Deadline or the Effective Time (as such terms are defined in Sections
2.3(d) and 1.3, respectively), Parent shall cause the Exchange Agent (as
defined in Section 2.3) to effect the allocation among holders of Company
Common Stock of rights to receive the Cash Consideration and the Stock
Consideration as follows:
(i) If the aggregate number of shares of Company Common
Stock with respect to which a Stock Election shall have been made
(the "Stock Election Number") exceeds the Stock Conversion Number,
then all Cash Election Shares and all Non-Election Shares of each
holder thereof shall be converted into the right to receive the Cash
Consideration, and Stock Election Shares of each holder thereof
(other than Stock Election Shares held by the Ford Parties, all of
which shall be converted into Stock Consideration) will be converted
into the right to receive the Stock Consideration in respect of that
number of Stock Election Shares equal to the product obtained by
multiplying (x) the number of Stock Election Shares held by such
holder (other than the Ford Parties) by (y) a fraction, the numerator
of which is the Stock Conversion Number less the number of Stock
Election Shares held by the Ford Parties and the denominator of which
is the Stock Election Number less the number of Stock Election Shares
held by the Ford Parties, with the remaining number of such holder's
Stock Election Shares being converted into the right to receive the
Cash Consideration; and
(ii) If the Stock Election Number is less than the Stock
Conversion Number (the amount by which the Stock Conversion Number
exceeds the Stock Election Number being referred to herein as the
"Shortfall Number"), then all Stock Election Shares shall be
converted into the right to receive the Stock Consideration and the
Non-Election Shares and Cash Election Shares shall be treated in the
following manner:
(A) If the Shortfall Number is less than or equal to the
number of Non-Election Shares, then all Cash Election Shares shall
be converted into the right to receive the Cash Consideration and
Non-Election Shares of each holder thereof shall convert into the
right to receive the Stock Consideration in respect of that number
of Non-Election Shares equal to the product obtained by
multiplying (x) the number of Non-Election Shares held by such
holder by (y) a fraction, the numerator of which is the Shortfall
Number and the denominator of which is the total number of
Non-Election Shares, with the remaining number of such holder's
Non-Election Shares being converted into the right to receive the
Cash Consideration; or
(B) If the Shortfall Number exceeds the number of
Non-Election Shares, then all Non-Election Shares shall be
converted into the right to receive the Stock Consideration and
Cash Election Shares of each holder thereof shall convert into the
right to receive the Stock Consideration in respect of that number
of Cash Election Shares equal to the product obtained by
multiplying (x) the number of Cash Election Shares held by such
holder by (y) a fraction, the numerator of which is the amount by
which (1) the Shortfall Number exceeds (2) the total number of
Non-Election Shares and the denominator of which is the total
number of Cash Election Shares, with the remaining number of such
holder's Cash Election Shares being converted into the right to
receive the Cash Consideration.
SECTION 2.3 Election and Exchange Procedures. Each holder of record
of shares of Company Common Stock (other than Dissenting Shares) ("Holder")
shall have the right, subject to the limitations set forth in this Article II,
to submit an election in accordance with the following procedures:
(a) Each Holder may specify in a request made in accordance with the
provisions of this Section (herein called an "Election") (x) the number of
shares of Company Common Stock owned by such Holder with respect to which such
Holder desires to make a Stock Election and (y) the number of shares of
Company Common Stock owned by such Holder with respect to which such Holder
desires to make a Cash Election.
(b) Parent shall prepare a form reasonably acceptable to the Company
(the "Form of Election") which shall be mailed to the Company's stockholders
entitled to vote at the Company Stockholders Meeting so as to permit the
Company's stockholders to exercise their right to make an Election prior to
the Election Deadline (as defined in subsection (d)).
(c) Parent shall make the Form of Election initially available at the
time that the Proxy Statement (as defined herein) is made available to the
stockholders of the Company, to such stockholders, and shall use all
reasonable efforts to make available as promptly as possible a Form of
Election to any stockholder of the Company who requests such Form of Election
following the initial mailing of the Forms of Election and prior to the
Election Deadline. In no event shall the Form of Election be made available
less than twenty (20) days prior to the Election Deadline.
(d) Any Election shall have been made properly only if the person
authorized to receive Elections and to act as exchange agent under this
Agreement, which person shall be designated by Parent and reasonably
acceptable to the Company (the "Exchange Agent"), shall have received, by 5:00
p.m. local time in the city in which the principal office of such Exchange
Agent is located, on the date of the Election Deadline, a Form of Election
properly completed and signed and accompanied by certificates of the shares of
Company Common Stock (the "Company Stock Certificates") to which such Form of
Election relates or by an appropriate customary guarantee of delivery of such
certificates, as set forth in such Form of Election, from a member of any
registered national securities exchange or a commercial bank or trust company
in the United States; provided, that such certificates are in fact delivered
to the Exchange Agent by the time required in such guarantee of delivery.
Failure to deliver shares of Company Common Stock covered by such a guarantee
of delivery within the time set forth on such guarantee shall be deemed to
invalidate any otherwise properly made Election, unless otherwise determined
by Parent, in its sole discretion. As used herein, "Election Deadline" means
5:00 p.m. on the date that is the day prior to the date of the Company
Stockholder Meeting. The Company and Parent shall cooperate to issue a press
release reasonably satisfactory to each of them announcing the date of the
Election Deadline not more than fifteen (15) business days before, and at
least five (5) business days prior to, the Election Deadline.
(e) Any Company stockholder may, at any time prior to the Election
Deadline, change his or her Election by written notice received by the
Exchange Agent prior to the Election Deadline accompanied by a properly
completed and signed, revised Form of Election. If Parent shall determine in
its reasonable discretion that any Election is not properly made with respect
to any shares of Company Common Stock, such Election shall be deemed to be not
in effect, and the shares of Company Common Stock covered by such Election
shall, for purposes hereof, be deemed to be Non-Election Shares, unless a
proper Election is thereafter timely made.
(f) Any Company stockholder may, at any time prior to the Election
Deadline, revoke his or her Election by written notice received by the
Exchange Agent prior to the Election Deadline or by withdrawal prior to the
Election Deadline of his or her Company Stock Certificate, or of the guarantee
of delivery of such certificates, previously deposited with the Exchange
Agent. All Elections shall be revoked automatically if the Exchange Agent is
notified in writing by Parent or the Company that this Agreement has been
terminated in accordance with Article VII.
(g) If any portion of the Merger Consideration is to be paid to a
person other than the person in whose name a Company Stock Certificate so
surrendered is registered, it shall be a condition to such payment that such
Company Stock Certificate shall be properly endorsed or otherwise be in proper
form for transfer and the person requesting such payment shall pay to the
Exchange Agent any transfer or other similar Taxes (as defined in Section
3.1(j)) required as a result of such payment to a person other than the
registered holder of such Company Stock Certificate, or establish to the
reasonable satisfaction of the Exchange Agent that such Tax has been paid or
is not payable. Parent or the Exchange Agent shall be entitled to deduct and
withhold from the Merger Consideration (including cash in lieu of fractional
shares of Parent Common Stock) otherwise payable pursuant to this Agreement to
any holder of Company Common Stock such amounts as Parent or the Exchange
Agent are required to deduct and withhold under the Code, or any provision of
state, local or foreign Tax law, with respect to the making of such payment.
To the extent the amounts are so withheld by Parent or the Exchange Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of shares of Company Common Stock in respect of
whom such deduction and withholding was made by Parent or the Exchange Agent.
(h) After the Effective Time there shall be no further registration
or transfers of shares of Company Common Stock. If after the Effective Time,
Company Stock Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged for the Merger Consideration in accordance
with the procedures set forth in this Article II.
(i) At any time following the nine month anniversary of the Effective
Time, Parent shall be entitled to require the Exchange Agent to deliver to it
any remaining portion of the Merger Consideration not distributed to holders
of shares of Company Common Stock that was deposited with the Exchange Agent
at the Effective Time (the "Exchange Fund") (including any interest received
with respect thereto and other income resulting from investments by the
Exchange Agent, as directed by Parent), and holders shall be entitled to look
only to the Parent (subject to abandoned property, escheat or other similar
laws) with respect to the Merger Consideration, any cash in lieu of fractional
shares of Parent Common Stock and any dividends or other distributions with
respect to Parent Common Stock payable upon due surrender of their Company
Stock Certificates, without any interest thereon. Notwithstanding the
foregoing, neither the Parent nor the Exchange Agent shall be liable to any
holder of a Company Stock Certificate for Merger Consideration (or dividends
or distributions with respect thereto) or cash from the Exchange Fund in each
case delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(j) In the event any Company Stock Certificates shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Company Stock Certificate(s) to be lost, stolen or
destroyed and, if required by Parent, the posting by such person of a bond in
such sum as Parent may reasonably direct as indemnity against any claim that
may be made against it or the Surviving Corporation with respect to such
Company Stock Certificate(s), the Exchange Agent will issue the Merger
Consideration deliverable in respect of the shares of Company Common Stock
represented by such lost, stolen or destroyed Company Stock Certificates.
(k) No dividends or other distributions with respect to Parent Common
Stock with a record date after the Effective Time shall be paid to the holder
of any unsurrendered Company Stock Certificate with respect to the shares of
Parent Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to subsection (l)
below, and all such dividends, other distributions and cash in lieu of
fractional shares of Parent Common Stock shall be paid by Parent to the
Exchange Agent and shall be included in the Exchange Fund, in each case until
the surrender of such Company Stock Certificate in accordance with subsection
(l) below. Subject to the effect of applicable abandoned property, escheat or
similar laws, following surrender of any such Company Stock Certificate there
shall be paid to the holder of a certificate for Parent Common Stock (a
"Parent Stock Certificate") representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Parent Common Stock and the amount of any cash payable in lieu of a fractional
share of Parent Common Stock to which such holder is entitled pursuant to
subsection (l), and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time
but prior to such surrender and with a payment date subsequent to such
surrender payable with respect to such whole shares of Parent Common Stock.
Parent shall make available to the Exchange Agent cash for these purposes, if
necessary.
(l) No Parent Stock Certificates representing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of Company
Stock Certificates; no dividend or distribution by Parent shall relate to such
fractional share interests; and such fractional share interests will not
entitle the owner thereof to vote or to any rights as a shareholder of Parent.
In lieu of any such fractional shares, each holder of a Company Stock
Certificate who would otherwise have been entitled to receive a fractional
share interest in exchange for such Company Stock Certificate shall receive
from the Exchange Agent an amount in cash equal to the product obtained by
multiplying (A) the fractional share interest to which such holder (after
taking into account all shares of Company Common Stock held by such holder at
the Effective Time) would otherwise be entitled by (B) the Closing Parent
Share Value.
(m) Parent shall have the right to make all determinations, not
inconsistent with the terms of this Agreement, governing (A) the validity of
the Forms of Election and compliance by any Company Stockholder with the
Election procedures set forth herein, (B) the manner and extent to which
Elections are to be taken into account in making the determinations prescribed
by Section 2.3, (C) the issuance and delivery of Parent Stock Certificates
into which shares of Company Common Stock are converted in the Merger and (D)
the method of payment of cash for shares of Company Common Stock converted
into the right to receive the Cash Consideration and cash in lieu of
fractional shares of Parent Common Stock where the holder of the applicable
Company Stock Certificate has no right to receive whole shares of Parent
Common Stock.
(n) As soon as reasonably practicable following the Effective Time,
Parent will deposit with the Exchange Agent certificates representing shares
of Parent Common Stock sufficient to pay in a timely manner, and the Parent
shall instruct the Exchange Agent to timely pay, the aggregate Stock
Consideration. In addition, Parent shall make available to the Exchange Agent
on a daily basis sufficient cash to permit prompt payment of the Cash
Consideration and cash in lieu of fractional shares of Parent Common Stock,
and Parent shall instruct the Exchange Agent to timely pay the Cash
Consideration and cash in lieu of fractional shares of Parent Common Stock
where the holder of the applicable Company Stock Certificate has no right to
receive whole shares of Parent Common Stock.
(o) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a Company Stock
Certificate(s) which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock whose shares were converted into
the right to receive the Merger Consideration pursuant to Section 2.1 and any
cash in lieu of fractional shares of Parent Common Stock to be issued or paid
in consideration therefor who did not complete an Election Form, (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Company Stock Certificate(s) shall pass, only upon
delivery of the Company Stock Certificate(s) (or affidavits of loss in lieu of
such certificates) (the "Letter of Transmittal") to the Exchange Agent and
shall be in such form and have such other provisions as Parent or the Exchange
Agent may reasonably specify) and (ii) instructions for use in surrendering
the Company Stock Certificate(s) in exchange for the Merger Consideration and
any cash in lieu of fractional shares of Parent Common Stock to be issued or
paid in consideration therefor upon surrender of such certificate in
accordance with Section 2.3(l) and any dividends or distributions to which
such holder is entitled pursuant to Section 2.3(k).
(p) Upon surrender to the Exchange Agent of its Company Stock
Certificate or Company Stock Certificates, accompanied by a properly completed
Form of Election or a properly completed Letter of Transmittal a holder of
Company Common Stock will be entitled to receive promptly after the Effective
Time the Merger Consideration (elected or deemed elected by it, subject to
Sections 2.1 and 2.2) in respect of the shares of Company Common Stock
represented by its Company Stock Certificate. Until so surrendered, each such
Company Stock Certificate shall represent after the Effective Time, for all
purposes, only the right to receive the Merger Consideration and any cash in
lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance with
Section 2.3(l) and any dividends or distributions to which such holder is
entitled pursuant to Section 2.3(k).
SECTION 2.4 Certain Adjustments. If after the date hereof and on or
prior to the Effective Time the outstanding shares of Parent Common Stock or
Company Common Stock shall be changed into a different number of shares by
reason of any reclassification, recapitalization or combination, stock split,
reverse stock split, stock dividend or rights issued in respect of such stock,
or any similar event shall occur (any such action, an "Adjustment Event"), the
Aggregate Parent Share Amount shall be adjusted accordingly to provide to the
holders of Company Common Stock the same economic effect as contemplated by
this Agreement prior to such Adjustment Event; provided, further, that, in the
case of an Adjustment Event in respect of the distribution of shares of
Travelers Property and Casualty Corp. capital stock to Parent's stockholders,
the Aggregate Parent Share Amount shall be adjusted by determining the value
of the distribution based on the NYSE methodology for setting the opening
trading price for shares of Parent Common Stock on the date that shares of
Parent Common Stock begin trading on an ex-dividend basis (which valuation
methodology is the same methodology that will be used in the anti-dilution
adjustments made to the outstanding employee stock options to purchase Parent
Common Stock).
SECTION 2.5 Shares of Dissenting Stockholders. Notwithstanding
anything in this Agreement to the contrary, any shares of Company Common Stock
that are issued and outstanding as of the Effective Time and that are held by
a stockholder who has properly exercised his appraisal rights under the DGCL
(the "Dissenting Shares") shall not be converted into the right to receive the
Merger Consideration unless and until the holder shall have failed to perfect,
or shall have effectively withdrawn or lost, his right to dissent from the
Merger under the DGCL and to receive such consideration as may be determined
to be due with respect to such Dissenting Shares pursuant to and subject to
the requirements of the DGCL. If any such holder shall have so failed to
perfect or have effectively withdrawn or lost such right after the Election
Deadline, each share of such holder's Company Common Stock shall thereupon be
deemed to have been converted into and to have become, as of the Effective
Time, the right to receive, without any interest thereon, the Stock Election
Consideration or the Cash Election Consideration or a combination thereof as
determined by Parent in its sole discretion. The Company shall give Parent (i)
prompt notice of any notice or demands for appraisal or payment for shares of
Company Common Stock received by the Company and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect to any
such demands or notices. The Company shall not, without the prior written
consent of Parent, make any payment with respect to, or settle, offer to
settle or otherwise negotiate, any such demands.
SECTION 2.6 Litigation Tracking Warrants. Following the Effective
Time, the outstanding litigation tracking warrants issued by the Company to
purchase shares of Company Common Stock and those held in tandem with stock
options outstanding under the Amended and Restated Golden State Bancorp Inc.
Stock Option and Long-Term Performance Incentive Plan, as amended (the
"LTWs"), whether or not then exercisable, shall be assumed by Parent. Each LTW
shall continue to have, and be subject to, the same terms and conditions
applicable to such LTW immediately prior to the Effective Time, except that,
from and after the Effective Time, each LTW shall, when and if it becomes
exercisable in accordance with its terms, be exercisable in respect of Parent
Common Stock and cash in the same proportion that the holders of Company
Common Stock receive in the aggregate in the Merger as measured as of the
Effective Time. Parent shall be solely responsible for the issuance of Parent
Common Stock and the delivery of the cash amount upon such exercise. From and
after the Effective Time, (i) Parent shall (A) assume all of the obligations
and obtain all of the rights of the Company under the Warrant Agreement and in
connection with the LTWs and (B) be solely responsible for the issuance of
Parent Common Stock and the delivery of the cash amount upon exercise of the
LTWs, and (ii) the Company shall have no further rights and obligations under
the Warrant Agreement and in connection with the LTWs.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. Except as
set forth on the Disclosure Schedule delivered by the Company to Parent prior
to the execution of this Agreement (the "Company Disclosure Schedule") and
making reference to the particular subsection of this Agreement to which
exception is being taken, the Company represents and warrants to Parent as
follows:
(a) Organization, Standing and Corporate Power.
(i) Each of the Company and its subsidiaries (as defined in
Section 8.3) is a corporation or other legal entity duly organized,
validly existing and in good standing (with respect to jurisdictions
which recognize such concept) under the laws of the jurisdiction in
which it is organized and has the requisite corporate or other power,
as the case may be, and authority to carry on its business as now
being conducted. Each of the Company and its subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership,
leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions where the failure
to be so qualified or licensed or to be in good standing individually
or in the aggregate would not reasonably be expected to have a
material adverse effect on the Company or the applicable subsidiary.
(ii) The Company has delivered or made available to Parent
prior to the execution of this Agreement complete and correct copies
of the certificate of incorporation and by-laws or other
organizational documents, as amended to date, of the Company and its
subsidiaries.
(iii) The minute books of the Company, in all material
respects, contain accurate records of all meetings and accurately
reflect all other material actions taken by the stockholders, the
Board of Directors and all standing committees of the Board of
Directors of the Company since January 1, 1999.
(b) Subsidiaries. Section 3.1(b) of the Company Disclosure Schedule
lists all the subsidiaries of the Company, whether consolidated or
unconsolidated. The issued and outstanding securities of California Federal
Bank (the "Bank") consists of: (i) 60,880,000 issued and outstanding shares of
common stock and 1,725,000 issued and outstanding shares of 10 ? %
Noncumulative Perpetual Preferred Stock, Series B and 3,007,900 issued and
outstanding shares of 11 1/2% Noncumulative Perpetual Preferred Stock, Series
C, all of which are owned by Golden State Holdings Inc., a wholly-owned
subsidiary of the Company; (ii) 5,077,323 Contingent Litigation Recovery
Participation Interests ("CALGZs"), issued by the Bank, pursuant to an
Agreement, dated as of June 30, 1995, between the Bank and Chemical Trust
Company of California; and (iii) 5,078,221 Secondary Contingent Litigation
Recovery Participation Interests ("CALGLs"), issued by the Bank, pursuant to
an Agreement, dated as of December 2, 1996, between the Bank and ChaseMellon
Shareholder Services, LLC. Except for the securities of the Bank identified
above the issued and outstanding securities of the subsidiaries of the Company
consists of: (i) 20,000,000 shares of preferred stock of Preferred Capital
Corp. (the "REIT Preferred Stock") with a stated liquidation value of $25 per
share; (ii) shares of capital stock, or other equity interests, that are
owned, directly or indirectly, by the Company; and (iii) such securities as
are set forth in Section 3.1(b) of the Company Disclosure Schedule. Except as
set forth in Section 3.1(b) of the Company Disclosure Schedule, all
outstanding shares of capital stock of, or other equity interests in, each
such subsidiary: (i) have been validly issued and are fully paid and
nonassessable; (ii) are owned directly or indirectly by the Company (other
than the REIT Preferred Stock, the CALGZs and the CALGLs), free and clear of
all pledges, claims, liens, charges, encumbrances and security interests of
any kind or nature whatsoever, other than those imposed generally on similar
entities under applicable law (collectively, "Liens"); and (iii) are free of
any other material restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other ownership
interests) that would prevent the operation by the Surviving Corporation of
such subsidiary's business as currently conducted. Neither the Company nor any
of its subsidiaries conducts any international operations or is subject to any
regulatory oversight by foreign Governmental Entities (as defined below in
Section 3.1(d)).
(c) Capital Structure. The authorized capital stock of the Company
consists of 250,000,000 shares of Company Common Stock and 50,000,000 shares
of preferred stock, par value $1.00 per share, of the Company ("Company
Preferred Stock"). As of May 17, 2002: (i) 152,474,700 shares of Company
Common Stock were issued and outstanding, of which 160,056 shares are
restricted shares of Company Common Stock issued pursuant to the Company Stock
Plans (as defined below); (ii) 16,433,269 shares of Company Common Stock were
held by the Company in its treasury and no shares of Company Common Stock were
held by subsidiaries of the Company; (iii) no shares of Company Preferred
Stock were issued and outstanding; (iv) no shares of Company Preferred Stock
were held by the Company in its treasury or were held by any subsidiary of the
Company; (v) 7,821,666 shares of Company Common Stock were reserved for
issuance pursuant to the Company's Omnibus Stock Plan and all other plans,
agreements or arrangements providing for equity-based compensation to any
director, Employee, consultant or independent contractor of the Company or any
of its subsidiaries (collectively, the "Company Stock Plans"), of which
5,361,680 shares are subject to outstanding Company Stock Options (as defined
below); and (vi) 83,687,589 LTWs were issued and outstanding pursuant to the
Warrant Agreement dated as of May 4, 1998 between the Company and Chase Mellon
Shareholder Services L.L.C. (the "Warrant Agreement"). All outstanding shares
of capital stock of the Company are, and all shares thereof which may be
issued prior to the Closing will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. The
Company has delivered to Parent a true and complete list, as of the close of
business on May 17, 2002, of all outstanding stock options to purchase or
receive Company Common Stock and all other rights to purchase or receive
Company Common Stock granted under the Company Stock Plans (collectively, the
"Company Stock Options"), the number of shares subject to each such Company
Stock Option, the grant dates and exercise prices of each such Company Stock
Option and the names of the holders thereof. Except as set forth in this
Section 3.1(c) and in Section 3.1(c) of the Company Disclosure Schedule and
except for changes since May 17, 2002, resulting from (i) the issuance of
shares of Company Common Stock pursuant to and in accordance with Company
Stock Options outstanding prior to May 17, 2002; (ii) transactions
contemplated by the 1998 Merger Agreement pursuant to the terms thereof; (ii)
the issuance of Company Common Stock upon exercise of the LTWs pursuant to the
terms thereof and (iv) as expressly contemplated hereby or by the
Securityholders Agreement, (x) there are not issued, reserved for issuance or
outstanding (A) any shares of capital stock or voting securities or other
ownership interests of the Company, (B) any securities of the Company or any
Company subsidiary convertible into or exchangeable or exercisable for shares
of capital stock or voting securities or other ownership interests of the
Company, or (C) any warrants, calls, options or other rights to acquire from
the Company or any Company subsidiary, or any obligation of the Company or any
of its subsidiaries to issue, any capital stock, voting securities or other
ownership interests in, or securities convertible into or exchangeable or
exercisable for, capital stock or voting securities or other ownership
interests of the Company, and (y) there are no outstanding obligations of the
Company or any of its subsidiaries to repurchase, redeem or otherwise acquire
any such securities or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities, other than pursuant to any "cashless
exercise" provision of any Company Stock Options. Except as set forth in
Section 3.1(c) of the Company Disclosure Schedule, there are no outstanding
(A) securities of the Company or any of its subsidiaries convertible into or
exchangeable or exercisable for shares of capital stock or voting securities
or other ownership interests in any subsidiary of the Company, (B) warrants,
calls, options or other rights to acquire from the Company or any of its
subsidiaries, or any obligation of the Company or any of its subsidiaries to
issue, any capital stock, voting securities or other ownership interests in,
or any securities convertible into or exchangeable or exercisable for, any
capital stock, voting securities or other ownership interests in, any
subsidiary of the Company or (C) obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any such outstanding
securities of subsidiaries of the Company or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities. Neither the
Company nor any of its subsidiaries is a party and, other than the
Securityholders Agreement and other than as described in Section 3.1(c) of the
Company Disclosure Schedule, to the knowledge of the Company, as of the date
hereof, no other person having beneficial ownership (within the meaning of
Rule 13d-3) of more than 5% of the outstanding Company Common Stock (a "Major
Shareholder") is a party to any agreement restricting the transfer of,
relating to the voting of, requiring registration of, or granting any
preemptive or antidilutive rights with respect to any of the securities of the
Company or any of its subsidiaries. There are no voting trusts or other
agreements or understandings to which the Company or any of its subsidiaries
is a party or, other than the Securityholders Agreement or as described in
Section 3.1(c) of the Company Disclosure Schedule, to the knowledge of the
Company, as of the date hereof, any Major Shareholder is a party with respect
to the voting of the capital stock of the Company or any of the subsidiaries.
(d) Authority; Noncontravention. The Company has all requisite
corporate power and authority to enter into this Agreement and, subject, in
the case of the Merger, to the Company Stockholder Approval (as defined in
Section 3.1(r)) to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the consummation by
the Company of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject, in the
case of the Merger, to the Company Stockholder Approval. This Agreement has
been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Merger Sub, constitutes
the legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except that (i) such enforceability
may be subject to applicable bankruptcy, insolvency or other similar laws now
or hereafter in effect affecting creditors' rights generally and (ii) the
availability of the remedy of specific performance or injunction or other
forms of equitable relief may be subject to equitable defenses and would be
subject to the discretion of the court before which any proceeding therefor
may be brought. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby (including, without
limitation, the Bank Combination (as defined in Section 5.5)) and compliance
with the provisions of this Agreement will not, conflict with, or result in
any violation, forfeiture or termination of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
forfeiture, termination, cancellation or acceleration (with or without notice
or lapse of time, or both) of any obligation or loss of a benefit or, in the
case of clause (iii) below, any material obligation or loss of a material
benefit, under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its subsidiaries under, (i) the
certificate of incorporation or by-laws of the Company, (ii) the certificate
of incorporation or by-laws or the comparable organizational documents of any
of its subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease, vendor agreement, software agreement or other agreement,
instrument, Intellectual Property (as defined in Section 3.1(n)) right,
permit, concession, franchise, license or similar authorization applicable to
the Company or any of its subsidiaries or their respective properties or
assets that is material to the operations of the Company and its subsidiaries
taken as a whole or (iv) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Company or any of its
subsidiaries or their respective properties or assets, other than, in the case
of clause (iv), any such conflicts, violations, defaults, rights, losses or
Liens that individually or in the aggregate would not (x) reasonably be
expected to have a material adverse effect on the Company or (y) reasonably be
expected to materially impair or materially delay the ability of the Company
to perform its obligations under this Agreement. Except as set forth in
Section 3.1(d) of the Company Disclosure Schedule, no consent, approval, order
or authorization of, action by or in respect of, or registration, declaration
or filing with, any (i) Federal, state, local, municipal or foreign
government, (ii) governmental, quasi-governmental authority (including any
governmental agency, commission, branch, department or official, and any court
or other tribunal) or body exercising, or entitled to exercise, any
governmentally-derived administrative, executive, judicial, legislative,
police, regulatory or taxing authority, or (iii) any self-regulatory
organization, administrative or regulatory agency, commission or authority
(each, a "Governmental Entity") is required by or with respect to the Company
or any of its subsidiaries in connection with the execution and delivery of
this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except for (1) the filing of a pre-merger
notification and report form by the Company under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and filing of
a copy of the application to the Federal Reserve Board pursuant to Section
7A(c)(8) of the HSR Act; (2) the filings with the SEC of (A) a proxy statement
relating to the Company Stockholders Meeting (such proxy statement, as amended
or supplemented from time to time, the "Proxy Statement") and a registration
statement on Form S-4 to be prepared and filed in connection with the issuance
of Parent Common Stock in the Merger (the "Form S-4"), and (B) such reports
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement and the transactions
contemplated by this Agreement; (3) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and such filings with
Governmental Entities to satisfy the applicable requirements of the laws of
states in which the Company and its subsidiaries are qualified or licensed to
do business or state securities or "blue sky" laws; (4) the approval of the
Board of Governors of the Federal Reserve System (the "Federal Reserve") under
Section 4(j) of the Bank Holding Company Act; (5) the approval of the Office
of Thrift Supervision under the Homeowners' Loan Act (the "OTS Approval"); (6)
filings in respect of, and approvals and authorizations of, any Governmental
Entity having jurisdiction over the consumer lending, banking, insurance or
other financial services businesses; and (7) filings required as a result of
the particular status of Parent or Merger Sub (collectively, the "Governmental
Approvals").
(e) Company Documents; Undisclosed Liabilities. Since January 1,
1999, the Company and each of its SEC reporting subsidiaries have filed all
required reports, schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) with the SEC (the
"Company SEC Documents"). As of their respective filing dates, (i) the Company
SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Company SEC Documents, and (ii) no Company SEC
Document, as of their respective dates, except as amended or supplemented by a
subsequent Company Filed SEC Document (as defined in Section 3.1(g)),
contained, and no Company SEC Document filed subsequent to the date hereof
will contain as of their respective dates, any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company and its subsidiaries included in Company SEC
Documents (including the related notes) complied as to form, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles in the United States ("GAAP") (except, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the
consolidated financial position of the Company and/or its subsidiaries, as the
case may be, as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to notes and normal year-end audit adjustments that were
not, or with respect to any such financial statements contained in any Company
SEC Documents to be filed subsequent to the date hereof are not reasonably
expected to be material in amount or effect). Except (A) as reflected in the
Company's unaudited balance sheet as of March 31, 2002 or liabilities
described in any notes thereto (or liabilities for which neither accrual nor
footnote disclosure is required pursuant to GAAP) or (B) for liabilities
incurred in the ordinary course of business since March 31, 2002 consistent
with past practice or in connection with this Agreement or the transactions
contemplated hereby, neither the Company nor any of its subsidiaries has any
material liabilities or obligations of any nature. Section 3.1(e) of the
Company Disclosure Schedule identifies each subsidiary of the Company that is
required to file Company SEC Documents with the SEC.
(f) Certain Contracts. Except as set forth in the exhibit index for
the Company's Report on Form 10-K for the year ended December 31, 2001 or as
permitted pursuant to Section 4.1 or as set forth on Section 3.1(f) of the
Company Disclosure Schedule, neither the Company nor any of its subsidiaries
is a party to or bound by (a) any agreement relating to the incurring of
indebtedness by the Company or any of its subsidiaries (including sale and
leaseback transaction in excess of $2,100,000 and including capitalized lease
transactions and other similar financing transactions) including, without
limitation, any such agreement which contains provisions which in any
non-de-minimis manner restrict, or may restrict, the conduct of business of
the issuer thereof as currently conducted (collectively, "Instruments of
Indebtedness"), (b) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC), (c) any non-competition agreement or
any other agreement or obligation which purports to limit in any respect (i)
the ability of the Company or its businesses to solicit customers or (ii) the
manner in which, or the localities in which, all or any substantial portion of
the business of the Company and its subsidiaries, taken as a whole, or,
following consummation of the transactions contemplated by this Agreement,
Parent and its subsidiaries, is or would be conducted, (d) any agreement
providing for the indemnification by the Company or a subsidiary of the
Company of any person, other than customary agreements relating to the
indemnity of directors, officers and employees of the Company or its
subsidiaries, (e) any joint venture or partnership agreement, (f) any
agreement that grants any right of first refusal or right of first offer or
similar right or that limits or purports to limit the ability of the Company
or any of its subsidiaries to own, operate, sell, transfer, pledge or
otherwise dispose of any material amount of assets or business (other than in
connection with securitization or financing transactions or contracts entered
into in the ordinary course of business that require that the particular
transactions that are the subject thereof to be conducted with the
counterparty or counterparties to the contract), (g) any contract or agreement
providing for any material future payments that are conditioned, in whole or
in part, on a change of control of the Company or any of its subsidiaries, (h)
any collective bargaining agreement, (i) any employment agreement or any
agreement or arrangement that contains any material severance pay or
post-employment liabilities or obligations to any current or former employee
of the Company or its subsidiaries (any such person, hereinafter, an
"Employee"), other than as required under law, (j) any agreement regarding any
agent bank or other similar relationships with respect to lines of business,
(k) any material agreement that contains a "most favored nation" clause, (l)
any material agreement pertaining to the use of or granting any right to use
or practice any rights under any Intellectual Property, whether the Company is
the licensee or licensor thereunder, (m) any material agreements pursuant to
which the Company or any of its subsidiaries leases any real property, and (n)
any contract or other agreement not made in the ordinary course of business
which is material to the Company and its subsidiaries taken as a whole or
which would reasonably be expected to materially delay the consummation of the
Merger or any of the transactions contemplated by this Agreement (the
agreements, contracts and obligations of the type described in clauses (a)
through (n) being referred to herein as "Company Material Contracts"). Each
Company Material Contract is valid and binding on the Company (or, to the
extent a subsidiary of the Company is a party, such subsidiary) and, to the
knowledge of the Company, any other party thereto and is in full force and
effect. Neither the Company nor any of its subsidiaries is in breach or
default under any Company Material Contract. Neither the Company nor any
subsidiary of the Company knows of, or has received notice of, any violation
or default under (nor, to the knowledge of the Company, does there exist any
condition which with the passage of time or the giving of notice or both would
result in such a violation or default under) any Company Material Contract by
any other party thereto. Prior to the date hereof, the Company has made
available to Parent true and complete copies of all Company Material
Contracts. Except as set forth in Section 3.1(f) of the Company Disclosure
Schedule, there are no provisions in any Instrument of Indebtedness that
provide any restrictions on, or that require that any financial payment (other
than payment of outstanding principal and accrued principal) be made in the
event of, the repayment of the outstanding indebtedness thereunder prior to
its term.
(g) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, and except as set forth in Section 3.1(g) of the Company Disclosure
Schedule, or as disclosed in the Company SEC Documents filed and publicly
available prior to the date hereof (as amended to the date hereof, "Company
Filed SEC Documents"), since December 31, 2001, the Company and its
subsidiaries have conducted their respective businesses only in the ordinary
course, and there has not been:
(i) any material adverse change in the Company, including,
but not limited to, any material adverse change arising from or
relating to fraudulent or unauthorized activity,
(ii) any issuance of Company Stock Options or restricted
shares of Company Common Stock (in any event identifying in Section
3.1(g) of the Company Disclosure Schedule the issue date, exercise
price and vesting schedule, as applicable, for issuances since
December 31, 2001),
(iii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property)
with respect to any of the Company's capital stock, other than
regular quarterly cash dividends not to exceed $0.10 on the Company
Common Stock in accordance with its terms and regular cash dividends
on the REIT Preferred Stock of Preferred Capital Corp. in accordance
with its terms,
(iv) any split, combination or reclassification of any of
the Company's capital stock or any issuance or the authorization of
any issuance of any other securities in respect of, in lieu of or in
substitution for shares of the Company's capital stock, except for
issuances of Company Common Stock (and LTWs, if any) upon the
exercise of Company Stock Options awarded prior to the date hereof in
accordance with their present terms,
(v) prior to the date hereof (A) any granting by the Company
or any of its subsidiaries to any current or former director,
executive officer or other Employee of any increase in compensation,
bonus or other benefits, except for increases to then current
Employees who are not directors or executive officers that were made
in the ordinary course of business, (B) any granting by the Company
or any of its subsidiaries to any such current or former director,
executive officer or Employee of any increase in severance or
termination pay, or (C) any entry by the Company or any of its
subsidiaries into, or any amendment of, any employment, deferred
compensation, consulting, severance, termination or indemnification
agreement with any such current or former director, executive officer
or any Employee,
(vi) except insofar as may have been required by a change in
GAAP or regulatory accounting principles, any change in accounting
methods, principles or practices by the Company affecting its assets,
liabilities or business, including, without limitation, any
reserving, renewal or residual method, or estimate of practice or
policy,
(vii) any Tax election or change in any Tax election,
amendment to any Tax Return (as defined in Section 3.1(j)), closing
agreement with respect to Taxes, or settlement or compromise of any
income Tax liability by the Company or its subsidiaries, except as
would not be required to be disclosed in the Company SEC Documents,
(viii) any material change in investment policies, or
(ix) any agreement or commitment (contingent or otherwise)
to do any of the foregoing.
(h) Licenses; Compliance with Applicable Laws
(i) Section 3.1(h) of the Company Disclosure Schedule sets
forth a true and complete listing of all states in which the Company
and its subsidiaries are licensed to conduct business, including in
connection with their mortgage or auto lending businesses. The
Company, its subsidiaries and Employees hold all material permits,
licenses, variances, authorizations, exemptions, orders,
registrations and approvals of all Governmental Entities which are
required for the operation of the respective businesses of the
Company and its subsidiaries (the "Permits") as presently conducted.
Each of the Company and its subsidiaries is, and for the last five
years has been, in compliance in all material respects with the terms
of the Permits and all the Permits are in full force and effect and
no suspension modification or revocation of any of them is pending
or, to the knowledge of the Company, threatened nor, to the knowledge
of the Company, do grounds exist for any such action.
(ii) Each of the Company and its subsidiaries is, and for
the last five years has been, in compliance in all material respects
with all applicable statutes, laws, regulations, ordinances, Permits,
rules, judgments, orders, decrees or arbitration awards of any
Governmental Entity applicable to the Company or its subsidiaries.
(iii) Neither the Company nor any of its subsidiaries is
subject to any outstanding order, injunction or decree or is a party
to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or, except as would not have a material adverse
effect on the Company, is subject to any order or directive by, or is
a recipient of any supervisory letter from or has adopted any
resolutions at the request of any Governmental Entity that restricts
in any respect the conduct of its business or, except as would not
have a material adverse effect on the Company, that in any manner
relates to its capital adequacy, its policies, its management or its
business (each, a "Company Regulatory Agreement"), nor has the
Company or any of its subsidiaries or affiliates (as defined in
Section 8.3(a)) (A) to the Company's knowledge, been advised since
January 1, 2001 by any Governmental Entity that it is considering
issuing or requesting any such Company Regulatory Agreement or (B)
have knowledge of any pending or threatened regulatory investigation.
(iv) Except for filings with the SEC, which are the subject
of Section 3.1(e), the Company and each of its subsidiaries have
timely filed all regulatory reports, schedules, forms, registrations
and other documents, together with any amendments required to be made
with respect thereto, that they were required to file since January
1, 1999 with any Governmental Entity (the "Other Company Documents"),
and have timely paid all taxes, fees and assessments due and payable
in connection therewith, except where the failure to make such
payments and filings individually or in the aggregate would not have
a material adverse effect on the Company. There is no material
unresolved violation or exception by any of such Governmental
Entities with respect to any report or statement relating to any
examinations of the Company or any of its subsidiaries. No Other
Company Document, as of their respective dates, except as amended or
supplemented by an Other Company Document filed prior to the date
hereof, contained, and no Other Company Document filed subsequent to
the date hereof will contain as of their respective dates, any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The Company has delivered or made
available to Parent a true and complete copy of each material Other
Company Document, including currently effective Forms BD.
(v) Neither the Company nor any of its subsidiaries nor any
of their respective current directors, executive officers or
Employees has been the subject of any disciplinary proceedings or
orders of any Governmental Entity arising under applicable laws or
regulations which would be required to be disclosed in any Other
Company Document except as disclosed therein, and no such
disciplinary proceeding or order is pending, nor to the knowledge of
the Company threatened.
(vi) Except as disclosed on such Forms BD or Forms U-4,
neither the Company or any of its affiliates, nor, to the knowledge
of the Company, any "affiliated person" (as defined in the Investment
Company Act) of the Company or any of its affiliates, is ineligible
pursuant to Section 9(a) or 9(b) of the Investment Company Act to act
as, or subject to any disqualification which would form a reasonable
basis for any denial, suspension or revocation of the registration of
or licenses or for any limitation on the activities of the Company or
any its affiliates as, an investment advisor (or in any other
capacity contemplated by the Investment Company Act) to a registered
investment company. Neither the Company or any of its affiliates, nor
to the knowledge of the Company, any "associated person of a broker
or dealer" (as defined in the Exchange Act) of the Company or any of
its affiliates, is ineligible pursuant to Section 15(b) of the
Exchange Act to act as a broker-dealer or as an associated person to
a registered broker-dealer or is subject to a "statutory
disqualification" as defined in Section 3(a)(39) of the Exchange Act
or otherwise ineligible to serve as a broker-dealer or as an
associated person to a registered broker-dealer.
(vii) Each of the Company's insured depository institution
subsidiaries is "well-capitalized" (as that term is defined at 12
C.F.R. 225.2(r)(2)(i)) and "well managed" (as that term is defined at
12 C.F.R. 225.81(c)), and each institution's examination rating under
the Community Reinvestment Act of 1977 is satisfactory or
outstanding.
(viii) The business and operations of the Company and of
each of the Company's subsidiaries through which the Company conducts
its finance activities (including mortgage banking and mortgage
lending activities and consumer finance activities, which consumer
finance activities include direct and indirect automobile lending,
banking, home equity operations and consumer financial services
(together the "Company Finance Subsidiaries") have been conducted in
compliance in all material respects with all applicable statutes and
regulations regulating the business of consumer lending, including
state usury laws, the Truth in Lending Act, the Real Estate
Settlement Procedures Act, the Consumer Credit Protection Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the
Homeowners Ownership and Equity Protection Act, the Fair Debt
Collections Act and other Federal, state, local and foreign laws
regulating lending ("Finance Laws"), and have complied in all
material respects with all applicable collection practices in seeking
payment under any loan or credit extension of such subsidiaries. In
addition, there is no pending or, to the knowledge of the Company,
threatened charge by any Governmental Entity that any of the Company
Finance Subsidiaries has violated, nor any pending or, to the
knowledge of the Company, threatened investigation by any
Governmental Entity with respect to possible violations of, any
applicable Finance Laws where such violations would, individually or
in the aggregate, have a material adverse effect on the Company.
(ix) Since December 31, 1999, neither the Company nor any of
its subsidiaries, nor to the knowledge of the Company any other
person acting on behalf of the Company or any of its subsidiaries
that qualifies as a "financial institution" under the U.S. Anti-Money
Laundering laws has knowingly acted, by itself or in conjunction with
another, in any act in connection with the concealment of any
currency, securities, other proprietary interest that is the result
of a felony as defined in the U.S. Anti-Money Laundering laws
("Unlawful Gains"), nor knowingly accepted, transported, stored,
dealt in or brokered any sale, purchase or any transaction of other
nature for Unlawful Gains. The Company and each of its subsidiaries
that qualifies as a "financial institution" under the U.S. Anti-Money
Laundering laws has, during the past three years, implemented in all
material respects such anti-money laundry mechanisms and kept and
filed all material reports and other necessary material documents as
required by, and otherwise complied in all material respects with,
the U.S. Anti-Money Laundering laws and the rules and regulations
issued thereunder.
(i) Litigation. Except as set forth in Section 3.1(i) of the Company
Disclosure Schedule, which contains a true and current summary description of
any pending and, to the Company's knowledge, threatened material litigation,
action, suit, proceeding, investigation or arbitration, the forum, the parties
thereto, the subject matter thereof and the amount of damages claimed or other
remedies requested as of the date hereof, no material action, demand, charge,
requirement or investigation by any Governmental Entity and no material
litigation, action, suit, proceeding, investigation or arbitration by any
person or Governmental Entity, in each case with respect to the Company or any
of its subsidiaries or any of their respective properties or Permits, is
pending or, to the knowledge of the Company, threatened. Except as set forth
in Section 3.1(i) of the Company Disclosure Schedule or as contemplated by the
LTWs, the CALGZs, the CALGLs and the 1998 Merger Agreement, no person is
entitled, directly or indirectly, to participate or receive any portion of any
recovery, settlement or award granted in respect of any litigation, action,
suit, proceeding or arbitration in which the Company or any of its
subsidiaries is plaintiff or claimant.
(j) Taxes. For purposes of this Section 3.1(j) any reference to the
Company or the Company's subsidiaries shall be deemed to include a reference
to the Company's predecessors or the Company's subsidiaries' predecessors,
respectively, except where inconsistent with the language of this Section
3.1(j).
(i) Each of the Company and each of its subsidiaries has (A)
timely filed (or there have been timely filed on its behalf) with the
appropriate Governmental Entities all income and other material Tax
Returns required to be filed by it (giving effect to all extensions)
and such Tax Returns are true, correct and complete; (B) timely paid
in full (or there has been timely paid in full on its behalf) all
income and other material Taxes required to have been paid by it; and
(C) made adequate provision (or adequate provision has been made on
its behalf) for all accrued Taxes not yet due. The accruals and
reserves for Taxes reflected in the Company's audited consolidated
balance sheet as of December 31, 2001 (and the notes thereto) and the
most recent quarterly financial statements (and the notes thereto)
are adequate in accordance with GAAP to cover all Taxes accrued or
accruable through the date thereof.
(ii) There are no material Liens for Taxes upon any property
or assets of the Company or any subsidiary of the Company, except for
Liens for Taxes not yet due or for Taxes which are being contested in
good faith by appropriate proceedings (and for which adequate
reserves have been established in the Company's audited consolidated
financial statements in accordance with GAAP).
(iii) Each of the Company and its subsidiaries has complied
in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and has,
within the time and in the manner prescribed by law, withheld and
paid over to the proper Governmental Entities all material amounts
required to be so withheld and paid over under applicable laws.
(iv) As of the date of this Agreement, no Federal, state,
local or foreign audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or Tax
Returns of the Company or any of its subsidiaries, and neither the
Company nor any subsidiary of the Company has received a written
notice of any material pending or proposed claims, audits or
proceedings with respect to Taxes.
(v) Neither the Company nor any of its subsidiaries has
granted in writing any power of attorney which is currently in force
with respect to any Taxes or Tax Returns.
(vi) Other than in the ordinary course of business, and
except as provided in Section 3.1(j)(vi) of the Company Disclosure
Schedule, which may be delivered to Parent no later than 30 days
after the date hereof, neither the Company nor any of its
subsidiaries has requested an extension of time within which to file
any Tax Return which has not since been filed and no currently
effective waivers, extensions, or comparable consents regarding the
application of the statute of limitations with respect to Taxes or
Tax Returns has been given by or on behalf of the Company or any of
its subsidiaries.
(vii) Neither the Company nor any of its subsidiaries is a
party to any agreement providing for the allocation, sharing or
indemnification of Taxes.
(viii) The Federal income Tax Returns of the Company and
each of its subsidiaries have been examined and any disputes relating
thereto have been settled with the Internal Revenue Service (the
"IRS") (or the applicable statutes of limitation for the assessment
of Taxes for such periods have expired) for all periods through and
including December 31, 1988.
(ix) Neither the Company nor any of its subsidiaries has
been included in any "consolidated," "unitary" or "combined" Tax
Return (other than Tax Returns which include only the Company and any
of its subsidiaries) provided for under the laws of the United
States, any foreign jurisdiction or any state or locality with
respect to Taxes for any taxable year ending after December 31, 1988.
(x) No election under Section 341(f) of the Code has been
made by the Company or any of its subsidiaries.
(xi) Neither the Company nor any of its subsidiaries has
constituted either a "distributing corporation" or a "controlled
corporation" (within the meaning of Section 355(a)(1)(A) of the Code)
in a distribution of stock to which Section 355 of the Code (or so
much of Section 356 of the Code as relates to Section 355 of the
Code) applies and which occurred within two years of the date of this
Agreement.
(xii) Except as provided in Section 3.1(j)(xii) of the
Company Disclosure Schedule, which may be delivered to Parent no
later than 30 days after the date hereof, neither the Company nor any
of its subsidiaries have agreed, or is required, to make any material
adjustment under Section 481 of the Code affecting any taxable year
ending after December 31, 1997.
(xiii) Except as disclosed in Section 3.1(j)(xiii) of the
Company Disclosure Schedule, there have not been, within two years of
the date of this Agreement, any (i) redemptions by the Company or any
of its subsidiaries, (ii) transfers or dispositions of property by
the Company or any of its subsidiaries for which the Company or its
subsidiary did not receive adequate consideration, (iii)
distributions to the holders of Company Common Stock with respect to
their stock other than distributions of cash in the ordinary course
of business, (iv) distributions of cash with respect to the LTWs, (v)
distributions of cash or stock with respect to the CALGZs or CALGLs,
or (vi) distributions of cash or stock with respect to Section
1.6(a), Section 1.6(b) or Section 1.6(c) of the 1998 Merger
Agreement.
(xiv) No claim has been made in writing by any Governmental
Entities in a jurisdiction where the Company or any of its
subsidiaries does not file Tax Returns that any such entity is, or
may be, subject to taxation by that jurisdiction.
(xv) Each of the Company and each of its subsidiaries has
made available to Parent correct and complete copies of (i) all of
their material Tax Returns filed within the past three years, (ii)
all audit reports, letter rulings, technical advice memoranda and
similar documents issued by a Governmental Entity within the past
five years relating to the Federal, state, local or foreign Taxes due
from or with respect to the Company or any of its subsidiaries, and
(iii) any closing letters or agreements entered into by the Company
or any of its subsidiaries with any Governmental Entities within the
past five years with respect to Taxes.
(xvi) Neither the Company nor any of its affiliates or
subsidiaries has taken or agreed to take any action, has failed to
take any action or knows of any fact, agreement, plan or other
circumstance that could prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code.
(xvii) Neither the Company nor any of its subsidiaries has
received any notice of deficiency or assessment from any Governmental
Entity for any amount of Tax that has not been fully settled or
satisfied, and to the knowledge of the Company and its subsidiaries
no such deficiency or assessment is proposed.
(xviii) Preferred Capital Corp. ("PCC") (f/k/a California
Federal Preferred Capital Corporation f/k/a First Nationwide
Preferred Capital Corporation (A) was formed in 1996 and included in
the 1996 consolidated Federal income tax return of the affiliated
group of which Mafco Holdings Inc. was the common parent, (B) has
been at all times since January 1, 1997 a "real estate investment
trust" ("REIT") as defined in Section 856(a) of the Code, (C) has met
at all times since January 1, 1997 the requirements of Section 857(a)
of the Code, (D) has not been at any time since January 1, 1997
described in Section 856(c)(6) of the Code, (E) has not had at any
time since January 1, 1997 any "net income derived from prohibited
transactions" within the meaning of Section 857(b)(6) of the Code and
(F) has not issued any stock or securities as part of a multiple
party financing transaction described in IRS Notice 97-21, 1997-11
I.R.B. 2, or Treasury Regulations Section 1.7701(l)-3.
(xix) For purposes of this Agreement (A) "Tax" or "Taxes"
shall mean (I) any and all taxes, customs, duties, tariffs, imposts,
charges, deficiencies, assessments, levies or other like governmental
charges, including, without limitation, income, gross receipts,
excise, real or personal property, ad valorem, value added,
estimated, alternative minimum, stamp, sales, withholding, social
security, occupation, use, service, service use, license, net worth,
payroll, franchise, transfer and recording taxes and charges, imposed
by the IRS or any other taxing authority (whether domestic or foreign
including, without limitation, any state, county, local or foreign
government or any subdivision or taxing agency thereof (including a
United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term
shall include any interest, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such
amounts, (II) any liability for the payment of any amounts described
in (I) as a result of being a member of an affiliated, consolidated,
combined, unitary, or similar group or as a result of transferor or
successor liability, and (III) any liability for the payment of any
amounts as a result of being a party to any tax sharing agreement or
as a result of any obligation to indemnify any other person with
respect to the payment of any amounts of the type described in (I) or
(II), and (B) "Tax Return" shall mean any report, return, document,
declaration, election or other information or filing required to be
supplied to any taxing authority or jurisdiction (foreign or
domestic) with respect to Taxes, including, without limitation,
information returns and any documents with respect to or accompanying
payments of estimated Taxes or requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
(k) Employee Benefit Plans.
(i) Section 3.1(k) of the Company Disclosure Schedule
contains a true and complete list of each deferred compensation and
each bonus or other incentive compensation, stock purchase, stock
option and other equity compensation plan, program, agreement or
arrangement; each severance or termination pay, medical, surgical,
hospitalization, life insurance and other "welfare" plan, fund or
program (within the meaning of Section 3(l) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")); each
profit-sharing, stock bonus or other "pension" plan, fund or program
(within the meaning of Section 3(2) of ERISA); each employment,
termination or severance agreement or arrangement with any director
or former director of the Company or any of its subsidiaries or any
Employee and each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to by the Company or
by any trade or business, whether or not incorporated, that together
with the Company is a "single employer" within the meaning of Section
4001(b) of ERISA (an "ERISA Affiliate"), or to which the Company or
an ERISA Affiliate is party, whether written or oral, for the benefit
of any Employee or any director or former director of the Company or
any of its subsidiaries (the "Plans"). Section 3.1(k)(i) of the
Company Disclosure Schedule identifies each of the Plans that is
subject to section 302 or Title IV of ERISA or section 412 of the
Code (the "Title IV Plans"). Neither the Company nor any subsidiary
of the Company has any commitment or formal plan, whether legally
binding or not, to create any additional employee benefit plan or
modify or change any existing Plan other than as may be required by
the terms of such Plan or applicable law.
(ii) With respect to each Plan, the Company has heretofore
delivered or made available to Parent true and complete copies of
each of the following documents:
(A) a copy of the Plan and any amendments thereto (or if the
Plan is not a written Plan, a description thereof);
(B) a copy of the most recent annual report and actuarial
report, if required under ERISA, and the most recent report
prepared with respect thereto in accordance with Statement of
Financial Accounting Standards No. 87;
(C) a copy of the most recent Summary Plan Description
required under ERISA with respect thereto;
(D) if the Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding agreement
and the latest financial statements thereof; and
(E) the most recent determination letter received from the
Internal Revenue Service with respect to each Plan intended to
qualify under Section 401 of the Code.
(iii) All contributions required to have been made with
respect to any Plan have been paid when due. There has been no
amendment to, written interpretation of or announcement (whether or
not written) by the Company or any affiliate or the Company or any
subsidiary of the Company relating to, or change in the Plan
provisions relating to employee participation or coverage under, any
Plan that would increase materially the expense of maintaining such
Plan above the level or expense incurred in respect thereof for the
most recent fiscal year ended prior to the date hereof, except as
required by applicable law or previously disclosed contractual
commitment as set forth in Section 3.1(k)(iii) of the Company
Disclosure Schedule.
(iv) Neither the Company nor any ERISA Affiliate contributes
to, or is obligated to contribute to, a "multiemployer pension plan,"
as defined in Section 3(37) of ERISA nor has the Company or any ERISA
Affiliate, during the five year period prior to the date hereof been
obligated, to contribute to such plan for which the Company or any of
its subsidiaries could reasonably be expected to have any material
liability.
(v) Neither the Company or any subsidiary of the Company,
any Plan, any trust created thereunder, nor, to the knowledge of the
Company, any trustee or administrator thereof has engaged in a
transaction in connection with which the Company or any subsidiary of
the Company, any Plan, any such trust, or any trustee or
administrator thereof, or any party dealing with any Plan or any such
trust could be subject to either any material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material tax imposed
pursuant to Section 4975 or 4976 of the Code.
(vi) Each Plan has been operated and administered in
accordance with its terms and applicable law in all material
respects, including but not limited to ERISA and the Code.
(vii) The IRS has issued a favorable determination letter
with respect to each Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code that has not been revoked, and,
to the knowledge of the Company no circumstances exist that could
adversely affect the qualified status of any such plan and the
exemption under Section 501(a) of the Code of the trust maintained
thereunder. Each Plan intended to satisfy the requirements of Section
501(c)(9) of the Code has satisfied such requirements in all material
respects.
(viii) With respect to any plan subject to Title IV of
ERISA, to which the Company or any ERISA Affiliate made, or was
required to make, contributions on behalf of any Employee or any
director or former director during the five (5)-year period ending on
the last day of the most recent plan year ended prior to the Closing
Date, (a) no liability under Title IV or Section 302 of ERISA has
been incurred by the Company or any ERISA Affiliate that has not been
satisfied in full, and (b) to the knowledge of the Company, no
condition exists that presents a material risk to the Company or any
ERISA Affiliate of incurring any such liability, other than liability
for premiums due the Pension Benefit Guaranty Corporation ("PBGC")
(which premiums have been paid when due).
(ix) The PBGC has not instituted proceedings to terminate
any Title IV Plan and, to the knowledge of the Company, no condition
exists that presents a material risk that such proceedings will be
instituted. With respect to each Title IV Plan, the present value of
accrued benefits under such plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial
report prepared by such plan's actuary with respect to such plan did
not exceed, as of its latest valuation date, the then current value
of the assets of such plan allocable to such accrued benefits. No
Title IV Plan or any trust established thereunder has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA
and Section 412 of the Code), whether or not waived, as of the last
day of the most recently ended fiscal year.
(x) No Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for Employees for
periods extending beyond their retirement or other termination of
service, other than (i) coverage mandated by applicable law, (ii)
death benefits under any "pension plan," (iii) benefits the full cost
of which is borne by the Employee (or his beneficiary) or (iv) Plans
that can be amended or terminated by the Company without consent.
(xi) No material amounts payable under the Plans will fail
to be deductible for Federal income tax purposes by virtue of Section
162(m) of the Code.
(xii) The consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with another
event, (i) entitle any current or former employee or officer of the
Company to severance pay, unemployment compensation or any other
payment, except as expressly provided in this Agreement, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer.
(xiii) There are no pending or, to the knowledge of the
Company, threatened or anticipated claims by or on behalf of any Plan
by any Employee or beneficiary covered under any such Plan, or
otherwise involving any such Plan (other than routine claims for
benefits).
(xiv) Except with respect to Employees listed on Section
3.1(k)(xiv) of the Company Disclosure Schedule, no person will be
entitled to a "gross up" or other similar payment in respect of
excise taxes under Section 4999 of the Code with respect to the
transactions contemplated by this Agreement.
(xv) To the extent that the Company or any of its
subsidiaries is deemed to be a fiduciary with respect to any Plan
that is subject to ERISA, the Company or such subsidiary (1) during
the past five years has complied with the requirements of ERISA and
the Code in the performance of its duties and responsibilities with
respect to such employee benefit plan and (2) has not knowingly
caused any of the trusts for which it serves as an investment
manager, as defined in Section 3(38) of ERISA, to enter into any
transaction that would constitute a "prohibited transaction" under
Section 406 of ERISA or Section 4975 of the Code, with respect to any
such trusts, except for transactions that are the subject of a
statutory or administrative exemption.
(l) Labor Matters. There are no labor or collective bargaining
agreements to which the Company or any subsidiary of the Company is a party.
There is no union organizing effort pending or, the Company's knowledge,
threatened against the Company or any subsidiary of the Company. There is no
labor strike, labor dispute (other than routine employee grievances that are
not related to union Employees), work slowdown, stoppage or lockout pending
or, to the Company's knowledge, threatened against the Company or any
subsidiary of the Company. There is no material unfair labor practice or labor
arbitration proceeding pending or, to the knowledge of the Company, threatened
against the Company or any subsidiary of the Company (other than routine
employee grievances). The Company and its subsidiaries are in compliance in
all material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and are not engaged in any unfair labor practice.
(m) Environmental Liability. Except as set forth in the Company Filed
SEC Documents and except as would not have a material adverse effect on the
Company, there are no pending or threatened legal, administrative, arbitral or
other proceedings, claims, actions, causes of action, notices, private
environmental investigations or remediation activities or governmental
investigations of any nature (including, without limitations, claims of
alleging potential liability for investigating costs, cleanup costs,
governmental response costs, natural resources damage, property damages,
personal injuries or penalties) by any person or entity (collectively,
"Environmental Claims") or any conditions or circumstances that could form the
basis of any Environmental Claim seeking to impose on the Company or any of
its subsidiaries, or that reasonably could be expected to result in the
imposition on the Company or any of its subsidiaries of, any liability or
obligation arising under applicable common law standards relating to pollution
or protection of the environment, human health or safety, or under any local,
state or Federal environmental statute, regulation, ordinance, decree,
judgment or order relating to pollution or protection of the environment,
human health or safety including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
pending or, to the knowledge of the Company, threatened, against the Company
or any of its subsidiaries as a result of the transactions contemplated by
this Agreement.
(n) Intellectual Property.
(i) Section 3.1(n)(i) of the Company Disclosure Schedule
sets forth, for the Intellectual Property (as defined below) owned by
the Company or any of its subsidiaries, a complete and accurate list
of all material U.S. and foreign (A) patents and patent applications,
(B) trademark or service mark registrations and applications, (C)
copyright registrations and applications, and (D) Internet domain
names. The Company or one of its subsidiaries owns or has the valid
right to use all material patents and patent applications,
trademarks, service marks, trademark or service mark registrations
and applications, trade names, logos, designs, Internet domain names,
slogans and general intangibles of like nature, together with all
goodwill related to the foregoing, copyrights, copyright
registrations, renewals and applications, Software (as defined
below), technology, trade secrets and other confidential information,
know-how, proprietary processes, formulae, algorithms, models and
methodologies, licenses, agreements and all other material
proprietary rights (collectively, the "Intellectual Property"), used
in the business of the Company as it currently is conducted.
"Software" means any and all (A) computer programs, including any and
all software implementations of algorithms, models and methodologies,
whether in source code or object code, (B) databases and
compilations, including any and all data and collections of data,
whether machine readable or otherwise, (C) descriptions, flow-charts
and other work product used to design, plan, organize and develop any
of the foregoing, (D) the technology supporting and content contained
on any owned or operated Internet site(s), and (E) all documentation,
including user manuals and training materials, relating to any of the
foregoing.
(ii) All of the material Intellectual Property owned by the
Company or one of its subsidiaries is free and clear of all Liens.
The Company or one of its subsidiaries is listed in the records of
the appropriate United States, state or foreign agency as, the sole
owner of record for each application and registration listed in
Section 3.1(n)(i) of the Company Disclosure Schedule.
(iii) All of the material registrations listed in Section
3.1(n)(i) of the Company Disclosure Schedule are valid, subsisting,
enforceable, in full force and effect, and have not been cancelled,
expired, abandoned or otherwise terminated and all renewal fees in
respect thereof have been duly paid. There is no pending or, to the
Company's knowledge, threatened opposition, interference or
cancellation proceeding before any court or registration authority in
any jurisdiction against the registrations and applications listed in
Section 3.1(n)(i) of the Company Disclosure Schedule or, to the
Company's knowledge, against any other material Intellectual Property
used by the Company or its subsidiaries.
(iv) The conduct of the Company's and its subsidiaries'
business as currently conducted or planned by the Company to be
conducted does not, in any material respect, infringe upon (either
directly or indirectly such as through contributory infringement or
inducement to infringe), dilute, misappropriate or otherwise violate
any Intellectual Property owned or controlled by any third party.
(v) To the Company's knowledge, no third party is
misappropriating, infringing, diluting, or violating any material
Intellectual Property owned by or licensed to or by the Company or
its subsidiaries and no such claims have been made against a third
party by the Company or its subsidiaries.
(vi) Each material item of Software, which is used by the
Company or its subsidiaries in connection with the operation of their
businesses as currently conducted, is either (A) owned by the Company
or its subsidiaries, (B) currently in the public domain or otherwise
available to the Company without the need of a license, lease or
consent of any third party, or (C) used under rights granted to the
Company or its subsidiaries pursuant to a written agreement, license
or lease from a third party.
(o) Insurance Matters. The Company and its subsidiaries have all
material primary, excess and umbrella policies of general liability, fire,
workers' compensation, products liability, completed operations, employers,
liability, health, bonds, earthquake and other forms of insurance providing
insurance coverage that is customary in amount and scope for other companies
in the industry in which they operate, are in full force and effect on the
date hereof and shall be kept in full force and effect by the Company through
the Effective Time. All such policies, considered collectively with other such
policies providing the same type of coverage, are sufficient for compliance in
all material respects with all requirements of law and of all requirements
under contracts or leases to which the Company is a party. With respect to all
such policies that are individually or in the aggregate material to the
Company or its subsidiaries, all premiums currently payable or previously due
and payable with respect to all periods up to and including the Effective Time
have been paid to the extent such premiums are due and payable on or prior to
the date hereof and, with respect to premiums not due or payable at or prior
to the date hereof, subject to Section 4.1 of this Agreement, all premiums due
and payable prior to the Effective Time, will have been paid prior to the
Effective Time and no notice of cancellation or termination has been received
with respect to any such policy.
(p) Information Supplied. None of the information supplied or to be
supplied by the Company in writing specifically for inclusion or incorporation
by reference in (i) the Form S-4 will, at the time the Form S-4 becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or (ii) the Proxy
Statement will, at the date it is first mailed to the Company's stockholders
or at the time of the Company Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent specifically for inclusion or incorporation by reference in the Proxy
Statement. The Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder.
(q) Transactions with Affiliates. Except as set forth in Section
3.1(q) of the Company Disclosure Schedule there are no outstanding amounts
payable to or receivable from, or advances by the Company or any of its
subsidiaries to, and neither the Company nor any of its subsidiaries is
otherwise a creditor or debtor to, any stockholder, director, Employee or
affiliate of the Company or any of its subsidiaries, other than as part of the
normal and customary terms of such persons' employment or service as a
director with the Company or any of its subsidiaries. Except as set forth in
Section 3.1(q) or Section 3.1(k) of the Company Disclosure Schedule neither
the Company nor any subsidiary of the Company is a party to any transaction or
agreement with any affiliate, stockholder, director or executive officer of
the Company or any of its subsidiaries or any material transaction or
agreement with any Employee other than executive officers.
(r) Voting Requirements. The affirmative vote at the Company
Stockholders Meeting (the "Company Stockholder Approval") of a majority of the
number of outstanding shares of Company Common Stock to approve and adopt this
Agreement is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve and adopt this Agreement and the
transactions contemplated hereby, including the Merger.
(s) Opinions of Financial Advisor. The Company has received the
opinion of Goldman Sachs, dated the date hereof, to the effect that, as of
such date, the aggregate Merger Consideration is fair from a financial point
of view to the stockholders of the Company.
(t) Brokers. Except for Goldman Sachs, whose fees in connection with
the transactions contemplated hereby shall not exceed the amount set forth on
Section 3.1(t) of the Company Disclosure Schedule, no broker, investment
banker, financial advisor or other person is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. The Company has delivered to Parent
complete and correct copies of such arrangements which are set forth as part
of the Company Disclosure Schedule.
(u) Takeover Laws. The approval of this Agreement, the
Securityholders Agreement and the Merger by the Board of Directors of the
Company constitutes approval of this Agreement, the Securityholders Agreement
and the Merger and the transactions contemplated hereby for purposes of
Section 203 of the DGCL. Except for Section 203 of the DGCL (which has been
rendered inapplicable), no "moratorium", "control share", "fair price" or
other antitakeover laws and regulations of any state are applicable to the
Merger or other transactions contemplated by this Agreement.
(v) Derivative Transactions.
(i) Except as would not reasonably be expected to have a
material adverse effect on the Company, all Derivative Transactions
(as defined herein) entered into by the Company or any of its
subsidiaries were entered into in accordance with applicable rules,
regulations and policies of any regulatory authority, and in
accordance with the investment, securities, commodities, risk
management and other policies, practices and procedures employed by
the Company and its subsidiaries, and were entered into with counter
parties believed at the time to be financially responsible and able
to understand (either alone or in consultation with their advisers)
and to bear the risks of such Derivative Transactions; and the
Company and each of its subsidiaries have duly performed all of their
obligations under the Derivative Transactions to the extent that such
obligations to perform have accrued, and, to the Company's knowledge,
there are no material breaches, violations or defaults or allegations
or assertions of such by any party thereunder.
(ii) For purposes of this Section 3.1(v), "Derivative
Transactions" means any swap transaction, option, warrant, forward
purchase or sale transaction, futures transaction, cap transaction,
floor transaction or collar transaction relating to one or more
currencies, commodities, bonds, equity securities, loans, interest
rates, credit-related events or conditions or any indexes, or any
other similar transaction or combination of any of these
transactions, including collateralized mortgage obligations or other
similar instruments or any debt or equity instruments evidencing or
embedding any such types of transactions, and any related credit
support, collateral or other similar arrangements related to such
transactions; provided that, for the avoidance of doubt, the term
"Derivative Transactions" shall not include any of Company Stock
Options or the LTWs.
(w) Investment Securities and Commodities.
(i) Except as would not reasonably be expected to have a
material adverse effect on the Company, each of the Company and its
subsidiaries has good title to all securities and commodities owned
by it (except those sold under repurchase agreements or held in any
fiduciary or agency capacity), free and clear of any Lien, except to
the extent such securities or commodities are pledged in the ordinary
course of business to secure obligations of the Company or its
subsidiaries. Such securities and commodities are valued on the books
of the Company in accordance with GAAP in all material respects.
(ii) The Company and its subsidiaries and their respective
businesses employ investment, securities, commodities, risk
management and other policies, practices and procedures (the
"Policies, Practices and Procedures") which the Company believes are
prudent and reasonable in the context of such businesses. Prior to
the date hereof, the Company has made available to Parent in writing
the material Policies, Practices and Procedures.
(x) Loan Portfolio.
(i) Section 3.1(x)(i) of the Company Disclosure Schedule
sets forth (A) the aggregate outstanding principal amount, as of the
date hereof, of all written or oral loan agreements, notes or
borrowing arrangements (including, without limitation, leases, credit
enhancements, commitments, guarantees and interest-bearing assets)
payable to the Company or its subsidiaries (collectively, "Loans"),
other than "non-accrual" Loans, and (B) the aggregate outstanding
principal amount, as of April 30, 2002, of all "non-accrual" Loans.
As of April 30, 2002, the Company and its subsidiaries, taken as a
whole, did not have outstanding Loans and assets classified as "Other
Real Estate Owned" with an aggregate then outstanding, fully
committed principal amount in excess of $320,000,000, net of specific
reserves with respect to such Loans and assets, that were designated
by the Company as "Special Mention", "Substandard", "Doubtful",
"Loss", or words of similar import ("Criticized Assets"). Section
3.1(x) of the Company Disclosure Schedule sets forth (A) a summary of
Criticized Assets as of April 30, 2002, by category of Loan (e.g.,
commercial, consumer, etc.), together with the aggregate principal
amount of such Loans by category and (B) each asset of the Company
that, as of April 30, 2002, is classified as "Other Real Estate
Owned" and the book value thereof.
(ii) Except as would not have a material adverse effect on
the Company, each Loan (i) is evidenced by notes, agreements or other
evidences of indebtedness which are true, genuine and what they
purport to be, (ii) to the extent secured, has been secured by valid
liens and security interests which have been perfected and (iii) is
the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to
general equity principles. Except as would not have a material
adverse effect on the Company, all Loans originated by the Company or
its subsidiaries, and all such Loans purchased by the Company or its
subsidiaries, were made or purchased in accordance with customary
lending and leading standards of the Company or its subsidiaries, as
applicable. Except as set forth in Section 3.1(x) of the Company
Disclosure Schedule, all such Loans (and any related guarantees) and
payments due thereunder are, and on the Closing Date will be, free
and clear of any Lien, and the Company or its subsidiaries has
complied in all material respects, and on the Closing Date will have
complied in all material respects, with all laws and regulations
relating to such Loans.
(y) Real Property.
(i) Each of the Company and its subsidiaries has good title
free and clear of all Liens to all real property (the "Owned
Properties") owned by such entities, except for (i) Liens for taxes
not yet due and payable or contested in good faith by appropriate
proceedings, (ii) such imperfections of title, easements and
encumbrances, if any, as do not interfere in any material respect
with the use of the property as such property is used on the date of
this Agreement or (iii) mechanics' materialmen's, workmen's,
repairmen's, warehousemen's, carrier's and other similar Liens
arising in the ordinary course of business.
(ii) A true and complete copy of each agreement pursuant to
which the Company or any of its subsidiaries leases any real property
(such agreements, together with any amendments, modifications and
other supplements thereto, collectively, the "Leases") has heretofore
been made available to Parent. Each Lease is valid, binding and
enforceable against the Company or its applicable subsidiary in
accordance with its terms and is in full force and effect. There are
no existing defaults by the Company or any of its subsidiaries, as
applicable, under any of the Leases which, in the aggregate, would
result in the termination of such Leases and a material adverse
effect on the Company. The consummation of the transactions
contemplated by this Agreement will not cause defaults under the
Leases which, in the aggregate, would result in a material adverse
effect on the Company.
(iii) The Owned Properties and the properties (the "Leased
Properties") leased pursuant to the Leases constitute all of the real
estate within which the Company and its subsidiaries conduct their
respective business operations as of the date of this Agreement,
except for locations the loss of which would not constitute a
material adverse effect on the Company. The Owned Properties and the
Leased Properties are in compliance with all laws in all material
respects, except for any lack of compliance which would not result in
a material adverse effect on the Company. Neither any agreement
relating to the Owned Properties nor any of the Leases requires
consent of any third party for the consummation of the transactions
contemplated hereby except for (i) such consents which will be
obtained prior to Closing, and (ii) such consents which, if not
obtained, will not, in the aggregate, result in a material adverse
effect on the Company.
(iv) A true and complete copy of each agreement pursuant to
which the Company or any of its subsidiaries leases real property to
a third party (such agreements, together with any amendments,
modifications and other supplements thereto, collectively, the "Third
Party Leases") has heretofore been made available to Parent. Each
Third Party Lease is valid, binding and enforceable in accordance
with its terms and is in full force and effect, except that (i) such
enforceability may be subject to applicable bankruptcy, insolvency or
other similar laws now or hereafter in effect affecting creditors'
rights generally and (ii) the availability of the remedy of specific
performance or injunction or other forms of equitable relief may be
subject to equitable defenses and would be subject to the discretion
of the court before which any proceeding therefor may be brought.
There are no existing defaults by the tenant under any Third Party
Lease which, in the aggregate, would result in the termination of
such Third Party Leases and a material adverse effect on the Company.
The consummation of the transactions contemplated by this Agreement
will not cause defaults under the Third Party Leases which, in the
aggregate, would result in a material adverse effect on the Company.
SECTION 3.2 Representations and Warranties of Parent. Except as set
forth on the Disclosure Schedule delivered by Parent to the Company prior to
the execution of this Agreement (the "Parent Disclosure Schedule") and making
reference to the particular subsection of this Agreement to which exception is
being taken, Parent represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power.
(i) Each of Parent, its subsidiaries (as defined in Rule
1-02 of Regulation S-X, promulgated pursuant to the Securities Act by
the SEC ("significant subsidiaries")) and Merger Sub is a corporation
or other legal entity duly organized, validly existing and in good
standing (with respect to jurisdictions which recognize such concept)
under the laws of the jurisdiction in which it is organized and has
the requisite corporate or other power, as the case may be, and
authority to carry on its business as now being conducted except, as
to subsidiaries, for those jurisdictions where the failure to be duly
organized, validly existing and in good standing, individually or in
the aggregate, would not have a material adverse effect on Parent.
Each of Parent and its subsidiaries is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the
nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, except
for those jurisdictions where the failure to be so qualified or
licensed or to be in good standing, individually or in the aggregate,
would not have a material adverse effect on Parent.
(ii) Merger Sub is a newly formed corporation with no
material assets or liabilities, except for liabilities arising under
this Agreement. Merger Sub will not conduct any business or
activities other than the issuance of its stock to Parent prior to
the Merger.
(b) Capital Structure. The authorized capital stock of Parent
consists of 15,000,000,000 shares of Parent Common Stock and 30,000,000 shares
of preferred stock, par value $1.00 per share, of Parent ("Parent Authorized
Preferred Stock"), of which, as of the date hereof, 1,600,000 shares have been
designated as 6.365% Cumulative Preferred Stock, Series F ("Parent Series F
Preferred Stock"), 800,000 shares have been designated as 6.213% Cumulative
Preferred Stock, Series G ("Parent Series G Preferred Stock"), 800,000 shares
have been designated as 6.231% Cumulative Preferred Stock, Series H ("Parent
Series H Preferred Stock"), 800,000 shares have been designated as 5.864%
Cumulative Preferred Stock, Series M ("Parent Series M Preferred Stock"),
700,000 shares have been designated as Adjustable Rate Cumulative Preferred
Stock, Series Q ("Parent Series Q Preferred Stock"), 400,000 shares have been
designated as Adjustable Rate Cumulative Preferred Stock, Series R ("Parent
Series R Preferred Stock"), 250,000 shares have been designated as
Fixed/Adjustable Rate Cumulative Preferred Stock, Series V ("Parent Series V
Preferred Stock"), 5,000 shares have been designated as Cumulative Adjustable
Rate Preferred Stock, Series Y ("Parent Series Y Preferred Stock"), 987 shares
have been designated as 5.321% Cumulative Preferred Stock, Series YY ("Parent
Series YY Preferred Stock") and 2,597 shares have been designated 6.767%
Cumulative Preferred Stock, Series YYY ("Parent Series YYY Preferred Stock").
At the close of business on May 6, 2002: (i) 5,477,416,254 shares of Parent
Common Stock were issued and outstanding; (ii) 331,997,699 shares of Parent
Common Stock were held by Parent in its treasury; (iii) no shares of Parent
Common Stock were held by subsidiaries of Parent; (iv) 1,600,000 shares of
Parent Series F Preferred Stock were issued and outstanding; (v) 800,000
shares of Parent Series G Preferred Stock were issued and outstanding; (vi)
800,000 shares of Parent Series H Preferred Stock were issued and outstanding;
(vii) 800,000 shares of Parent Series M Preferred Stock were issued and
outstanding; (viii) 700,000 shares of Parent Series Q Preferred Stock were
issued and outstanding; (ix) 400,000 shares of Parent Series R Preferred Stock
were issued and outstanding ; (x) 250,000 shares of Parent Series V Preferred
Stock were issued and outstanding; (xi) 2,262 shares of Parent Series Y
Preferred Stock were issued and outstanding; (xii) 987 shares of Parent Series
YY Preferred Stock were issued and outstanding; (xiii) 2,597 shares of Parent
Series YYY Preferred Stock were issued and outstanding; (xiv) approximately
976.4 million shares of Parent Common Stock were reserved for issuance
pursuant to the stock-based plans identified in Section 3.2(b) of the Parent
Disclosure Schedule (such plans, collectively, the "Parent Stock Plans"), of
which approximately 429 million shares are subject to outstanding employee
stock options or other rights to purchase or receive Parent Common Stock
granted under the Parent Stock Plans (collectively, "Parent Employee Stock
Options"); (xv) 1,116,769 shares of Parent Common Stock are reserved for
issuance pursuant to convertible securities; and (xvi) other than as set forth
above, no other shares of Parent Authorized Preferred Stock have been
designated or issued. All outstanding shares of capital stock of Parent are,
and all shares thereof which may be issued pursuant to this Agreement or
otherwise will be, when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. Except as set forth in
this Section 3.2(b) and except for changes since May 6, 2002 resulting from
the issuance of shares of Parent Common Stock pursuant to the Parent Stock
Plans, Parent Employee Stock Options or Parent Convertible Securities and
other rights referred to in this Section 3.2(b), as of the date hereof, (x)
there are not issued, reserved for issuance or outstanding (A) any shares of
capital stock or other voting securities of Parent, (B) any securities of
Parent or any Parent subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or voting securities of Parent, (C)
any warrants, calls, options or other rights to acquire from Parent or any
Parent subsidiary, and any obligation of Parent or any Parent subsidiary to
issue, any capital stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of Parent
or other ownership interests of Parent, and (y) there are no outstanding
obligations of Parent or any Parent subsidiary to repurchase, redeem or
otherwise acquire any such securities or to issue, deliver or sell, or cause
to be issued, delivered or sold, any such securities. As of the date hereof,
there are no outstanding (A) securities of Parent or any Parent subsidiary
convertible into or exchangeable or exercisable for shares of capital stock or
other voting securities or other ownership interests in any Parent subsidiary,
(B) warrants, calls, options or other rights to acquire from Parent or any
Parent subsidiary, and any obligation of Parent or any Parent subsidiary to
issue, any capital stock, voting securities or other ownership interests in,
or any securities convertible into or exchangeable or exercisable for any
capital stock, voting securities or ownership interests in, any Parent
subsidiary or (C) obligations of Parent or any Parent subsidiary to
repurchase, redeem or otherwise acquire any such outstanding securities of
Parent subsidiaries or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. Parent does not own any shares of
Company Common Stock.
(c) Authority; Noncontravention. Each of Parent and Merger Sub has
all requisite corporate power and authority to enter into this Agreement, and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate and shareholder action on the part of
Parent and Merger Sub, respectively. This Agreement has been duly executed and
delivered by each of Parent and Merger Sub, and, assuming the due
authorization, execution and delivery by the Company, constitutes the legal,
valid and binding obligations of Parent and Merger Sub, respectively,
enforceable against Parent and Merger Sub, respectively, in accordance with
their terms except that (i) such enforceability may be subject to applicable
bankruptcy, insolvency or other similar laws now or hereafter in effect
affecting creditors' rights generally and (ii) the availability of the remedy
of specific performance or injunction or other forms of equitable relief may
be subject to equitable defenses and would be subject to the discretion of the
courts for which any proceeding therefor may be brought. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the provisions of this Agreement will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
benefit under, or result in the creation of any Lien upon any of the
properties or assets of Parent or any of its subsidiaries under, (i) the
certificate of incorporation or by-laws of Parent, (ii) the certificate of
incorporation or by-laws of the comparable organizational documents of any of
its significant subsidiaries or Merger Sub, (iii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license or similar authorization
applicable to Parent or any of its subsidiaries or their respective properties
or assets or (iv) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or any of its
subsidiaries or their respective properties or assets, other than, in the case
of clauses (ii), (iii) and (iv), any such conflicts, violations, defaults,
rights, losses or Liens that individually or in the aggregate would not (x)
have a material adverse effect on Parent or (y) reasonably be expected to
materially impair or materially delay the ability of Parent or Merger Sub to
perform its obligations under this Agreement. No consent, approval, order or
authorization of, action by, or in respect of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to Parent
or any of its subsidiaries in connection with the execution and delivery of
this Agreement by Parent and Merger Sub or the consummation by Parent and
Merger Sub of the transactions contemplated by this Agreement, except for (1)
the filing of a pre-merger notification and report form by Parent under the
HSR Act, and filing of a copy of the application to the Federal Reserve Board
pursuant to Section 7A(c)(8) of the HSR Act; (2) the filing with the SEC of
(A) the Form S-4 and the Proxy Statement and (B) such reports under the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated hereby; (3) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and such filings with
Governmental Entities to satisfy the applicable requirements of the laws of
states in which Parent and its subsidiaries are qualified or licensed to do
business or state securities or "blue sky" laws; (4) such filings with and
approvals of the NYSE and the Pacific Stock Exchange (the "PSX") to permit the
shares of Parent Common Stock to be issued in the Merger and under the Company
Stock Plan to be listed on the NYSE and PSX; (5) the approval of the Federal
Reserve under Section 4(j) of the Bank Holding Company Act; and (6) filings in
respect of, and approvals and authorizations of, any Governmental Entity
having jurisdiction over the consumer lending, banking, insurance or other
financial services businesses.
(d) Parent Documents. Since January 1, 1999, Parent has filed all
required reports, schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) with the SEC (the
"Parent SEC Documents"). As of their respective filing dates, (i) the Parent
SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Parent SEC
Documents, and (ii) none of the Parent SEC Documents when filed (or when
amended and restated and as supplemented by subsequently filed Parent SEC
Document) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of Parent included in the
Parent SEC Documents complied as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position of
Parent and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments and to other adjustments described in the notes to such unaudited
statements). Except (A) as reflected in Parent's unaudited balance sheet as of
March 31, 2002 or liabilities described in any notes thereto (or liabilities
for which neither accrual nor footnote disclosure is required pursuant to
GAAP) or (B) for liabilities incurred in the ordinary course of business since
March 31, 2002 consistent with past practice or in connection with this
Agreement or the transactions contemplated hereby, neither Parent nor any of
its subsidiaries has any liabilities or obligations of any nature other than
liabilities or obligations that would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on Parent.
(e) Information Supplied. None of the information supplied or to be
supplied by Parent specifically for inclusion or incorporation by reference in
(i) the Form S-4 will, at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) the Proxy Statement will, at the
date it is first mailed to the Company's stockholders or at the time of the
Company Stockholders Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading, in either case, no representation or
warranty is made by Parent with respect to statements made or incorporated by
reference therein based on information supplied by the Company specifically
for inclusion or incorporation by reference in the Form S-4. The Form S-4 will
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations thereunder.
(f) Brokers. No broker, investment broker, financial advisor or other
person is entitled to a broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent.
(g) Tax Matters. Neither Parent nor any of its affiliates or
subsidiaries has taken or agreed to take any action, has failed to take any
action or knows of any fact, agreement, plan or other circumstance that could
prevent the Merger from qualifying as a "reorganization" within the meaning of
Section 368(a) of the Code.
(h) Compliance with Laws.
(i) Except as set forth in the Parent SEC Document filed and
publicly available prior to the date hereof, and except as would not
have a material adverse effect on Parent, each of Parent and its
subsidiaries is, and for the last five years has been, in compliance
in all material respects with all applicable statutes, laws,
regulations, ordinances, permits, rules, judgments, orders, decrees
or arbitration awards of any Governmental Entity applicable to Parent
or its subsidiaries.
(ii) Except as would not reasonably be expected to have a
material adverse effect on Parent, neither Parent nor any of its
subsidiaries is subject to any outstanding order, injunction or
decree or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or, except as would not have a
material adverse effect on Parent, is subject to any order or
directive by, or is a recipient of any supervisory letter from or has
adopted any resolutions at the request of any Governmental Entity
that restricts in any respect the conduct of its business or, except
as would not have a material adverse effect on Parent, that in any
manner currently relates to its capital adequacy, its policies, its
management or its business currently (each, a "Parent Regulatory
Agreement"), nor has Parent or any of its subsidiaries or affiliates
(A) to its knowledge, been advised since January 1, 2001 by any
Governmental Entity that it is considering issuing or requesting any
Parent Regulatory Agreement that is reasonably be expected to have a
material adverse effect on Parent or (B) have knowledge of any
pending or threatened regulatory investigation that would result in a
material adverse effect on Parent.
(i) Litigation. Except as described in the Parent SEC Document filed
and publicly available prior to the date hereof, as of the date hereof there
are no pending or, to Parent's knowledge, threatened litigations, actions,
suits, proceedings, investigations or arbitrations with respect to Parent or
any of its subsidiaries or any of their respective properties that would
result in a material adverse effect on Parent.
(j) Absence of Certain Changes. Except for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby, and
except as disclosed in the Parent SEC Documents filed and publicly available
prior to the date hereof, since December 31, 2001, (A) there has not been any
material adverse change in Parent or (B) there are not, to Parent's knowledge,
any facts, circumstances or events that make it reasonably likely that Parent
will not be able to fulfill its obligations under this Agreement in all
material respects.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business by the Company. Except as set forth
in Section 4.1 of the Company Disclosure Schedule, except as otherwise
expressly contemplated by this Agreement or except as consented to by Parent
in writing or required by applicable law or regulation, during the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement and the Effective Time, the Company shall, and shall cause
its subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course consistent with past practice and in compliance in
all material respects with all applicable laws and regulations, pay their
respective material debts and material Taxes when due, pay or perform their
other respective material obligations when due, and, use all commercially
reasonable efforts consistent with the other terms of this Agreement to
preserve intact their current business organizations, use all commercially
reasonable efforts consistent with the other terms of this Agreement to keep
available the services of their current officers and employees and preserve
their relationships with those persons having business dealings with them, all
with the goal of preserving unimpaired their goodwill and ongoing businesses
at the Effective Time. Without limiting the generality of the foregoing,
senior officers of Parent and the Company shall meet on a reasonably regular
basis to review the financial and operational affairs of the Company and its
subsidiaries, in accordance with applicable law, and the Company shall give
due consideration to Parent's input on such matters, consistent with Section
4.5 hereof, with the understanding that Parent shall in no event be permitted
to exercise control of the Company prior to the Effective Time. Except as
expressly contemplated by this Agreement, except as disclosed in Section 4.1
of the Company Disclosure Schedule, or except as consented to by Parent in
writing or required by applicable law or regulation, after the date hereof the
Company shall not, and shall not permit any of its subsidiaries to:
(i) other than dividends and distributions by a direct or
indirect wholly owned subsidiary of the Company to its parent, (x)
declare, set aside or pay any dividends on, make any other
distributions in respect of, or enter into any agreement with respect
to the voting of, any of its capital stock (except for regular
quarterly cash dividends not to exceed $0.10 on the Company Common
Stock and regular cash dividends on the REIT Preferred Stock of
Preferred Capital Corp. and pursuant to the terms of the LTWs and the
CALGZs and the CALGLs), (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of, or in substitution for, shares
of its capital stock, except upon the exercise of Company Stock
Options that are outstanding as of the date hereof in accordance with
their present terms, or pursuant to the terms of the LTWs or pursuant
to Section 1.6 of the 1998 Merger Agreement, or (z) purchase, redeem
or otherwise acquire any shares of capital stock of the Company or
any of its subsidiaries, other securities thereof or any rights,
warrants or options to acquire any such shares or other securities
(other than the issuance of Company Common Stock upon the exercise of
Company Stock Options that are outstanding as of the date hereof in
accordance with their present terms, pursuant to the terms of the
LTWs or pursuant to Section 1.6 of the 1998 Merger Agreement);
(ii) issue, deliver, sell, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other voting
securities, including, without limitation, any restricted shares of
Company Common Stock, or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting
securities or convertible securities, including, without limitation,
any Company Stock Options (other than the issuance of Company Common
Stock upon the exercise of Company Stock Options that are outstanding
as of the date hereof in accordance with their present terms, or (x)
pursuant to the terms of the LTWs or pursuant to Section 1.6(a) or
(b) of the 1998 Merger Agreement, or (y) to the extent contemplated
by Section 6(c)(iii)(A) of the Securityholders Agreement, pursuant to
Section 1.6(c) of the 1998 Merger Agreement);
(iii) amend its certificate of incorporation, by-laws or
other comparable organizational documents;
(iv) (A) acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or any equity
securities of, or by any other manner, any business or any person, or
otherwise acquire or agree to acquire any assets for consideration in
excess of $1,000,000 in any one transaction or series of related
transactions or $5,000,000 in the aggregate, except for investment
securities and mortgage and automobile loans purchased in the
ordinary course of business and except for foreclosures, settlements
in lieu of foreclosure or troubled loan or debt restructurings in the
ordinary course of business consistent with past practice or (B)
open, close, sell or acquire any branches;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets other than securitizations and other transactions in the
ordinary course of business and consistent with past practices or
create any security interest in such assets or properties;
(vi) except for borrowings under existing credit facilities
or lines of credit or refinancing of indebtedness outstanding on the
date hereof not to exceed $100,000,000 and except for the incurring
of deposit liabilities in the ordinary course of business, incur any
indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise become responsible for the
obligations of any person, or, other than in the ordinary course of
business, make any loans, advances or capital contributions to, or
investments in, any person other than its wholly owned subsidiaries
and as a result of ordinary advances and reimbursements to employees
and endorsements of banking instruments;
(vii) change in any material respect its accounting methods
(or underlying assumptions), principles or practices affecting its
assets, liabilities or business, including without limitation, any
reserving, renewal or residual method, practice or policy, in each
case, in effect on the date hereof, except as required by changes in
GAAP or regulatory accounting principles, or change in any material
respect any of its methods of reporting income and deductions for
Federal income tax purposes from those employed in the preparation of
the Federal income tax returns of the Company for the taxable year
ending December 31, 2000, except as required by changes in law or
regulation;
(viii) change in any material respects its investment or
risk management or other similar policies of the Company or any of
its subsidiaries;
(ix) make or change any material Tax election, file any
material amended Tax Return, enter into any material closing
agreement, settle or compromise any material liability with respect
to Taxes, agree to any material adjustment of any Tax attribute, file
any claim for a material refund of Taxes, or consent to any extension
or waiver of the limitation period applicable to any material Tax
claim or assessment, provided, that for purposes of this subparagraph
(ix), "material" shall mean affecting or relating to $5 million of
taxable income;
(x) create, renew or amend, or take any other action that
may result in the creation, renewal, or amendment, of any agreement
or contract or other binding obligation of the Company or its
subsidiaries containing (A) any non-de-minimis restriction on the
ability of the Company and its subsidiaries, taken as a whole, to
conduct its business as it is presently being conducted or (B) any
non-de-minimis restriction on the Company or its subsidiaries
engaging in any type or activity or business;
(xi) (A) incur any capital expenditures in an annual
aggregate amount in excess of $7,500,000 or (B) enter into any
agreement obligating the Company to spend more than $1,000,000
annually, or $5,000,000 in the aggregate, or undertake any material
commitment or material transaction of the type described in Section
3.1(f) of this Agreement, other than in the ordinary course of
business consistent with past practice;
(xii) amend or otherwise modify, except in the ordinary
course of business, or knowingly violate in any material respect the
terms of, any of the Company Material Contracts or other binding
material obligations of the Company or its subsidiaries;
(xiii) except as required by agreements or instruments in
effect on the date hereof, alter in any material respect, or enter
into any commitment to alter in any material respect, its interest in
any material corporation, association, joint venture, partnership or
business entity in which the Company directly or indirectly holds any
equity or ownership interest on the date hereof (other than any
interest arising from any foreclosure, settlement in lieu of
foreclosure or troubled loan or debt restructuring in the ordinary
course of business consistent with past practice);
(xiv) (A) grant to any current or former director, executive
officer or other Employee of the Company or its subsidiaries any
increase in compensation, bonus or other benefits, except for salary,
wage, bonus or benefit increases to current Employees who are not
executive officers and which are in the ordinary course of business,
consistent with past practice, (B) grant to any such current or
former director, executive officer or other Employee of the Company
any increase in severance or termination pay, (C) enter into, or
amend, or take any action to clarify any provision of, any Plan or
any employment, deferred compensation, consulting, severance,
termination or indemnification agreement with any such current or
former director, executive officer or other Employee except as
required by applicable law or (D) modify any Company Stock Option;
(xv) except pursuant to agreements or arrangements in effect
on the date hereof and disclosed in writing and provided or made
available to Parent and except for compensation for service as an
officer, employee or director consistent with past practice, pay,
loan or advance any amount to, or sell, transfer or lease any
properties or assets (real, personal or mixed, tangible or
intangible) to, or enter into any agreement or arrangement with, any
of its officers or directors or any affiliate or the immediate family
members or associates of any of its officers or directors other than
compensation in the ordinary course of business consistent with past
practice;
(xvi) agree or consent to any material agreement or material
modifications of existing agreements with any Governmental Entity in
respect of the operations of its business, except (i) as required by
law or (ii) to effect the consummation of the transactions
contemplated hereby;
(xvii) pay, discharge, settle, compromise or satisfy any
material claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), including taking
any action to settle or compromise any litigation, other than any
such payment, discharge, settlement, compromise or satisfaction in
the ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company included
in the Company Filed SEC Documents, or incurred since March 31, 2002
in the ordinary course of business consistent with past practice;
(xviii) authorize, or commit or agree to take, any of the
foregoing actions or any other action that would be reasonably likely
to prevent the Company from performing or would be reasonably likely
to cause the Company not to perform its covenants hereunder in all
material respects;
(xix) issue any broadly distributed communication of a
general nature to Employees (including general communications
relating to benefits and compensation) or customers without the prior
written approval of Parent (which will not be unreasonably delayed or
withheld), except for communications in the ordinary course of
business that do not relate to the Merger or other transactions
contemplated hereby;
(xx) create, renew, amend or permit to expire, lapse or
terminate or knowingly take any action reasonably likely to result in
the creation, renewal, amendment, expiration, lapse or termination of
any insurance policies referred to in Section 3.1(o), except that the
Company shall be permitted to take any such action without Parent's
consent in the event that Parent shall fail to reasonably consent to
such action; or
(xxi) knowingly take any action or knowingly fail to take
any action which would result in any of the conditions of Article VI
not being satisfied.
SECTION 4.2 Advice of Changes. Except to the extent prohibited by
applicable law or regulation, the Company, Parent and Merger Sub shall
promptly advise the other party orally and in writing to the extent it has
knowledge of (i) any representation or warranty made by it contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect, (ii) the failure by it
to comply in any material respect with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement and (iii) any change or event having, or which, insofar as can
reasonably be foreseen, could have a material adverse effect on such party or
on the truth of their respective representations and warranties or the ability
of the conditions set forth in Article VI to be satisfied; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or
the conditions to the obligations of the parties under this Agreement;
provided further that a failure to comply with this Section 4.2 shall not
constitute a failure to be satisfied of any condition set forth in Article VI
unless the underlying untruth, inaccuracy, failure to comply or satisfy, or
change or event would independently result in a failure to be satisfied of a
condition set forth in Article VI.
SECTION 4.3 No Solicitation by the Company. (a) Except as otherwise
provided in this Section 4.3, until the earlier of the Effective Time and the
date of termination of this Agreement, neither the Company, nor any of its
subsidiaries or any of the officers, directors, agents, representatives or
affiliates of it or its subsidiaries (including any investment banker,
attorney or accountant retained by it or any of its subsidiaries) shall (i)
solicit, initiate or encourage (including by way of furnishing information),
or take any other action designed to facilitate, any inquiries or the making
of any proposal which constitutes a Company Takeover Proposal (as defined
below), (ii) participate in any discussions or negotiations regarding any
Company Takeover Proposal, (iii) enter into any agreement regarding any
Company Takeover Proposal or (iv) make or authorize any statement,
recommendation or solicitation in support of any Company Takeover Proposal. If
and only to the extent that (i) the Company Stockholders Meeting shall not
have occurred, (ii) the Board of Directors of the Company determines in good
faith, after consultation with outside counsel, that it is necessary to do so
in order to comply with its fiduciary duties to the Company's stockholders
under applicable law, (iii) the Company's Board of Directors concludes in good
faith that such Company Takeover Proposal constitutes a Company Superior
Proposal (as defined below), (iv) such Company Takeover Proposal was not
solicited by it and did not otherwise result from a breach of this Section
4.3(a), and (v) the Company provides prior written notice to Parent of its
decision to take such action, the Company shall be permitted to (A) furnish
information with respect to the Company and any of its subsidiaries to such
person pursuant to a customary confidentiality agreement, (B) participate in
discussions and negotiations with such person, (C) subject to first complying
with the provisions of Section 5.8(b) hereof, enter into a Company Acquisition
Agreement and (D) effect a Change in the Company Recommendation (as defined
below); provided, that at least five business days prior to taking any actions
set forth in clause (C) or (D) above, the Company's Board of Directors
provides Parent written notice advising Parent that the Company's Board of
Directors is prepared to conclude that such Company Takeover Proposal
constitutes a Company Superior Proposal and during such five business day
period the Company and its advisors shall have negotiated in good faith with
Parent to make adjustments in the terms and conditions of this Agreement such
that such Company Takeover Proposal would no longer constitute a Company
Superior Proposal and the Company's Board of Directors fully considers any
such adjustment and nonetheless concludes in good faith that such Company
Takeover Proposal constitutes a Company Superior Proposal. The Company, its
subsidiaries and their representatives immediately shall cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties with respect to any Company Takeover Proposal.
For purposes of this Agreement, "Company Takeover Proposal"
means any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of a business that constitutes 20% or more of
the net revenues, net income or assets of the Company and its subsidiaries,
taken as a whole, or 20% or more of any class of equity securities of the
Company, any tender offer or exchange offer that if consummated would result
in any person beneficially owning 20% or more of any class of any equity
securities of the Company, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
the Company (or any subsidiary of the Company whose business constitutes 20%
or more of the net revenues, net income or assets of the Company and its
subsidiaries, taken as a whole), other than the transactions contemplated by
this Agreement. For purposes of this Agreement, a "Company Superior Proposal"
means any proposal made by a third party (A) to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation, sale,
lease, exchange, transfer or other disposition (including a contribution to a
joint venture), dissolution or similar transaction, for consideration
consisting of cash and/or securities, 100% of the combined voting power of the
shares of the Company's capital stock then outstanding or 100% of the net
revenues, net income or assets of the Company and its subsidiaries, taken as a
whole and (B) which is otherwise on terms which the Board of Directors of the
Company determines in its good faith judgment (after consultation with (i)
either Goldman Sachs & Co. or another nationally recognized investment banking
firm and (ii) outside counsel), taking into account, among other things, all
legal, financial, regulatory and other aspects of the proposal and the person
making the proposal, that the proposal, (i) if consummated would result in a
transaction that is more favorable to the Company's stockholders than the
Merger and the other transactions contemplated hereby and (ii) is reasonably
capable of being completed, including to the extent required, financing which
is then committed or which, in the good faith judgment of the Board of
Directors of the Company, is reasonably capable of being obtained by such
third party.
(b) Except as expressly permitted by this Section 4.3, neither the
Board of Directors of the Company nor any committee thereof shall (i)
withdraw, modify or qualify, or propose publicly to withdraw, modify or
qualify, in a manner adverse to Parent, the approval of the Agreement, the
Merger or the Company Recommendation (as defined in Section 5.1(d)) or take
any action or make any statement in connection with the Company Stockholders
Meeting inconsistent with such approval or Company Recommendation
(collectively, a "Change in the Company Recommendation"), (ii) approve or
recommend, or propose publicly to approve or recommend, any Company Takeover
Proposal, or (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement
(each, a "Company Acquisition Agreement") related to any Company Takeover
Proposal. For purposes of this Agreement, a Change in the Company
Recommendation shall include any approval or recommendation (or public
proposal to approve or recommend), by the Company Board of a Company Takeover
Proposal, or any failure by the Company Board to recommend against a Company
Takeover Proposal. Notwithstanding the foregoing, the Board of Directors of
the Company, to the extent that it determines in good faith, after
consultation with outside counsel, that in light of a Company Superior
Proposal it is necessary to do so in order to comply with its fiduciary duties
to the Company's stockholders under applicable law, may terminate this
Agreement solely in order to concurrently enter into a Company Acquisition
Agreement with respect to any Company Superior Proposal, but only at a time
that is after the fifth business day following Parent's receipt of the written
notice specified in Section 4.3(a) and compliance by the Company with the
terms of Sections 4.3(a) and 5.8(b).
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.3, the Company shall immediately
advise Parent orally and in writing of any request for information relating to
a Company Takeover Proposal, or of any Company Takeover Proposal, the material
terms and conditions of such request or Company Takeover Proposal and the
identity of the person making such request or Company Takeover Proposal, and
shall promptly provide a copy of any written request or Company Takeover
Proposal to Parent. The Company will keep Parent promptly informed of the
status and details (including amendments or proposed amendments) of any such
request or Company Takeover Proposal.
(d) Nothing contained in this Section 4.3 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure if,
in the good faith judgment of the Board of Directors of the Company, after
consultation with outside counsel, failure so to disclose would violate its
obligations under applicable law; provided, however, any such disclosure
relating to a Company Takeover Proposal shall be deemed to be a Change in the
Company Recommendation unless the Board of Directors of the Company reaffirms
the Company Recommendation in such disclosure.
SECTION 4.4 Certain Tax Matters. During the period from the date of
this Agreement to the Effective Time, the Company shall, and shall cause each
of its subsidiaries to: (i) timely file (taking into account any extensions of
time within which to file) all Tax Returns ("Post-Signing Returns") required
to be filed by it and such Post-Signing Returns shall be prepared in a manner
reasonably consistent with past practice; (ii) timely pay all Taxes shown as
due and payable on such Post-Signing Returns that are so filed; (iii) accrue a
reserve in its books and records and financial statements in accordance with
past practice for all Taxes payable by it for which no Post-Signing Return is
due prior to the Effective Time; and (iv) promptly notify Parent of any
material suit, claim, action, investigation, proceeding or audit
(collectively, "Actions") pending against or with respect to the Company or
any of its subsidiaries in respect of any Tax matter, including (without
limitation) Tax liabilities and refund claims.
SECTION 4.5 Transition. Commencing following the date hereof, Parent
and the Company shall, and shall cause their respective subsidiaries to, use
their reasonable best efforts to facilitate the integration of the Company and
its subsidiaries, including the Bank, with the businesses of Parent and its
subsidiaries to be effective as of the Closing Date. Without limiting the
generality of the foregoing, from the date hereof through the Closing Date and
consistent with the performance of their day-to-day operations and the
continuous operation of the Company and its subsidiaries in the ordinary
course of business, the Company shall cause the employees and officers of the
Company and its subsidiaries, including the Bank, to use their reasonable best
efforts to provide support, including support from its outside contractors,
and to assist Parent in performing all tasks, including, without limitation,
equipment installation, reasonably required to result in a successful
integration at the Closing.
SECTION 4.6 No Fundamental Changes in the Conduct of Business by
Parent. Except as set forth in Section 4.6 of the Parent Disclosure Schedule,
except as otherwise expressly contemplated by this Agreement or except as
consented to by the Company in writing or required by applicable law or
regulation, during the period from the date of this Agreement to the Effective
Time, Parent shall not, and shall not permit any of it subsidiaries to:
(i) except as contemplated hereby, amend its certificate of
incorporation or by-laws in a manner that would adversely affect the
economic benefits of the Merger to the holders of Company Common
Stock; provided that the authorization or issuance of preferred stock
in a manner that would not require Parent stockholder approval shall
not be deemed to violate this clause (i);
(ii) enter into any agreement to acquire all or
substantially all of the capital stock or assets of any other person
or business unless such transaction would not materially delay or
impede the consummation of the Merger;
(iii) knowingly take any action or knowingly fail to take
any action which would result in any of the conditions of Article VI
not being satisfied;
(iv) authorize, or commit or agree to take, any of the
foregoing actions or any other action that would be reasonably likely
to prevent Parent from performing or would be reasonably likely to
cause Parent not to perform its covenants hereunder in all material
respects; or
(v) directly purchase or otherwise acquire any shares of
Company Common Stock.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4, Proxy Statement;
Stockholders Meeting.
(a) As promptly as practicable following the date of this Agreement,
Parent and the Company shall prepare and file with the SEC the Form S-4, in
which the Proxy Statement will be included as a prospectus. Each of Parent and
the Company shall use all reasonable efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such
filing. The Company shall use reasonable best efforts to cause the Proxy
Statement to be mailed to holders of Company Common Stock as promptly as
practicable after the Form S-4 is declared effective.
(b) If at any time prior to the Effective Time there shall occur (i)
any event with respect to the Company or any of its subsidiaries, or with
respect to other information supplied by Company for inclusion in the Form S-4
or the Proxy Statement or (ii) any event with respect to Parent, or with
respect to information supplied by Parent for inclusion in the Form S-4 or the
Proxy Statement, in either case, which event is required to be described in an
amendment of, or a supplement, to the Form S-4 or the Proxy Statement, such
event shall be so described, and such amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
stockholders of Company.
(c) Each of the Company and Parent shall promptly notify the other of
the receipt of any comments from the SEC or its staff or any other appropriate
government official and of any requests by the SEC or its staff or any other
appropriate government official for amendments or supplements to any of the
filings with the SEC in connection with the Merger and other transactions
contemplated hereby or for additional information and shall supply the other
with copies of all correspondence between the Company or any of its
representatives, or Parent or any of its representatives, as the case may be,
on the one hand, and the SEC or its staff or any other appropriate government
official, on the other hand, with respect thereto. The Company and Parent
shall use their respective reasonable best efforts to respond to any comments
of the SEC with respect to the Form S-4 and the Proxy Statement as promptly as
practicable. The Company and Parent shall cooperate with each other and
provide to each other all information necessary in order to prepare the Form
S-4 and the Proxy Statement, and shall provide promptly to the other party any
information such party may obtain that could necessitate amending any such
document.
(d) The Company shall, as promptly as practicable after the Form S-4
is declared effective under the Securities Act, duly call, give notice of,
convene and hold the Company Stockholders Meeting in accordance with the DGCL
for the purpose of obtaining the Company Stockholder Approval and subject to
Section 4.3, the Board of Directors of the Company shall recommend to the
Company's stockholders the approval and adoption of this Agreement, the Merger
and the other transactions contemplated hereby (the "Company Recommendation").
Without limiting the generality of the foregoing, the Company agrees that its
obligations pursuant to the first sentence of this Section 5.1(d) shall not be
affected by the commencement, public proposal, public disclosure or
communication to the Company of any Company Takeover Proposal. Notwithstanding
any Change in the Company Recommendation, unless otherwise directed in writing
by Parent, this Agreement and the Merger shall be submitted to the
stockholders of the Company at the Company Stockholders Meeting for the
purpose of approving the Agreement and the Merger and nothing contained herein
shall be deemed to relieve the Company of such obligation.
(e) The Company shall coordinate and cooperate with Parent with
respect to the timing of the Company Stockholders Meeting.
SECTION 5.2 Letters of the Company's Accountants. The Company shall
cause to be delivered to Parent two letters from the Company's independent
accountants, one dated a date within two business days before the date on
which the Form S-4 shall become effective and one dated a date within two
business days before the Closing Date, each addressed to Parent, in form and
substance reasonably satisfactory to Parent and customary in scope and
substance for comfort letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
SECTION 5.3 Letters of Parent's Accountants. Parent shall cause to be
delivered to the Company two letters from Parent's independent accountants,
one dated a date within two business days before the date on which the Form
S-4 shall become effective and one dated a date within two business days
before the Closing Date, each addressed to the Company, in form and substance
reasonably satisfactory to the Company and customary in scope and substance
for comfort letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
SECTION 5.4 Access to Information; Confidentiality. Subject to the
Agreement, dated as of April 4, 2002 (executed as of April 8, 2002) between
Parent and the Company (the "Confidentiality Agreement"), and subject to
applicable law, the Company shall, and shall cause its subsidiaries to, afford
Parent and to the officers, employees, accountants, counsel, financial
advisors and other representatives of Parent, reasonable access during normal
business hours during the period prior to the Effective Time to all its
respective properties, books, contracts, commitments, personnel and records
and, during such period, the Company shall, and shall cause each of its
subsidiaries to, furnish promptly to Parent (a) a copy of each material
report, schedule, registration statement and other document filed by it with
any Governmental Entity and (b) all other information concerning its business,
properties and personnel as such other party may reasonably request. In
addition, the Company will deliver, or cause to be delivered, to Parent the
internal or external reports prepared by the Company and/or its subsidiaries
in the ordinary course that are reasonably required by Parent promptly after
such reports are made available to the Company's personnel. No review pursuant
to this Section 5.4 shall affect any representation or warranty given by the
Company to Parent. Parent will hold, and will cause its officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in accordance with the terms of
the Confidentiality Agreement.
SECTION 5.5 Reasonable Best Efforts. (a) Subject to the terms and
conditions set forth in this Agreement, each of the parties hereto shall use
its reasonable best efforts (subject to, and in accordance with, applicable
law) to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Merger and the other
transactions contemplated by this Agreement, including (i) the obtaining of
all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and
filings and the taking of all steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by, any Governmental
Entity, (ii) the obtaining of all necessary consents, approvals or waivers
from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated by this Agreement and (iv)
the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the
purposes of, this Agreement.
(b) In connection with and without limiting the foregoing, the
Company and Parent shall (i) use their reasonable best efforts to ensure that
no state takeover statute or similar statute or regulation is or becomes
applicable to this Agreement or the Merger or any of the other transactions
contemplated hereby, and (ii) if any state takeover statute or similar statute
or regulation becomes applicable to this Agreement or the Merger or any other
transaction contemplated hereby, take all action necessary to ensure that the
Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise to minimize the effect of such statute or regulation on the Merger
and the other transactions contemplated hereby.
(c) In connection with and without limiting the foregoing, the
Company and Parent shall use their reasonable best efforts to effect the
combination (the "Bank Combination") of the Bank with Citibank FSB, or another
banking subsidiary of Parent, including, without limitation, the obtaining of
all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities (including the OTS Approval) and the making of all
necessary registrations and filings and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity (including the OTS Approval).
(d) At the reasonable request of Parent, the Company and its
subsidiaries shall use their reasonable best efforts and cooperate with Parent
in order to permit all of the indebtedness outstanding under the Indenture,
dated as of August 6, 1998, between Mercury State Holdings Inc. and The Bank
of New York, as trustee (including any amendments and supplemental indentures,
the "Indenture"), to be called for redemption and redeemed as promptly as
possible following the Closing. In furtherance thereof, the Company and its
subsidiaries agree to request that The Bank of New York consent to shorten the
notice period required pursuant to Section 3.02 of the Indenture from 60 days
to 30 days or agree to accept a redemption notice that is conditioned upon the
consummation of the Merger.
SECTION 5.6 Company Equity-Based Incentives. (a) As of the Effective
Time, each outstanding Company Stock Option representing a right to receive
Company Common Stock upon exercise of such Company Stock Option shall be
converted into an option (an "Adjusted Option") to purchase the number of
shares of Parent Common Stock (rounded to the nearest whole number of shares
of Parent Common Stock) equal to the number of shares of Company Common Stock
subject to such Company Stock Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, at an exercise price per share (rounded to
the nearest whole cent) equal to the exercise price for each such share of
Company Common Stock subject to such Company Stock Option divided by the
Exchange Ratio, and references in each such option to the Company shall be
deemed to refer to Parent, where appropriate; provided, however, Parent shall
assume the obligations of the Company under the applicable Company Stock Plan
and agreements under which the Adjusted Option was originally granted, subject
to the adjustments required by this Section 5.6(a). The other terms of each
such Adjusted Option, and the plans under which they were issued, shall
continue to apply in accordance with their terms. Notwithstanding anything
contained herein to the contrary, with respect to the Company Stock Options
granted under the LTIP, (i) the rights with respect to LTWs attached to such
Company Stock Options shall continue in full force and effect following the
Effective Time, with such LTWs to be adjusted in accordance with Section 2.6
hereof, (ii) the exercise price of such Company Stock Options relating to such
LTWs shall be adjusted to include the adjusted LTW exercise price in lieu of
the current LTW exercise price and (iii) such Company Stock Options to be
subject to adjustment following the Effective Time in accordance with the
special LTW anti-dilution provision of the LTIP upon the exercise of any such
Company Stock Option on or after the Triggering Event (as defined in the
Warrant Agreement). Notwithstanding the foregoing, in the case of any Company
Stock Option to which Section 421 of the Code applies by reason of its
qualification as an incentive stock option under Section 422 of the Code, the
conversion formula shall be adjusted if necessary to comply with Section
424(a) of the Code.
(b) The Company shall adopt such resolutions and take all such other
actions as may be required to permit the transactions contemplated by this
Section 5.6, including, but not limited to the conversion of shares of Company
Common Stock held or to be awarded or paid pursuant to such benefit plans,
programs or arrangements into shares of Parent Common Stock on a basis
consistent with the transactions contemplated by this Agreement.
(c) Parent shall (i) reserve for issuance the number of shares of
Parent Common Stock that will become subject to the plans referred to in this
Section 5.6 and (ii) issue or cause to be issued the appropriate number of
shares of Parent Common Stock pursuant to applicable plans upon the exercise
or maturation of rights existing thereunder on the Effective Time or
thereafter granted or awarded. As soon as practicable following the Effective
Time, Parent shall prepare and file with the SEC a registration statement on
Form S-8 (or other appropriate form) registering a number of shares of Parent
Common Stock necessary to fulfill Parent's obligations under this Section 5.6.
(d) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of Company Stock Options appropriate notices setting
forth such holders' rights pursuant to awards granted under the Company Stock
Plans.
(e) Prior to the Effective Time, the Company shall take all such
steps as may be required to cause any dispositions of Company Common Stock or
acquisitions of Parent Common Stock (including derivative securities with
respect to Company Common Stock or Parent Common Stock) resulting from the
transactions contemplated by Article I and II or Section 5.6 of this Agreement
by each individual who is subject to the reporting requirements of Section
16(a) of the Exchange Act with respect to the Company or by each individual,
if any, who will be so subject, immediately following the Effective Time, with
respect to Parent, to be exempt under Rule 16b-3 promulgated under the
Exchange Act, such steps to be taken in accordance with the No-Action Letter
dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher &
Flom LLP.
SECTION 5.7 Indemnification, Exculpation and Insurance. (a) All
rights to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time now existing in favor of
the current or former directors or officers of the Company and its
subsidiaries as provided in their respective certificates of incorporation or
by-laws (or comparable organizational documents) and any existing
indemnification agreements or arrangements of the Company and its subsidiaries
shall survive the Merger and shall continue in full force and effect in
accordance with their terms, and shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of such individuals for acts or
omissions occurring at or prior to the Effective Time.
(b) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action suit, proceeding or
investigation in which any individual who is now, or has been at any time
prior to the date of this Agreement, or who becomes prior to the Effective
Time, a director or officer of the Company or any of its subsidiaries (the
"Indemnified Parties"), is, or is threatened to be, made a party based in
whole or in part on, or arising in whole or in part out of, or pertaining to
(i) the fact that he is or was a director, officer or employee of the Company
or any of its subsidiaries or their respective predecessors or (ii) this
Agreement or any of the transactions contemplated hereby, whether in any case
asserted or arising before or after the Effective Time, the parties hereto
agree to cooperate and use their best efforts to defend against and respond
thereto.
(c) For six years after the Effective Time, the Surviving Corporation
shall maintain in effect the Company's current directors' and officers'
liability insurance covering acts or omissions occurring prior to the
Effective Time with respect to those persons who are currently covered by the
Company's directors' and officers' liability insurance policy on terms with
respect to such coverage and amount no less favorable to the Company's
directors and officers currently covered by such insurance than those of such
policy in effect on the date hereof; provided, that the Surviving Corporation
may substitute therefor policies of Parent or its subsidiaries (including self
insurance) containing terms with respect to coverage and amount no less
favorable to such directors or officers; provided, further, that in no event
shall the Surviving Corporation be required to pay aggregate premiums for
insurance under this Section 5.7(c) in excess of 200% of the aggregate
premiums paid by the Company in 2001 on an annualized basis for such purpose
and, if the annual premiums of such insurance coverage exceed such amount, the
Surviving Corporation shall be obligated to obtain a policy with the greatest
coverage available for a cost not exceeding such amount.
(d) Parent shall cause the Surviving Corporation or any successor
thereto, whether by consolidation, merger or transfer of substantially all of
its properties or assets, to comply with its obligations under this Section
5.7. The provisions of this Section 5.7 shall survive the Effective Time and
are intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party and other person named herein and his or her heirs and
representatives.
SECTION 5.8 Fees and Expenses. (a) Except as provided in this Section
5.8 or in Section 5.14, all fees and expenses incurred in connection with the
Merger, this Agreement, and the transactions contemplated by this Agreement
shall be paid by the party incurring such fees or expenses, whether or not the
Merger is consummated. Subject to Section 5.14, the Company shall not become
or agree to become liable for any fees and expenses related to work performed
on behalf of its major stockholders.
(b) (i) In the event that this Agreement is terminated by Parent
pursuant to Section 7.1(c)(ii), then, upon such termination, the Company shall
pay Parent a fee equal to $117,500,000 by wire transfer of same day funds
within two business days after such termination; furthermore, if, prior to the
date that is twelve (12) months after the date of such termination the Company
consummates a Company Takeover Proposal or enters into a Company Acquisition
Agreement (provided that, for purposes of this Section 5.8(b)(i), the
percentage referred to in the definition of Company Takeover Proposal shall be
50% or more and any reference in such definition to any merger, consolidation,
business combination, recapitalization or substantially similar transaction
involving the Company shall mean any such transaction in which the
stockholders of the Company immediately prior to such transaction, as a group,
own less than a majority of the outstanding common stock or other ownership
interests of the Company or the surviving or resulting corporation in such
transaction or, as applicable, the publicly traded parent corporation thereof,
immediately following such transaction (and shall not include any such
transaction solely with a wholly owned subsidiary and not involving the
Company), and any references to liquidation or dissolution shall not include
any such transaction not undertaken in connection with any third-party
transaction of the type contemplated above), then the Company shall, on the
date such Company Takeover Proposal is consummated or such Company Acquisition
Agreement is entered into, pay Parent a fee equal to $117,500,000 by wire
transfer of same day funds.
(ii) In the event that (A) a Pre-Termination Takeover
Proposal Event (as defined below) shall occur after the date of this
Agreement and thereafter this Agreement is terminated by either
Parent or the Company pursuant to Section 7.1(b)(ii) and (B) prior to
the date that is twelve (12) months after the date of such
termination the Company consummates a Company Takeover Proposal or
enters into a Company Acquisition Agreement (provided that for
purposes of this Section 5.8(b)(ii), the percentage referred to in
the definition of Company Takeover Proposal shall be 50% or more and
any reference in such definition to any merger, consolidation,
business combination, recapitalization or substantially similar
transaction involving the Company shall mean any such transaction in
which the stockholders of the Company immediately prior to such
transaction own less than a majority of the outstanding common stock
or other ownership interests of the Company or the surviving or
resulting corporation in such transaction immediately following such
transaction (and shall not include any such transaction solely with a
wholly owned subsidiary and not involving the Company), and any
references to liquidation or dissolution shall not include any such
transaction not undertaken in connection with any third-party
transaction of the type contemplated above), then the Company shall,
on the date such Company Takeover Proposal is consummated or such
Company Acquisition Agreement is entered into, pay Parent a fee equal
to $235,000,000 by wire transfer of same day funds.
(iii) In the event that this Agreement is terminated by the
Company pursuant to Section 7.1(d), then concurrently with such
termination, the Company shall pay to Parent a fee equal to
$235,000,000 by wire transfer of same day funds.
(iv) For purposes of this Section 5.8(b), a "Pre-Termination
Takeover Proposal Event" shall be deemed to occur if, prior to the
event giving rise to the right to terminate this Agreement, a bona
fide Company Takeover Proposal shall have been made known to the
Company or any of its subsidiaries or has been made directly to its
stockholders generally or any person shall have publicly announced an
intention (whether or not conditional) to make a Company Takeover
Proposal, and such Company Takeover Proposal or public announcement
shall not have been irrevocably withdrawn not less than five business
days prior to the Company Stockholders Meeting. The Company
acknowledges that the agreements contained in this Section 5.8(b) are
an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if the Company fails promptly to pay the
amount due pursuant to this Section 5.8(b), and, in order to obtain
such payment, Parent commences a suit which results in a judgment
against the Company for the fee set forth in this Section 5.8(b), the
Company shall pay to Parent its costs and expenses (including
attorneys' fees and expenses) in connection with such suit, together
with interest on the amount of the fee at the rate on six-month U.S.
Treasury obligations plus 300 basis points in effect on the date such
payment was required to be made.
SECTION 5.9 Public Announcements. Parent and the Company will consult
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with and use reasonable efforts to agree on,
any press release or other public statements and any broadly distributed
internal communications with respect to the transactions contemplated by this
Agreement, including the Merger, and shall not issue any such press release or
make any such public statement prior to such consultation, except as either
party may determine is required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange and except for any discussions with rating agencies. The parties
agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
SECTION 5.10 Affiliates. Concurrently with the execution of this
Agreement (or to the extent not practicable, as soon as practicable and in any
event within 10 business days after the date hereof), the Company shall
deliver to Parent a written agreement substantially in the form attached as
Exhibit A hereto of all of the persons who are "affiliates" of the Company for
purposes of Rule 145 under the Securities Act; all of such affiliates, who are
affiliates as of the date of this Agreement, are identified in Section 5.10 of
the Company Disclosure Schedule. Section 5.10 of the Company Disclosure
Schedule shall be updated by the Company as necessary to reflect changes from
the date hereof and the Company shall use reasonable best efforts to cause
each person added to such schedule after the date hereof to deliver a similar
agreement.
SECTION 5.11 Stock Exchange Listing. Parent shall use best efforts to
cause the Parent Common Stock issuable (i) under Article II or (ii) upon
exercise of the LTWs and Adjusted Options pursuant to Section 5.6 to be
approved for issuance on the NYSE and the PSX, in each case subject to
official notice of issuance, as promptly as practicable after the date hereof,
and in any event prior to the Closing Date.
SECTION 5.12 Stockholder Litigation. Each of the Company and Parent
shall give the other the reasonable opportunity to participate in the defense
of any stockholder litigation against the Company or Parent, as applicable,
and its directors relating to the transactions contemplated by this Agreement.
SECTION 5.13 Standstill Agreements; Confidentiality Agreements.
During the period from the date of this Agreement through the Effective Time,
the Company shall not terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it or any of its respective
subsidiaries is a party and which relates to the confidentiality or
information regarding the Company or its subsidiaries or which relate to
securities of the Company. During such period, the Company shall use
reasonably best efforts to enforce, to the fullest extent permitted under
applicable law, the provisions of any such agreement, including by using
reasonable best efforts to obtain injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in any
court having jurisdiction.
SECTION 5.14 Conveyance Taxes. Parent and the Company shall cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer, real
property transfer gains, sales, use, transfer, value added, stock transfer and
stamp Taxes, any transfer, recording, registration and other fees or any
similar Taxes which become payable in connection with the transactions
contemplated by this Agreement that are required or permitted to be filed on
or before the Effective Time. The Company shall pay on behalf of its
stockholders any such Taxes or fees imposed by any Governmental Entity which
become payable in connection with the transactions contemplated by this
Agreement for which such stockholders are primarily liable and in no event
shall Parent pay such amounts.
SECTION 5.15 Employee Benefits. (a) Parent shall, or shall cause the
Surviving Corporation and its subsidiaries to, (i) give those Employees who
are, as of the Effective Time, employed by the Company and its subsidiaries
(the "Continuing Employees") full credit for purposes of eligibility, vesting
and benefit accruals (other than for purposes of benefit accruals under any
defined benefit pension plan) under any employee benefit plans or arrangements
maintained by Parent, the Surviving Corporation or any subsidiary of Parent or
the Surviving Corporation for such Continuing Employees' service with the
Company or any subsidiary of the Company (or any predecessor entity) to the
same extent recognized by the Company and its subsidiaries, and (ii) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the
Continuing Employees under any welfare plan that such employees may be
eligible to participate in after the Effective Time, other than limitations or
waiting periods that are already in effect with respect to such employees and
that have not been satisfied as of the Effective Time under any welfare plan
maintained for the Continuing Employees immediately prior to the Effective
Time, and provide credit under any such welfare plan for any copayments,
deductibles and out-of-pocket expenditures for the remainder of the coverage
period during which any transfer of coverage occurs.
(b) From and after the Effective Time and through December 31 of the
calendar year in which the Effective Time occurs (the "Continuation Period"),
Parent shall provide, or shall cause to be provided, to the Continuing
Employees compensation and employee benefit plans, programs and arrangements
that are, in the aggregate, comparable to those generally provided to such
employees as of the date hereof. From and after the expiration of the
Continuation Period, Parent shall provide, or shall cause to be provided, to
the Continuing Employees compensation and employee benefit plans, programs and
arrangements that are no less favorable than those generally provided to
similarly situated employees of Parent. Notwithstanding anything contained
herein to the contrary, each Continuing Employee whose employment is
terminated during the twelve-month period (or such longer period as may be
required by the terms of the applicable Company Severance Plan as in effect on
the date hereof) following the Effective Time shall be entitled to receive
severance pay and benefits equal to the severance pay and benefits under the
applicable severance plan of the Company listed on Section 5.15(b) of the
Company Disclosure Schedule, as in effect on the date hereof.
(c) From and after the Effective Time, Parent shall, or shall cause
the Surviving Corporation to, assume and honor all Plans (including the
Litigation Management Agreement, dated as of February 4, 1998, entered into by
the Company and the other parties thereto, as amended), as in effect on the
date hereof; provided, however, nothing herein shall restrict Parent's or the
Surviving Corporation's ability to amend or terminate such Plans in accordance
with their terms.
SECTION 5.16 Tax Matters. Parent and the Company shall use reasonable
best efforts to cause the Merger to qualify as a reorganization within the
meaning of Section 368(a) of the Code and to obtain the Tax opinions set forth
in Sections 6.2(d) and 6.3(c) hereof. This Agreement is intended to constitute
a "plan of reorganization" within the meaning of Treas. Reg. Sec. 1.368-2(g).
Officers of Parent, Merger Sub and the Company shall execute and deliver to
Wachtell, Lipton, Rosen & Katz ("Wachtell"), counsel to the Company, and
Skadden Arps, counsel to Parent, certificates containing appropriate
representations at such time or times as may be reasonably requested by such
law firms, including the effective date of the Form S-4 and the Closing Date,
in connection with their respective deliveries of opinions, pursuant to
Sections 6.2(d) and 6.3(c) hereof, with respect to the Tax treatment of the
Merger. None of Parent, Merger Sub or the Company shall take or cause to be
taken any action which would cause to be untrue (or fail to take or cause not
to be taken any action which would cause to be untrue) any of such
certificates and representations.
SECTION 5.17 Amendment of Warrant Agreement. The Company's Board of
Directors, in accordance with Section 4.5 of the Warrant Agreement, has
determined that, following the Effective Time, by virtue of the Merger,
holders of LTWs shall be exercisable in respect of an amount in cash and
shares of Parent Common Stock as provided for in Section 2.6 of this Agreement
and, in connection therewith, the Company shall cause the Warrant Agreement to
be amended and signed by Parent with the consent of the warrant agent to so
provide and to provide for Parent's assumption of the Company's obligations
thereunder by virtue of such determination as provided in Section 2.6.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver by each of Parent and the Company on or
prior to the Closing Date of the following conditions:
(a) Stockholder Approval. The Company Stockholder Approval shall have
been obtained.
(b) Governmental and Regulatory Approvals. Other than the filing
provided for under Section 1.3 and the waiting period pursuant to the HSR Act
(which is addressed in Section 6.1(f)), all consents, approvals and actions
of, filings with and notices to any Governmental Entity required by the
Company, Parent or any of their subsidiaries under applicable law or
regulation to consummate the Merger, the Bank Combination and the other
transactions contemplated hereby, the failure of which to be obtained or made
would result in a material adverse effect on Parent's ability to conduct the
business in the Company in substantially the same manner as presently
conducted, shall have been obtained or made, including, without limitation,
approval of the Federal Reserve and the OTS Approval (all such approvals and
the expiration of all such waiting periods, the "Requisite Regulatory
Approvals").
(c) No Injunctions or Restraints. No judgment, order, decree,
statute, law, ordinance, rule or regulation, entered, enacted, promulgated,
enforced or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect preventing the consummation of the Merger;
provided, however, that each of the parties shall have used its best efforts
to prevent the entry of any such Restraints and to appeal as promptly as
possible any such Restraints that may be entered.
(d) Form S-4. The Form S-4 shall have become effective under the
Securities Act and no stop order or proceedings seeking a stop order shall
have been entered or be pending by the SEC.
(e) Stock Exchange Listing. The shares of Parent Common Stock
issuable to the Company's stockholders (i) as contemplated by Article II or
(ii) upon exercise of the LTWs and the Adjusted Options pursuant to Section
5.6 shall have been approved for listing on the NYSE and the PSX, subject to
official notice of issuance.
(f) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
SECTION 6.2 Conditions to Obligations of Parent. The obligation of
Parent to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth herein shall be true and correct at and as
of the Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), provided
that no representation or warranty of the Company shall be deemed untrue or
incorrect for purposes hereunder as a consequence of the existence of any
fact, event or circumstance inconsistent with such representation or warranty,
unless such fact, event or circumstance, individually or taken together with
all other facts, events or circumstances inconsistent with any representation
or warranty of the Company, has had or would result in a material adverse
effect on the Company, disregarding for these purposes (x) any qualification
or exception for, or reference to, materiality in any such representation or
warranty and (y) any use of the terms "material," "materially," "in all
material respects," "material adverse change," "material adverse effect" or
similar terms or phrases in any such representation or warranty.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all material obligations, taken as a whole,
required to be performed by it at or prior to the Closing Date under this
Agreement.
(c) Regulatory Condition. No condition or requirement has been
imposed by one or more Governmental Entities in connection with any required
approval by them of the Merger or the Bank Combination that requires the
Company or its subsidiaries to be operated in a manner that would have a
material adverse effect on the Company.
(d) Tax Opinion. Parent shall have received the opinion of Skadden,
Arps, in form and substance reasonably satisfactory to Parent, dated the
Closing Date, rendered on the basis of facts, representations and assumptions
set forth in such opinion and the certificates obtained from officers of
Parent, Merger Sub and the Company, all of which are consistent with the state
of facts existing as of the Effective Time, to the effect that the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the Code.
In rendering the opinion described in this Section 6.2(d), Skadden Arps shall
have received and may rely upon the certificates and representations referred
to in Section 5.16 hereof.
SECTION 6.3 Conditions to Obligations of the Company. The obligation
of the Company to effect the Merger is further subject to satisfaction or
waiver of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent set forth herein shall be true and correct at and as of
the Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), provided
that no representation or warranty of Parent shall be deemed untrue or
incorrect for purposes hereunder as a consequence of the existence of any
fact, event or circumstance inconsistent with such representation or warranty,
unless such fact, event or circumstance, individually or taken together with
all other facts, events or circumstances inconsistent with any representation
or warranty of Parent, has had or would result in a material adverse effect on
Parent, disregarding for these purposes (x) any qualification or exception
for, or reference to, materiality in any such representation or warranty and
(y) any use of the terms "material," "materially," "in all material respects,"
"material adverse change," "material adverse effect" or similar terms or
phrases in any such representation or warranty.
(b) Performance of Obligations of Parent. Parent shall have performed
in all material respects all material obligations, taken as a whole, required
to be performed by it at or prior to the Closing Date under this Agreement.
(c) Tax Opinion. The Company shall have received the opinion of
Wachtell, in form and substance reasonably satisfactory to the Company, dated
the Closing Date, rendered on the basis of facts, representations and
assumptions set forth in such opinion and the certificates obtained from
officers of Parent, Merger Sub and the Company, all of which are consistent
with the state of facts existing as of the Effective Time, to the effect that
the Merger will qualify as a reorganization within the meaning of Section
368(a) of the Code. In rendering the tax opinion described in this Section
6.3(c), Wachtell shall have received and may rely upon the certificates and
representations referred to in Section 5.16 hereof.
SECTION 6.4 Frustration of Closing Conditions. Neither Parent nor the
Company may rely on the failure of any condition set forth in Section 6.1, 6.2
or 6.3, as the case may be, to be satisfied if such failure was caused by such
party's failure to use reasonable best efforts to consummate the Merger and
the other transactions contemplated by this Agreement, as required by and
subject to Section 5.5.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, and whether before or after the Company
Stockholder Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by the
date that is twelve months following the date hereof, provided,
however, that the right to terminate this Agreement pursuant to this
Section 7.1(b) shall not be available to any party whose failure to
perform any of its obligations under this Agreement results in the
failure of the Merger to be consummated by such time;
(ii) if the Company Stockholder Approval shall not have been
obtained at the Company Stockholders Meeting duly convened therefor
or at any adjournment or postponement thereof;
(iii) if any Restraint having any of the effects set forth
in Section 6.1(c) shall be in effect and shall have become final and
nonappealable; provided, that the party seeking to terminate this
Agreement pursuant to this Section 7.1(b)(iii) shall have used
reasonable best efforts to prevent the entry of and to remove such
Restraint; or
(iv) if any Governmental Entity that must grant a Requisite
Regulatory Approval has denied the applicable Requisite Regulatory
Approval and such denial has become final and nonappealable;
(c) by Parent, if (i) the Company shall have failed to make the
Company Recommendation in the Proxy Statement, (ii) the Company shall have
effected a Change in the Company Recommendation in accordance with the terms
hereof, (iii) the Company shall have effected a Change in the Company
Recommendation in violation of the terms hereof, or (iv) the Company shall
have breached its obligations under this Agreement by reason of a failure to
call or convene the Company Stockholders Meeting in accordance with Section
5.1(d);
(d) by the Company in accordance with Section 4.3(b); provided, that
in order for the termination of this Agreement pursuant to this paragraph (d)
to be deemed effective, the Company shall have complied in all material
respects with all provisions of Section 4.3, including the notice provisions
therein, and with applicable requirements, including the payment of the fee,
referred to in paragraph (b)(iii) of Section 5.8;
(e) by Parent, if the Company shall have breached any of its
representations, warranties, covenants or other agreements contained in this
Agreement, which breach (i) would give rise to the failure of a condition set
forth in Section 6.2(a) or (b), and (ii) is incapable of being cured by the
Company or is not cured within 30 days of written notice thereof; or
(f) by the Company, if Parent shall have breached any of its
representations, warranties, covenants or other agreements contained in this
Agreement, which breach (A) would give rise to the failure of a condition set
forth in Section 6.3(a) or (b), and (B) is incapable of being cured by Parent
or is not cured within 30 days of written notice thereof.
The party desiring to terminate this Agreement pursuant to
clause (b), (c), (d), (e) or (f) of this Section 7.1 shall give written notice
of such termination to the other party in accordance with Section 8.2,
specifying the provision hereof pursuant to which such termination is
effected.
SECTION 7.2 Effect of Termination. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 7.1,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent or the Company, other than that
the provisions of Section 5.8, this Section 7.2 and Article VIII shall survive
such termination, provided, however, that nothing herein (including the
payment of any amounts pursuant to Section 5.8 hereof) shall relieve any party
from any liability for any willful breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 7.3 Amendment. This Agreement may be amended by the parties
at any time before or after the Company Stockholder Approval; provided,
however, that after such approval, there shall not be made any amendment that
by law requires further approval by the stockholders of the Company without
the further approval of such stockholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of all of the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective
Time, a party may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies in
the representations and warranties of the other party contained in this
Agreement or in any document delivered pursuant to this Agreement or (c)
subject to the proviso of Section 7.3, waive compliance by the other party
with any of the agreements or conditions contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such
rights.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 8.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent or Merger Sub, to
Citigroup Inc.
Corporate Law Department
425 Park Avenue, 2nd Fl.
New York, New York 10043
Telecopy No.: (212) 793-7600
Attention: Associate General Counsel
Mergers & Acquisitions
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Telecopy No.: (212) 735-2000
Attention: Kenneth J. Bialkin, Esq.
Eric J. Friedman, Esq.
if to the Company, to
Golden State Bancorp Inc.
135 Main Street
San Francisco, California 94105
Telecopy No.: (415) 904-1157
Attention: General Counsel
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York
Telecopy No.: (212) 403-2000
Attention: Craig M. Wasserman
SECTION 8.3 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person, where "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the
ownership of voting securities, by contract, as trustee or executor, or
otherwise; provided, that (x) any investment account advised or managed by
such person or one of its subsidiaries or affiliates on behalf of third
parties, or (y) any partnership, limited liability company, or other similar
investment vehicle or entity engaged in the business of making investments of
which such person acts as the general partner, managing member, manager,
investment advisor, principal underwriter or the equivalent shall not be
deemed an affiliate of such person.
(b) "Closing Parent Share Value" shall have the meaning set forth in
Section 2.1(d)(iv) hereof; provided, however, if necessary to comply with any
requirements of the Securities and Exchange Commission (the "SEC"), the term
Closing Parent Share Value shall be deemed to mean the date which is the
closest in time but prior to the Closing Date which complies with such rules
and regulations.
(c) "material adverse change" or "material adverse effect" means,
when used in connection with the Company or Parent, any change, effect, event,
occurrence or state of facts that is, or would reasonably be expected to be,
materially adverse to the business, financial condition or results of
operations of such party and its subsidiaries taken as a whole, other than (i)
any change, effect, event or occurrence relating to the United States economy
or financial or securities markets in general, (ii) any change, effect, event
or occurrence relating to the financial services industry to the extent not
affecting such person to a materially greater extent than it affects other
persons in industries in which such person competes, (iv) any change, effect,
event or occurrence relating to the announcement or performance hereof and the
transactions contemplated hereby (including without limitation the impact
thereof on relationships with customers, suppliers or employees), (v) any
change in banking, savings association and similar laws, rules or regulations
of general applicability or interpretations thereof by courts or governmental
authorities and (vi) any change in GAAP or regulatory accounting requirements
applicable to banks, savings associations or their holding companies
generally.
(d) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
(e) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of Directors
or other governing body (or, if there are no such voting interests, 50% or
more of the equity interests of which) is owned directly or indirectly by such
first person; provided, however, that (x) any investment account advised or
managed by such person or one of its subsidiaries or affiliates on behalf of
third parties, or (y) any partnership, limited liability company, or other
similar investment vehicle or entity engaged in the business of making
investments of which such person acts as the general partner, managing member,
manager, investment advisor, principal underwriter or the equivalent shall not
be deemed an affiliate of such person.
(f) "knowledge" means, (i) with respect to the Company, the knowledge
of the individuals listed on Section 8.3(f) of the Company Disclosure Schedule
and (ii) with respect to Parent, the knowledge of Parent's executive officers.
SECTION 8.4 Interpretation. When a reference is made in this
Agreement to an Article, Section or Exhibit, such reference shall be to an
Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
All terms defined in this Agreement shall have the defined meanings when used
in any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means, in the case of any
agreement or instrument, such agreement or instrument as from time to time
amended, modified or supplemented, including by waiver or consent and, in the
case of statutes, such statutes as in effect on the date of this Agreement.
References to a person are also to its permitted successors and assigns. The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any Federal, state, local or foreign statute or law shall be
deemed to also refer to any amendments thereto and all rules and regulations
promulgated thereunder, unless the context requires otherwise.
SECTION 8.5 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties. A facsimile copy of a
signature page shall be deemed to be an original signature page.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede
all prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter of this Agreement and (b) except
for the provisions of Section 5.7 and Sections 2 and 3 of Schedule 3.1(q) of
the Company Disclosure Schedule which shall inure to the benefit of and be
enforceable by the persons referred to therein, are not intended to confer
upon any person other than the parties any rights or remedies.
SECTION 8.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict
of laws thereof.
SECTION 8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or
in part, by operation of law or otherwise by any of the parties hereto without
the prior written consent of the other parties, provided, however, that Parent
may assign Merger Sub's rights and obligations, in whole or in part, under
this Agreement to Parent or any other, wholly-owned, direct subsidiary of
Parent. Any assignment in violation of the preceding sentence shall be void.
Subject to the preceding two sentences, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
SECTION 8.9 Consent to Jurisdiction. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated
by this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such
court, and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any
court other than a Federal court sitting in the State of Delaware or a
Delaware state court.
SECTION 8.10 Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.11 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the extent possible.
SECTION 8.12 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement, this being in
addition to any other remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
CITIGROUP INC.
By /s/ Robert B. Willumstad
------------------------
Name: Robert B. Willumstad
Title: President
GOLDEN STATE BANCORP INC.
By /s/ Gerald J. Ford
------------------------
Name: Gerald J. Ford
Title: Chairman of the Board and CEO
MERCURY MERGER SUB, INC.
By /s/ Robert B. Willumstad
------------------------
Name: Robert B. Willumstad
Title: President
EXHIBIT A
Form of Affiliate Letter
______________, 2002
Citigroup, Inc.
Corporate Law Department
425 Park Avenue, 2nd Fl.
New York, New York 10043
Attention: Assistant General Counsel, M&A
Ladies and Gentlemen:
I have been advised that I may be deemed to be an "affiliate" of
Golden State Bancorp Inc., a Delaware corporation (the "Company"), as that
term is defined in Rule 145 promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"). I understand that pursuant to the terms of the Agreement
and Plan of Merger dated as of May 21, 2002 (the "Merger Agreement"), by and
among Citigroup Inc., a Delaware corporation ("Parent"), Mercury Merger Sub,
Inc., a Delaware corporation and a subsidiary of Parent ("Merger Sub") and the
Company, the Company plans to merge with and into Merger Sub (the "Merger")
with Merger Sub being the surviving corporation. Capitalized terms used herein
but not otherwise defined shall have the meanings given to such terms in the
Merger Agreement.
I further understand that, as a result of the Merger, in exchange for
shares of common stock, par value $1.00 per share, of the Company ("Company
Common Stock") or upon the exercise of the Company Stock Options that will be
assumed by Parent in the Merger ("Assumed Options"), I may receive common
stock, par value $0.01 per share, of Parent ("Parent Common Stock").
I have read this letter and discussed the requirements hereof to the
extent I felt necessary with my counsel or counsel for the Company.
I represent, warrant and covenant with and to Parent that in the
event I receive any Parent Common Stock as a result of the Merger or the
exercise of Assumed Options:
1. I shall not make any sale, transfer, or other disposition of such
Parent Common Stock unless (i) such sale, transfer or other disposition has
been registered under the Securities Act, (ii) such sale, transfer or other
disposition is made in conformity with the provisions of Rule 145 under the
Securities Act (as such rule may be amended from time to time), (iii) in the
opinion of counsel in form and substance reasonably satisfactory to Parent, or
under a "no-action" letter or interpretive letter from the staff of the SEC,
such sale, transfer or other disposition will not violate or is otherwise
exempt from registration under the Securities Act, or (iii) I have the right
to have the legend set forth in Sections 3 and 4 below removed pursuant to
Section 4 below.
2. I understand that Parent is under no obligation to register the
sale, transfer or other disposition of Parent Common Stock by me or on my
behalf under the Securities Act or, other than as set forth below, to take any
other action necessary in order to make compliance with an exemption from such
registration available.
3. I understand that stop transfer instructions will be given to
Parent's transfer agent with respect to the Parent Common Stock issued to me
as a result of the Merger or the exercise of Assumed Options and that there
will be placed on the certificates, if any, for such shares, or any
substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the
Securities Act of 1933 applies. The shares represented by
this certificate may be transferred only in accordance with
the terms of a letter agreement between the registered
holder hereof and Citigroup Inc., a copy of which agreement
is on file at the principal offices of Citigroup Inc."
4. I understand that, unless the transfer by me of the Parent Common
Stock issued to me as a result of the Merger or upon the exercise of Assumed
Options has been registered under the Securities Act or such transfer is made
in conformity with the provisions of Rule 145(d) under the Securities Act,
Parent reserves the right, in its sole discretion, to place the following
legend on the certificates, if any, issued to my transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and were
acquired from a person who received such shares in a
transaction to which Rule 145 under the Securities Act of
1933 applies. The shares may not be sold, transferred or
otherwise disposed of except pursuant to an effective
registration statement under, or in accordance with an
exemption from the registration requirements of, the
Securities Act of 1933."
It is understood and agreed that the legends set forth in paragraphs
(3) and (4) above shall be removed by delivery of substitute certificates
without such legend and/or any stop transfer instructions will be lifted (A)
if one year (or such other period as may be required by Rule 145(d)(2) or any
successor thereto) shall have elapsed from the date I acquired the Parent
Common Stock received in the Merger and the provisions of Rule 145(d)(2) (or
any successor thereto) are then available to me, (B) if two years (or such
other period as may be required by Rule 145(d)(3) or any successor thereto)
shall have elapsed from the date I acquired the Parent Common Stock received
in the Merger and the provisions of Rule 145(d)(3) (or any successor thereto)
are then available to me or (C) if I shall have delivered to Parent (i) a copy
of a "no-action" letter or interpretative letter from the staff of the SEC, or
an opinion of counsel in form and substance reasonably satisfactory to Parent,
to the effect that such legend is not required for purposes of the Securities
Act or (ii) a written statement from me representing that that the Parent
Common Stock represented by such certificates are being or have been sold in
conformity with the provisions of Rule 145(d) or pursuant to an effective
registration statement under the Securities Act.
Execution of this letter should not be considered an admission on my
part of "affiliate" status as described in the first paragraph of this letter
agreement, or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
Very truly yours,
By: _______________________
Name:
Accepted this ____ day of
________________, 2002.
CITIGROUP INC.
By: _____________________________
Name:
Title: