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 event reported: December 31, 1996
DANIELSON HOLDING CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 1-6732 95-6021257
(State of Incorporation) (Commission File (IRS Employer
Number) Identification No.)
767 Third Avenue, New York, New York 10017
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 888-0347
Exhibit Index is
located on Page 4
Page 1 of 5
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Item 2. Acquisition or Disposition of Assets
On December 31, 1996, the Registrant consumated the sale of its trust
subsidiary, Danielson Trust Company ("Danielson Trust") to North American
Fiduciary Services, Inc. ("NAFS"), the parent of North American Trust Company
("NATCO") for a purchase price of $3,000,000.00. The sale was effectuated by the
merger of Danielson Trust into NATCO, with NATCO being the survivor. The
transaction was first announced on October 11, 1996.
Item 7. Financial Statements and Exhibits
A. Exhibits
The following exhibits are filed as part of this report.
10.1 Stock Sale Agreement dated October 10, 1996
between Danielson Holding Corporation and North American
Trust Company
10.2 Assignment and Assumption Agreement and
Acknowledgment dated December 16, 1996 by and between North
American Trust Company, North American Fiduciary Services,
Inc. and Danielson Holding Corporation
10.3 Merger Agreement dated December 31, 1996 by and
among North American Trust Company, North American Fiduciary
Services, Inc., Danielson Trust Company and Danielson
Holding Corporation
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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.
January 8, 1997 DANIELSON HOLDING CORPORATION
By: /s/ David M. Barse
David M. Barse
President
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EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DOCUMENT NUMBER
10.1 Stock Sale Agreement dated October 10, 1996
between Danielson Holding Corporation and
North American Trust Company 5
10.2 Assignment and Assumption Agreement and
Acknowledgment dated December 31, 1996 by
and between North American Trust Company,
North American Fiduciary Services, Inc. and
Danielson Holding Corporation X
10.3 Merger Agreement dated December 31, 1996 by
and among North American Trust Company,
North American Fiduciary Services, Inc., Danielson
Trust Company and Danielson Holding Corporation X
Page 4 of 5
STOCK SALE AGREEMENT
BETWEEN
DANIELSON HOLDING CORPORATION
AND
NORTH AMERICAN TRUST COMPANY
October 10, 1996
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TABLE OF CONTENTS
PAGE
ARTICLE I -- DEFINITIONS............................................ 1
1.1 Definitions....................................... 1
1.2 General........................................... 3
ARTICLE II -- CLOSING............................................... 4
2.1 Sale and Purchase of Shares....................... 4
2.2. Earnest Money Deposit............................. 4
2.3 Closing........................................... 4
2.4 Conditions Precedent.............................. 4
ARTICLE III -- SHAREHOLDER'S REPRESENTATIONS........................ 7
3.1 Organization and Standing......................... 7
3.2 Authority and Capacity............................ 7
3.3 Conflicts......................................... 7
3.4 Binding Agreement................................. 8
3.5 Title............................................. 8
3.6 Capital Stock..................................... 8
3.7 Subsidiaries...................................... 9
3.8 Financial Statements.............................. 9
3.9 Company Income Taxes.............................. 9
3.10 Company Property and Assets....................... 10
3.11 Absence of Certain Changes........................ 10
3.12 Intellectual Property............................. 11
3.13 Material Contracts and Obligations................ 11
3.14 Employment Arrangements........................... 11
3.15 Proceedings....................................... 13
3.16 Absence of Liabilities............................ 13
3.17 Shareholder's Disclaimer.......................... 13
3.18 Brokers........................................... 13
3.19 Conduct of Trust Business......................... 13
3.20 Books and Records................................. 14
3.21 Clients and Customers............................. 14
3.22 Regulatory Correspondence......................... 14
3.23 Insurance......................................... 14
3.24 Disclosed Interests............................... 15
ARTICLE IV -- BUYER'S REPRESENTATIONS.............................. 15
4.1 Organization...................................... 15
4.2 Authority and Capacity............................ 15
4.3 Conflicts......................................... 15
4.4 Binding Agreement................................. 15
4.5 Proceedings....................................... 16
4.6 Financing......................................... 16
4.7 Brokers........................................... 16
4.8 Buyer's Examination and Agreement to Investigate.. 16
4.9 No Inducements.................................... 17
4.10 No Public Market.................................. 17
4.11 Investment Intent................................. 17
4.12 Compliance with Securities Laws................... 17
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ARTICLE V -- SHAREHOLDER'S COVENANTS................................ 18
5.1 Conduct of the Business........................... 18
5.2 Access............................................ 20
5.3 Common Trust Funds................................ 20
5.4 Further Assurances................................ 20
ARTICLE VI -- COVENANTS AND INDEMNITIES............................. 20
6.1 Reasonable Efforts and Certain Obligations........ 20
6.2 Public Announcements.............................. 20
6.3 Certain Income Tax Matters........................ 21
6.4 Indemnification by Shareholder.................... 22
6.5 Buyer's Indemnity................................. 24
6.6 Notice............................................ 25
6.7 Procedures for Indemnification.................... 25
6.8 Assumption of Defense............................. 25
6.9 Confidentiality................................... 26
6.10 Danielson Name.................................... 26
6.11 Employee Matters.................................. 27
ARTICLE VII -- TERMINATION; EXPENSES; REMEDIES...................... 28
7.1 Termination....................................... 28
7.2 Effect of Termination............................. 28
7.3 Expenses.......................................... 29
7.4 Liquidated Damages................................ 29
ARTICLE VIII -- MISCELLANEOUS....................................... 29
8.1 Survival.......................................... 29
8.2 Non-Waiver........................................ 29
8.3 Amendment......................................... 29
8.4 Notices........................................... 30
8.5 Choice of Law..................................... 31
8.6 Entire Agreement.................................. 31
8.7 Third Party Beneficiaries......................... 31
8.8 Severability...................................... 31
8.9 Headings.......................................... 31
8.10 Counterparts...................................... 31
8.11 Further Assurances................................ 31
8.12 Successors and Assigns............................ 31
8.13 Cooperation....................................... 32
8.14 Company Obligations............................... 32
8.15 Method of Payment................................. 32
8.16 Waiver of Jury Trial.............................. 32
8.17 Attorneys' Fees................................... 32
8.18 Choice of Forum................................... 32
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EXHIBITS
A EQSF Side Letter
B Siciliano Side Letter
SCHEDULES
3A Disclosed Exceptions
3.12 Intellectual Property
3.13 Material Contracts and Obligations
3.14 Employment Arrangements
3.23 Insurance
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STOCK SALE AGREEMENT
THIS STOCK SALE AGREEMENT (the "Agreement") is entered into as of the
10th day of October, 1996, between DANIELSON HOLDING CORPORATION, a Delaware
corporation ("Shareholder"), and NORTH AMERICAN TRUST COMPANY, a California
corporation ("Buyer").
RECITALS
A. Danielson Trust Company, a California corporation (the "Company"),
is wholly-owned by Shareholder and is engaged in the trust company business.
B. Shareholder desires to sell to Buyer, and Buyer desires to purchase
from Shareholder, all of the issued and outstanding shares of capital stock of
the Company, on the terms and subject to the conditions set forth in this
Agreement.
AGREEMENT
The Parties agree as follows:
ARTICLE I -- DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following terms shall
have the meanings specified below: "Acquisition" means the purchase by Buyer of
the Shares.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person.
"Agreement" means this Stock Sale Agreement and all of its Exhibits and
Schedules, as they may be amended or supplemented in writing by the Parties.
"Business" means the business of the Company and includes, for purposes
of Shareholder's representations and warranties concerning material adverse
effect, the financial condition and prospects of the Company.
"Business Day" means any day other than a Saturday, Sunday or federal
holiday or any other day on which banking institutions in San Diego, California
or New York, New York are authorized by law or by executive order to be closed.
"Buyer's Representations" means the representations and warranties made by
Buyer in Article IV.
"Claims" means any claim, demand or legal proceeding.
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"Closing" means the consummation of the Acquisition.
"Closing Date" means the date of the Closing, determined under Section 2.3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" means the confidentiality agreement dated as of
September 6, 1996 between Buyer and the Company.
"Decision" means any judgment, decree, order, injunction or writ issued by
any court or governmental agency of competent jurisdiction.
"Department Approval" is defined in Section 2.4(a)(i).
"Disclosed Exceptions" means those items listed on Schedule 3A as
exceptions to Shareholder's Representations.
"Due Diligence Notice Date" means October 31, 1996.
"Effective Date" means the date of this Agreement as indicated at the top
of page 1.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Ernest Money Deposit" is defined in Section 2.2.
"Knowledge of Shareholder" means the actual knowledge of persons employed
by Shareholder and principally responsible for the sale of the Shares, without
conducting any specific inquiry or investigation of the Business, whether or not
such inquiry or investigation might have been reasonable or prudent.
"Law" means any statute, rule or regulation.
"Losses" means any and all costs, losses, liabilities, damages, and
expenses, including reasonable attorneys' fees, but net of any related tax
benefit realized by the Party incurring the Losses.
"Objection Notice" is defined in Section 2.4(c)(iv).
"Parties" means Shareholder and Buyer.
"Person" means an individual, corporation, partnership, association, trust
or any other entity or organization, including a governmental entity.
"Proceeding" means a court action, an administrative or regulatory action
or investigation, or an arbitration proceeding.
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"Purchase Price" means $3,000,000.
"Returns" means all returns, declarations, reports, statements, schedules
and other documents required to be filed with regard to Taxes, whether timely or
delinquent, and all related amendments.
"SDREM" and "SDREM Note" are defined in Section 3.6
"Shareholder Group" means the affiliated group of which Shareholder is the
common parent for federal income tax purposes.
"Shareholder's Representations" means the representations and warranties
made by Shareholder in Article III.
"Shares" means 5,000 shares of common stock of the Company, $125 par value,
owned by Shareholder.
"Subsidiary" of any entity means any Person in which the entity has,
directly or indirectly, an equity ownership interest in excess of 25%.
"Taxes" means all federal, state, local, foreign and other taxes,
assessments or other governmental charges, including income, business, sales,
use, transfer, franchise, license, withholding, employment, excise, occupation
or property taxes, together with any related interest, penalties or additions.
"Termination Date" means the date that is the earlier of six months from
the completion of the Company's audited financial statements for the year ending
December 31, 1996, or 12 months after the Closing Date.
"Updated Balance Sheet" and "Updated Financial Statements" are defined in
Section 3.8.
"Year-end Balance Sheet" and "Year-end Financial Statements" are defined in
Section 3.8.
General. 1.2
In this Agreement:
(a) Defined terms include the plural as well as the singular;
(b) All references to designated "Articles," "Sections," "Exhibits,"
"Schedules" and other subdivisions are to the designated Articles, Sections,
Exhibits, Schedules and other subdivisions of this Agreement, and all Exhibits
and Schedules are incorporated in this Agreement by this reference.
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(c) Pronouns of either gender or neuter include, as appropriate, the other
pronoun forms;
(d) The words "herein," "hereof" and "hereunder" and similar words refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision;
(e) The terms "includes" and "including" do not imply any limitation.
(f) All accounting terms used without specific definition have the meanings
under, and are used in accordance with, generally accepted accounting principles
as applied to trust companies.
ARTICLE II -- CLOSING
2.1 SALE AND PURCHASE OF SHARES. Upon the terms and subject to the
conditions in this Agreement, Shareholder shall sell, transfer and deliver to
Buyer, and Buyer shall purchase from Shareholder, the Shares for the Purchase
Price.
2.2 EARNEST MONEY DEPOSIT. Concurrently with the execution of this
Agreement, Buyer is depositing $50,000 in cash with Shareholder (the "Earnest
Money Deposit").
2.3 CLOSING. The Closing Date shall be December 31, 1996 or, if the
required Department Approval is not received prior to that date, the first
month-end occurring after that approval is received (the "Closing Date"). The
Closing shall take place at the offices of the Company.
2.4 CONDITIONS PRECEDENT.
(a) Conditions Precedent to Performance of Each Party. The obligations of
each Party under this Agreement are subject to the satisfaction, on the Closing
Date, of the following conditions precedent, unless, as to clauses (ii) and
(iii) below, satisfaction is waived by both Parties in writing:
(i) Department of Banking Approval. The Department of
Banking of the State of California shall have approved the
Acquisition under Sections 700 et seq., or Section 2058, of
the California Financial Code, without the imposition on
either Party of any materially burdensome requirement (the
"Department Approval").
(ii) No Injunctions. No Decision or Law restraining or
prohibiting the Acquisition shall be in effect.
(iii) No Proceeding. No Proceeding that questions the
validity or legality of the Acquisition shall have been
instituted and remain pending, or shall be threatened, on
the Closing Date.
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(b) Additional Conditions Precedent to Shareholder's
Performance. Shareholder's obligations under this Agreement
are subject to the satisfaction, on or prior to the Closing
Date, of the following additional conditions precedent,
unless waived by Shareholder in writing:
(i) Buyer's Deliveries. Shareholder shall have received from
Buyer:
(A) the Purchase Price, less the Ernest Money Deposit, by
wire transfer to the account designated in writing by
Shareholder;
(B) a copy of the resolutions adopted by Buyer's Board of
Directors approving this Agreement and the Acquisition,
certified by the Secretary of Buyer, and a copy of the
unanimous written consent approving this Agreement and the
Acquisition, signed on behalf of Buyer's shareholder by an
authorized officer of Buyer's shareholder;
(C) a certificate dated as of the Closing Date executed by
the Chief Executive Officer and the Chief Financial Officer
of Buyer certifying, to the best of their knowledge,
compliance with Sections 2.4(a)(ii) and (iii) and 2.4(b)(ii)
and (iii); and
(D) a certificate of Buyer's good standing, dated not more
than 10 calendar days prior to the Closing Date, from the
State of California.
(ii) Performance of Other Covenants. Buyer shall have
performed and observed in all material respects all other
covenants, obligations, agreements and conditions required
by this Agreement to be performed and observed by it prior
to or at the Closing.
(iii) Representations and Warranties True. All
representations and warranties of Buyer in this Agreement
shall be true and correct in all material respects at and as
of the Closing Date, and Buyer shall have performed all
agreements and covenants required by this Agreement to be
performed by it prior to or at the Closing Date.
(c) Additional Conditions Precedent to Buyer's Performance. Buyer's
obligations under this Agreement are subject to the satisfaction, on or prior to
the Closing Date, of the following additional conditions precedent, unless
waived by Buyer in writing:
(i) Shareholder Deliveries. Buyer shall have received from
Shareholder:
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(A) a certificate or certificates representing the Shares,
duly endorsed in blank for transfer or with attached
executed stock powers;
(B) the written resignations, effective on or prior to the
Closing Date, of all of the directors of the Company;
(C) a copy of the resolutions adopted by Shareholder's Board
of Directors approving this Agreement and the Acquisition,
certified by the Secretary of Shareholder;
(D) a certificate of Shareholder's good standing dated not
more than 10 calendar days prior to the Closing Date, from
the State of Delaware;
(E) a certificate dated as of the Closing Date, executed by
the President and Chief Financial Officer of Shareholder
certifying, to the best of their knowledge, compliance with
Sections 2.4(a)(ii) and (iii) and 2.4(c)(ii) and (iii);
(F) a side letter from EQSF Advisers, Inc. in the form of
Exhibit A;
(G) a side letter in the form of Exhibit B terminating the
Memorandum dated January 9, 1995 relating to A. Vincent
Siciliano's employment by the Company (the "Siciliano
Memorandum"), effective on the Closing Date; and
(H) a copy of the notice sent by the Company to the lessor
under the Company's Lease for 525 B Street dated September
10, 1993, advising the lessor of the Acquisition.
(ii) Performance of Other Covenants. Shareholder shall have
in all material respects performed and observed all other
covenants, obligations, agreements and conditions required
by this Agreement to be performed and observed by it prior
to or at Closing.
(iii) Representations and Warranties True. All
representations and warranties of Shareholder in this
Agreement shall be true and correct in all material respects
at and as of the Closing Date, and Shareholder shall have
performed all agreements and covenants required by this
Agreement to be performed by it prior to or at the Closing
Date.
(iv) Completion of Due Diligence. Buyer shall have
satisfactorily completed its due diligence on or before the
Due Diligence Notice Date, as evidenced by the absence of a
notice to the contrary (an "Objection Notice") given to
Shareholder; provided, however, that if such a notice is
given, this condition may be satisfied by (A) Buyer's
withdrawal of the Objection Notice within the five Business
Days after it was given, or (B) the Parties reaching a
mutually acceptable accommodation within that period.
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(v) Regulatory Approvals. Each regulatory approval required
for the Acquisition shall have been obtained without the
imposition of any condition that Buyer in good faith
determines to be materially burdensome on the conduct of the
business of Buyer or the Company as conducted at the time
such approval is granted; all such regulatory approvals
shall be in effect, and no Proceedings shall have been
instituted or threatened with respect thereto; all
applicable waiting periods with respect to such approvals
shall have expired; and all conditions and requirements
required by Law or by such regulatory approvals to be
satisfied on or before the Closing Date shall have been
satisfied.
ARTICLE III -- SHAREHOLDER'S REPRESENTATIONS
Except for the Disclosed Exceptions, Shareholder represents and
warrants to Buyer as follows as of the Effective Date and on the Closing Date:
3.1 ORGANIZATION AND STANDING. Shareholder is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of California, and has the requisite
corporate power to own, operate and lease its properties and to carry on its
business in all material respects as presently conducted. To the Knowledge of
Shareholder, the Company does not own or lease property or engage in any
activity in any jurisdiction in which the failure by the Company to qualify to
do business as a foreign corporation would reasonably be expected to have a
material adverse effect on the Business. Prior to the execution of this
Agreement, Shareholder made available to Buyer true and complete copies of the
Company's Articles of Incorporation and By-laws, each as amended to date and as
presently in effect, as well as minutes of meetings of the Company's Board of
Directors since March 26, 1993. The Company has delivered to Buyer: (a) a true
copy of the Company's Certificate of Authorization to engage in the trust
business in the State of California, which is in full force and effect, and (b)
a Certificate of Good Standing of the Company issued by the Superintendent of
Banks of the State of California.
3.2 Authority and Capacity. Shareholder has all requisite corporate power,
authority and capacity to enter into this Agreement and the related instruments
required to be executed by Shareholder, to perform its obligations under this
Agreement and those instruments, and to consummate the Acquisition.
3.3 CONFLICTS. So long as the Department Approval is obtained, the
execution, delivery and performance of this Agreement by Shareholder does not,
and the consummation of the Acquisition will not, (a) conflict with or violate
any material provision of any Law or Decision applicable to Shareholder or the
Company or the material properties and assets owned by the Company, (b) conflict
with or violate any of the terms of Shareholder's Certificate of Incorporation
or By-laws or the Company's Articles of Incorporation or By-laws, (c) result in
a breach of or constitute a default under any material indenture, agreement or
other instrument to which Shareholder or the Company is a party or by which
either is bound, other than, in all cases, a conflict or violation which would
not reasonably be expected to have a material adverse effect on the Business, or
(d) constitute a violation by the Company or Shareholder of any Law applicable
to the Company or the Shareholder or to the Company's property or the Business.
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3.4 BINDING AGREEMENT. Shareholder's execution and delivery of this
Agreement and all related instruments and the consummation of the Acquisition,
have each been duly and validly authorized by Shareholder. This Agreement is a
valid and binding obligation of Shareholder, enforceable against Shareholder in
accordance with its terms (except as enforcement may be limited by applicable
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditor's rights generally and general equitable principles).
3.5 TITLE. Shareholder owns the Shares beneficially and of record, free and
clear of all liens, claims and encumbrances of any kind or nature.
3.6 CAPITAL STOCK. The authorized capital stock of the Company consists of
10,000 shares of common stock, $125 par value per share. The Shares represent
all of the issued and outstanding capital stock of the Company. All of the
Shares have been duly authorized, validly issued and are fully paid and
non-assessable. There are not any (a) pre-emptive rights, outstanding
subscriptions, warrants, options, convertible securities or other rights
(contingent or otherwise) to purchase, redeem, exchange or otherwise require the
issuance of any shares of any class of stock of the Company or any interest
therein, (b) obligations to pay any dividend or make any other distribution in
respect of the Shares, or (c) agreements to do any of the above. Upon transfer
of the Shares to Buyer at the Closing, Buyer will own all of the outstanding
shares of the Company's capital stock and will obtain good and marketable title
to the Shares free and clear of all liens and encumbrances, other than as
created by or through Buyer. With respect to the $105,000 8.75% Convertible
Secured Promissory Note (the "SDREM Note") issued to the Company by San Diego
Real Estate Management ("SDREM"), the Company has not converted and will not
convert the SDREM Note into shares of SDREM capital stock. SDREM has not given
notice to the Company that any capital contributions are due from the Company
pursuant to Section 5.01 of that certain Provider Services Agreement dated as of
December 1, 1993. To the Knowledge of Shareholder, the Company has received from
SDREM all amounts to which the Company is entitled under its contract with
SDREM.
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3.7 SUBSIDIARIES. The Company has no Subsidiaries, nor does it have any
direct or indirect equity interest in any other Person.
3.8 FINANCIAL STATEMENTS. Prior to the execution of this Agreement,
Shareholder made available to Buyer (a) the unaudited balance sheet of the
Company as of December 31, 1995 ("Year-end Balance Sheet"), together with the
Company's unaudited statement of income for the fiscal year then ended
(collectively, with the Year-end Balance Sheet, the "Year-end Financial
Statements"); and (b) the unaudited balance sheet of the Company as of September
30, 1996 ("Updated Balance Sheet") and the Company's unaudited statements of
income for the nine months then ended (collectively, with the Updated Balance
Sheet, the "Updated Financial Statements"). To the Knowledge of Shareholder, the
Year-end Financial Statements and the Updated Financial Statements fairly
present the financial position of the Company and the results of its operations,
in accordance with generally accepted accounting principles applied on a
consistent basis, as of the dates and for the periods indicated; provided,
however, that the Updated Financial Statements are subject to normal year-end
adjustments, and neither the Year-end Financial Statements nor the Updated
Financial Statements contain notes.
3.9 COMPANY INCOME TAXES. The Company or Shareholder has timely filed or
obtained presently effective extensions with respect to all material income tax
Returns required by law to be filed by the Company, and has either duly paid all
Taxes indicated in such Returns as being due or will have made adequate
provisions for the payment thereof. To the Knowledge of Shareholder, the accrual
for income taxes reflected on the Year-end Balance Sheet and the Updated Balance
Sheets are reasonable in amount for the payment of all liabilities for all
income taxes (whether or not disputed) for which the Company is liable and which
are properly attributable to the operations of the Company through the date of
such Balance Sheet. There are no pending, or to the Knowledge of Shareholder,
threatened, audits, examinations, proceedings or claims by any taxing authority
for or relating to any material liability in respect of Taxes. No agreement has
been executed or filed with any taxing authority extending the period for
assessment or collection of any income taxes of the Company. To the Knowledge of
Shareholder, the Company has made all withholdings of Taxes required under all
applicable federal, state, local, foreign and other income tax Laws, and such
withholdings have either been paid to such respective governmental agencies or
set aside for such purpose. Shareholder is entitled to file a consolidated
federal income tax Return with the Company for the taxable year of the Company
which ends on the Closing Date.
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3.10 COMPANY PROPERTY AND ASSETS. The Company is the lawful owner of, and
has good and marketable title to, the material properties and assets it purports
to own, including all properties and assets reflected in the Year-end Financial
Statements (except to the extent such properties or assets have been disposed of
since the date of such financial statements), free and clear of all liens,
encumbrances, claims or security interests of any kind ("Imperfections"), except
for (a) Imperfections reflected in the Year-end Financial Statements or
subsequently created in the ordinary course of business, (b) Imperfections that
do not materially interfere with the present use by the Company of the property
subject thereto or affected thereby, (c) Imperfections for Taxes, or landlords',
mechanics', workmen's, materialmen's or similar liens, in each case that are not
delinquent or that are being contested in good faith, (d) Imperfections of
record, and (e) Imperfections that would not reasonably be expected to have a
material adverse effect on the Business. Any material properties or assets
leased by the Company are held under valid, subsisting and enforceable leases.
The assets owned or leased by the Company are adequate in all material respects
for the conduct of the Business as currently conducted.
3.11 ABSENCE OF CERTAIN CHANGES. Since the date of the Updated Balance
Sheet, there have not been (a) any occurrences, conditions or developments
relating specifically to the Business or the trust company industry (as opposed
to general economic, political or similar developments of an international,
national or regional character) that, singly or in the aggregate, have had or
would reasonably be expected to have a material adverse effect on the Business
(it being understood that monthly operating losses incurred between the
Effective Date and the Closing Date in the general range of amounts experienced
in the months leading up to the Effective Date will not, singly or with any
other occurrences, conditions or developments, constitute a material adverse
effect under this clause (a)), (b) any dividend or other distribution, or any
recapitalization, combination or subdivision with respect to, or any purchase or
redemption by the Company, of any shares of its capital stock; (c) any
indebtedness for borrowed money (including, without limitation, obligations to
guaranty indebtedness of another Person) incurred by the Company, except in the
ordinary course of business; (d) any sale, transfer, lease, mortgage, pledge,
grant of security interest in or other encumbrance on any of the Company's
material assets or cancellation of any claims of, or indebtedness or obligations
owing to, the Company, except in the ordinary course of business; (e) any
increase in salaries or other compensation or employee benefits with respect to
any employees of the Company, other than increases made in connection with
normal reviews of employees or increases which have not had or would not
reasonably be expected to have a material adverse effect on the Business; (f)
any purchase of or agreement to purchase any additional assets by the Company,
except in the ordinary course of business; (g) any actual labor stoppage which
has had or would reasonably be expected to have a material adverse effect on the
Business; or (h) any action taken by the Company, its directors or officers or
Shareholder to authorize any of the actions described in clauses (b), (c), (d),
(e) or (f) above.
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3.12 INTELLECTUAL PROPERTY. Schedule 3.12 lists the trademarks, service
marks, trademark and service mark applications, trade names, copyrights and
licenses presently owned or held by the Company. To the Knowledge of
Shareholder, the conduct of the Business as now conducted does not constitute an
infringement of or violation of any trademark, service mark, trade name,
copyright, license or trade secret of any other Person.
3.13 MATERIAL CONTRACTS AND OBLIGATIONS. Schedule 3.13 lists the following
types of written instruments to which the Company is a party or by which the
Company is bound as of the Effective Date: (a) each indenture, loan agreement or
other instrument related to indebtedness for borrowed money; (b) all real
property leases; (c) each agreement to which Shareholder or any individual
acting in the capacity of officer or director of the Company, or any Affiliate
of any such Person, is presently a party, including, without limitation, any
agreement or other arrangement providing for the furnishing of services or
rental of real or personal property from, or otherwise requiring payments to,
any such Person; and (d) each other agreement (including, without limitation,
leases for personal property) that requires future expenditures by the Company
in excess of $50,000, excluding long-term purchase contracts with suppliers that
the Company may cancel on not more than 30 days' notice. To the Knowledge of
Shareholder, all of the agreements and contracts listed in Schedule 3.13 are
valid, binding and in full force and effect. To the Knowledge of Shareholder,
there exist no defaults, events of default, or events, occurrences, or acts
which, with the giving of notice or the lapse of time, or both, would constitute
defaults under or with respect to any of the agreements or contracts listed on
Schedule 3.13, other than defaults or events of default that do not have or
would not reasonably be expected to have, either individually or in the
aggregate, a material adverse effect on the Business. The Company has not
received written notice, and no member of Company senior management has received
oral notice, from the other party to any contract listed on Schedule 3.13 that
such party intends to terminate that contract. Prior to the execution of this
Agreement, true and complete copies of all instruments described in subsections
(a) through (e) above were made available to Buyer.
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3.14 EMPLOYMENT ARRANGEMENTS.
(a) PLANS AND AGREEMENTS. Schedule 3.14(a) lists all of the
employee benefit plans in which the Company's employees participate (the
"Plans"). The Company (a) does not maintain or contribute to any other pension,
profit-sharing, stock bonus, welfare benefit or other "employee benefit plan" as
defined in Section 3(3) of ERISA and (b) is not a party to or required to make
payments under union contracts, collective bargaining agreements, employment
contracts, consulting contracts, distributor or sales representative contracts,
deferred compensation agreements or bonus or incentive plans or other similar
plans or arrangements currently in force and effect. All of the Plans intended
to be qualified under Section 401(a) of the Code have received favorable
determination letters from the Internal Revenue Service, and, to the Knowledge
of Seller, the Plans are in substantial compliance with applicable provisions of
ERISA and the Code. With respect to any Plan subject to Title IV of ERISA and
any defined benefit plan that is subject to Title IV of ERISA and maintained or
contributed to by Shareholder or any entity under common control with
Shareholder within the meaning of Section 414(b) or (c) of the Code (an "ERISA
Affiliate"): (i) no liability to the Pension Benefit Guaranty Corporation
("PBGC") has been incurred (other than for premiums not yet due); (ii) no notice
of intent to terminate any such plan has been filed with the PBGC or distributed
to participants and no amendment terminating any such plan has been adopted;
(iii) no proceedings to terminate any such plan have been instituted by the PBGC
and neither the Company, Shareholder nor any ERISA Affiliate has received notice
from the PBGC of an intent to institute such proceedings; (iv) no lien exists or
is expected to arise within 60 days with respect to any property of the Company
pursuant to Section 412(n) of the Code due to any failure to timely make any
contribution to such plan required by Section 412 of the Code; (v) to the
Knowledge of Seller, no "accumulated funding deficiency," within the meaning of
Section 412 of the Code, whether or not waived, exists; and (vi) no "reportable
event" within the meaning of Section 4043 of ERISA (for which the 30-day notice
requirement has not been waived by the PBGC) has occurred within the last 12
months. No Plan is a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA. Neither the Company, Shareholder nor any ERISA Affiliate
has incurred any "withdrawal liability" (as defined in Section 4201 et seq. of
ERISA) which has not been satisfied. No material liability to the PBGC with
respect to a Plan has been incurred by Shareholder or any ERISA Affiliate with
respect to any defined benefit plan (within the meaning of Section 3(35) of
ERISA) maintained or contributed to by Shareholder or any ERISA Affiliate which
has been terminated, which liability has not been satisfied. To the Knowledge of
Shareholder, no Plan has engaged in any transaction that would subject such Plan
or the Company to any material liability under Section 409 of ERISA or under
Section 4975 of the Code. No Plan provides health, life insurance, disability or
other similar welfare benefits to retirees or former employees, their spouses or
dependents, other than in accordance with Section 4980B of the Code or
applicable state continuation coverage law.
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(b) OPTIONS. Shareholder acknowledges that Buyer is not
assuming those options in Shareholder capital stock previously issued (or issued
in the future) to Company employees.
(c) SEVERANCE. As of the Effective Date, the Company has no
severance plan or policy, and no obligation to make severance payments to any
individual, other than under the Siciliano Memorandum. The Company expects to
incur and pay, prior to the Closing Date, the severance obligations described on
Schedule 3.14(c).
3.15 PROCEEDINGS. There is no Proceeding pending or, to the Knowledge of
Shareholder, threatened, nor is there any Decision outstanding against or
relating to the properties, assets or business of the Company which would
reasonably be expected to have a material adverse effect on the Business, nor,
to the Knowledge of Shareholder, is there any material basis for any such
Proceeding.
3.16 ABSENCE OF LIABILITIES. To the Knowledge of Shareholder, the Company
does not have any material liabilities, whether absolute or contingent, of the
type that are required to be reflected or provided for on a balance sheet
prepared in accordance with generally accepting accounting principles, which are
not fully reflected or provided for in the Updated Balance Sheet or in this
Agreement, other than those incurred in the ordinary course of business since
the date of the Updated Balance Sheet.
3.17 SHAREHOLDER'S DISCLAIMER. Except as expressly provided in this
Agreement, no representation or warranty of any kind or nature (express or
implied) is being made by Shareholder or the Company, or any of their respective
shareholders, directors, officers, employees or agents, with respect to the
Company, or the Business, or the nature, condition or value of any assets or
liabilities of the Company, including any representation or warranty regarding
the merchantability, fitness for a particular purpose, condition, use, quantity,
workmanship or existence of any asset, property, collateral, right or interest
of the Company. Buyer acknowledges that, except for the express representations
and warranties of Shareholder in this Agreement, the Acquisition is being made
"AS IS, WHERE IS."
3.18 BROKERS. Neither Shareholder nor the Company nor anyone acting on the
behalf of either of them has become obligated to pay any fee or commission to,
or any expenses of, any broker, finder or investment banker, or anyone else
acting in a similar capacity, in connection with the Acquisition.
3.19 CONDUCT OF TRUST BUSINESS. The Company is duly licensed as a
state-chartered trust company and has full power and authority to act as a
fiduciary, to provide fiduciary services, to engage in the trust business in
California and to conduct the Business as presently conducted. The Company's
Certificate of Authorization No. 1178, dated 10 December 1993 is in full force
and effect. To the Knowledge of Shareholder, the Company is not a party to or
bound by any agreement, contract, commitment, arrangement, instrument,
restriction or understanding with any other Person that (a) in any material way
limits or restricts its rights to exercise such power or authority, (b) provides
for the conduct of any part of the Company's trust business by any other Person
by license from the Company, or (c) provides for the conduct of any material
part of the trust business of the Company by license from any other
non-governmental Person. To the Knowledge of Shareholder, the Company has
conducted and presently conducts its business in all material respects in
accordance with its internal controls and guidelines and applicable Laws.
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3.20 BOOKS AND RECORDS. To the Knowledge of Shareholder, the books and
records of the Company have been maintained, and are being maintained, in all
material respects in accordance with applicable regulatory requirements.
3.21 CLIENTS AND CUSTOMERS. Shareholder has previously provided to Buyer a
complete and accurate list of all clients and customers of the Company as of
September 30, 1996 and all amounts under administration for such client or
customer. At Closing, Shareholder shall deliver to Buyer a revised list as of
the last business day of the month immediately preceding the month of the
Closing Date.
3.22 REGULATORY CORRESPONDENCE. Shareholder has provided Buyer with copies
of all material correspondence since January 1, 1995 between the Company and any
federal or state banking authority with respect to the Business, except
examination-related materials.
3.23 INSURANCE. Schedule 3.23 (a) lists each insurance policy under which
the Company or any Company director or officer (in such capacity) is or was a
beneficiary (other than the Terminated Policies described in Section 6.11), (b)
specifies any premiums paid by the Company under each policy, and (c) summarizes
the type and amount of coverage. All premiums payable under each such insurance
policy have been duly paid to date, and each such policy is in full force and
effect up to the full amount of coverage. To the Knowledge of Shareholder, there
are no facts that would afford a basis for such policy to be voided on account
of any act, omission or nondisclosure on the part of any party. To the Knowledge
of Shareholder, the Company is not in default with respect to any material
provision of any such insurance policy and has not failed to give any notice or
present any claim thereunder in due and timely fashion. To the Knowledge of
Shareholder, the execution and delivery of this Agreement and the consummation
of the Acquisition will not result in any violation of or default or loss of any
benefit under, or permit the termination of, any such insurance policy.
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3.24 DISCLOSED INTERESTS. To the Knowledge of Shareholder, no officer,
director or employee of the Company (nor any relative or spouse of such officer,
director or employee) has a direct or indirect interest in, any material
property, real or personal, tangible or intangible, used in or pertaining to the
Business. All capital contributions, cash infusions, loans or forebearances by
Shareholder to or for the benefit of the Company have been forgiven in full.
ARTICLE IV -- BUYER'S REPRESENTATIONS ARTICLE IV -- BUYER'S REPRESENTATIONS
Buyer represents and warrants to Shareholder as follows as of the Effective
Date and the Closing Date:
4.1 ORGANIZATION. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of California, has full
corporate power and authority to conduct its business as it is presently being
conducted and to own and lease its properties and assets, is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is necessary under the applicable Law
as a result of the conduct of its business or the ownership of its properties
and in which the failure to be so qualified would have a material adverse effect
on Buyer. To the knowledge of Buyer, the ownership of the Shares by Buyer will
not violate any Law.
4.2 AUTHORITY AND CAPACITY. Buyer has all requisite corporate power,
authority and capacity to enter into this Agreement and the related instruments
required to be executed by Buyer, to perform its obligations under this
Agreement and those instruments and to consummate the Acquisition.
4.3 Conflicts. So long as the Department Approval is obtained, the
execution, delivery and performance of this Agreement by Buyer does not, and the
consummation of the Acquisition will not, (a) violate any provision of any Law
or Decision applicable to Buyer, (b) conflict with or violate any of the terms
of (i) Buyer's Articles of Incorporation or By-laws, or (ii) any other governing
instrument relating to the conduct of Buyer's business or the ownership of its
properties, (c) result in a breach of or constitute a default or give rise to
any right of termination, cancellation or acceleration under any contract,
agreement, indebtedness, lease, commitment, license, sublicense, franchise,
permit, authorization, concession or other instrument to which Buyer is a party
or by which Buyer or any of its assets is bound, or (d) result in the imposition
of any material encumbrance, restriction or charge on the business of Buyer or
on any of the assets or properties of Buyer.
4.4 Binding Agreement. Buyer's execution and delivery of this Agreement and
all related instruments, and the consummation of the Acquisition, have each been
duly and validly authorized by Buyer. This Agreement is a valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms
(except as enforcement may be limited by applicable bankruptcy, insolvency or
other similar laws affecting the enforcement of creditor's rights generally and
general equitable principles).
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4.5 Proceedings. There is no Proceeding pending or, to the knowledge of
Buyer, threatened, nor is there any Decision outstanding against or relating to
Buyer or its properties, assets or business, which would reasonably be expected
to have a material adverse effect on Buyer's ability to meet its obligations
under this Agreement, nor does Buyer know of any material basis for any such
Proceeding. To Buyer's knowledge, no Proceeding has been instituted or
threatened by any Person or public authority seeking to restrain or prohibit or
to obtain damages with respect to the execution, delivery and performance of
this Agreement or the consummation of the Acquisition.
4.6 Financing. Buyer has, or will have through one or more of its
Affiliates, sufficient funds available to enable it to consummate the
Acquisition.
4.7 BROKERS. Neither Buyer nor anyone acting on its behalf has become
obligated to pay any fee or commission to or any expenses of any broker, finder
or investment banker, or anyone else acting in a similar capacity, in connection
with the Acquisition.
4.8 BUYER'S EXAMINATION AND AGREEMENT TO INVESTIGATE
(a) DUE DILIGENCE. Buyer understands and agrees that it is
solely responsible for conducting its due diligence investigation of the
Company. That investigation has included, and will include prior to the Due
Diligence Notice Date, extensive inquiries and review of information concerning
the Company, its business and its personnel. Accordingly, unless Buyer notifies
Shareholder to the contrary on or before the Due Diligence Notice Date, Buyer
and its agents shall be conclusively deemed to have (i) asked all the questions
of Shareholder and Company personnel they wanted to ask and received and
reviewed all the information they requested of Shareholder and the Company, and
(ii) completed Buyer's due diligence investigation of the Company to the full
satisfaction of Buyer.
(b) EXPERIENCE AND FINANCIAL RESOURCES. Buyer has such
knowledge and experience in business matters as to be capable of evaluating
independently the merits and risks of purchasing the Shares and operating the
Company. Buyer has the financial resources to sustain a complete loss of its
investment in the Shares and the Company.
(c) BUYER'S ANALYSIS. Buyer is not relying on any forecasted
operating results, budgets or valuations prepared by Shareholder or the Company,
but rather is relying upon its own plan of operation and financial forecasts for
the Company or such other information as it deems appropriate. Buyer
acknowledges that, independently and without reliance upon Shareholder or the
Company or any of their respective officers, directors, employees or agents and,
based upon such information as it has deemed appropriate, Buyer has made its own
analysis and decision to enter into this Agreement.
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(d) DISCLOSED EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES OF
SHAREHOLDER. Buyer has reviewed the Disclosed Exceptions and acknowledges them.
(e) COMPANY PROSPECTS. Buyer acknowledges that Shareholder
makes no representations or warranties whatsoever regarding the future
revenues or prospects of the Company.
4.9 NO INDUCEMENTS. Neither Buyer nor any Affiliate of Buyer or any of its
Subsidiaries nor any of their respective officers, directors, employees, agents
or partners has offered or paid any fee, remuneration, compensation or other
thing of value to any officer, director, employee or agent of the Company in
order to induce any such Person to recommend the Acquisition. Notwithstanding
the foregoing, Shareholder acknowledges that Buyer has had discussions with key
managerial personnel of the Company regarding future employment with the
Company.
4.10 NO PUBLIC MARKET. Buyer understands that no public market now exists
for the Shares and that it is likely that a public market may never exist for
the Shares.
4.11 INVESTMENT INTENT. Buyer is acquiring the Shares for investment
purposes only, for its own account, not as a nominee or agent, and not with a
view to, or for resale in connection with, any distribution of the Shares. Buyer
has no contract, undertaking, agreement or arrangement with any Person to sell,
transfer or otherwise distribute to such Person or to have any Person sell,
transfer or otherwise distribute for Buyer any of the Shares or any interest in
them. Buyer is not engaged, nor does Buyer plan to engage within the presently
foreseeable future, in any discussion with any Person relative to such sale,
transfer or other distribution of any of the Shares or any interest in them.
4.12 COMPLIANCE WITH SECURITIES LAWS. Buyer understands that the Shares
have not been, and will not be, registered under the Securities Act of 1933 or
qualified pursuant to the California Securities Law of 1968, by reason of
specific exemptions that depend upon, among other things, the bona fide nature
of the investment intent and the accuracy of Buyer's representations in this
Agreement. Buyer understands that the exemptions only exempt the sale of the
Shares to Buyer and not necessarily any sale or other disposition of the Shares
or any interest in them by Buyer.
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ARTICLE V -- SHAREHOLDER'S COVENANTS
5.1 CONDUCT OF THE BUSINESS. Except as contemplated by this Agreement, from
the Effective Date to the Closing Date, Shareholder agrees to use its best
efforts to cause the Company to conduct the Business in the ordinary and usual
course consistent with the conduct of the Business immediately prior to the
Effective Date, to continue to exercise the same degree of care that the Company
has exercised with respect to the Business immediately prior to the Effective
Date (including the preservation of the Company's relationships with its
employees, independent contractors, suppliers and other Persons with which the
Company does business). The Company's payment of liabilities accrued on the
Updated Balance Sheet, or accrued in the normal course of business between
October 1, 1996 and the Closing Date, shall be deemed for purposes of this
Section 5.1 to be in the ordinary course of business and consistent with past
practice. Shareholder will also use its best efforts to cause the Company not to
(except as contemplated or permitted by this Agreement or with the written
approval of Buyer, which approval shall not be unreasonably withheld):
(a) sell, transfer, pledge, dispose of or encumber, except in
the ordinary course of business, any of its assets (including, without
limitation, any indebtedness owed to or any claims held by it) which are
material, in the aggregate, to the Company's condition (financial or otherwise);
(b) declare, set aside or pay any dividend or distribution
payable in cash, stock, property or otherwise with respect to any Shares;
(c) redeem, purchase or otherwise acquire or offer to redeem,
purchase or otherwise acquire any Shares;
(d) transfer any assets or liabilities to any Affiliate
except in the ordinary course of business and consistent with past practice;
(e) acquire (by merger, consolidation or acquisition of stock
or assets) any Person or division thereof, convert the SDREM Note, or make any
material investment either by purchase of stock or securities, contribution to
capital or property transfer (provided that the Company may make investments for
its own account in publicly-traded securities in the ordinary course of
business);
(f) incur any indebtedness for borrowed money (other than in
the ordinary course of business consistent with past practice, except that the
Company shall not borrow from Shareholder), issue any debt securities, assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual or entity, make any loans or advances, incur
any other liabilities, obligations or commitments or forgive or discharge any
indebtedness, other than in the ordinary course of business;
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(g) except for arrangements or transactions entered into in
the ordinary course of business, adopt or amend any bonus, profit sharing,
thrift, savings, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust, plan,
fund or other arrangement for the benefit or welfare of any of its employees;
(h) other than in the ordinary course of business, consistent
with past practice, increase or authorize an increase in the compensation or
fringe benefits of any employee or pay or authorize any payment of any benefit
not required by any existing Plan or arrangement;
(i) issue, authorize, or propose the issuance of, additional
shares of its capital stock of any class or securities convertible into or
rights, warrants or options to acquire any such shares;
(j) split, combine or reclassify any shares of its capital
stock or declare, set aside or pay any dividend or distribution payable in cash,
stock, property or otherwise with respect to any of its capital stock.
(k) make any material change in any method of accounting or
auditing practice;
(l) hire any employees, directors, officers, agents or
representatives, or increase the salary of, or benefits or any other
compensation to any employees, directors, officers, agents or representatives,
except in the ordinary course of business and except that the Company may incur
and pay severance obligations as contemplated by Schedule 3.14(c);
(m) make any capital expenditure or commitment therefor,
except in the ordinary course of business;
(n) write off as uncollectible any notes or accounts
receivable, except in the ordinary course of business, none of which
individually or in the aggregate is material to the Company;
(o) cancel or waive any claims or rights of substantial value
to the Company, other than the cancellation of the Loan Agreement dated January
1, 1996 between Shareholder and the Company, and in the ordinary course of
business and consistent with past practices;
(p) make any payment of any kind to Shareholder or any of its
Affiliates; or
(q)agree, in writing or otherwise, to do any of the foregoing.
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5.2 ACCESS. Shareholder will, upon reasonable notice, cause the Company to
permit Buyer, its officers and employees, Buyer's lenders and their respective
representatives and agents reasonable access during normal working hours to the
Company's business, properties, assets, books, records and personnel.
5.3 COMMON TRUST FUNDS. Before the Closing, Shareholder will cause the
Company to do, in the Company's discretion, one of the following things in
connection with the 32 accounts previously transferred by the Company to
Montecito Bank and Trust (the "Accounts") and included in the Company's common
trust funds (the "Funds"): (a) restructure the Funds in accordance with
applicable Law, (b) rescind the transfer of the Accounts, or (c) implement
another solution acceptable to Buyer.
5.4 FURTHER ASSURANCES. After the Closing, at the request of Buyer, and
without any additional consideration, Shareholder shall execute and deliver and
cause the execution and delivery by its Affiliates of such further agreements,
documents or instruments as may be reasonably requested in order to give effect
to this Agreement, or to perfect or evidence Buyer's rights in connection with
Acquisition. Shareholder shall endeavor to cause such other Persons to execute
such agreements, document, consents, acknowledgments or instruments as may be
reasonably requested to give effect to this Agreement or to perfect or evidence
Buyer's rights in connection with the Acquisition.
ARTICLE VI -- COVENANTS AND INDEMNITIES
6.1 REASONABLE EFFORTS AND CERTAIN OBLIGATIONS. Subject to the terms and
conditions of this Agreement, each Party agrees to use its reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary or advisable under applicable Laws to fulfill its obligations
under this Agreement. Buyer shall take the lead in preparing and prosecuting an
application for the Department Approval, and Shareholder will cooperate and
cause the Company to cooperate in this effort. Buyer and Shareholder shall
promptly furnish financial statements and other information to each other and to
third parties as may be reasonably necessary to obtain any required waivers,
consents, releases, extensions, licenses or other approvals.
6.2 PUBLIC ANNOUNCEMENTS. The Parties will consult in advance concerning
any public announcements about the Acquisition. Both Parties intend to make
public announcements when this Agreement is signed and upon Closing.
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6.3 CERTAIN INCOME TAX MATTERS.
(a) Returns To Be Filed by Shareholder. Shareholder shall
prepare or cause to be prepared any Returns required to be filed for all income
tax periods ending on or before the Closing Date by the Company or that require
the inclusion of the Company. Except as otherwise provided in this Section 6.3,
Shareholder or the Company shall pay or cause to be paid all income taxes shown
or such Returns to be due and shall be entitled to any refunds attributable to
periods covered by such Returns (including any interest received with respect
thereto). Buyer shall cooperate with Shareholder and its Affiliates in the
preparation of the portions of such Returns pertaining to the Company. Buyer
shall cause the Company to execute and file all separate Returns of the Company
required to be prepared by Shareholder relating to tax periods ending on or
before the Closing Date.
(b) Buyer's Tax Payment. With regard to any Return to be
prepared by Shareholder pursuant to paragraph (a) above which is due after the
Closing Date, Buyer shall cause the Company to pay Shareholder when any income
taxes to which such Return relates are due an amount equal to any Taxes required
to be paid (but that were not previously paid) with respect to that Return.
Notwithstanding anything in this Agreement to the contrary, at Shareholder's
option, any amount owing under this Section 6.3(b) by Buyer to Shareholder may
be offset by Shareholder against its indemnification obligations, if any, under
Section 6.4(a).
(c) Returns to Be Filed By Buyer. Buyer shall prepare or cause
to be prepared any Returns required to be filed for all tax periods ending after
the Closing Date that require the inclusion of the Company. Buyer shall pay or
cause to be paid all Taxes to which such Returns relate for all periods covered
by such Returns. Unless otherwise required by applicable Law, Buyer shall not
file or permit to be filed an amended Return for the Company covering any period
(or portion thereof) ending on or before the Closing Date, without Shareholder's
prior written consent.
(d) Refunds. Buyer shall pay or cause to be paid to
Shareholder any refund of Taxes received by Buyer or the Company to which
Shareholder is entitled pursuant to Section 6.3 (a) within ten calendar days of
receipt thereof. Buyer shall provide Shareholder with any assistance as may
reasonably be requested by Shareholder in connection with obtaining any refund
of Taxes to which Shareholder is entitled.
(e) Tax Proceedings; Cooperation and Assistance. Shareholder
shall exercise, at its expense, complete control over the handling, disposition
and settlement of any governmental inquiry, examination, audit or proceeding
that could result in a determination with respect to income taxes due or payable
by Buyer or the Company and for which Shareholder may be liable under this
Agreement. Shareholder shall, however, promptly notify the Company if, in
connection with any such inquiry, examination, audit or proceeding, any
government authority proposes in writing to make any assessment or adjustment
with respect to liability for Taxes of the Company, which assessments or
adjustments could affect the liability of the Company for income taxes for
periods following the Closing Date. Buyer shall notify Shareholder in writing
promptly upon learning of any such inquiry, examination, audit or proceeding
relating to assessments or adjustments of income taxes which would affect the
liability of Shareholder hereunder. Each Party shall provide the other Party
with such assistance as may reasonably be requested by such other Party in
connection with the preparation of any Returns, or any inquiry, examination,
audit or proceeding by any taxing authority relating to liability for income
taxes of the Company or the Shareholder Group. Without limiting the foregoing,
Buyer will retain and cause the Company to retain, and Shareholder will retain,
until the applicable statutes of limitations (including any extensions) have
expired, copies of all Returns, supporting work schedules and other records or
information relevant to such Returns, to the possible filing of amended or
delinquent Returns, or to the possibility of a tax audit and examination and
possible litigation resulting therefrom, for all Tax periods (or portions
thereof) ending before or including the Closing Date, and will not destroy or
otherwise dispose of any such records without first providing the other Party
with a reasonable opportunity to review and copy them (with reimbursement for
reasonable expenses incurred in providing such assistance).
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(f) Termination of Existing Tax-Sharing Agreements. Except as
provided in this Agreement, all tax-sharing agreements or similar arrangements
with respect to or involving the Company shall be terminated effective as of the
Closing Date.
6.4 INDEMNIFICATION BY SHAREHOLDER.
(a) Indemnification. Subject to this Section 6.4, Shareholder
shall save, defend, indemnify and hold harmless Buyer and the Company from, and
shall promptly reimburse Buyer or the Company, as the case may be, for any and
all Losses or Claims incurred by or assessed against the Company or Buyer and
arising out of or resulting from:
(i) the inaccuracy in any material respect of any
representation or warranty made by Shareholder in this Agreement;
(ii) any unfunded current liabilities of, or upon any
termination whenever occurring any unfunded benefit liabilities
under, any defined benefit plan(including any applicable share of
any multiemployer pension plan) maintained or contributed to by
the Shareholder Group or any entity owning, controlling, owned by
or controlled by directly or indirectly, any of them, to the
extent such liabilities exceed the related reserve on the Updated
Balance Sheet, including without limitation all such Loss,
whether to the Internal Revenue Service, PBGC, the United States
Department of Labor or any other part, arising under the Code or
ERISA; or
(iii) the failure by Shareholder to perform or observe any
material Shareholder covenant in this Agreement.
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(b) Limits on Liability. Shareholder shall not indemnify or
hold harmless Buyer or the Company from, and neither Buyer nor the Company shall
make a Claim or seek reimbursement or indemnity from Shareholder for, any Losses
of Buyer that exceed in the aggregate the Purchase Price, other than Losses that
arise out of or result from the inaccuracy of Section 3.9, a breach of Section
6.3, or Shareholder's fraud.
(c) Exclusions from Liability. Notwithstanding anything else
to the contrary and in addition to any other limitations and exclusions in this
Agreement, Shareholder shall not indemnify or hold harmless Buyer or the Company
and neither Buyer nor the Company shall make a Claim or seek reimbursement or
indemnity from Shareholder for any of the following:
(i) Losses incurred after the Termination Date, with two
exceptions: (A) Losses resulting from a Proceeding as to which
Buyer is entitled to indemnification under Section 6.4(a) and
which is pending on the Termination Date; and (B) Losses covered
by Section 6.4(c)(vii);
(ii) Losses that arise from or in connection with any Claim
made by Buyer or the Company against Shareholder for
consequential damages, including, without limitation, lost
profits, lost investment or business opportunity, interest,
damages to reputation, punitive damages, exemplary damages,
treble damages, nominal damages and operating Losses, unless such
Losses are incurred by Buyer or the Company as a direct result of
a third party Claim asserted against Buyer or the Company;
(iii) Losses arising from or in connection with Claims
asserted against Buyer by any of its Affiliates or any of its or
their respective officers, directors, partners, employees,
agents, creditors or stockholders (beneficial or of record);
(iv) Losses or Claims with respect to which Buyer or the
Company fails in any material respect to comply with its
obligations under this Agreement; provided, however, that neither
Buyer's nor the Company's noncompliance shall limit Buyer's or
the Company's ability to recover Losses against which Shareholder
has indemnified Buyer or the Company under the terms of this
Agreement unless Buyer's or the Company's noncompliance (A)
materially and adversely affects Shareholder's ability to
administer a Claim made by Buyer or the Company against
Shareholder, in which case Shareholder may withhold payment on
Claims for which Buyer and the Company seek reimbursement from
Shareholder until Buyer and the Company comply with their
obligations hereunder, or (B) materially and adversely affects
the ability to cure a breach, mitigate Losses, defend a Claim or
otherwise results in a material Loss to Shareholder, in which
case Shareholder may refuse payment on Claims to the extent of
the Losses resulting from Buyer's and the Company's
noncompliance;
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<PAGE>
(v) Losses or Claims arising from or in connection with the
existence of any hazardous material in, on or under any property
owned or leased by the Company, whether the same is latent or
patent, known or unknown, and whether such existed in the past or
exists presently or in the future, including, without limitation,
Claims or Losses arising from or in connection with any
investigation, environmental audit, remediation or other
corrective action which may be required or desirable, any Claims
or Losses to Persons, property or natural resources, and
attorneys' and consultants' fees in connection with any of the
foregoing;
(vi) Losses which are not reasonable, customary and
necessary under the circumstances, other than damage awards made
by a court of competent jurisdiction or awarded in a final
non-appealable order of any other tribunal or agreed to in
connection with the final settlement of a dispute;
(vii) Losses against which Buyer is indemnified by
Shareholder under Section 6.3 or as a result of breach of Section
3.9, unless a Claim is asserted in writing by the appropriate
taxing authority prior to the earlier of (i) the expiration of
the applicable statute of limitations with respect to such Claim
or (ii) the 2nd anniversary of the Closing Date;
(viii) Losses or Claims, to the extent any state of facts
that otherwise might constitute a Loss or Claim is provided for
on the Updated Balance Sheet or to the extent any such Loss or
Claim is paid by insurance or to the extent secured by collateral
pledged prior to the Closing Date;
(ix) Losses that arise out of or result from the Disclosed
Exceptions listed on Schedule 3A;
(x) The first $100,000 of Losses or Claims for which
indemnification is sought pursuant to this Section 6.4; or
(xi) Losses arising from facts or circumstances of which the
Buyer was aware on or prior to the Closing Date, notwithstanding
that such facts or circumstances would constitute an inaccuracy
of any of Shareholder's Representations.
6.5 BUYER'S INDEMNITY. Buyer shall save, defend, indemnify and hold
harmless Shareholder and its officers, directors, principals, attorneys,
accountants, agents, financial advisors, employees and other representatives
(the "Seller Indemnified Parties") from, and shall promptly reimburse any Seller
Indemnified Parties for any Losses incurred by or assessed against any Seller
Indemnified Party and arising out of or resulting from:
Page 24 of 33
<PAGE>
(a) the inaccuracy in any material respect of any representation or
warranty made by Buyer in this Agreement;
(b) the operation of the Company after the Closing Date; or
(c) the failure by Buyer to perform or observe any material term or
provision of this Agreement.
6.6 NOTICE. If any Claim is instituted or asserted by any Person in respect
of which any Seller Indemnified Party or Buyer (an "Indemnified Party") may seek
indemnification pursuant to this Agreement or if any Indemnified Party believes
that it has sustained or incurred any Loss subject to indemnification, the
Indemnified Party shall promptly cause a written notice of the Claim or Loss to
be made to Buyer or Shareholder, as the case may be (the "Indemnifying Party")
(but the failure to give such notice shall not relieve the Indemnifying Party of
its indemnification obligation under this Agreement as long as the Indemnifying
Party is not materially prejudiced by the failure). The notice shall describe
the Claim or Loss, the amount of any claimed Loss, and the method of computation
of the Loss, with reasonable particularity.
6.7 PROCEDURES FOR INDEMNIFICATION. The Indemnifying Party shall pay such
Loss to the Indemnified Party within 30 days after receipt of the Indemnified
Party's notice of Loss, or shall, within such period, give the Indemnified Party
notice of any particulars in which it disputes the Loss claimed by the
Indemnified Party and pay to the Indemnified Party only that amount of the Loss
not in dispute. If the Indemnified Party disagrees with any disputed amount of
the claimed Loss, the Indemnified Party shall have all rights and remedies
available at law or in equity with respect to the Indemnifying Party's
obligations under this Agreement.
6.8 ASSUMPTION OF DEFENSE. Subject to Section 6.8(a) and (b), the
Indemnifying Party shall have the right, at its option and expense, to assume
the defense of any Claim.
(a) Conflicts. Notwithstanding the foregoing, the Indemnifying
Party shall not have the right to assume the defense of any Claim if
representation of both the Indemnifying Party and the Indemnified Party by the
same counsel would be inappropriate due to actual or potential differing
interests between them.
(b) Rights Upon Assumption. If the Indemnifying Party has
assumed the defense of a Claim, the following shall apply:
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<PAGE>
(i) The Indemnifying Party shall have the right to assume
the defense of and to conduct and control, through counsel
of its own choosing, any such Claim, but the Indemnified
Party may, at its election, participate in the defense of
any such Claim at its sole cost and expense; provided,
however, that if the Indemnifying Party fails to defend any
such claim, action, suit or proceeding, the Indemnified
Party may defend, through counsel of its own choosing, such
Claim, and may settle such Claim and recover from the
Indemnifying Party the amount of any such settlement or
judgment rendered therein which constitutes a Loss
indemnified against hereunder, as well as the reasonable
costs and expenses of the Indemnified Party's defense
allocable to such indemnified Loss;
(ii) The Indemnifying Party shall not be liable to the
Indemnified Party for the fees, costs or expenses of the
Indemnified Party's counsel or other expenses incurred by
the Indemnified Party in connection with participating in
the defense of such Claim; provided, however, that the
Indemnifying Party shall be liable in accordance with the
terms and conditions of this Agreement for (x) any such
fees, costs and expenses incurred prior to the time the
Indemnifying Party assumed such pursuit or defense and (y)
the reasonable costs of investigation and preparation
incurred by the Indemnified Party at the request of the
Indemnifying Party; and
(iii) The Indemnifying Party shall have no liability with
respect to any Loss arising or resulting from a compromise
or settlement of such Claim effected without its consent,
which consent shall not be unreasonably withheld.
(c) RIGHTS IF NO ASSUMPTION. If the Indemnifying Party does
not assume the defense of such Claim (whether because it elects not to or has no
right to), the Indemnifying Party shall have the right, at its sole cost and
expense, to monitor and participate in the defense of such Claim and to employ
its own counsel for that purpose.
6.9 CONFIDENTIALITY. If the Acquisition is not consummated, Buyer and its
representatives and Affiliates shall continue to be bound by the Confidentiality
Agreement.
6.10 DANIELSON NAME. Effective immediately after the Closing, Buyer will
amend the Company's Articles of Incorporation so as to eliminate the word
"Danielson" from the name of the Company. Buyer shall cause the Company to (a)
stop using the terms "Danielson," "Danielson Trust Company" or "DTC" in the
Company's marketing, correspondence, signage, checks, purchase orders,
employment applications, stationery, contracts and other trust company material
put in use by the Company after the Closing Date (except, for a period of 60
days after the Closing, for practically unavoidable uses in the ordinary course
of business incidental to the transition to a new name), (b) refrain from
conducting any business after the Closing Date under the Danielson name or
holding itself out as an Affiliate of Shareholder, and (c) notify all the
Company's customers and suppliers of the Company's change of name, promptly
after the Closing Date. However, the Company may, for a reasonable period after
the Closing Date, use the phrase "formerly Danielson Trust Company" (and phrases
of similar meaning) in Company documents, to the extent reasonably necessary in
connection with the transition to a new name.
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<PAGE>
6.11 EMPLOYEE MATTERS.
(a) Insurance and Related Benefits. The Company has the
medical and other employee-related insurance policies and benefit plans listed
in the attachment to Schedule 3.14. After the Closing, Buyer may cause the
Company to continue some or all of these plans (other than the Plans described
in Section 6.11(b)) or provide generally comparable coverage through plans made
available by Buyer or an Affiliate of Buyer. Any former employees of Company
that elected COBRA coverage and any employees of Company that are terminated on
or before the Closing Date shall be entitled to COBRA coverage after the Closing
Date under the Company's medical, dental and vision plans or, if those plans are
terminated, through plans made available by Buyer or an Affiliate of Buyer.
(b) Plans. As of the Closing Date, the Company will terminate
its participation in the KCP Holding Company 401(k) Salary Deferral Plan,
Employee Stock Ownership Plan of KCP Holding Company and Subsidiaries, and the
KCP Holding Company and Subsidiaries Cash Balance/Pension Plan ("Cash Balance
Plan"). Buyer will allow those persons employed by the Company on the Closing
Date to participate in a 401(k) plan offered by Buyer or a Buyer Affiliate. On
or before the Closing Date, Shareholder will cause the Company to contribute to
each plan described in the preceding sentence the Company's pro rata share of
the contributions due for the year (or a portion thereof) ending on the Closing
Date. In addition, in the case of the Cash Balance Plan, the Company will
contribute on or before the Closing Date the additional amount required to make
the portion of the Cash Balance Plan attributable to the Company fully funded as
determined in good faith by the plan's actuaries based on the funding methods
and assumptions adopted in prior years.
(c) Other Benefits. From and after the Closing Date, Buyer
will assume all vacation, sick leave and similar benefits accrued through the
Closing Date for the benefit of persons employed by the Company on the Closing
Date.
(d) Prior Service Credit. To the extent Buyer plans, policies
or similar benefits are made available to Company employees in substitution for
Company plans, policies or benefits to be terminated, Buyer's plans, policies or
benefits will give Company employees credit for all prior service with the
Company for all purposes, other than benefit accrual under a defined benefit
plan.
Page 27 of 33
<PAGE>
ARTICLE VII -- TERMINATION; EXPENSES; REMEDIES
7.1 TERMINATION. This Agreement and the transactions contemplated hereby
may be terminated as follows:
(a) by mutual written consent of Buyer and Shareholder at
any time prior to the Closing Date;
(b) by either Buyer or Shareholder, if, (i) on the Closing
Date, the conditions of Sections 2.4(a)(ii) or (iii) cannot be satisfied, or
(ii) Buyer gives an Objection Notice on or before the Due Diligence Notice Date
and (A) that notice is not withdrawn within the five Business Days after it is
given, and (B) the Parties do not otherwise reach a satisfactory accommodation
within that period;
(c) by Buyer, if any condition in Section 2.4(c) is not met
on or prior to the Closing Date (other than because of Shareholder's inability
to certify compliance with Sections 2.4(a)(i) and (iii)) and, as a result, the
Closing shall not have occurred; provided, however, that Buyer may not terminate
this Agreement pursuant to this Section 7.1(c) if Buyer is in breach in any
material respect of any of Buyer's Representations or of any of Buyer's
covenants or obligations in this Agreement;
(d) by Shareholder, if any condition in Section 2.4(b) of
this Agreement is not met on or prior to the Closing Date (other than because of
Buyer's inability to certify compliance with Sections 2.4(a)(ii) and (iii)) and,
as a result, the Closing shall not have occurred; provided, however, that
Shareholder may not terminate this Agreement pursuant to this Section 7.1(d) if
Shareholder is in breach in any material respect of any of Shareholder's
Representations or of any of Shareholder's covenants or obligations in this
Agreement; and
(e) by Shareholder, if the Closing has not occurred by
December 31, 1996; provided, however, that if the Department Approval has been
received prior to that date but contains terms or conditions that make it
practically impossible to close on that date, Shareholder shall not have the
right to terminate this Agreement under this Section 7.1(e) until the earlier of
February 28, 1997, or the date Shareholder reasonably determines that the terms
and conditions of the Department Approval cannot reasonably be satisfied by
February 28, 1997..
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement (other than Sections 6.9, 7.2,
7.3 and 7.4) shall forthwith become void and have no effect, without any
liability on the part of either Party other than as set forth in Section 7.4.
Page 28 of 33
<PAGE>
7.3 EXPENSES. Except as is otherwise provided in this Agreement, each Party
shall pay its own costs, expenses and attorneys' fees (including the fees and
expenses of any broker, finder, investment advisor, investment banker or other
professional advisor) incurred in connection with the preparation, negotiation
and closing of this Agreement and the consummation of the Acquisition.
Notwithstanding the foregoing, Shareholder shall pay all transfer taxes
associated with the transfer of the Shares.
Liquidated Damages. In the event of termination of this Agreement without
consummation of the Acquisition, Buyer's and Shareholder's remedies shall be
governed exclusively by this Section 7.4.
(a) Shareholder's Remedy. If this Agreement is terminated by
Shareholder pursuant to Section 7.1(d) or pursuant to Section 7.1(e) because of
Buyer's failure to perform its obligations under this Agreement, Shareholder
shall be entitled to retain the Earnest Money Deposit as and for liquidated
damages. Buyer and Shareholder shall then have no further obligation or
liability under this Agreement to one another.
(b) Buyer's Remedy. If this Agreement is terminated by Buyer
pursuant to Section 7.1(c), Buyer shall be entitled to have the Earnest Money
Deposit returned to it within five business Days after such termination,
together with an additional $50,000 in cash paid by Shareholder, as and for
liquidated damages. Upon the payment of these amounts, Shareholder and Buyer
shall have no further obligation or liability under this Agreement to one
another.
ARTICLE VIII -- MISCELLANEOUS
8.1 SURVIVAL. Except as otherwise expressly provided in this Agreement, the
representations, warranties and obligations contained in this Agreement shall
survive the Closing Date until the Termination Date, without regard to any
investigation made by the Parties, except that any claim for indemnification
made during the survival period shall survive until such claim is resolved.
8.2 NON-WAIVER. Except to the extent otherwise specifically provided in
this Agreement, the failure at any time to enforce any of its provisions shall
in no way be construed as a waiver of those provisions and shall not affect the
right of either Party to enforce each and every provision of this Agreement in
accordance with its terms.
8.3 AMENDMENT. This Agreement may not be amended except by the mutual
agreement of the Parties evidenced by a writing signed by each Party.
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<PAGE>
8.4 NOTICES. All notices and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given if delivered by
hand, by overnight courier, or by registered or certified mail, return receipt
requested, postage prepaid, addressed to the Parties at the following addresses
(or at such other addresses as shall be specified by like notice).
To Shareholder:
Danielson Holding Corporation
767 Third Avenue - Fifth Floor
New York, New York 10017
Attn: David M. Barse
President and
Chief Operating Officer
Telecopier No.: (212) 888-6704
With a copy to:
Ian Kirschner
General Counsel and Secretary
Danielson Holding Corporation
767 Third Avenue - Fifth Floor
New York, New York 10017
Telecopier No.: (212) 735-0003
To Buyer:
North American Trust Company
225 Broadway, Suite 400
San Diego, CA 92101
Attn: L. Mark Fingerlin
President and Chief Executive Officer
Telecopier No.: (619) 237-5528
With a copy to:
BERKELEY INTERNATIONAL
CAPITAL CORPORATION
650 California Street, Suite 2800
San Francisco, CA 94108-2609
Attn: Robert A. Cornman
General Counsel
Telecopier No.: 415-249-0553
If such notice or communication is served personally, service shall be
conclusively deemed made at the time of personal service. If such notice or
other communication is given by mail, service shall be conclusively deemed given
72 hours after deposit in the United States mail. If such notice or other
communication is given by overnight courier, or electronic transmission, service
shall be conclusively deemed made at the time of confirmation of delivery.
Page 30 of 33
<PAGE>
8.5 CHOICE OF LAW. To the extent federal law does not control, this
Agreement and the Parties' rights and obligations hereunder shall be governed by
and construed in accordance with the internal laws of the State of California
without giving effect to its choice of law principles. Nothing in this Agreement
shall require any unlawful action or inaction by either Party.
8.6 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules set
forth the entire agreement and understanding of the Parties regarding the
Acquisition and supersede all prior oral and written agreements, arrangements
and understandings relating to the Acquisition. There are no oral or written
agreements, understandings, representations or warranties between the Parties
and relating to the Acquisition other than those contained in this Agreement.
8.7 THIRD PARTY BENEFICIARIES. This Agreement is intended for the sole
benefit of the Parties and the Company and their respective successors and
assigns, and there shall be no other third-party beneficiaries.
8.8 SEVERABILITY. If any provision of this Agreement or the application of
any provision of this Agreement is for any reason declared by a court of
competent jurisdiction invalid, illegal or unenforceable, such provision shall
be construed and enforced as if it had been more narrowly drawn so as not to be
invalid, illegal or unenforceable, and the validity, legality and enforceability
of the remaining provisions of this Agreement shall not in any way be affected
or impaired thereby.
8.9 HEADINGS. The captions and headings in this Agreement are for
convenience of reference only and are not a part of this Agreement and shall not
be used in construing this Agreement.
8.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be considered one and the same instrument.
8.11 FURTHER ASSURANCES. Shareholder and Buyer shall each use all
reasonable efforts to obtain all requisite consents required in order to
consummate the Acquisition and to cooperate with one another to carry out to the
fullest extent possible the purposes of this Agreement.
8.12 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the Parties and their respective successors and assigns.
Notwithstanding the foregoing or anything to the contrary contained in this
Agreement, Buyer shall not transfer or assign any of its rights or obligations
under this Agreement to any Person without the prior written consent of
Shareholder.
Page 31 of 33
<PAGE>
8.13 COOPERATION. The Parties shall act reasonably and in good faith in
complying with their obligations under this Agreement.
8.14 COMPANY OBLIGATIONS. To the extent this Agreement imposes obligations
on the Company after the Closing, it shall be Buyer's responsibility, and Buyer
hereby covenants and agrees either to cause the Company to comply with such
obligations or to comply with such obligations itself on behalf of the Company.
8.15 METHOD OF PAYMENT. Unless otherwise stated, all payments by either
Party to the other Party under this Agreement shall be made in U.S. dollars, in
immediately available funds, by wire transfer as instructed, by notice
hereunder, by the Party who is to receive such payment, provided, however, that,
at the option of Shareholder, payments made to Buyer or the Company for Losses
payable in connection with Claims made under Section 6.4 may be made by check.
8.16 WAIVER OF JURY TRIAL. In any action or proceeding involving any
dispute under this Agreement, the Parties hereby waive any right to a trial by
jury.
8.17 ATTORNEYS' FEES. Should any Party institute any action or proceeding
at law or in equity to enforce any provision, including an action for
declaratory relief or for damages by reason of an alleged breach of any
provision of this Agreement, or otherwise in connection with this Agreement, or
any provision hereof, the prevailing party shall be entitled to recover from the
losing party reasonable attorneys' fees and costs for services rendered to the
prevailing Party in such action or proceeding.
8.18 CHOICE OF FORUM. No proceeding relating to this Agreement shall be
commenced or prosecuted in any state other than California or New York, and each
party irrevocably consents to the jurisdiction of the state and federal courts
in those two states.
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<PAGE>
IN WITNESS WHEREOF, each Party has caused this Agreement to be executed
by its duly authorized officer or agent effective as of the day and year first
above written.
DANIELSON HOLDING CORPORATION
By: /s/ David Barse
Its: President
NORTH AMERICAN TRUST CO.
By: /s/ Mark Fingerlin
Its: President
[CUSTODIAN SEAL]
Page 33 of 33
<PAGE>
EXHIBIT A
[LETTERHEAD OF EQSF ADVISERS, INC.]
Danielson Trust Company
525 B Street
16th Floor
San Diego, California 92101-4492
Ladies and Gentlemen:
The undersigned, EQSF Advisers, Inc. ("EQSF") is the
investment adviser to Third Avenue Value Fund, Inc. (the "Fund"), which
currently engages Danielson Trust Company (the "Trust Company") to act as the
Fund's custodian pursuant to a Custody Agreement dated as of September 9, 1993.
This will confirm our agreement that, so long as the fees and level of service
of the Trust Company (or its prospective successor, North American Trust
Company) remain at least as competitive with industry standards as they
currently are and its services are performed satisfactorily, EQSF will recommend
that the Trust Company (or such successor) continue to be retained as the Fund's
custodian for each of the next five years (ending December 31, 2001), it being
understood that the Board of Directors of the Fund, in the exercise of its
fiduciary obligations, retains the ultimate decision over custody arrangements
each year.
Very truly yours,
EQSF Advisers, Inc.
By:
Name:
Title:
ACKNOWLEDGED AND AGREED
Danielson Trust Company
By:
Name:
Title:
EXHIBIT A-1
<PAGE>
EXHIBIT B
[DANIELSON TRUST COMPANY LETTERHEAD]
October 10, 1996
Mr. A. Vincent Siciliano
President and Chief Executive Officer
Danielson Trust Company
525 B Street, 16th Floor
San Diego, California 92101-4492
Dear Vince:
This confirms that the Memorandum to you dated January 9, 1995
(the "Memorandum") concerning your employment by Danielson Trust Company (the
"Company") will terminate automatically, and without further liability or
obligation of either party under the Memorandum, effective upon the closing of
the sale of all of the stock of the Company to North American Trust Company.
If this is consistent with your understanding of our
agreement, please so indicate in the space provided below.
Very truly yours,
Martin J. Whitman
Chairman of the Board
AGREED AND ACCEPTED
AS OF THE ABOVE DATE
- --------------------
A. Vincent Siciliano
EXHIBIT B-1
ASSIGNMENT AND ASSUMPTION AGREEMENT AND ACKNOWLEDGMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT AND ACKNOWLEDGMENT (the
"Assignment and Acknowledgment") is made and entered into this 31st day of
December, 1996, by and between North American Trust Company, a California
corporation ("NATC"), North American Fiduciary Services, Inc., a California
corporation ("NAFS"), and Danielson Holding Corporation, a Delaware corporation
("DHC").
RECITALS
A. WHEREAS, DHC and NATC previously entered into that certain Stock Sale
Agreement, dated as October 10, 1996 (the "Agreement"), pursuant to which, among
other things, DHC agreed to sell all of the issued and outstanding shares of
capital stock of Danielson Trust Company, a California corporation ("DTC") to
NATC. Undefined capitalized terms as used in this Assignment and Acknowledgment
shall have such meanings ascribed to them as found in the Agreement;
B. WHEREAS, the Agreement (at Section 4.6) permits NATC or one of its
affiliates to fund the Acquisition;
C. Whereas, NAFS is the immediate parent to, and Affiliate of, NATC;
D. WHEREAS, the Agreement (at Section 8.12) permits the transfer and
assignment of rights under the Agreement, subject to prior written consent of
DHC;
E. WHEREAS, NAFS desires to fund the acquisition and succeed to the rights
and obligations of NATC under the Agreement;
F. WHEREAS, immediately following the Closing, NATC contemplates merging
with and into DTC, with NATC being the surviving entity (the "Post-Closing
Merger");
G. WHEREAS, in light of the Post-Closing Merger, NATC has requested the
written consent of DHC to permit NAFS to succeed to, and assume all rights and
obligations of, NATC pursuant to the Agreement.
NOW, THEREFORE, based on the foregoing premises, and other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. ASSIGNMENT AND ASSUMPTION.NATC hereby assigns to NAFS its rights and
obligations under the Agreement. NAFS hereby accepts such assignment of rights
and assumes such obligations.
Page 1 of 3
<PAGE>
2. ASSUMPTION OF REPRESENTATIONS AND WARRANTIES. NAFS hereby represents and
warrants to DHC that it is the immediate parent to, and Affiliate of, NATC. NAFS
further represents and warrants to DHC that all of the representations and
warranties made by NATC to DHC, as the same are found in the Agreement at
Article IV, Sections 4.1 through 4.12, inclusive, are hereby adopted as the
representations and warranties of NAFS made to DHC, as of the Effective Date and
the Closing Date, mutatis mutandis.
3. ASSUMPTION OF COVENANTS AND INDEMNITIES. NAFS hereby covenants to DHC
that all of the covenants and indemnities made by NATC to DHC, as the same are
found in the Agreement at Article VI, Sections 6.1 through 6.11, inclusive, are
hereby adopted as the covenants of NAFS made to DHC, as of the Effective Date
and on the Closing Date, mutatis mutandis.
4. ASSIGNMENT OF RIGHTS. DHC hereby consents to the assignment of rights
and obligations under and pursuant to the Agreement by NATC in favor of NAFS,
with NATC remaining responsible to see that its obligations under the Agreement
are fulfilled.
5. EARNEST MONEY DEPOSIT. NATC hereby acknowledges that the Earnest Money
Deposit was and shall be deemed to have been made by NAFS in favor of DHC.
6. REAFFIRMATION. Except as such terms or provisions are affected hereby,
the Agreement shall remain in full force and effect in accordance with its
terms. The assignments and acknowledgments contained herein are one-time
assignments and acknowledgments only, are made with respect to the specific
sections of the Agreement as specified, and are not to be construed, nor shall
they constitute, a waiver, modification, forbearance or amendment of any other
section or sections of the Agreement. Except as otherwise provided herein, the
Agreement is in all respects ratified and affirmed, and nothing contained in
this Assignment and Acknowledgment shall, or shall be construed to, modify,
invalidate or otherwise affect any provision of the Agreement.
7. SEVERABILITY. In the event that any provision of this Assignment and
Acknowledgment, or the application of any such provision to any of the parties
hereto or any set of circumstances shall be determined to be invalid, unlawful,
void or unenforceable to any extent, the remainder of this Assignment and
Acknowledgment, and the application of such provision to parties or
circumstances other that those as to which it is determined to be invalid,
unlawful, void or unenforceable, shall not be affected and shall continue to be
valid and enforceable to the fullest extent permitted by law.
8. COUNTERPARTS. This Assignment and Acknowledgment may be signed in any
number of counterparts, each of which shall be an original and all of which
taken together shall constitute a single agreement with the same effect as if
the signature thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement and Acknowledgment to be executed the day and the year first above
written:
NORTH AMERICAN TRUST COMPANY
/s/ Mark Fingerlin
By: Mark Fingerlin
Its: President
Page 2 of 3
<PAGE>
NORTH AMERICAN FIDUCIARY SERVICES, INC.
/s/ Ian Whitehead
By: Ian Whitehead
Its:
DANIELSON HOLDING CORPORATION
/s/ David Barse
By: David Barse
Its: President
Page 3 of 3
MERGER AGREEMENT
THIS IS A MERGER AGREEMENT (this "Merger Agreement") dated as of
December 18, 1996 by and among NORTH AMERICAN TRUST COMPANY, a California state
trust company ("NATCO"), with its principal place of business at 225 Broadway,
Suite 400, San Diego, California 92101, NORTH AMERICAN FIDUCIARY SERVICES, INC.,
a California corporation ("NAFS"), with its principal place of business at 650
California Street, San Francisco, California 94108, DANIELSON TRUST COMPANY, a
California state trust company ("DTC"), with its principal place of business at
525 B Street, 16th Floor, San Diego, California 92101, and DANIELSON HOLDING
CORPORATION, a Delaware corporation ("DHC"), with its principal place of
business at 767 Third Avenue, Fifth Floor, New York, New York 10017.
RECITALS
WHEREAS, NATCO and DHC are parties to that certain Stock Sale
Agreement, dated as of October 10, 1996 (the "Sale Agreement"). NATCO is a
wholly owned subsidiary of NAFS. DTC is a wholly owned subsidiary of DHC. The
Sale Agreement provides for the acquisition of DTC's stock by NATCO. For
business and regulatory reasons, that acquisition of DTC will be accomplished by
the merger of DTC into NATCO (with NATCO surviving) and the payment of the
specified consideration to DHC by NAFS. That merger will be consummated on the
terms of this Merger Agreement and in accordance with Sections 4880 through 4891
of the California Financial Code (the "Merger");
WHEREAS, NATCO has authorized capital stock of 10,000,000 shares of
common stock, $1.00 par value per share, of which at the date hereof 270,000
shares are outstanding.
WHEREAS, DTC has authorized capital stock of 10,000 shares of common
stock, $125.00 par value per share, of which at the date hereof 5,000 shares are
outstanding;
WHEREAS, the directors, or a majority of them, of each constituent
entity, respectively, deem it advisable and in the best interests of the
respective trust companies and their respective shareholders that the Merger be
so consummated; and
WHEREAS, this Merger Agreement is being executed on behalf of DHC to
facilitate the timely consummation of the transactions contemplated by the Sale
Agreement and the related Assignment and Assumption Agreement and Acknowledgment
among NATC, NAFS and DHC, and is not intended to modify those agreements in any
substantive way.
NOW, THEREFORE, NATCO, NAFS, DTC and DHC, in consideration of the
premises and of the mutual covenants and agreements contained herein and in the
Sale Agreement and of the benefits to accrue to them, hereby agree that the
constituent trust companies be merged into a single trust company which shall be
NATCO and hereby agree, prescribe and set forth (among other provisions) the
terms and conditions of the Merger, the mode of carrying the same into effect
and the manner and basis of converting the shares of each constituent trust
company on the terms and subject to the conditions set forth in this Merger
Agreement.
<PAGE>
ARTICLE I
MERGER
1.1 DTC shall be merged into NATCO in accordance with the applicable
provisions of Sections 4880 through 4891 of the California Financial Code upon
the filing of this Merger Agreement with the California State Superintendent of
Banks (the "Superintendent"), following prior approval by the Superintendent and
certification by the California Secretary of State. The Merger shall be
effective, subject to the completion of the above filings, at 5:01 P.M.,
TUESDAY, DECEMBER 31,1996 (the "Effective Time"). At the Effective Time, the
separate existence of DTC shall cease except to the extent provided by law in
the case of a corporation after its merger into another corporation and NATCO
shall continue under the laws of California as the surviving trust company (the
"surviving trust company").
1.2 The name of the surviving trust company shall be "North American
Trust Company."
1.3 The main office of the surviving trust company shall be 225
Broadway, Suite 400, San Diego, California 92101.
ARTICLE II
ARTICLES OF INCORPORATION AND
BYLAWS OF SURVIVING TRUST COMPANY
2.1 The Articles of Incorporation of NATCO as in effect immediately
before the Effective Time shall continue in full force and effect as the
Articles of Incorporation of the surviving trust company until thereafter duly
amended.
2.2 The Bylaws of NATCO as in effect immediately before the Effective
Time shall continue in full force and effect as the Bylaws of the surviving
trust company until thereafter duly amended.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS AND
OFFICERS OF SURVIVING TRUST COMPANY
3.1 All directors of NATCO serving immediately before the Effective
Time shall continue to serve for the terms to which they were elected before the
Effective Time.
3.2 All officers of NATCO serving immediately before the Effective Time
shall continue to serve for the terms to which they were elected before the
Effective Time.
ARTICLE IV
MANNER OF CONVERTING SHARES
OF STOCK OF CONSTITUENT TRUST COMPANIES
4.1 As of the Effective Time, all outstanding shares of capital stock
of DTC that are outstanding immediately before the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder hereof, be
converted into the right to receive a total of $3,000,000, representing $600.00
per share of common stock DTC.
ARTICLE V
SUBMISSION TO SHAREHOLDERS AND EFFECTIVENESS
5.1 This Merger Agreement shall be submitted for consideration and vote
by the shareholder of each constituent trust company as required by California
law. If adopted by the requisite votes of the shareholder of each constituent
trust company, this Merger Agreement shall be delivered to the Superintendent
and the California Secretary of State for filing. The officers of the
constituent trust companies shall execute all such other documents and take all
such other actions as may be necessary to effect the Merger in accordance with
this Merger Agreement.
<PAGE>
ARTICLE VI
TRANSFER OF ASSETS AND LIABILITIES
6.1 Upon and after the Effective Time, the surviving trust company
shall possess all the rights, privileges, powers and franchises, of a public as
well as of a private nature, and be subject to all the restrictions,
disabilities and duties, of the constituent trust companies; and all the rights,
privileges, powers and franchises of the constituent trust companies, and all
property, real, personal and mixed, and all debts due to either constituent
trust company on whatever account, as well for stock subscriptions as all other
things in action or belonging to each constituent trust company shall be vested
in the surviving trust company; and all property, rights, privileges, powers and
franchises, and all and every other interest, shall be thereafter as effectively
the property of the surviving trust company as they were constituent trust
companies, and the title to any real estate vested by deed or otherwise in
either constituent trust company shall not revert or be in any way impaired by
reason of the Merger; but all rights of creditors and all liens upon any
property of either constituent trust company shall be preserved unimpaired, and
all debts, liabilities and duties of the constituent trust companies shall
thenceforth attach to the surviving trust company, and may be enforced against
it to the same extent as if said debts, liabilities and duties had been incurred
or contracted by it.
6.2 If at any time after the Effective Time the surviving trust company
shall consider or be advised that any further deeds, assignments or assurances
in law or any other things are necessary, desirable or proper to vest, perfect
or confirm, of record or otherwise, in the surviving trust company, the title to
any property or rights of the constituent trust company acquired or to be
acquired by reason of, or as a result of, the Merger, the constituent trust
companies agree that the surviving trust company and its proper officers and
directors shall execute and deliver all such property, deeds, assignments and
assurances in law and do all things necessary, desirable or proper to vest,
perfect or confirm title to such property or rights in the surviving trust
company and otherwise carry out the purposes of this Merger Agreement, and that
the proper officers and directors of the constituent trust companies and the
proper officers and directors of the surviving trust company are fully
authorized in the name of the constituent trust companies or otherwise to take
any and all such action.
<PAGE>
ARTICLE VII
TERMINATION OF AGREEMENT AND ABANDONMENT OF MERGER
7.1 This Merger Agreement and the Merger contemplated hereby may be
terminated and abandoned, as provided in the Sale Agreement, at any time before
this Merger Agreement has been filed as provided herein, whether before or after
approval of this Merger Agreement by the shareholders of DTC and NATCO, or both
of them, and shall automatically terminate without further action by either of
the parties hereto if the Sale Agreement is terminated in accordance with its
terms.
7.2 At any time before the filing of this Merger Agreement as provided
herein, the parties hereto may, by written agreement approved by their Boards of
Directors, and with any required shareholder approval, (i) extend the time for
the performance of any of the obligations or other acts of the parties hereto,
(ii) waive compliance with any of the conditions, covenants or agreements
contained in this Merger Agreement or (iii) amend or modify any of the
provisions of this Merger Agreement.
7.3 If for any reason this Merger Agreement ceases to be binding upon
the constituent trust companies because of termination as provided herein or
otherwise, it shall thereafter be void without further action by the
shareholders of either constituent trust company.
ARTICLE VIII
MISCELLANEOUS
8.1 This Merger Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which counterparts collectively
shall constitute one instrument representing the Merger Agreement.
8.2 Except as otherwise provided in this Merger Agreement, nothing
herein expressed or implied is intended, or shall be construed, to confer upon
or give any person, firm or bank, other than the constituent trust companies and
their respective security holders and their successors and assigns, any rights
or remedies under or by reason of this Merger Agreement.
8.3 This Merger Agreement and the legal relations between the parties
shall be governed by and construed in accordance with the internal laws of the
State of California without taking into account provisions regarding choice of
law, except to the extent certain matters may be governed as a matter of law by
the law of the jurisdiction of organization o DHC.
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<PAGE>
IN WITNESS WHEREOF, NATCO, NAFS, Danielson and DHC have caused this
Merger Agreement to be signed as of the date first above written.
NORTH AMERICAN TRUST COMPANY DANIELSON TRUST COMPANY
By: /s/ Mark Fingerlin By: /s/ A. Vincent Siciliano
L. Mark Fingerlin A. Vincent Siciliano
President and Chief President and Chief
Executive Officer Executive Officer
By: /s/ Julie Duncan By: /s/ Carlee Harmonson
Julie Duncan Carlee Harmonson
Assistant Secretary Assistant Secretary
NORTH AMERICAN FIDUCIARY SERVICES, INC. DANIELSON HOLDING CORPORATION
By: /s/ Ian K. Whitehead By: /s/ David M. Barse
Ian K. Whitehead David M. Barse
Vice President President and Chief
Operating Officer
By: /s/ Robert A. Cornman By: /s/ Ian Kirschner
Robert A. Cornman Ian Kirschner
Assistant Secretary Secretary
