UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 31, 1999
Commission File Number 0-20905
UNITED PAYORS & UNITED PROVIDERS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 51-0374698
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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2275 Research Boulevard, 6th Floor, Rockville, Maryland 20850
(Address of principal executive offices, Zip Code)
(301) 548-1000
(Registrant's phone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
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ITEM 1. (Not Applicable)
ITEM 2. ACQUISITION
On August 31, 1999, United Payors & United Providers, Inc. acquired Quantum
Financial Holdings, Inc. and its wholly-owned subsidiary, Baltimore American
Savings Bank, F.S.B., a savings bank in Maryland with total assets of $28
million for a purchase price of approximately $2.5 million in cash. The purchase
price was paid from existing working capital. The acquisition will be accounted
as a purchase, in accordance with generally accepted accounting principles.
ITEMS 3-6. (Not Applicable)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of the Business Acquired. (To be filed within 60
days from September 15, 1999)
(b) Pro Forma Consolidated Financial Information.(To be filed within 60
days from September 15, 1999)
(c) Exhibits.(Filed Herewith)
Exhibit No. Description
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10.16 Agreement and Plan Reorganization by and between
Quantum Financial Holdings, Inc. and United Payors
& United Providers, Inc. dated as of October 16,
1998.
10.17 First Amendment to Agreement and Plan of
Reorganization by and between Quantum Financial
Holdings, Inc. and United Payors & United
Providers, Inc. dated as of June 23, 1999.
ITEMS 8-9 (Not Applicable)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED PAYORS & UNITED PROVIDERS, INC.
Date: September 15, 1999 By: /s/ EDUARDO V. FEITO
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Eduardo V. Feito
Controller and Chief Accounting Officer
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EXHIBIT 10.16
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") dated as of October 16,
1998, by and between QUANTUM FINANCIAL HOLDINGS, INC. ("Quantum"), a Maryland
corporation having its principal office at 4023 Annapolis Road, Baltimore,
Maryland 21227, and UNITED PAYORS & UNITED PROVIDERS, INC. ("Acquiror"), a
Delaware corporation having its principal office at 2275 Research Boulevard,
Sixth Floor, Rockville, Maryland 20850.
W I T N E S S E T H
WHEREAS, the parties hereto desire that Quantum shall be merged with a
corporation to be formed by Acquiror (the "Merger") pursuant to Articles of
Merger in the form attached hereto as Annex A (the "Articles of Merger") and
which is an integral part of this Agreement;
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
"AcquisitionCo" shall mean a corporation to be formed by Acquiror for the
purpose of effecting the Merger.
"Bank" shall mean Quantum's wholly owned subsidiary, Baltimore American
Savings Bank, F.S.B., a federal savings bank.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Department" shall mean the Department of Assessments and Taxation of the
State of Maryland.
"Disclosure Statement" shall mean a statement identified as a Disclosure
Statement and contemplated by various sections of this Agreement and attached as
an exhibit hereto.
"Effective Date" shall mean the date specified pursuant to Section 2.4
hereof as the effective date of the Merger.
"Environmental Claim" means any written notice from any governmental
authority or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Agent" shall mean a banking institution with a banking office in
the State of Maryland appointed by Acquiror and approved by Quantum (which
approval shall not be unreasonably withheld) to make payment of the Merger
Consideration after the Effective Date to the holders of certificates which
formerly represented Quantum Common Stock.
"FHLB" shall mean Federal Home Loan Bank.
"FDIA" shall mean the Federal Deposit Insurance Act.
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"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Financial Statements" shall mean: (i) with respect to Quantum and
Acquiror, their consolidated statements of financial condition (including
related notes and schedules, if any) as of December 31, 1997 and 1996 and the
related consolidated statements of operations, stockholders' equity and cash
flows (including related notes and schedules, if any) for each of the three
years ended December 31, 1997, 1996 and 1995, and (ii) the consolidated
statements of financial condition of each (including related notes and
schedules, if any) and related statements of operations, shareholders' equity
and cash flows (including related notes and schedules, if any) with respect to
the quarterly periods ended subsequent to December 31, 1997.
"FIRREA" shall mean the Financial Institutions Reform, Recovery and
Enforcement Act of 1989.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger Consideration" shall mean the aggregate consideration to be
received by holders of outstanding shares of Quantum Common Stock and of options
to acquire shares of Quantum Common Stock pursuant to Article II hereof.
"MGCL" shall mean the Maryland General Corporation Law
"OTS" shall mean the Office of Thrift Supervision of the U.S. Department of
the Treasury and its predecessor, the Federal Home Loan Bank Board, or any
successor thereto.
"Per Share Merger Consideration" shall have the meaning specified in
Section 2.3.
"Proxy Statement" shall mean the proxy statement together with any
supplements thereto sent to shareholders of Quantum to solicit their votes in
connection with the approval of this Agreement and the Articles of Merger.
"Quantum Common Stock" shall mean the shares of common stock, par value
$.01 per share, of Quantum.
"Quantum Subsidiaries" shall mean the Bank and any other corporation, bank,
savings association, partnership, joint venture, or other organization more than
10% of the stock or ownership interest of which is owned, directly or
indirectly, by Quantum or the Bank.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests.
"Stock Option Plan" shall mean the Baltimore American Savings Bank, F.S.B.
1988 Stock Option and Incentive Plan.
Other terms used herein are defined in the preamble and elsewhere in the
Agreement.
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ARTICLE 11
MERGER
2.1 THE MERGER
Subject to the terms and conditions of this Agreement and subject to and in
accordance with the Articles of Merger between Quantum and AcquisitionCo, a copy
of which is attached hereto as Annex A (the "Articles of Merger") and
incorporated herein by reference, at the Effective Date (as defined in Section
2.4 hereof), AcquisitionCo shall be merged with and into Quantum (the "Merger")
in accordance with applicable laws and regulations, with Quantum as the
surviving corporation (hereinafter sometimes called the "Surviving
Corporation"). Each share of Quantum Common Stock outstanding immediately prior
to the Effective Date (other than any such share directly or indirectly owned by
Acquiror or AcquisitionCo) shall, by virtue of the Merger and without any
further action by the holder thereof, be converted into and represent the right
to receive in cash the Per Share Merger Consideration set forth in Section 2.3.
Each share of Common Stock, par value $.01 per share, of AcquisitionCo
("AcquisitionCo Common Stock") which is issued and outstanding immediately prior
to the Effective Date shall continue to be an issued and outstanding share of
Common Stock of the Surviving Corporation.
2.2 STOCK OPTIONS
At or immediately prior to the Effective Date, Quantum shall take such
actions as are necessary to cause each outstanding option to purchase Quantum
Common Stock pursuant to the Stock Option Plan to be cancelled, and each holder
of any such option, whether or not then vested or exercisable, shall be paid by
Acquiror for each stock option an amount determined by multiplying (i) the
excess, if any, of the Per Share Merger Consideration over the applicable
exercise price per share of such option by (ii) the number of shares of Quantum
Common Stock subject to such option.
2.3 MERGER CONSIDERATION AND PER SHARE MERGER CONSIDERATION
The Merger Consideration shall be $2,500,000.00. The Per Share Merger
Consideration shall be that amount equal to (i) the Merger Consideration, minus
the aggregate dollar amount to be paid to holders of outstanding options to
purchase Quantum Common Stock pursuant to Section 2.2 above, (ii) divided by the
number of outstanding shares of Quantum Common Stock immediately prior to the
Effective Date.
2.4 EFFECTIVE DATE
The Merger shall become effective on the date and at the time specified in
the certificate of merger relating to the Merger issued by the Department
pursuant to the MGCL, or any successor thereto ("Effective Date"). A closing
(the "Closing") shall take place immediately prior to the Effective Date at
10:00 a.m., on the fifth business day following the receipt of all necessary
regulatory or governmental approvals and consents and the expiration of all
statutory waiting periods in respect thereof and the satisfaction or waiver, to
the extent permitted hereunder, of the conditions to the consummation of the
Merger specified in Article VI of this Agreement (other than the delivery of
certificates, opinions and other instruments and documents to be delivered at
the Closing), at the offices of Muldoon, Murphy & Faucette, 5101 Wisconsin
Avenue, N.W., Suite 500, Washington, D.C. 20016, or at such other place, at such
other time, or on such other date as the parties may mutually agree upon. At the
Closing, there shall be delivered to Acquiror and Quantum the opinions,
certificates and other documents required to be delivered under Article VI
hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF QUANTUM
Quantum represents and warrants to Acquiror as follows:
3.1 ORGANIZATION, STANDING AND AUTHORITY
Quantum is a corporation duly organized, validly existing and in good
standing under the MGCL and the Bank is a federal stock savings bank duly
organized, validly existing under the HOLA, each with full corporate power and
authority to carry on its business as now conducted and duly qualified to do
business in each jurisdiction in which its ownership or leasing of property or
the conduct of its business requires such qualification or where the failure to
so qualify would have a Material Adverse Effect (as defined in Section 3.8) on
the financial condition, results of operation, business or prospects of Quantum.
3.2 CAPITAL STRUCTURE
The authorized capital stock of Quantum consists of 3,500,000 shares of
Quantum Common Stock, par value $.01, and 1,500,000 shares of preferred stock,
par value $.01. As of August 31, 1998, there were 106,924 shares of Quantum
Common Stock and no shares of preferred stock issued and outstanding. There are
no Rights authorized, issued or outstanding with respect to the capital stock of
Quantum, except as provided for under the Stock Option Plan. As of August 31,
1998, there were options outstanding under the Stock Option Plan, to acquire,
upon exercise, 7,700 shares of Quantum Common Stock (the "Option"). All
outstanding shares of Quantum Common Stock have been duly issued and are validly
outstanding, fully paid and nonassessable, and all shares of Quantum Common
Stock which may be issued upon exercise of the Option will be duly issued, and
validly outstanding, fully paid and nonassessable. None of the shares of Quantum
Common Stock has been issued and none of the shares of Quantum Common Stock
which may be issued upon exercise of the Option, will be issued in violation of
the preemptive rights of any person.
3.3 OWNERSHIP OF QUANTUM SUBSIDIARIES
Except for the Bank and for the Quantum Subsidiaries set forth in
Disclosure Statement 3.3 provided by Quantum, Quantum has no subsidiaries.
Except for the Quantum Subsidiaries, stock in the FHLB of Atlanta and securities
or other interests taken in consideration of debts previously contracted,
Quantum does not own or have the right to acquire, directly or indirectly, any
outstanding capital stock or other voting securities or ownership interests of
any corporation, bank, savings association, partnership, joint venture, or other
organization. The outstanding shares of capital stock or other ownership
interests of each of the Quantum Subsidiaries are validly issued and
outstanding, fully paid and nonassessable and all such shares are directly or
indirectly owned by Quantum free and clear of all liens, claims and encumbrances
or preemptive rights of any person. No Rights are authorized, issued or
outstanding with respect to the capital stock or other ownership interests of
any Quantum Subsidiaries and there are no agreements, understandings or
commitments relating to the right of Quantum to vote or to dispose of said
shares or other ownership interests.
3.4 ORGANIZATION, STANDING AND AUTHORITY OF QUANTUM SUBSIDIARIES
Each of the Quantum Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized. Each of the Quantum Subsidiaries (i) has
full power and authority to carry on its business as now conducted, and (ii) is
duly qualified to do business in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such qualification
where the failure to so qualify would have a Material Adverse Effect (as defined
in Section 3.8) on the financial condition, results of operations, business or
prospects of Quantum.
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3.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Quantum has all requisite corporate power and authority to enter into
this Agreement and (subject to receipt of all necessary governmental approvals
and the approval of this Agreement and the Articles of Merger by the affirmative
vote of two-thirds of the shares of Quantum Common Stock outstanding and
entitled to vote at the time, at a duly called meeting of stockholders) to
perform all of its obligations under this Agreement and the Articles of Merger.
The execution and delivery of this Agreement and consummation of the
transactions contemplated hereby and by the Articles of Merger have been duly
and validly authorized by all necessary corporate action in respect thereof on
the part of Quantum, except the approval of this Agreement and the Articles of
Merger by Quantum's shareholders. This Agreement and the Articles of Merger
constitute legal, valid and binding obligations of Quantum, each of which is
enforceable against Quantum in accordance with its respective terms, subject, as
to enforceability, to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby or by the Articles of Merger, nor
compliance by Quantum with any of the provisions hereof or thereof shall (i)
conflict with or result in a breach of any provision of the Articles of
Incorporation or bylaws of Quantum or the equivalent documents of any Quantum
Subsidiary, (ii) constitute or result in a breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any material property or asset
of Quantum or any Quantum Subsidiary pursuant to, any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation, or (iii)
subject to receipt of all required governmental approvals, violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Quantum or
any Quantum Subsidiary.
(c) Quantum will cooperate with Acquiror and use its best efforts to
procure all consents and approvals from all regulatory agencies having
jurisdiction over the transaction contemplated by this Agreement.
(d) As of the date hereof, Quantum is not aware of any reasons why all
consents and approvals shall not be procured from all regulatory agencies having
jurisdiction over the transactions contemplated by this Agreement as shall be
necessary for consummation of the transactions contemplated by this Agreement.
As of the date hereof, Quantum is not aware of any reason why all consents and
approvals shall not be procured from all other persons and entities whose
consent or approval shall be necessary for consummation of the transactions
contemplated by this Agreement.
3.6 REPORTS
For the five years preceding the date hereof, Quantum and the Quantum
Subsidiaries have in all material respects filed all reports required to be
filed with all applicable governmental authorities, including, without
limitation, the OTS, the FDIC and the FHLB of Atlanta, and such reports comply
in all material respects with applicable law and regulations, except as
disclosed in Disclosure Statement 3.6 provided by Quantum.
3.7 FINANCIAL STATEMENTS
The Financial Statements of Quantum and Quantum Subsidiaries fairly present
or will fairly present, as the case may be, the consolidated financial position
of Quantum and the Quantum Subsidiaries as of the dates indicated and the
consolidated results of operations, changes in shareholders' equity and
statements of cash flows for the periods then ended in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis (except as
stated therein). As of their respective dates, neither such financial
statements, nor any subsequent Quantum or Quantum Subsidiary financial
statements contained or will contain any untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated therein or
necessary to make the statement made therein, in light of the circumstances
under which they were made, not misleading. Quantum represents that the
information in Annex C has been taken from the Bank's accounting records and
presents fairly all of the direct revenues and costs
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of and a good faith estimate of other costs attributable to the Bank's mortgage
banking activities for the seven months ended July 31, 1998.
3.8 MATERIAL ADVERSE CHANGE
Except as disclosed in Disclosure Statement 3.8 provided by Quantum,
Quantum has not, on a consolidated basis, suffered any material adverse change
since December 31, 1997, and there has not been any condition, event, change or
occurrence that individually or in the aggregate, has had, or is reasonably
likely to have, a material adverse effect on Quantum. For purposes of this
Agreement, "Material Adverse Effect" means with respect to Quantum, a material
adverse effect upon the financial condition, results of operations, assets,
business or prospects of Quantum and the Quantum Subsidiaries, taken as a whole.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES
Neither Quantum nor any Quantum Subsidiary has any liability (contingent or
otherwise) that is material to Quantum on a consolidated basis or that, when
combined with all similar liabilities, would be material to Quantum on a
consolidated basis, except for liabilities incurred in the ordinary course of
business since the date of Quantum's most recent Financial Statements, nor are
there any circumstances that, to the knowledge of Quantum, are reasonably
expected to result in any such liability.
3.10 ENVIRONMENTAL MATTERS
(a) To the best of their knowledge, Quantum and the Quantum Subsidiaries
are in substantial compliance with all Environmental Laws. Neither Quantum nor
any Quantum Subsidiary has received any communication alleging that Quantum or
any Quantum Subsidiary is not in such compliance and, to the best knowledge of
Quantum and the Quantum Subsidiaries, there are no present circumstances that
would prevent or interfere with the continuation of such compliance.
(b) To the best knowledge of Quantum and the Quantum Subsidiaries, there
are no past or present actions, activities, circumstances, conditions, events or
incidents that could reasonably form the basis of any Environmental Claim or
other claim or action or governmental investigation that could result in the
imposition of any liability that would be material to Quantum on a consolidated
basis arising under any Environmental Laws against Quantum or any Quantum
Subsidiary or against any person or entity whose liability for any Environmental
Claim Quantum or any Quantum Subsidiary has or may have retained or assumed
either contractually or by operation of law, except as disclosed in Disclosure
Statement 3.10 provided by Quantum.
3.11 ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflected on the consolidated statements of
financial condition included in the Financial Statements of Quantum is or will
be adequate in the opinion of Quantum's management based on information
currently available in all material respects as of their respective dates under
the requirements of GAAP to provide for reasonably anticipated losses on
outstanding loans net of recoveries.
3.12 TAX MATTERS
(a) For the past five years, Quantum and the Quantum Subsidiaries, and each
of their predecessors, have timely filed all federal, state and local (and, if
applicable, foreign) tax returns required by applicable law to be filed by them
(including, without limitation, estimated tax returns, income tax returns,
information returns, and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all taxes required to be paid in respect
of the periods covered by such returns and, as of the Effective Date, will have
paid, or where payment is not required to have been made, will have set up an
adequate reserve or accrual for the payment of, all taxes for any subsequent
periods ending on or prior to the Effective Date, except as disclosed in
Disclosure Statement 3.12 provided by Quantum. Neither Quantum nor any of
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the Quantum Subsidiaries will have any material liability for my such taxes in
excess of the amounts so paid or reserves or accruals so established.
(b) For the past five years, all federal, state and local (and, if
applicable, foreign) tax returns filed by Quantum and the Quantum Subsidiaries
have been complete and accurate in all material respects. Neither Quantum nor
any of the Quantum Subsidiaries is delinquent in the payment of any material
tax, assessment or governmental charge, and, except as disclosed on Disclosure
Statement 3.12, none of them has requested any extension of time within which to
file any tax returns in respect of any fiscal year or portion thereof which have
not since been filed. No deficiencies for the tax, assessment or governmental
charge have been proposed, asserted or assessed (tentatively or otherwise)
against Quantum or any Quantum Subsidiary which have not been settled and paid.
There are currently no agreements in effect with respect to Quantum or any
Quantum Subsidiary to extend the period of limitations for the assessment or
collection of any tax. Except as disclosed on Disclosure Statement 3.12, as of
the date hereof, no audit, examination or deficiency or refund litigation with
respect to such return is pending.
3.13 LEGAL PROCEEDINGS
At the date hereof, there are no actions, suits, claims, governmental
investigations or proceedings instituted, pending or, to the best knowledge of
Quantum, threatened (or unasserted but considered by Quantum probable of'
assertion and which if asserted would have at least a reasonable probability of
a materially unfavorable outcome) against Quantum or any Quantum Subsidiary or
against any asset, interest, or right of Quantum or any Quantum Subsidiary, or
against any officer, director or employee of any of them that in any such case,
if decided adversely, would have a Material Adverse Effect on the financial
condition, results of operations, business or prospects of Quantum on a
consolidated basis, except as disclosed in Disclosure Statement 3.13 provided by
Quantum. To the knowledge of Quantum, there are no actual or threatened actions,
suits or proceedings which present a claim to restrain or prohibit the
transactions contemplated herein, or in the Articles of Merger.
3.14 COMPLIANCE WITH LAWS
Each of Quantum and the Quantum Subsidiaries is in compliance in all
material respects with all statutes and regulations applicable and material to
the conduct of its business (except for any violations not material to the
financial condition, results of operations, business or prospects of Quantum on
a consolidated basis), and neither Quantum nor any Quantum Subsidiary has
received notification from any agency or department of federal, state or local
government (i) asserting a violation or possible violation of any such statute
or regulation and which violation would have a material adverse effect on the
financial condition, results of operations, business or prospects, of Quantum on
a consolidated basis, (ii) threatening to revoke any license, franchise, permit
or government authorization or (iii) restricting or in any way limiting its
operations. Neither Quantum nor any Quantum Subsidiary is subject to any
regulatory or supervisory cease and desist order, agreement, written directive,
memorandum of understanding or written commitment, and none of them has received
any written communication requesting that they enter into any of the foregoing.
3.15 DEPOSIT INSURANCE AND OTHER REGULATORY MATTERS
(a) The deposit accounts of the Bank are insured by the Savings Association
Insurance Fund of the FDIC to the maximum extent permitted by law, and the Bank
has paid all premiums and assessments and filed all reports required under the
FDIA and under the National Housing Act prior to the enactment of FIRREA.
(b) The Bank is a member in good standing of the FHLB of Atlanta and owns
the requisite amount of stock in the FHLB of Atlanta.
(c) The Bank is a "qualified thrift lender," as such term is defined in the
HOLA.
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(d) The Bank is a qualified seller and servicer for the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation.
3.16 CERTAIN INFORMATION
The information relating to (i) Quantum and the Quantum Subsidiaries and
(ii) this Agreement and the transactions contemplated hereby, to be contained in
the proxy statement to be delivered to shareholders of Quantum in connection
with the solicitation of their approval of this Agreement and the Articles of
Merger and the transactions contemplated hereby and thereby, as of the date such
proxy statement is mailed to shareholders of Quantum and up to and including the
date of the meeting of shareholders to which such proxy statement relates (it
being understood that any supplement to such proxy statement as of a later date
shall be deemed to modify information as of an earlier date) will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.17 EMPLOYEE BENEFIT PLANS
(a) Except as disclosed on Disclosure Statement 3.17 provided by Quantum,
Quantum and the Quantum Subsidiaries have no stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans,
deferred compensation, consultant, bonus or group insurance contract or any
other incentive, welfare or employee benefit plan or agreement maintained for
the benefit of employees or former employees of Quantum or any Quantum
Subsidiary. Quantum has previously furnished true and complete copies of any
such plans, contracts or agreements identified on Disclosure Statement 3.17,
together with (i) the most recent actuarial and financial reports prepared with
respect to any qualified plans, (ii) the most recent annual reports filed with
any governmental agency, and (iii) all rulings and determination letters and any
open requests for rulings or letters that pertain to any qualified plan.
(b) Neither Quantum nor any other Quantum Subsidiary (or any pension plan
maintained by any of them and qualified under Section 401 of the Code) has
incurred any material liability to the Pension Benefit Guaranty Corporation or
the Internal Revenue Service with respect to any pension plan that Quantum or a
Quantum Subsidiary maintains for or with respect to any of their employees and
which is qualified under Section 401 of the Code except liabilities to the
Pension Benefit Guaranty Corporation pursuant to Section 4007 of ERISA, all of
which have been fully paid. To the best of Quantum's knowledge, no reportable
event under Section 4043(b) of ERISA has occurred with respect to any such
pension plan.
(c) Neither Quantum nor any Quantum Subsidiary participates in or has
incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from, a multi employer plan (as such term is defined in ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each "employee pension plan" (as defined in
Section 3(2) of ERISA) of Quantum or any Quantum Subsidiary which is intended to
qualify under Section 401 of the Code to the effect that such plan is qualified
under Section 401 of the Code and the trust associated with such employee
pension plan is tax exempt under Section 501 of the Code. To the best of
Quantum's knowledge, no such letter has been revoked or threatened to be revoked
and Quantum does not know of any ground on which such revocation may be based.
Neither Quantum nor any Quantum Subsidiary has a material liability under any
such plan that is not reflected on the consolidated balance sheet included in
the Financial Statements of Quantum as of December 31, 1997.
(e) To the best of Quantum's knowledge, no prohibited transaction (which
shall mean any transaction prohibited by Section 406 of ERISA and not exempt
under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any employee benefit plan maintained by Quantum or any Quantum
Subsidiary (i) which would result in the imposition, directly or indirectly, of
a material excise tax under Section 4975 of the Code, or (ii) the correction of
which would have a Material Adverse Effect on the financial condition, results
of operations, business or prospects of Quantum on a consolidated basis.
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(f) Neither Quantum nor any Quantum Subsidiary maintains any defined
benefit plans.
3.18 CERTAIN CONTRACTS
(a) Except for this Agreement and except as disclosed in Disclosure
Statement 3.18 provided by Quantum, neither Quantum nor any Quantum Subsidiary
is a party to a written or, to Quantum's knowledge, oral (i) consulting
agreement not terminable on thirty (30) days' or less notice, and providing for
payments in excess of $5,000 per annum, (ii) agreement with any director,
executive officer or other key employee of Quantum or any Quantum Subsidiary the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving Quantum or any Quantum Subsidiary
of the nature contemplated by this Agreement, (iii) agreement with respect to
any director, executive officer or employee of Quantum or any Quantum Subsidiary
providing for other than at-will employment, (iv) agreement or plan, including
any stock option plan, stock appreciation rights plan, restricted stock plan,
stock purchase plan, or any other non-qualified compensation plan, any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement, (v) agreement containing covenants that limit the ability of Quantum
or any Quantum Subsidiary to compete in any line of business or with any person,
or that involve any restriction on the geographic area in which or method by
which, Quantum (including any successor thereof) or any Quantum Subsidiary may
carry on its business (other than as may be required bylaw or any regulatory
agency), (vi) agreement which by its terms limits the payment of dividends by
Quantum or any Quantum Subsidiary, (vii) instrument evidencing or related to
indebtedness for borrowed money, whether directly or indirectly, by way of
purchase money obligation, conditional sale, lease purchase, guaranty or
otherwise, in respect of which Quantum or any Quantum Subsidiary is an obligor
to any person, which instrument evidences or relates to indebtedness (other than
deposits, bankers acceptances, and "treasury tax and loan" accounts established
in the ordinary course of business and transactions in "federal funds") or which
contains financial covenants or other restrictions (other than those relating to
the payment of principal and interest when due) which would be applicable on or
after the Effective Date to Acquiror, or any of the Acquiror Subsidiaries;
(viii) contract (other than this Agreement) limiting the freedom of Quantum or
Bank to engage in any type of banking or bank-related business permissible under
law; (ix) contract, plan or arrangement which provides for payments of benefits
payable to any participant therein or party thereto, and which might render any
portion of any such payments or benefits subject to disallowance of deduction
therefor as a result of the application of Code Section 280G; or (x) agreement
for investment banking services or services related to the sale, merger or
acquisition of Quantum or any Quantum Subsidiary. Quantum has disclosed on
Disclosure Statement 3.18 any material contracts not otherwise disclosed
pursuant to subparagraphs (i)-(x) above.
(b) All the contracts, plans, arrangements and instruments listed in
Disclosure Statement 3.18 are in full force and effect on the date hereof and
neither Quantum nor, to the knowledge of Quantum, any other party to any such
contract, plan, arrangement or instrument, has breached any provisions of, or is
in material default in any respect under any term of, any such contract, plans,
arrangement or instrument. Except as otherwise disclosed in Disclosure Statement
3.18, no plan, employment agreement, termination agreement, or similar agreement
or arrangement to which Quantum or any Quantum Subsidiary may be liable (i)
contains provisions which permit an employee or independent contractor to
terminate it without cause and continue to accrue benefits thereunder; (ii)
provides for acceleration in the vesting of benefits thereunder upon the
occurrence of a change in ownership or control of Quantum or any Quantum
Subsidiary; (iii) provides for benefits which may cause the disallowance of a
federal income tax deduction under Code Section 280G; or (iv) requires Quantum
or any Quantum Subsidiary to provide a benefit in the form of Quantum Common
Stock or determined by reference to the value of Quantum Common Stock.
(iii) Neither Quantum nor any Quantum Subsidiary is in default under
or in violation of any provision, and is not aware of any fact or circumstance
that has been or could be alleged to constitute a material default or violation,
of any note, bond, indenture, mortgage, deed of trust, loan agreement or other
agreement to which it is a party or by which it is bound or to which its
respective properties or assets is subject.
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3.19 BROKERS AND FINDERS
Except as set forth on Disclosure Statement 3.19 provided by Quantum,
neither Quantum nor any Quantum Subsidiary nor any of their respective officers,
directors or employees has employed any broker, finder or financial advisor or
incurred any liability for any fees, commissions or other transaction-based
compensation in connection with the transactions contemplated herein or in the
Articles of Merger (other than fees to attorneys, auditors, proxy solicitors and
similar professionals).
3.20 INSURANCE
Quantum and the Quantum Subsidiaries each currently maintain insurance in
the amounts and for the coverages set forth on Disclosure Statement 3.20
provided by Quantum. Within the past three years neither Quantum nor any Quantum
Subsidiary has received any notice of cancellation with respect to any insurance
policy or bond, and within the last three years, neither Quantum nor any Quantum
Subsidiary has been refused any insurance coverage sought or applied for, and
has no reason to believe that existing insurance coverage cannot be renewed as
and when the same shall expire, upon terms and conditions as favorable as those
presently in effect, other than possible increases in premiums or unavailability
of coverage that do not result from any extraordinary loss experience on the
part of Quantum or any Quantum Subsidiary.
3.21 LOANS
Each loan on the books and records of Quantum and any Quantum Subsidiary,
including unfunded portions of outstanding lines of credit and loan commitments,
was made in all material respects in accordance with customary lending standards
in the ordinary course of business, is evidenced in all material respects by
appropriate and sufficient documentation, and constitutes the legal, valid and
binding obligation of the obligator named therein subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
3.22 PROPERTIES
Quantum and the Quantum Subsidiaries have good and marketable title free
and clear of all liens, encumbrances, charges, defaults or equities (other than
equities of redemption under applicable foreclosure laws) to all of the material
properties and assets, real and personal, reflected on the consolidated
statements of financial condition included in the Financial Statements of
Quantum as of December 31, 1997 or acquired after such date, except (i) liens
for current taxes not yet due and payable, (ii) pledges to secure deposits and
other liens incurred in the ordinary course of its banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are not material
in character, amount or extent, (iv) dispositions and encumbrances for business,
and (v) as disclosed in the Financial Statements of Quantum. All material leases
pursuant to which Quantum or any Quantum Subsidiary, as lessee, leases real or
personal property, are valid and enforceable in accordance with their respective
terms.
3.23 MATERIAL INTERESTS OF CERTAIN PERSONS
Except as disclosed on Disclosure Statement 3.23 provided by Quantum, to
Quantum's knowledge, no officer or director of Quantum, or any associate (as
such term is defined in Rule 14a-1(a) under the Securities Exchange Act of 1934,
as amended) of any such officer or director, has any interest in any material
contract or property (real or personal), tangible or intangible, used in or
pertaining to the business of Quantum or any Quantum Subsidiary that are
required to be disclosed under Regulation S-K of the Securities and Exchange
Commission (the "SEC").
3.24 ACCURACY OF INFORMATION
The statements contained in this Agreement, Quantum Disclosure Statements,
or in any other written document delivered by or on behalf of Quantum pursuant
to the terms of this Agreement are true and correct, and to the knowledge
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of Quantum, such statements and documents do not omit any fact necessary to make
the statements contained therein not misleading.
3.25 BOOKS AND RECORDS
The books and records of Quantum and each Quantum Subsidiary have been, and
are being, maintained in accordance with applicable legal and accounting
requirements and reflect in all material respects the substance of material
events and transactions that should be included therein.
3.26 CORPORATE DOCUMENTS
Quantum has delivered to Acquiror true and complete copies of its Articles
of Incorporation and bylaws, as amended to date, which are currently in full
force and effect.
3.27 SHAREHOLDERS' AGREEMENT
Each shareholder of Quantum who is a director or executive officer of
Quantum or who has or shares the right to vote or dispose of an aggregate of 10%
or more of the outstanding shares of Quantum Common Stock or who is identified
on Disclosure Statement 3.27 provided by Quantum, has executed a written
Shareholders' Agreement in the form attached hereto as Annex B and the aggregate
number of shares of Quantum Common Stock which such persons are entitled to vote
represent in the aggregate at least 20% of the outstanding shares of Quantum
Common Stock.
3.28 YEAR 2000 MATTERS
Quantum has completed a review of Bank's computer systems to identify
systems that could be affected by the "Year 2000" issue and reasonably believes
it has identified all such Year 2000 problems. Quantum's management has
developed and commenced implementation of a plan to respond to this issue which
is designed to complete any required initial changes to its computer systems and
to complete testing of those changes by December 31, 1998, or, with respect to
coordination with a third party provider of computer services, such other data
that such third party provider mandates; provided, however, that the Bank's Year
2000 compliance shall be satisfactory to the OTS. Between the date of this
Agreement and the Effective Date, Quantum shall use commercially practicable
efforts to implement and/or continue to undertake such plan. Year 2000 issues
have not had, and are not reasonably expected to have, a Material Adverse Effect
on Quantum or any Quantum Subsidiary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to Quantum as follows:
4.1 ORGANIZATION, STANDING AND AUTHORITY OF ACQUIROR AND ACQUISITIONCO.
Acquiror is and, at the Effective Date, AcquisitionCo will be a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of their respective incorporation, each with full corporate power
and authority to carry on its business as it is now conducted and duly qualified
to do business in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such qualification or where the
failure to so qualify would have a Material Adverse Effect (as defined in
Section 4.5) on the financial condition, results of operations, business or
prospects of Acquiror.
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4.2 AUTHORIZED AND EFFECTIVE AMENDMENT
(a) Acquiror has all requisite corporate power and authority, and, at the
Effective Date, AcquisitionCo will have all requisite corporate power and
authority, to enter into this Agreement and (subject to receipt of all necessary
governmental approvals) to perform all of their obligations under this Agreement
and the Articles of Merger. The execution and delivery of this Agreement, and
consummation of the transactions contemplated hereby and by the Articles of
Merger, will have been duly and validly authorized by all necessary corporate
action in respect thereof on the part of Acquiror and AcquisitionCo. This
Agreement and the Articles of Merger constitute legal, valid and binding
obligations of Acquiror and AcquisitionCo, in each case enforceable against it
in accordance with their respective terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby or by the Articles of Merger, nor
compliance by Acquiror or AcquisitionCo with any of the provisions hereof or
thereof shall (i) conflict with or result in a breach of any provision of the
Articles of Incorporation or bylaws of Acquiror or AcquisitionCo, (ii)
constitute or result in a breach of any term, condition or provision of, or
constitute a default under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of Acquiror or
AcquisitionCo pursuant to, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation, or (iii) subject to any required
governmental approvals, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Acquiror or AcquisitionCo.
(c) Except for any necessary consents and approvals of, or any necessary
filings or registrations with, or notices to the SEC, the OTS, the FDIC, the
Department of Justice ("DOJ"), the Board of Governors of the Federal Reserve
System ("FRB") and the Federal Trade Commission ("FTC"), no consents or
approvals of or filings or registrations with, or notices to any public body or
authority are necessary on behalf of Acquiror and AcquisitionCo in connection
with (i) the execution and delivery by Acquiror of this Agreement and the
Articles of Merger by AcquisitionCo, or (ii) the consummation by Acquiror,
AcquisitionCo or Principal Life Insurance Company ("Principal Life") of the
transactions contemplated by this Agreement.
(d) As of the date hereof, Acquiror is not aware of any reasons why all
consents and approvals shall not be procured from all regulatory agencies having
jurisdiction over the transactions contemplated by this Agreement as shall be
necessary for consummation of the transactions contemplated by this Agreement.
As of the date hereof, Acquiror is not aware of any reason why all consents and
approvals shall not be procured from all other persons and entities whose
consent or approval shall be necessary for consummation of the transactions
contemplated by this Agreement.
(e) Acquiror and Acquiror's affiliates are not subject to any "presumptive
disqualifier" as defined in 12 C.F.R. ss. 574.7(g).
4.3 CERTAIN INFORMATION
The information relating to Acquiror and AcquisitionCo to be provided in
writing to Quantum for inclusion in the Proxy Statement to be delivered to
shareholders of Quantum in connection with the solicitation of their approval of
this Agreement, the Articles of Merger and the transactions contemplated hereby
and thereby, as of the date such Proxy Statement is mailed to shareholders of
Quantum and up to and including the date of the meeting of shareholders to which
such Proxy Statement relates (it being understood that any supplement to such
Proxy Statement as of a later date shall be deemed to modify information as of
an earlier date) will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statement therein, in light
of the circumstances under which they were made, not misleading.
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4.4 FINANCIAL STATEMENTS
The Financial Statements of Acquiror fairly present or will fairly present,
as the case may be, the consolidated financial position of Acquiror and the
Acquiror's Subsidiaries as of the dates indicated and the consolidated results
of operations, changes in shareholders' equity and changes in cash flows for the
periods then ended in conformity with GAAP applied on a consistent basis (except
as stated therein). As of their respective dates, neither such Financial
Statements, nor any subsequent Acquiror or Acquiror Subsidiary Financial
Statements contained or will contain any untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated therein or
necessary to make the statement made therein, in light of the circumstances
under which they were made, not misleading.
4.5 MATERIAL ADVERSE CHANGE
Acquiror has not, on a consolidated basis, suffered any material adverse
change since December 31, 1997, and there has not been any condition, event,
change or occurrence that individually or in the aggregate, has had, or is
reasonably likely to have, a Material Adverse Effect on Acquiror on a
consolidated basis. For purposes of this Agreement, "Material Adverse Effect,"
with respect to Acquiror, means a material adverse effect upon the financial
condition, results of operations, assets, business or prospects of Acquiror and
the Acquiror Subsidiaries, taken as a whole.
4.6 ABSENCE OF UNDISCLOSED LIABILITIES
Acquiror does not have any liability (contingent or otherwise) that is
material to Acquiror on a consolidated basis or that, when combined with all
similar liabilities, would be material to Acquiror on a consolidated basis,
except as disclosed in the Financial Statements of Acquiror and except for
liabilities incurred in the ordinary course of its business since the date of
Acquiror's most recent Financial Statements, nor are there any such
circumstances, that, to the knowledge of Acquiror, are reasonably expected to
result in any such liability.
4.7 TAX MATTERS
(a) For the five years preceding the date hereof, Acquiror has timely filed
all federal, state and local (and, if applicable, foreign) tax returns required
by applicable law to be filed by Acquiror (including, without limitation,
estimated tax returns, income tax returns, information returns, and withholding
and employment tax returns) and have paid, or where payment is not required to
have been made, have set up an adequate reserve or accrual for the payment of,
all taxes required to be paid in respect of the periods covered by such returns
and, as of the Effective Date, will have paid, or where payment is not required
to have been made, will have set up an adequate reserve or accrual for the
payment of, all taxes for any subsequent periods ending on or prior to the
Effective Date which are not being contested in good faith. Acquiror will not
have any material liability for any such taxes in excess of the amounts so paid
or reserves or accruals so established.
(b) For the five years preceding the date hereof, all federal, state and
local (and, if applicable, foreign) tax returns filed by Acquiror have been
complete and accurate in all material respects. Acquiror is not delinquent in
the payment of any tax, assessment or governmental charge. No deficiencies for
any tax, assessment or governmental charge have been proposed, asserted or
assessed (tentatively or otherwise) against Acquiror which have not been settled
and paid. There are currently no agreements in effect with respect to Acquiror
to extent the period of limitations for the assessment or collection of any tax.
4.8 LEGAL PROCEEDINGS
At the date hereof, there are no actions, suits, claims, governmental
investigations or proceedings instituted, pending or, to the best knowledge of
Acquiror, threatened (or unasserted but considered by Acquiror probable of
assertion and which if asserted would have a reasonable probability of a
materially unfavorable outcome) against Acquiror or any of its affiliates or
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against any asset, interest or right of Acquiror or any of its affiliates, or
against any officer, director or employee of any of them that, if decided
adversely, might have an adverse effect on the ability of the Acquiror to pay
the Merger Consideration. To the knowledge of Acquiror, there are no actual or
threatened actions, suits or proceedings which present a claim to restrain or
prohibit the transactions contemplated herein, or in the Articles of Merger.
4.9 COMPLIANCE WITH LAWS
Acquiror is in material compliance with all statutes and regulations
applicable and material to the conduct of its business (except for any
violations not material to the financial condition, results of operations,
business or prospects of Acquiror on a consolidated basis), and Acquiror has not
received notification from any agency or department of federal, state or local
government (i) asserting a violation or possible violation of any such statute
or regulation, and which violations would have a Material Adverse Effect on the
financial condition, results of operations, business or prospects of Acquiror,
(ii) threatening to revoke any license, franchise, permit or government
authorization or (iii) restricting or in any way limiting its operations.
4.10 BROKERS AND FINDERS
Except as disclosed in Disclosure Statement 4.10 provided by Acquiror,
Acquiror has not employed any broker, finder or financial advisor or incurred
any liability for any fees, commissions or other transaction-based compensation
in connection with the transactions contemplated herein or in the Articles of
Merger (other than fees to attorneys, auditors, proxy solicitors and similar
professionals).
ARTICLE V
COVENANTS
5.1 SHAREHOLDER MEETING
Quantum shall take all action necessary, including the preparation of the
Proxy Statement, to properly call and convene a meeting of its shareholders as
soon as practicable, and not later than 60 days, after the date that any
required filing with respect to the divestiture of control of Acquiror by
Principal Life is filed with the OTS, as contemplated by Section 5.3(b) hereof.
At such meeting, Quantum shall submit for the approval of its shareholders this
Agreement and the Articles of Merger.
5.2 RECOMMENDATIONS TO SHAREHOLDERS
Subject to compliance with the legal and fiduciary duties of such directors
and the receipt of an opinion from RP Financial, LLC dated on or immediately
prior to the date of mailing of the Proxy Statement for the meeting of
shareholders at which this Agreement and the Articles of Merger will be
considered and not subsequently withdrawn prior to such meeting of shareholders
to the effect that the Merger Consideration is fair to such shareholders from a
financial point of view, the Board of Directors of Quantum shall recommend that
its shareholders approve this Agreement and the Articles of Merger.
5.3 APPLICATIONS
(a) As promptly as practicable, Acquiror shall incorporate and organize
AcquisitionCo and shall submit applications for prior approval of the
transactions contemplated herein and in the Articles of Merger to the OTS, the
FDIC or any other federal, state or local government agency, department or body
the approval of which is required for consummation of the Merger. Quantum shall
have the right to review and comment on the portions of such applications and
amendments that relate directly to Quantum prior to their filing with any
regulatory agencies, and Acquiror promptly shall furnish Quantum with copies of
the non-confidential portions of such applications after filing of applications
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with these or any other regulatory agencies. Quantum and Acquiror each represent
and warrant to the other that all information concerning it and its directors,
officers, shareholders and subsidiaries included (or submitted for inclusion) in
any such application shall be true, correct and complete in all material
respects.
(b) Acquiror's application to the OTS will disclose an intention by
Principal Life to divest control, within the meaning of HOLA, and the
regulations promulgated thereunder, of Acquiror and requisite banking regulatory
applications required in connection with such proposed divestiture of control by
Principal Life will be filed within 45 days of the date Acquiror files the
necessary banking regulatory applications for prior approval of the transactions
contemplated herein and in the Articles of Merger.
5.4 BEST EFFORTS
Acquiror and Quantum shall each use its best efforts in good faith, and
each of them shall cause its subsidiaries to use their best efforts in good
faith, to (i) furnish such information as may be required in connection with and
otherwise cooperate in the preparation and filing of the documents referred to
in Sections 5.1 and 5.3 herein, and (ii) take or cause to be taken all actions
necessary or desirable on its part so as to permit consummation of the
transactions contemplated by this Agreement and the Articles of Merger at the
earliest possible date. Neither Acquiror nor Quantum shall take, or cause, or to
the best of its ability permit to be taken, any action that would substantially
delay or impair the prospects of consummating the transactions contemplated by
this Agreement and the Articles of Merger.
5.5 INVESTIGATION AND CONFIDENTIALITY
Quantum will keep Acquiror advised of all material developments relevant to
its business and to consummation of the Merger, and Acquiror will advise Quantum
of any material adverse change in its financial condition, results of
operations, business or prospects and all material developments that are likely
adversely to affect consummation of the Merger. Acquiror and Quantum each may
make or cause to be made such investigation of the financial and legal condition
of the other as such party reasonably deems necessary or advisable in connection
with the transactions contemplated herein, provided, however, that such
investigation shall be reasonably related to such transactions and shall not
interfere unnecessarily with the other and the other's advisors with such
financial data and other information with respect to its business and properties
as such other party shall from time to time reasonably request. No investigation
pursuant to this Section 5.5 shall affect or be deemed to modify any
representation or warranty made by, or the conditions to the obligations
hereunder of, either party hereto. Each party hereto shall, and shall cause its
directors, officers, attorneys, and advisors to, maintain the confidentiality of
all information obtained in such investigation which is not otherwise publicly
disclosed by the other party, said undertaking with respect to confidentiality
to survive any termination of this Agreement pursuant to Section 7.1 hereof.
5.6 PRESS RELEASE
Acquiror and Quantum shall agree with each other as to the form and
substance of any press release related to this Agreement and the Articles of
Merger or the transactions contemplated hereby and thereby, and consult with
each other as to the form and substance of other public disclosures related
thereto, provided, however, that nothing contained herein shall prohibit either
party, following notification to the other party, from making any disclosure
which its counsel deems necessary. Notwithstanding the above, Quantum shall not
issue any press release that names Acquiror, Principal Life, or their affiliates
without the approval of Acquiror, which approval shall not be unreasonably
withheld.
5.7 FORBEARANCE OF QUANTUM
Except with the prior written consent of Acquiror, which consent shall not
be unreasonably withheld, or as expressly contemplated herein, between the date
hereof and the Effective Date, Quantum shall not, and shall cause each Quantum
Subsidiary not to:
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(a) carry on its business, including the continued expansion of mortgage
banking activities, other than in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted or with respect to
continued expansion of mortgage banking activities consistent with the trend in
such expansion over the preceding 12 month period (and in the case of Bank other
than in accordance with prudent banking practices), or establish or acquire any
new subsidiary or cause to permit any subsidiary to engage in any new activity
or materially expand any existing activities;
(b) declare, set aside, make or pay any dividend or other distribution in
respect of its capital stock;
(c ) issue any shares of its capital stock other than pursuant to the
exercise of options granted under the Stock Option Plan to purchase no more than
7,700 shares of Quantum Common Stock Options which are outstanding at the date
of this Agreement;
(d) issue, grant or authorize any Rights or effect any recapitalization,
reclassification, stock dividend, stock split or like change in capitalization;
(e) amend its Articles of Incorporation or bylaws or equivalent documents;
impose, or suffer the imposition, on any share of stock held by Quantum or any
Quantum Subsidiary of any material lien, charge or encumbrance or permit any
such lien to exist; or waive or release any material right or cancel or comprise
any material debt or claim other than in the ordinary course of its business;
(g) fail to comply in any material respect with any laws, regulations,
ordinances, or governmental actions applicable to it and to the conduct of its
business except where Quantum or any Quantum Subsidiary is in good faith
contesting the validity of any of the foregoing, or where the failure to so
comply will not have a Material Adverse Effect on the financial condition,
results of operations, business or prospects of Quantum;
(h) increase the rate of compensation of any of its officers or employees,
or pay or agree to pay any bonus to, or provide any other employee benefit or
incentive to, any of its officers or employees, except in the normal course of
business and in a manner consistent with past practice; provided, however, that
no such increase shall be paid or provided to the President and Chief Executive
Officer except to the extent specifically identified in Disclosure Statement
5.7(h) provided by Quantum;
(i) enter into or substantially modify (except as may be required by
applicable law) any pension, retirement, stock option, stock purchase, stock
appreciation right, savings, profit sharing, deferred compensation, employment,
consulting, bonus, group insurance or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement related thereto,
in respect of any of its directors, officers or other employees;
(j) solicit or encourage inquiries or proposals with respect to, furnish
any information relating to, or participate in any negotiations or discussions
concerning, any acquisition or purchase of all or a substantial portion of the
assets of, or a substantial equity interest in, Quantum or any Quantum
Subsidiary or any business combination with Quantum or any Quantum Subsidiary
other than as contemplated by this Agreement (except where the failure to
furnish such information or participate in such negotiations or discussions
would constitute a breach of the fiduciary or legal obligations of Quantum's
Board of Directors to its shareholders) or otherwise agreed to by the parties;
or authorize or permit any officer, director, agent or affiliate of it to do any
of the above; or fail to notify Acquiror immediately if any such inquiries or
proposals are received by, any such information is required from, or any such
negotiations or discussions are sought to be initiated with, Quantum or any
Quantum Subsidiary;
(k) enter into or renew (i) any material agreement, arrangement or
commitment not made in the ordinary course of business consistent with historic
and prudent banking practices, other than agreements or memoranda of
understanding with regulatory authorities, or as set forth in Disclosure
Statement 5.7(k) provided by Quantum, (ii) any agreement, indenture or other
instrument relating to the borrowing of money by Quantum or any Quantum
Subsidiary or guarantee by Quantum or any Quantum Subsidiary or any such
obligation, except as disclosed in Disclosure Statement 5.7(k), and for deposits
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and advances from the FHLB of Atlanta in a manner consistent with past practice,
(iii) any agreement, arrangement or commitment relating to the employment of, or
severance of, a consultant (except such agreements, arrangements or commitment
with consultants as may be required to consummate the transactions contemplated
herein or to enforce Quantum's rights and remedies hereunder) or the employment,
severance, election or retention in office of any present or former director,
officer or employee, except as disclosed in Disclosure Statement 5.7(k), or (iv)
any contract, agreement or understanding with a labor union;
(l) change its lending, investment or asset liability management policies
in any material respect except as may be required by applicable law;
(m) change its method of accounting in effect at December 31, 1997, except
as required by changes in regulation or GAAP concurred in by its independent
certified public accountants, or change any of its methods of reporting income
and deductions for federal income tax purposes from those employed in the
preparation of its federal income tax returns for the year ended December 31,
1997, except as required by changes in law or regulation;
(n) take or cause to be taken any action which would disqualify the Merger
as a tax-free reorganization under Section 368 of the Code with respect to each
of the corporate partners to this Agreement and to the Articles of Merger; or
(n) agree to do any of the foregoing.
5.8 CONDUCT OF QUANTUM'S BUSINESS PRIOR TO THE EFFECTIVE DATE
Except with the written consent of Acquiror, which consent shall not be
unreasonably withheld, or as expressly contemplated herein, between the date
hereof and the Effective Date, Quantum shall, and shall cause each Quantum
Subsidiary to:
(a) conduct their business, maintain their properties and operate only in
the ordinary course of business consistent with past practices and maintain
Quantum's financial statements and reports in accordance with GAAP and maintain
Quantum Bank's regulatory reports in accordance with applicable requirements;
(b) conduct their business and operate only in accordance with sound
banking practices, including charging off all loans required to be charged off
by bank regulators and regulations, statutes and sound banking practices;
(c) remain in good standing with all applicable bank regulatory agencies
and preserve each of their existing banking locations;
(d) use their commercially reasonable efforts to maintain and preserve
intact their business organization, properties, leases and advantageous business
relationships and maintain good relationships with employees, and the goodwill
and business relationships with customers and others;
(e) maintain in full force and effect all of the insurance policies and
bonds covering the directors, officers, employees, properties, businesses and
employee plans of Quantum and the Quantum Subsidiaries;
(f) not knowingly take any action which would materially adversely affect
or delay the ability of Quantum, Bank or any other Quantum Subsidiary, Acquiror,
or AcquisitionCo to obtain any necessary approvals, consents or waivers of any
governmental authority or any other entity required for the transactions
contemplated hereby; and
(i) take such actions in the ordinary course of business consistent with
past practices to protect Bank's deposit base and prevent any excessive
withdrawals of deposits, provided, however, Bank shall not pay any interest on
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deposits which would exceed the maximum amount paid on like accounts with
comparable institutions in Bank's marketplace.
5.9 FORBEARANCES OF ACQUIROR
Except with the prior written consent of Quantum, which consent will not be
unreasonably withheld, between the date hereof and the Effective Date, Acquiror
shall not:
(a) enter into any agreement, understanding or commitment, written or
oral, with any other party which would impede in any material respect the
ability of Acquiror to perform the undertakings, commitments and obligations
arising under this Agreement and the Articles of Merger; or
(b) sell or lease any material portion of the assets and business of
Acquiror or any of its affiliates, except where any such sale or lease will not
materially and adversely affect the ability of Acquiror to pay the Merger
Consideration.
5.10 INDEMNIFICATION AND INSURANCE
(a) From and after the Effective Date, Acquiror shall indemnify, defend
and hold harmless each person who is now, or has been at any time prior to the
(date hereof or who becomes prior to the Effective Date, an officer, director or
employee of Quantum (the "Indemnified Parties") against all losses, claims,
damages, costs, expenses (including attorney's fees), liabilities or judgments
or amounts that are paid in settlement of or in connection with any claim,
action, suit, proceeding or investigation (each a "Claim") in which an
Indemnified Party is, or is threatened to be made, a party or a witness based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or employee of Quantum or any Quantum
Subsidiary if such Claim pertains to any matter or fact arising, existing or
occurring prior to the Effective Date (including, without limitation, the Merger
and other transactions contemplated by this Agreement), regardless of whether
such Claim is asserted or claimed prior to, or at or after, the Effective Date
(the "Indemnified Liabilities") to the full extent permitted under applicable
state or federal law in effect as of the date hereof or as amended applicable to
a time prior to the Effective Date and under Quantum's Articles of Incorporation
and Bylaws (and Acquiror shall pay expenses in advance of the final disposition
of any such action or proceeding to each Indemnified Party to the full extent
permitted by applicable state or federal law in effect as of the date hereof or
as amended applicable to a time prior to the Effective Date upon receipt of any
undertaking required by applicable law). Any Indemnified Party wishing to claim
indemnification under this Section 5.9(a) upon learning of any Claim shall
notify Acquiror (but the failure to notify Acquiror shall not relieve Acquiror
from any liability which they may have under this Section 5.10(a) shall except
to the extent such failure prejudices Acquiror) and shall deliver to Acquiror
the undertaking, if any, required by applicable law. The obligations of Acquiror
described in this Section 5.10(a) shall continue in full force and effect,
without any amendment thereto, for a period of not less than three years from
the Effective Date; provided, however, that all rights to indemnification in
respect of any Claim asserted or made within such period shall continue until
the final disposition of such Claim.
(b) From and after the Effective Date, the directors, officers and
employees of Quantum who become directors, officers or employees of Acquiror or
any of the Acquiror Subsidiaries, except for the indemnification rights set
forth in paragraph (a) of this Section 5.10, shall have indemnification rights
having prospective application only. The prospective indemnification rights
shall consist of such rights to which directors, officers and employees of
Acquiror are entitled under the provisions of the Certificate of Incorporation,
or similar governing documents, of Acquiror and the Acquiror Subsidiaries, as in
effect from time to time after the Effective Date, as applicable, and provisions
of applicable state and federal law as in effect from time to time after the
Effective Date.
(c) The obligations of Acquiror provided under paragraphs (a) and (b) of
this Section 5.10 are intended to benefit, and be enforceable against Acquiror
directly by, the Indemnified Parties, and shall be binding on all respective
successors and permitted assigns of Acquiror.
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(d) For a period of three years following the Effective Date, Acquiror
shall permit Quantum to purchase and keep in force, or at Acquiror's option to
provide comparable coverage, directors' and officers' liability insurance to
provide coverage for acts or omissions of the type and in the amount currently
covered by Quantum's existing directors' and officers' liability insurance for
acts or omissions occurring on or prior to the Effective Date, but only to the
extent such insurance may be purchased or kept in force on commercially
reasonable terms taking into account the cost hereof and the benefits provided
thereby.
5.11 EMPLOYEES
(a) Unless the employee is entitled to a larger payment under an
employment or severance agreement, or pursuant to paragraph (b) of this Section
5.11, each employee of Bank who is terminated by Acquiror during the first year
after the Effective Date for a reason other than cause and has been employed by
the Bank for a continuous period of (i) more than seven years prior to the
Effective Date, shall be entitled to receive a lump sum severance payment equal
to 40 weeks base salary as in effect at the time of this Agreement, (ii) more
than two years and up to seven years prior to the Effective Date, shall be
entitled to receive a lump sum severance payment equal to six months base salary
as in effect at the time of this Agreement, and (iii) less than two years prior
to the Effective Date, shall be entitled to receive a lump sum severance payment
equal to one week of base salary for each one month of continuous service, but
not to exceed two months base salary, as in effect at the time of this
Agreement.
(b) The employment agreement dated February 13, 1996 by and between Mr.
Richard W. Kraus, Quantum and the Bank (the "Employment Agreement") shall
terminate and be of no further force and effect as of the Closing. On or prior
to the Closing, Mr. Kraus shall furnish his written consent to such termination
of the Employment Agreement. Assuming such consent of Mr. Kraus is received by
Acquiror on or prior to Closing, at the Closing, Acquiror shall pay to Mr. Kraus
the full amount of payments to which Mr. Kraus is entitled under that Employment
Agreement upon a termination in connection with a change in control.
5.12 EMPLOYEE BENEFIT PLANS
(a) Each employee of Bank who becomes an employee of Acquiror or the
Acquiror Subsidiaries subsequent to the Merger shall be immediately entitled to
participate in all employee benefit plans sponsored by Acquiror or the Acquiror
Subsidiaries on the same terms and to the same extent as similarly situated
employees. Such employees shall receive credit for their period of service to
Bank for purposes of determining participation and vesting in all Acquiror
employee benefit plans.
(b) In the event Acquiror merges or consolidates any defined contribution
or defined benefit plan maintained by or for Quantum or a Quantum Subsidiary
into an Acquiror defined contribution or defined benefit plan, each
participating employee shall have an accrued benefit immediately after the
merger or consolidation which is equal to or greater than the employee's accrued
benefit immediately before the merger or consolidation. To the extent
permissible under the applicable provisions of the Code, in the event that on or
after the Effective Date, Acquiror terminates any defined contribution or
defined benefit plan maintained by or for Quantum or a Quantum Subsidiary, each
participating employee shall have the right or option either to receive a single
lump-sum payment equal to the benefits to which he or she is entitled under the
terminating plan, or to "roll over" such benefits to a defined contribution plan
maintained by Acquiror. In the event of any merger, consolidation or termination
of any defined benefit pension plan maintained by or for Quantum or a Quantum
Subsidiary, any excess funding shall be allocated to the accounts of
participating employees and shall in no event revert to Acquiror.
5.13 DIRECTORS
At the Effective Date, all of the directors of Bank shall resign and be
replaced by the directors of Acquisition Corp.
5.14 NOTIFICATION OF CERTAIN MATTERS
The Acquiror and Acquisition Co, on the one hand, and Quantum and Bank, on
the other hand, shall give prompt notice to the other of (a) the occurrence or
its knowledge of any event or condition that would cause any of its
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representations or warranties set forth in this Agreement not to be true and
correct in all material respects as of the date of this Agreement or as of the
Effective Date (except as to any representation or warranty which specifically
relates to an earlier date), or any of its obligations set forth in this
Agreement required to be performed at or prior to the Effective Date not to be
performed in all material respects at or prior to the Effective Date, including
without limitation, any event, condition, change or occurrence which
individually or in the aggregate has, or which, so far as reasonably can be
foreseen at the time of its occurrence, is reasonably likely to result in a
Material Adverse Effect on it; and (b) any action of a third party of which it
receives notice that might reasonably be expected to prevent or materially delay
the consummation of the transactions contemplated hereby, including, without
limitation, any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement.
5.15 DISSENTER'S RIGHTS
Any holder of Quantum Common Stock otherwise entitled to receive the Merger
Consideration for each of his or her shares shall be entitled to demand payment
of the fair cash value of such shares as specified in the laws of the State of
Maryland if the holder follows the procedures specified in the statutes. Those
shares shall hereafter be specified as "Dissenting Shares." Any Dissenting
Shares shall not, after the Effective Date, be entitled to vote for any purpose
or receive any dividends or other distributions and shall not be converted into
cash as provided in Section 2.1 hereof; provided, however, that shares of
Quantum Common Stock held by a dissenting shareholder who subsequently withdraws
a demand for payment, fails to comply fully with the requirements of the laws of
the State of Maryland, or otherwise fails to establish the right of such
shareholder to be paid the fair cash value of such shareholder's shares under
the laws of the State of Maryland shall be deemed to be converted into cash
pursuant to the terms and conditions specified herein. Quantum shall give
Acquiror prompt notice of any written demands for appraisal of any shares of
Quantum Common Stock, attempted withdrawals of any such demands, and any other
instruments served pursuant to the laws of the State of Maryland and received by
Quantum relating to shareholders' rights of appraisal. Quantum shall not, except
with the prior written consent of Acquiror, voluntarily make any payment with
respect to any demands for appraisals of any shares of Quantum Common Stock,
offer to settle or settle any such demands or approve any withdrawal of any such
demands.
5.16 CONTINUATION OF LEASES
Quantum shall use best efforts to ensure that all action is taken to enable
Acquiror to assume the leases currently held by Quantum and any Quantum
Subsidiary on its principal and branch office facilities. Quantum shall
cooperate with Acquiror to secure any approvals from the lessors that may be
required.
5.17 SUBSEQUENT FINANCIAL STATEMENTS
As soon as reasonably available, but in no event more than 20 days after
the end of each month ending after the date of this Agreement, Quantum will
deliver to Acquiror and Acquiror will deliver to Quantum their respective
monthly financial statements.
5.18 CURRENT INFORMATION
During the period from the date of this Agreement to the Effective Date,
Quantum will cause one or more of Bank's designated representatives to confer on
a regular and frequent basis (not less than monthly) with representatives of
Acquiror and to report (i) the general status of the ongoing operations of
Quantum and all Quantum Subsidiaries and (ii) the status of, and the action
proposed to be taken with respect to, loans held by Quantum or Bank which,
individually or in combination with one or more other Loans to the same borrower
thereunder, have an unpaid principal amount of $250,000 or more and are
non-performing assets. Quantum will promptly notify Acquiror of any material
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change in the normal course of business or in the operation of the properties of
Quantum or any of Quantum Subsidiaries and of any governmental complaints,
investigations or hearings (or communication indicating that the same may be
contemplated), or the institution or the threat of significant litigation
involving Quantum and the Quantum Subsidiaries, and will keep Acquiror fully
informed of such events.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT -- ACQUIROR AND QUANTUM
The respective obligations of Acquiror and Quantum to effect the
transactions contemplated by this Agreement shall be subject to satisfaction or
waiver of the following conditions at or prior to the Effective Date:
(a) The requisite approval by the shareholders of Quantum of this
Agreement and of the Articles of Merger.
(b) All approvals of the transactions contemplated herein from the OTS,
the FDIC and any other state or federal government agency, department or body,
the approval of which is required for the consummation of the Merger shall have
been received and all notice periods and waiting periods required after the
granting of any such approvals shall have passed and all such approvals shall be
in effect;
(c) Neither Acquiror, any affiliate of Acquiror, AcquisitionCo, Quantum or
any Quantum Subsidiary shall be subject to any order, decree or injunction of a
court or agency of competent jurisdiction which enjoins or prohibits
consummation of the transactions contemplated by this Agreement.
6.2 CONDITIONS PRECEDENT -- QUANTUM
The obligations of Quantum to effect the transactions contemplated by this
Agreement shall be subject to satisfaction of the following additional
conditions at or prior to the Effective Date unless waived by Quantum pursuant
to Section 7.4 hereof;
(a) The representations and warranties of Acquiror set forth in Article IV
hereof shall be true and correct in all material respects as of the date of this
Agreement and as of the Effective Date as though made on and as of the Effective
Date (or on the date when made in the case of any representation and warranty
which specifically relates to an earlier date), except as otherwise contemplated
by this Agreement or consented to in writing by Quantum (which consent shall not
be unreasonably withheld) and except for changes, none of which individually or
in the aggregate has a Material Adverse Effect on the financial condition,
results of operations, business or prospects of Acquiror;
(b) Acquiror shall have deposited with the Exchange Agent an amount of
immediately available funds equal to the aggregate Merger Consideration to be
paid hereunder.
(c) Acquiror shall have in all material respects performed all obligations
and complied with all covenants required to be performed by it on or prior to
the Effective Date;
(d) Acquiror shall have delivered to Quantum a certificate, dated the
Effective Date and signed by a senior officer, to the effect that the conditions
set forth in Section 6.1 (c), 6.2(a) and 6.2(b), to the extent applicable to
Acquiror, have been satisfied;
(e) There shall not have been a material adverse change in the ability of
the Acquiror to pay the Merger Consideration;
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(f) Quantum shall have received an opinion from counsel for Acquiror,
dated as of the Effective Date and which may be governed by and interpreted in
accordance with the Legal Opinion Accord of the American Bar Association Section
of Business Law (1991), to the effect that:
(i) Acquiror is a corporation validly existing and in good standing
under the laws of the State of Delaware;
(ii) the Agreement has been duly authorized, executed and delivered
by Acquiror and constitutes the valid and binding obligation of Acquiror,
subject to, as to enforceability, bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles;
(iii) except as disclosed in such opinion, to the knowledge of such
counsel there are no actions, suits, proceedings or investigations (public or
private) of any nature pending or threatened that challenge the validity or
propriety of the transactions contemplated by the Agreement and Articles of
Merger or which seek or threaten to restrain, enjoin or prohibit (or to obtain
substantial damages in connection with) the consummation of such transactions;
and
(iv) all regulatory and governmental approvals and consents which
are necessary to be obtained by Acquiror and the Acquiror Subsidiaries to permit
the execution, delivery and performance of the Agreement have been obtained.
(g) Acquiror and AcquisitionCo shall have furnished Quantum with such
certificates of their respective officers or others and such other documents to
evidence fulfillment of the conditions set forth in Section 6.1 and 6.2 as
Quantum may reasonably request.
6.3 CONDITIONS PRECEDENT -- ACQUIROR AND ACQUISITIONCO.
The obligations of Acquiror and AcquisitionCo to effect the transactions
contemplated by this Agreement shall be subject to satisfaction of the following
additional conditions at or prior to the Effective Date unless waived by
Acquiror pursuant to Section 7.4 hereof:
(a) The representations and warranties of Quantum set forth in Article III
hereof shall be true and correct in all material respects as of the date of this
Agreement and as of the Effective Date as though made on and as of the Effective
Date (or on the date when made in the case of any representation and warranty
which specifically relates to an earlier date), except as otherwise contemplated
by this Agreement or consented to in writing by Acquiror (which consent shall
not be unreasonably withheld) and except for changes, none of which individually
or in the aggregate has a Materially Adverse Effect on the financial condition,
results of operations, business or prospects of Quantum;
(b) Quantum shall have in all material respects performed all obligations
and complied with all covenants required to be performed by it on or prior to
the Effective Date;
(c) Quantum shall have delivered to Acquiror a certificate, dated the
Effective Date and signed by its Chairman or President, to the effect that the
conditions set forth in Sections 6.1(c), 6.3(a), and 6.3(b), to the extent
applicable to Quantum, have been satisfied;
(d) There shall not have been a material adverse change in the financial
condition, results of operations, business or prospects of Quantum on a
consolidated basis since December 31, 1997 (other than changes in banking or
savings and loan laws or regulations, GAAP, or interpretations thereof, that
affect the banking or savings and loan industries generally or changes in
general economic conditions that uniformly affect the banking and savings and
loan industries on a nationwide basis, including changes in the general level of
interest rates);
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(e) Acquiror shall have received an opinion or opinions from counsel to
Quantum, dated the Effective Date and which may be governed by and interpreted
in accordance with the Legal Opinion Accord of the American Bar Association
Section of Business Law (1991), to the effect that:
(i) Quantum is a corporation validly existing and in good standing
corporation under the laws of the State of Maryland and Bank is a federal
savings association duly incorporated and validly existing under the HOLA;
(ii) this Agreement and the Articles of Merger have been duly
authorized and approved by Quantum and this Agreement and the Articles of Merger
and the transactions contemplated thereby have been approved by the requisite
vote or consent of Quantum's shareholders and duly authorized, executed and
delivered by Quantum and this Agreement and Articles of Merger constitute the
valid and binding obligation of Quantum, subject to, as to enforceability,
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
(iii) the authorized capitalization of Quantum is as set forth in
Section 3.2 hereof;
(iv) to the knowledge of such counsel, except as otherwise disclosed
in such opinion, there are no actions, suits, proceedings or investigations of
any nature pending or threatened that challenge the validity or legality of the
transactions contemplated by this Agreement or Articles of Merger which seek or
threaten to restrain, enjoin or prohibit (or obtain substantial damages in
connection with) the consummation of such transactions;
(v) to the knowledge of such counsel, there is no litigation,
appraisal or other proceeding or governmental investigation pending or
threatened against or relating to the business or property of Quantum or any
Quantum Subsidiary which would have a Materially Adverse Effect on the financial
condition of Quantum, or of any legal impediment to the continued operation of
the properties and business of Quantum or any Quantum Subsidiary in the ordinary
course after the consummation of the transactions contemplated by this Agreement
and Articles of Merger; and
(vi) all regulatory and governmental approvals and consents which
are necessary to be obtained by Quantum and its Subsidiaries to permit the
execution, delivery and performance of the Agreement have been obtained.
(f) Quantum shall have furnished Acquiror with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Section 6.1 and 6.3 as Acquiror may reasonably request;
(g) There shall not have been any change in law or regulatory condition
imposed in connection with any required approval that would have the effect of
requiring Acquiror or any Acquiror Subsidiary to cease, terminate or divest any
of its activities or investments in order to acquire and/or maintain control of
the Bank.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 TERMINATION
This Agreement may be terminated:
(a) at any time on or prior to the Effective Date, by the mutual consent
in writing of the parties hereto;
(b) at any time on or prior to the Effective Date, by Acquiror in writing
if Quantum has, or by Quantum in writing if Acquiror has, in any material
respect, breached (i) any covenant or undertaking contained herein or in the
Articles of Merger, or (ii) any representation or warranty contained herein,
which breach, in the case of a breach by Quantum, has a Material Adverse Effect
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on the financial condition, results of operations, business or prospects of
Quantum or the ability of Quantum to effect the transactions contemplated by
this Agreement, or in the case of a breach by Acquiror materially and adversely
affects the ability of the Acquiror to pay the Merger Consideration or
consummate the transactions contemplated by this Agreement, in any case if such
breach has not been cured by the earlier of 30 days after the date on which
written notice of such breach is given to the party committing such breach or
the Effective Date; provided that it is understood and agreed that either party
may terminate this Agreement on the basis of any such material breach of any
representation or warranty contained herein, notwithstanding any qualification
therein, relating to the knowledge of the other party; and provided further that
a party seeking termination is not then in material breach of any
representation, covenant or other agreement contained herein;
(c) by either party in writing, if Acquiror or Principal Life is notified
by the OTS that the proposed method of divestiture of Principal Life's control
of Acquiror is not acceptable to the OTS as a divestiture of such control or the
OTS denies or furnishes written objection to an application to accomplish such
divestiture, and such action is not rescinded within 45 days;
(d) on the Effective Date, by either party hereto in writing, if any of
the conditions precedent to the obligations of such party to consummate the
transactions contemplated hereby have not been satisfied or fulfilled;
(e) by either party hereto in writing, if the Effective Date has not
occurred by the close of business on June 30, 1999; provided that this right to
terminate shall not be available to any party whose failure to perform an
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Merger to be consummated by June 30, 1999;
(f) at any time by either party hereto in writing, if such party
determines in good faith that any condition precedent to such party's
obligations to consummate the Merger is or would be impossible to satisfy and
such condition is not waived by the other party.
7.2 EFFECT OF TERMINATION
In the event this Agreement is terminated pursuant to Section 7.1 hereof,
both this Agreement and the Articles of Merger shall become void and have no
effect, except that (i) the provisions relating to confidentiality and expenses
set forth in Section 5.5 and 8.1, respectively, shall survive any such
termination, (ii) a termination pursuant to Section 7.1(b) shall not relieve the
breaching party from liability for an uncured willful breach of the covenant,
undertaking, representation or warranty giving rise to such termination, and
(iii) if this Agreement is terminated pursuant to Section 7.1(c) hereof, then
Acquiror agrees to pay $100,000 to Quantum and such amount shall constitute the
sole amount to which Quantum shall be entitled as a result of the termination of
this Agreement.
7.3 SURVIVAL OF REPRESENTATIONS; WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Agreement or the
Articles of Merger or in any instrument delivered pursuant hereto or thereto
shall expire on, and be terminated and extinguished at, the Effective Date other
than covenants that by their terms are to be performed after the Effective Date,
provided that no such representations, warranties or covenants shall be deemed
to be terminated or extinguished so as to deprive Acquiror or Quantum (or any
director, officer or controlling person thereof) of any defense at law or in
equity which otherwise would be available against the claims of any person,
including, without limitation, any shareholder or former shareholder of either
Acquiror or Quantum, the aforesaid representations, warranties and covenants
being material inducements to consummation by Acquiror and Quantum of the
transactions contemplated herein.
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7.4 WAIVER
Each party hereto by written instrument signed by an executive officer of
such party, may at any time (whether before or after approval of this Agreement
and the Articles of Merger by the shareholders of Quantum) extend the time for
the performance of any of the obligations or other acts of the other party
hereto and may waive (i) any inaccuracies of the other party in the
representations or warranties contained in this Agreement, the Articles of
Merger or any document delivered pursuant hereto, (ii) compliance with any of
the covenants, undertakings or agreements of the other party, or satisfaction of
any of the conditions precedent to its obligations, contained herein or in the
Articles of Merger or (iii) the performance by the other party of any of its
obligations set out herein or therein; provided that no such waiver or amendment
or supplement pursuant to Section 7.5 hereof executed after shareholders of
Quantum have approved the Merger shall reduce the Merger Consideration. Nothing
in this Section 7.4 will permit any party to waive any required regulatory
approvals or other conditions that cannot be waived as a matter of law.
7.5 AMENDMENT OR SUPPLEMENT
This Agreement and the Articles of Merger may be amended or supplemented at
any time by mutual agreement of Acquiror and Quantum subject to the provison to
Section 7.4 hereof. Any such amendment or supplement must be in writing and
approved by their respective boards of directors; provided that Acquiror may
unilaterally elect to modify the structure of the transaction so long as the
Merger Consideration is not reduced in amount due to such modification and such
modification is not likely to materially delay or jeopardize receipt of any
required regulatory approvals.
ARTICLE VIII
MISCELLANEOUS
8.1 EXPENSES
Each party hereto shall bear and pay all costs and expenses incurred by it
in connection with the transactions contemplated in this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel.
8.2 ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein or therein. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and thereto and their respective successors. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto and thereto, and their respective successors, any rights,
remedies, obligations or liabilities other than as set forth in Sections 5.11
and 5.12 hereof.
8.3 NO ASSIGNMENT
Neither of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.4 NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
overnight express or by registered or certified mail, postage prepaid, addressed
as follows:
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If to Quantum:
Quantum Financial Holdings, Inc.
4023 Annapolis Road
Baltimore, Maryland 21227
Attn: Richard W. Kraus
With a required copy to:
Housley Kantarian & Bronstein, P.C.
1220 19th Street, N.W.
Suite 700
Washington, D.C. 20036
Attention: James C. Stewart, Esquire
If to Acquiror
United Payors & United Providers, Inc.
2275 Research Boulevard
Sixth Floor
Rockville, Maryland 20850
Attention: S. Joseph Bruno
With a required copy to:
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Attention: Thomas J. Haggerty, Esquire
8.5 CAPTIONS
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement.
8.6 COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.7 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Maryland applicable to agreements made and entirely to be
performed within such jurisdiction except to the extent federal law may be
applicable.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
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Attest UNITED PAYORS & UNITED PROVIDERS, INC.
/s/ Joseph Mott By: /s/ Michael A. Smith
- -------------------------- --------------------------------
(SEAL) Michael A. Smith
Attest QUANTUM FINANCIAL HOLDINGS, INC.
/s/ Margaret A. McManus By: /s/ Richard W. Kraus
- -------------------------- --------------------------------
(SEAL) Richard W. Kraus
President
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EXHIBIT 10.17
FIRST AMENDMENT TO
AGREEMENT AND PLAN OF REORGANIZATION
This FIRST AMENDMENT, to the AGREEMENT AND PLAN OF REORGANIZATION, dated
October 16, 1998 (the "Agreement"), by and between QUANTUM FINANCIAL HOLDINGS,
INC. ("Quantum") and UNITED PAYORS & UNITED PROVIDERS, INC.
("Acquiror") is dated as of June 23, 1999.
WHEREAS, Quantum and Acquiror have entered into the Agreement providing for
the acquisition of Quantum by Acquiror, for an aggregate purchase price of $2.5
million (the "Merger Consideration") with each holder of Quantum Common Stock to
receive a per Share Merger Consideration equal to (i) the Merger Consideration,
minus the aggregate dollar amount to be paid to holders of outstanding options
to purchase Quantum Common Stock, (ii) divided by the number of outstanding
shares of Quantum Common Stock immediately prior to the Effective Date;
WHEREAS, a condition to the parties' obligations under the Agreement is the
receipt of all required regulatory approvals by Acquiror and the expiration of
all applicable waiting periods and as of the date hereof such regulatory
approvals have not been received;
WHEREAS, Section 7.1(e) of the Agreement provides that it may be terminated
by either party if the Effective Date has not occurred by the close of business
on June 30,1999 (the "Termination Date");
WHEREAS, the parties have determined that it will not be feasible to close
the Merger by the Termination Date and desire to extend the Termination Date in
order to allow additional time in which to secure regulatory approvals and in
consideration thereof Acquiror agrees to pay interest on the per Share Merger
Consideration for each day subsequent to June 30, 1999 until the Effective Date
and to make a loan to Quantum in the amount of $250,000 to be used to infuse
capital into its wholly owned subsidiary, Baltimore American Savings Bank,
F.S.B., (the "Bank"); and
WHEREAS, pursuant to Section 7.5 of the Agreement, the Agreement may be
amended by mutual agreement of the parties provided that no amendment executed
after the shareholders of Quantum have approved the Merger shall reduce the
Merger Consideration.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein contained, the parties hereto hereby mutually agree to amend the
Agreement as follows and to undertake the other obligations described herein:
1. The first sentence of Section 2.3 of the Agreement is hereby deleted and
replaced by the following:
The Merger Consideration shall be $2,500,000 provided that if the Effective
Date shall not have occurred by the close of business on June 30, 1999, the
Merger Consideration shall accrue interest for each day that elapses from June
30, 1999 until the Effective Date at thefollowing rates per annum:
<PAGE>
<TABLE>
<CAPTION>
If the Effective Date Occurs: The Rate Per
After Up to and Including Annum Shall Be:
<S> <C> <C>
June 30, 1999 July 31, 1999 7.5%
July 31, 1999 August 31, 1999 8.0%
August 31, 1999 September 30, 1999 8.5%
</TABLE>
and the sum of $2,500,000 plus the interest so accrued shall be the Merger
Consideration.
2. Paragraph (e) of Section 7.1 of the Agreement is hereby deleted and
replaced by the following:
(e) by either party hereto in writing, if the Effective Date has not
occurred by the close of business on September 30, 1999; provided that this
right to terminate shall not be available to any party whose failure to perform
an obligation under this Agreement has been the cause of, or resulted in, the
failure of the Merger to be consummated by September 30, 1999.
3. If the Effective Date shall not have occurred on or before June 30,
1999, the Acquiror agrees to loan Quantum the sum of $250,000 on an unsecured
basis to provide funds for a capital infusion by Quantum into the Bank. Such
loan shall not bear interest and shall not be due and payable until June 30,
2000.
4. Except as specifically set forth herein, the Agreement remains in full
force and effect. Should there by any ambiguity or conflict between the matters
expressed in this Amendment and the terms and conditions of the Agreement, the
parties intend that the provisions of this Amendment shall prevail and supercede
any such ambiguity or conflict. This Amendment may be executed in two or more
counterparts, all of which shall be considered one and the same agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be executed by its duly authorized officers as of the day and year written
above.
QUANTUM FINANCIAL HOLDINGS, INC.
By: /s/ Richard W. Kraus
----------------------------------
Its: Presidend and CEO
UNITED PAYORS & UNITED PROVIDERS, INC.
By: /s/ Edward S. Civera
----------------------------------
Its: Co-CEO and President
