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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: April 20, 1998
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HOUSEHOLD INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-8198 36-3121988
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation Number)
2700 Sanders Road, Prospect Heights, Illinois 60070
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 847/564-5000
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Item 5. Other Events.
On April 7, 1998, Household International, Inc. ("HI")
announced that it had reached a merger agreement with
Beneficial Corporation ("Beneficial"). A Form 8-K
dated April 7, 1998 relating to the merger was
previously filed with the Commission. Attached as an
exhibit hereto is the Agreement and Plan of Merger
among HI, Household Acquisition Corporation II and
Beneficial Corporation, dated as of April 7, 1998.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
Exhibit
No. Description
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2.1 Agreement and Plan of
Merger among Household
International, Inc.,
Household Acquisition
Corporation II and
Beneficial Corporation
dated as of April 7, 1998.<PAGE>
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SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
HOUSEHOLD INTERNATIONAL, INC.
----------------------------
(Registrant)
By: /s/ John W. Blenke
------------------
John W. Blenke
Assistant Secretary
Dated: April 20, 1998
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U:\LAW\EDGAR\I8K498.WP
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Exhibit Index
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Exhibit No. Exhibit
- ----------- -------
2.1 Agreement and Plan of Merger among Household
International, Inc., Household Acquisition
Corporation II and Beneficial Corporation
dated as of April 7, 1998
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CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
Among
HOUSEHOLD INTERNATIONAL, INC.,
HOUSEHOLD ACQUISITION CORPORATION II
and
BENEFICIAL CORPORATION
Dated as of April 7, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS 2
Section 1.1 Definitions 2
ARTICLE II
THE MERGER 10
Section 2.1 The Merger 10
Section 2.2 Closing 11
Section 2.3 Effective Time of the Merger 11
Section 2.4 Certificate of Incorporation 11
Section 2.5 By-Laws 11
Section 2.6 Directors 11
Section 2.7 Officers 11
Section 2.8 Effects of the Merger 12
Section 2.9 Tax Treatment 12
Section 2.10 Accounting Treatment 12
ARTICLE III
EFFECT ON CAPITAL STOCK 12
Section 3.1 Effect on Company Capital Stock 12
Section 3.2 Exchange of Certificates
Representing Shares 14
Section 3.3 Dividends, Etc. 16
Section 3.4 No Fractional Shares 16
Section 3.5 Termination of Exchange Fund 17
Section 3.6 Investment of Exchange Fund 17
Section 3.7 Closing of Company Transfer Books 17
Section 3.8 Employee Stock Options 18
ARTICLE IV
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES 19
Section 4.1 Disclosure Schedules 19
Section 4.2 Standards 19
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 20
Section 5.1 Organization 20
Section 5.2 Capitalization 21
Section 5.3 Authority Relative to this Agreement 22
Section 5.4 Consents and Approvals; No Violations22
Section 5.5 Reports and Financial Statements 24
Section 5.6 Absence of Certain Changes or Events 26
Section 5.7 Litigation 26
Section 5.8 Information in Disclosure Documents
and Registration Statement 26
Section 5.9 Compliance with Applicable Law 27
Section 5.10 ERISA Compliance 27
Section 5.11 Opinion of Financial Advisor 29
Section 5.12 Vote Required 29
Section 5.13 Takeover Statutes, Etc. 29
Section 5.14 Agreements with Regulatory Agencies 30
Section 5.15 Taxes 30
Section 5.16 Accounting for the Merger 31
Section 5.17 Brokers 31
Section 5.18 Interest Rate and Foreign Exchange
Contracts 31
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUIROR 32
Section 6.1 Organization 32
Section 6.2 Capitalization 33
Section 6.3 Authority Relative to this Agreement 33
Section 6.4 Consents and Approvals; No Violations34
Section 6.5 Reports and Financial Statements 35
Section 6.6 Absence of Certain Changes or Events 36
Section 6.7 Litigation 36
Section 6.8 Information in Disclosure Documents
and Registration Statement 37
Section 6.9 Compliance with Applicable Law 37
Section 6.10 Brokers 38
Section 6.11 Ownership of Company Common Stock;
Affiliates and Associates 38
Section 6.12 Agreements with Regulatory Agencies 38
Section 6.13 Vote Required 39
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Section 6.14 Taxes 39
Section 6.15 Accounting for the Merger 40
ARTICLE VII
COVENANTS RELATING TO CONDUCT OF BUSINESS 40
Section 7.1 Conduct of Business by the Company 40
Section 7.2 Conduct of Business by Acquiror 43
Section 7.3 Other Actions 44
Section 7.4 Advice of Changes 44
ARTICLE VIII
ADDITIONAL AGREEMENTS 45
Section 8.1 No Solicitation 45
Section 8.2 Preparation of the Registration
Statement and the Merger Proxy Statement;
Company and Acquiror Stockholders Meetings 45
Section 8.3 Access and Information;
Confidentiality 46
Section 8.4 Comfort Letters 47
Section 8.5 Listing Application 47
Section 8.6 Affiliates 47
Section 8.7 Governmental Authorizations 48
Section 8.8 Employee Matters 49
Section 8.9 Continuance of Existing
Indemnification Rights 51
Section 8.10 Expenses 52
Section 8.11 Certain Other Matters 53
Section 8.12 Beneficial Foundation; Certain
Charitable Contributions 53
Section 8.13 Public Announcements 53
Section 8.14 Reasonable Best Efforts 54
Section 8.15 Regulatory Filings 54
Section 8.16 Tax Treatment; Pooling of Interests 55
ARTICLE IX
CONDITIONS TO CONSUMMATION OF THE MERGER 55
Section 9.1 Conditions to Each Party's
Obligation to Effect the Merger 55
Section 9.2 Conditions to Obligations of Acquiror56
Section 9.3 Conditions to Obligations of the
Company 57
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ARTICLE X
TERMINATION, AMENDMENT AND WAIVER 58
Section 10.1 Termination 58
Section 10.2 Effect of Termination 61
Section 10.3 Amendment 61
Section 10.4 Extension; Waiver 62
ARTICLE XI
GENERAL PROVISIONS 62
Section 11.1 Survival of Representations
and Warranties 62
Section 11.2 Notices 62
Section 11.3 Descriptive Headings 64
Section 11.4 Entire Agreement; No Third-Party
Beneficiary 64
Section 11.5 Interpretation 64
Section 11.6 Severability 65
Section 11.7 Assignment 65
Section 11.8 Governing Law 65
Section 11.9 Specific Performance 65
Section 11.10 Counterparts 65
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 7, 1998
(this "Agreement"), among Household International, Inc., a Delaware
corporation ("Acquiror"), Household Acquisition Corporation II, a
Delaware corporation and a wholly owned subsidiary of Acquiror
("HAC"), and Beneficial Corporation, a Delaware corporation (the
"Company").
WHEREAS, the Boards of Directors of Acquiror, HAC and the
Company deem it advisable and in the best interests of their
respective companies and their stockholders that HAC merge with and
into the Company (the "Merger"), upon the terms and subject to the
conditions set forth herein, and such Boards of Directors have
approved the Merger;
WHEREAS, the Company and Acquiror desire to make certain
representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe certain conditions to the
Merger;
WHEREAS, in connection with the execution of this
Agreement, the Company and Acquiror will enter into a stock option
agreement, with the Company, as issuer, and Acquiror, as grantee
(the "Company Stock Option Agreement"), in the form attached hereto
as Exhibit A; and
WHEREAS, in connection with the execution of this
Agreement, Acquiror and the Company will enter into a stock option
agreement, with Acquiror, as issuer, and the Company, as grantee
(the "Acquiror Stock Option Agreement"), in the form attached
hereto as Exhibit B.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the
following terms shall have the following meanings, the definitions
to be applicable to both the singular and plural forms of each term
defined to the extent that such forms of such terms are used in
this Agreement.
"Acquiror" shall have the meaning ascribed to it in the
Preamble.
"Acquiror Common Stock" shall have the meaning ascribed
to it in Section 3.1(a).
"Acquiror Disclosure Schedule" shall have the meaning
ascribed to it in Section 4.1.
"Acquiror Licenses" shall have the meaning ascribed to it
in Section 6.9.
"Acquiror New Preferred Stock" shall have the meaning
ascribed to it in Section 3.1(c).
"Acquiror Preferred Stock" shall mean the preferred
stock, without par value, of Acquiror.
"Acquiror Ratio" shall have the meaning ascribed to it in
Section 10.1(g).
"Acquiror Regulatory Agreement" shall have the meaning
ascribed to it in Section 6.12.
"Acquiror SEC Reports" shall have the meaning ascribed to
it in Section 6.5(b).
"Acquiror Stock Option Agreement" shall have the meaning
ascribed to it in the Preamble.
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"Acquiror Stock Option Plans" shall have the meaning
ascribed to it in Section 6.2.
"Acquiror Stock Options" shall have the meaning ascribed
to it in Section 6.2.
"Acquiror Stockholder Approval" shall have the meaning
ascribed to it in Section 6.3.
"Acquiror Stockholders Meeting" shall have the meaning
ascribed to it in Section 6.3.
"Acquisition Proposal" shall mean any proposal made by a
third party, other than the Acquiror, to acquire, directly or
indirectly, (i) more than 10% of the shares and/or voting power of
the Company Common Stock then outstanding pursuant to a merger,
consolidation or other business combination, purchase of shares,
tender offer or exchange offer or similar transaction, including,
without limitation, any single or multi-step transaction or series
of related transactions or (ii) all or a substantial portion of the
business or assets of the Company and its subsidiaries.
"Affiliate" shall mean, as to any Person (as hereinafter
defined), any other Person which, directly or indirectly, is in
control of, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as
applied to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities or other ownership interest, by contract or otherwise.
"Agreement" shall have the meaning ascribed to it in the
Preamble.
"Average Closing Price" shall have the meaning ascribed
to it in Section 10.1(g).
"Bank Merger Act" shall mean 12 U.S.C. Section 1467a(S).
"BHC Act" shall mean the Bank Holding Company Act of
1956, as amended.
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"Certificate of Incorporation" have the meaning ascribed
to it in Section 2.4.
"Certificate of Merger" shall have the meaning ascribed
to it in Section 2.3.
"Change in Bank Control Act" shall mean 12 U.S.C.
Section 1817(j).
"Claim" shall have the meaning ascribed to it in Section
8.9(a).
"Closing" shall have the meaning ascribed to it in
Section 2.2.
"Closing Date" shall have the meaning ascribed to it in
Section 2.2.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commonly Controlled Entity" shall have the meaning
ascribed to it in Section 5.10(a).
"Company" shall have the meaning ascribed to it in the
Preamble.
"Company Common Stock" shall have the meaning ascribed to
it in Section 3.1(a).
"Company Convertible Preferred Stock" shall mean the
$5.50 Dividend Cumulative Convertible Preferred Stock, without par
value, of the Company.
"Company Disclosure Schedule" shall have the meaning
ascribed to it in Section 4.1.
"Company Employees" shall mean all current employees of
the Company and its subsidiaries as of the Effective Time.
"Company Licenses" shall have the meaning ascribed to it
in Section 5.9.
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"Company Participating Preferred Stock" shall mean the
Company's Series A Participating Preferred Stock.
"Company Plans" shall have the meaning ascribed to it in
Section 5.10(a).
"Company 5% Preferred Stock" shall mean the 5% Cumulative
Preferred Stock, par value $50.00 per share, of the Company.
"Company $4.50 Preferred Stock" shall mean the $4.50
Dividend Cumulative Preferred Stock, par value $100.00 per share,
of the Company.
"Company $4.30 Preferred Stock" shall mean the $4.30
Dividend Cumulative Preferred Stock, without par value, of the
Company.
"Company Right" shall have the meaning ascribed to it in
Section 3.1(a).
"Company Rights Agreement" shall mean the Renewed Rights
Agreement, dated as of August 22, 1996, by and between the Company
and First Chicago Trust Company of New York, as Rights Agent.
"Company Rule 145 Affiliates" shall have the meaning
ascribed to it in Section 8.6.
"Company SEC Reports" shall have the meaning ascribed to
it in Section 5.5(b).
"Company Stock Option Agreement" shall have the meaning
ascribed to it in the Preamble.
"Company Stock Option Plans" shall mean the Beneficial
Corporation 1990 Non-Qualified Stock Option Plan and the BenShares
Equity Participation Plan.
"Company Stockholder Approval" shall have the meaning
ascribed to it in Section 5.3.
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"Company Stockholders Meeting" shall have the meaning
ascribed to it in Section 5.3.
"Confidentiality Agreement" shall have the meaning
ascribed to it in Section 8.3.
"Continuation Period" shall have the meaning ascribed to
it in Section 8.8(b).
"Contract" shall have the meaning ascribed to it in
Section 5.4.
"D&O Insurance" shall have the meaning ascribed to it in
Section 8.9(c).
"Determination Date" shall have the meaning ascribed to
it in Section 10.1(g).
"DGCL" shall mean the Delaware General Corporation Law.
"Direct Purchase Plan" shall mean the Beneficial Direct
Investment Plan.
"DPC Shares" shall have the meaning ascribed to it in
Section 3.1(d).
"Effective Time" shall have the meaning ascribed to it in
Section 2.3.
"Employee Stock Options" shall mean all employee and non-
employee Director stock options issued pursuant to the Company
Stock Option Plans.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"ERISA Affiliate" shall have the meaning ascribed to it
in Section 5.10(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
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"Exchange Agent" shall have the meaning ascribed to it in
Section 3.2(a).
"Exchange Fund" shall have the meaning ascribed to it in
Section 3.2(a).
"FDIC" shall have the meaning ascribed to it in Section
5.1(b).
"Federal Reserve Board" shall mean the Board of Governors
of the Federal Reserve System.
"Filed Acquiror SEC Reports" shall have the meaning
ascribed to it in Section 6.5(c).
"Filed Company SEC Reports" shall have the meaning
ascribed to it in Section 5.5(c).
"Foreign Competition Laws" shall mean foreign statutes,
rules, regulations, orders, decrees, administrative and judicial
doctrines, and other foreign Laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect
of monopolization, lessening of competition or restraint of trade.
"Foundation" shall have the meaning ascribed to it in
Section 8.12(a).
"GAAP" shall mean United States generally accepted
accounting principles and practices in effect from time to time as
consistently applied.
"Goldman Sachs" shall mean Goldman Sachs & Co., one of
the Company's financial advisors.
"Governmental Entity" shall have the meaning ascribed to
it in Section 5.4.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
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"Indemnified Person" shall have the meaning ascribed to
it in Section 8.9(a).
"Index Group" shall have the meaning ascribed to it in
Section 10.1(g).
"Index Price" shall have the meaning ascribed to it in
Section 10.1(g).
"Index Ratio" shall have the meaning ascribed to it in
Section 10.1(g).
"Injunction" shall have the meaning ascribed to it in
Section 9.1(d).
"Laws" shall mean any federal, state, local or foreign
law, statute, ordinance, rule, regulation, order, judgment or
decree, administrative order or decree, administrative or judicial
decision, and any other executive or legislative proclamation.
"Liens" shall mean all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature
whatsoever.
"Material Adverse Effect" shall have the meaning ascribed
to it in Section 4.2(b).
"Merger" shall have the meaning ascribed to it in the
Recitals.
"Merger Proxy Statement" shall have the meaning ascribed
to it in Section 5.4.
"Merrill Lynch" shall mean Merrill Lynch & Co., one of
the Company's financial advisors.
"New Option" shall have the meaning ascribed to it in
Section 3.8.
"NYSE" shall mean the New York Stock Exchange, Inc.
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"OCC" shall mean the United States Office of the
Comptroller.
"Other Company Preferred Stock" shall mean, collectively,
the Company 5% Preferred Stock, the Company $4.50 Preferred Stock
and the Company $4.30 Preferred Stock.
"OTS" shall mean the United States Office of Thrift
Supervision.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation.
"Pension Plan" shall mean the Beneficial Corporation
Pension Plan.
"Per Share Merger Consideration" shall have the meaning
ascribed to it in Section 3.1(a).
"Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or
organization.
"Registration Statement" shall have the meaning ascribed
to it in Section 5.4.
"Regulatory Agencies" shall have the meaning ascribed to
it in Section 5.5(a).
"Regulatory Agreement" shall have the meaning ascribed to
it in Section 5.14.
"Requisite Regulatory Approvals" shall have the meaning
ascribed to it in Section 5.4.
"Retired Employees" shall have the meaning ascribed to it
in Section 8.8(b).
"SEC" shall mean the United States Securities and
Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
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"Starting Date" shall have the meaning ascribed to it in
Section 10.1(g).
"Starting Price" shall have the meaning ascribed to it in
Section 10.1(g).
"subsidiary" shall mean, with respect to any party, any
corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other subsidiary of
such party is a general partner or (ii) at least 50% of the securi
ties or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other
organization or at least 50% of the value of the outstanding equity
is directly or indirectly owned or controlled by such party or by
any one or more of its subsidiaries, or by such party and one or
more of its subsidiaries.
"Surviving Corporation" shall have the meaning ascribed
to it in Section 2.1.
"Tax" (and, with correlative meaning, "Taxes" and
"Taxable") shall mean (i) any federal, state, local or foreign net
income, gross income, receipts, windfall profit, severance,
property, production, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or add-on minimum, ad
valorem, transfer, stamp, or environmental tax, or any other tax,
custom, duty, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest or penalty,
addition to tax or additional amount imposed by any governmental
authority; (ii) any liability of Acquiror or any Acquiror
subsidiary or the Company or any of its subsidiaries, as
applicable, for the payment of amounts with respect to payments of
a type described in clause (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group; and (iii) any
liability for the payment of any amounts as a result of being party
to a tax sharing arrangement or as a result of any express or
implied obligation to indemnify any other entity or person with
respect to the payment of amounts of the type described in clause
(i) or clause (ii).
"Trust Account Shares" shall have the meaning ascribed to
it in Section 3.1(d).
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ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to
the conditions set forth herein, and in accordance with the DGCL,
at the Effective Time, HAC shall be merged with and into the
Company. Following the Effective Time, the Company shall continue
as the surviving corporation (the "Surviving Corporation"), and the
separate corporate existence of HAC shall cease. The name of the
Surviving Corporation shall be "Beneficial Corporation". Acquiror
may at any time change the method of effecting the combination with
the Company (including, without limitation, the provisions of this
Article II) if and to the extent it deems such change to be
desirable, including, without limitation, to provide for a merger
of the Company into Acquiror; provided, however, that no such
change shall (i) alter or change the amount or kind of Per Share
Merger Consideration (as hereinafter defined) to be issued to
holders of Company Common Stock as provided for in this Agreement,
(ii) adversely affect the tax treatment of the Company's
stockholders as a result of receiving the Per Share Merger
Consideration, or (iii) materially impede or delay consummation of
the transactions contemplated by this Agreement.
Section 2.2 Closing. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. on a date to be specified
by the parties (the "Closing Date"), which (subject to satisfaction
or waiver of the conditions set forth in Article IX) shall be no
later than the third NYSE trading day after satisfaction or waiver
of the conditions set forth in Section 9.1, at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New
York, New York 10022, unless another time, date or place is agreed
to in writing by the parties hereto.
Section 2.3 Effective Time of the Merger. The Merger
shall become effective on the date and at the time at which a
properly executed certificate of merger (the "Certificate of
Merger") is duly filed with the Secretary of State of the State of
Delaware, or at such later date and time as may be specified
therein. The Certificate of Merger shall be filed as soon as
practicable on or after the Closing Date. When used in this
Agreement, the term "Effective Time" shall mean the time and date
at which such Certificate of Merger is so filed or at such later
time as the parties shall designate therein.
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Section 2.4 Certificate of Incorporation. From and
after the Effective Time, the certificate of incorporation of the
Company as in effect immediately prior to the Effective Time (the
"Certificate of Incorporation") shall be the certificate of
incorporation of the Surviving Corporation until amended as
provided by Law and the terms thereof.
Section 2.5 By-Laws. The by-laws of HAC as in effect
immediately prior to the Effective Time shall be the by-laws of the
Surviving Corporation until amended as provided by Law, the
Certificate of Incorporation of the Surviving Corporation and the
terms thereof.
Section 2.6 Directors. The directors of HAC immediately
prior to the Effective Time shall be the initial directors of the
Surviving Corporation and shall hold office from the Effective Time
until their respective successors are duly elected or appointed and
qualify in the manner provided in the Certificate of Incorporation
and by-laws of the Surviving Corporation, or as otherwise provided
by Law.
Section 2.7 Officers. The officers of the Company
immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation and shall hold office from
the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the
Certificate of Incorporation and by-laws of the Surviving
Corporation, or as otherwise provided by Law.
Section 2.8 Effects of the Merger. At and after the
Effective Time, the Merger shall have the effects set forth in
Section 259 of the DGCL.
Section 2.9 Tax Treatment. It is intended that the
Merger shall qualify as a reorganization under Section 368(a) of
the Code, and that this Agreement shall constitute a "plan of
reorganization" for purposes of Section 368 of the Code.
Section 2.10 Accounting Treatment. It is intended that
the Merger be accounted for as a "pooling of interests" transaction
under GAAP.
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ARTICLE III
EFFECT ON CAPITAL STOCK
Section 3.1 Effect on Company Capital Stock.
(a)At the Effective Time, subject to Section 3.4
hereof, each share of the common stock, par value $.01 per share,
of the Company (including each attached right (a "Company Right")
issued pursuant to the Company Rights Agreement) (the "Company
Common Stock") issued and outstanding immediately prior to the
Effective Time (other than shares of Company Common Stock to be
cancelled pursuant to Section 3.1(d) hereof) shall, by virtue of
the Merger and without any action on the part of the holder
thereof, be converted into the right to receive 1.0222 duly
authorized, validly issued, fully paid and nonassessable shares
(the "Per Share Merger Consideration") of the common stock, par
value $1.00 per share, of Acquiror ("Acquiror Common Stock"). All
of the shares of Company Common Stock converted into Acquiror
Common Stock pursuant to this Article III shall no longer be
outstanding and shall automatically be cancelled and shall cease to
exist, and each certificate previously representing any such shares
of Company Common Stock shall thereafter only represent the right
to receive (i) the number of whole shares of Acquiror Common Stock
and (ii) the cash in lieu of fractional shares into which the
shares of Company Common Stock represented by such certificate have
been converted pursuant to this Section 3.1(a) and Section 3.4
hereof. Certificates previously representing shares of Company
Common Stock shall be exchanged for certificates representing whole
shares of Acquiror Common Stock and cash in lieu of fractional
shares issued in consideration therefor upon the surrender of such
certificates in accordance with Section 3.2 hereof, without any
interest thereon. If, between the date of this Agreement and the
Effective Time, the shares of Acquiror Common Stock shall be
changed into a different number or class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange
of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within said period, the Per Share
Merger Consideration shall be adjusted accordingly.
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(b)At the Effective Time, subject to Section 3.4
hereof, each share of the Company Convertible Preferred Stock
issued and outstanding immediately prior to the Effective Time
(other than shares of Company Convertible Preferred Stock to be
cancelled pursuant to Section 3.1(d)) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be
converted into the right to receive the number of shares of
Acquiror Common Stock that a holder of the number of shares of
Company Common Stock into which such share of Company Convertible
Preferred Stock could have been converted immediately prior to the
Effective Time would have the right to receive pursuant to Section
3.1(a) hereof. All of the shares of Company Convertible Preferred
Stock converted into Acquiror Common Stock pursuant to this Article
III shall no longer be outstanding and shall automatically be
cancelled and shall cease to exist, and each certificate previously
representing any such shares of Company Convertible Preferred Stock
shall thereafter only represent the right to receive (i) the number
of whole shares of Acquiror Common Stock and (ii) the cash in lieu
of fractional shares into which the shares of Company Common Stock
represented by such certificate have been converted pursuant to
this Section 3.1(b) and Section 3.4 hereof. Certificates
previously representing shares of Company Convertible Preferred
Stock shall be exchanged for certificates representing whole shares
of Acquiror Common Stock and cash in lieu of fractional shares
issued in consideration therefor upon the surrender of such
certificates in accordance with Section 3.2 hereof, without any
interest thereon.
(c)At the Effective Time, each share of Other
Company Preferred Stock issued and outstanding immediately prior to
the Effective Time (other than shares of Other Company Preferred
Stock to be canceled pursuant to Section 3.1(d)), shall, by virtue
of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive one share of newly
created series of preferred stock of the Acquiror (the "Acquiror
New Preferred Stock") having terms substantially identical to those
of the Other Company Preferred Stock, except that each share of the
Acquiror New Preferred Stock shall entitle the holder thereof to
one vote, voting together with the Acquiror Common Stock and not as
a separate class, on all matters brought before the holders of the
Acquiror Common Stock.
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<PAGE> 20
(d)At the Effective Time, all shares of Company
Common Stock, Company Convertible Preferred Stock and Other Company
Preferred Stock that are owned directly or indirectly by Acquiror
or the Company or any of their respective subsidiaries (other than
shares of Company Common Stock, Company Convertible Preferred Stock
and Other Company Preferred Stock (x) held directly or indirectly
in trust accounts, managed accounts and the like or otherwise held
in a fiduciary capacity for the benefit of third parties (any such
shares, whether held directly or indirectly by Acquiror, being
referred to herein as "Trust Account Shares") and (y) held by
Acquiror or any of its subsidiaries in respect of a debt previously
contracted (any such shares of Company Common Stock, Company
Convertible Preferred Stock and Other Company Preferred Stock which
are similarly held being referred to herein as "DPC Shares")) shall
be cancelled and shall cease to exist and no stock of Acquiror or
other consideration shall be delivered in exchange therefor.
(e)At the Effective Time, each issued and
outstanding share of capital stock of HAC shall be converted into
and become one validly issued, fully paid and nonassessable share
of common stock, par value $.01 per share, of the Surviving
Corporation.
Section 3.2 Exchange of Certificates Representing
Shares.
(a)As of the Effective Time, Acquiror shall deposit,
or shall cause to be deposited, with an exchange agent selected by
Acquiror and satisfactory to the Company (the "Exchange Agent"),
for the benefit of the holders of shares of Company Common Stock,
Company Convertible Preferred Stock and Other Company Preferred
Stock, for exchange in accordance with this Article III, (i)
certificates representing the number of shares of Acquiror Common
Stock issuable in the Merger, to be issued in respect of all shares
of Company Common Stock and Company Convertible Preferred Stock
outstanding immediately prior to the Effective Time and which are
to be exchanged pursuant to the Merger (other than shares to be
cancelled pursuant to Section 3.1(d) hereof), (ii) certificates
representing the number of shares of Acquiror New Preferred Stock
issuable in the Merger, to be issued in respect of all shares of
Other Company Preferred Stock outstanding immediately prior to the
Effective Time and which are to be exchanged pursuant to the Merger
(other than shares to be cancelled pursuant to Section 3.1(d)
hereof), and (iii) cash in an amount sufficient to make any cash
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<PAGE> 21
payment due under Section 3.4 hereof (such cash and certificates
for shares of Acquiror Common Stock and shares of Acquiror New
Preferred Stock being hereinafter referred to collectively as
the "Exchange Fund").
(b)As soon as reasonably practicable after the
Effective Time, Acquiror shall cause the Exchange Agent to mail (or
deliver at its principal office) to each holder of record of a
certificate or certificates representing shares of Company Common
Stock, Company Convertible Preferred Stock or Other Company
Preferred Stock, as the case may be, (i) a letter of transmittal
which shall specify that delivery shall be effected, and risk of
loss and title to the certificates for shares of Company Common
Stock, Company Convertible Preferred Stock or Other Company
Preferred Stock, as the case may be, shall pass, only upon delivery
of the certificates for such shares of Company Common Stock,
Company Convertible Preferred Stock or Other Company Preferred
Stock, as the case may be, to the Exchange Agent and shall be in
such form and have such other provisions, including appropriate
provisions with respect to back-up withholding, as Acquiror may
reasonably specify, and (ii) instructions for use in effecting the
surrender of the certificates for shares of Company Common Stock,
Company Convertible Preferred Stock or Other Company Preferred
Stock, as the case may be. Upon surrender of certificates for
shares of Company Common Stock, Company Convertible Preferred Stock
or Other Company Preferred Stock, as the case may be, for
cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed and completed in accordance with the
instructions thereto, the holder thereof shall be entitled to
receive in exchange therefor that portion of the Exchange Fund
which such holder has the right to receive pursuant to the
provisions of this Article III, after giving effect to any required
withholding Tax, and the certificates for shares of Company Common
Stock, Company Convertible Preferred Stock or Other Company
Preferred Stock, as the case may be, so surrendered shall forthwith
be cancelled. No interest will be paid or accrued on either the
stock or the cash portion of the Exchange Fund. In the event of
any transfer of ownership of shares of Company Common Stock,
Company Convertible Preferred Stock or Other Company Preferred
Stock, as the case may be, which has not been registered in the
transfer records of the Company, certificates representing the
proper number of shares of Acquiror Common Stock or Acquiror New
Preferred Stock, if any, and a check in an amount equal to the
proper amount of the cash component, if any, of the Exchange Fund,
will be issued to the transferee of the certificate representing
the transferred shares of Company Common Stock, Company Convertible
Preferred Stock or Other Company Preferred Stock, as the case may
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<PAGE> 22
be, only upon presentation to the Exchange Agent of a certificate
or certificates representing such shares of Company Common Stock,
Company Convertible Preferred Stock or Other Company Preferred Stock,
as the case may be, accompanied by all documents required to evidence
and effect the prior transfer thereof and to evidence that any
applicable stock transfer Taxes associated with such transfer were
paid.
Section 3.3 Dividends, Etc. No dividends that are
declared on shares of Acquiror Common Stock or Acquiror New
Preferred Stock will be paid to persons entitled to receive
certificates representing shares of Acquiror Common Stock or
Acquiror New Preferred Stock, as the case may be, until such
persons surrender their certificates representing shares of Company
Common Stock, Company Convertible Preferred Stock or Other Company
Preferred Stock, as the case may be. Upon such surrender, there
shall be paid to the person in whose name the certificates
representing such shares of Acquiror Common Stock or Acquiror New
Preferred Stock, as the case may be, shall be issued, any dividends
which shall have become payable with respect to such shares of
Acquiror Common Stock or Acquiror New Preferred Stock, as the case
may be, between the Effective Time and the time of such surrender.
In no event shall the person entitled to receive such dividends be
entitled to receive interest on such dividends. If any
certificates for any shares of Acquiror Common Stock or Acquiror
New Preferred Stock, as the case may be, are to be issued in a name
other than that in which the certificate representing shares of
Company Common Stock, Company Convertible Preferred Stock or Other
Company Preferred Stock, as the case may be, surrendered in
exchange therefor is registered, it shall be a condition of such
exchange that the person requesting such exchange shall pay to the
Exchange Agent any transfer or other Taxes required by reason of
the issuance of certificates for such shares of Acquiror Common
Stock or Acquiror New Preferred Stock, as the case may be, in a
name other than that of the registered holder of the certificate
surrendered or shall establish to the satisfaction of the Exchange
Agent that such Tax has been paid or is not applicable.
Notwithstanding the foregoing, (i) neither the Exchange Agent nor
any party hereto shall be liable to a holder of shares of Company
Common Stock, Company Convertible Preferred Stock or Other Company
Preferred Stock, as the case may be, for any shares of Acquiror
Common Stock or Acquiror New Preferred Stock, as the case may be,
or dividends thereon, or in accordance with Section 3.4 hereof, any
cash in lieu of fractional share interests, in each case, delivered
to a public official pursuant to applicable escheat Laws and (ii)
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<PAGE> 23
any shares of Acquiror Common Stock or Acquiror New Preferred Stock
held by the Exchange Agent prior to surrender of certificates
representing shares of Company Common Stock, Company Convertible
Preferred Stock or Other Company Preferred Stock, as the case may
be, shall not be deemed outstanding for quorum and voting purposes.
Section 3.4 No Fractional Shares. No certificates or
scrip representing fractional shares of Acquiror Common Stock shall
be issued upon the surrender for exchange of certificates
representing shares of Company Common Stock or Company Convertible
Preferred Stock, as the case may be, pursuant to this Article III
and no dividend, stock split or other change in the capital
structure of Acquiror shall relate to any fractional security, and
such fractional interests shall not entitle the owner thereof to
vote or to any rights of a security holder. In lieu of any such
fractional shares of Acquiror Common Stock, each holder of shares
of Company Common Stock or Company Convertible Preferred Stock, as
the case may be, who would otherwise have been entitled to a
fraction of a share of Acquiror Common Stock upon surrender of
certificates for exchange pursuant to this Article III will be paid
cash upon such surrender in an amount equal to the product of such
fraction multiplied by the closing sale price of one share of
Acquiror Common Stock on the NYSE on the day of the Effective Time,
or, if shares of Acquiror Common Stock are not so traded on such
day, the closing sale price of one such share on the next preceding
day on which such share was traded on the NYSE. For purposes of
this Section 3.4, shares of Company Common Stock or Company
Convertible Preferred Stock, as the case may be, of any holder
represented by two or more certificates may be aggregated, and in
no event shall any holder be paid an amount of cash in respect of
more than one share of Acquiror Common Stock.
Section 3.5 Termination of Exchange Fund. Any portion
of the Exchange Fund which remains undistributed to the holders of
the Company Common Stock, Company Convertible Preferred Stock or
Other Company Preferred Stock, as the case may be, for six months
after the Effective Time shall be delivered to Acquiror, upon
demand, and any holders of Company Common Stock, Company
Convertible Preferred Stock or Other Company Preferred Stock, as
the case may be, who have not theretofore complied with this
Article III shall thereafter look only to Acquiror for payment of
their claim for the shares of Acquiror Common Stock or Acquiror New
Preferred Stock, as the case may be, and cash and dividends or
other distributions, if any, pursuant to this Article III.
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<PAGE> 24
Section 3.6 Investment of Exchange Fund. The Exchange
Agent shall invest any cash included in the Exchange Fund, as
directed by Acquiror, on a daily basis. Any interest and other
income resulting from such investments shall be paid to Acquiror.
Section 3.7 Closing of Company Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be
closed and no transfer of shares of Company Common Stock, Company
Convertible Preferred Stock or Other Company Preferred Stock, as
the case may be, shall thereafter be made. If, after the Effective
Time, certificates representing shares of Company Common Stock,
Company Convertible Preferred Stock or Other Company Preferred
Stock, as the case may be, are presented to the Surviving
Corporation, they shall be cancelled and exchanged for certificates
representing shares of Acquiror Common Stock or shares of Acquiror
New Preferred Stock, as applicable.
Section 3.8 Employee Stock Options. At the Effective
Time, each of the Employee Stock Options which is outstanding and
unexercised at the Effective Time shall be converted automatically
into an option to purchase shares of Acquiror Common Stock (the
"New Option") in an amount and at an exercise price determined as
provided below (and otherwise subject to the terms of the Company
Stock Option Plans governing the Employee Stock Options):
(i) The number of shares of Acquiror
Common Stock to be issued upon exercise of the New Option
shall be equal to the product of the number of shares of
Company Common Stock to be issued upon exercise of the
original option and the Per Share Merger Consideration;
and
(ii) The exercise price per share of
Acquiror Common Stock under the New Option shall be equal
to the aggregate exercise price of the original option
divided by the total number of full shares of Acquiror
Common Stock to be issued upon exercise of the New Option
(as determined under paragraph (i) immediately above);
provided, however, that such exercise price shall be
rounded up to the nearest cent.
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<PAGE> 25
The duration and other terms of the New Option shall be the same as
that of the original option, except that all references to the
Company shall be deemed to be references to Acquiror. Acquiror
shall file with the SEC a registration statement on Form S-8 (or
other appropriate form) or a post-effective amendment to a
previously filed registration statement as promptly as practicable
after the Effective Time for purposes of registering all shares of
Acquiror Common Stock issuable after the Effective Time upon
exercise of the Employee Stock Options, and shall have such
registration statement or post-effective amendment become effective
and comply, to the extent applicable, with state securities or blue
sky Laws with respect thereto at the Effective Time.
ARTICLE IV
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
Section 4.1 Disclosure Schedules. Prior to the execu
tion and delivery of this Agreement, the Company has delivered to
Acquiror, and Acquiror has delivered to the Company, a schedule (in
the case of the Company, the "Company Disclosure Schedule," and, in
the case of Acquiror, the "Acquiror Disclosure Schedule") setting
forth, among other things, items the disclosure of which is neces
sary or appropriate either in response to an express disclosure
requirement contained in a provision hereof or as an exception to
one or more of such party's representations or warranties contained
in Article V, in the case of the Company, or Article VI, in the
case of Acquiror, or to one or more of such party's covenants
contained in Article VII; provided, however, that, notwithstanding
anything in this Agreement to the contrary, (a) no such item is re
quired to be set forth in the relevant Disclosure Schedule as an
exception to a representation or warranty if its absence would not
result in the related representation or warranty being deemed
untrue or incorrect under the standard established by Section 4.2,
and (b) the mere inclusion of an item in a Disclosure Schedule as
an exception to a representation or warranty shall not be deemed an
admission by a party that such item represents a material exception
or material fact, event or circumstance or that such item has had
or would have a Material Adverse Effect (as defined herein) with
respect to either the Company or Acquiror, respectively.
<PAGE>
<PAGE> 26
Section 4.2 Standards.
(a)No representation or warranty of the Company
contained in Article V or of Acquiror contained in Article VI shall
be deemed untrue or incorrect for any purpose under this Agreement,
and no party hereto shall be deemed to have breached a represen
tation or warranty for any purpose under this Agreement, in any
case as a consequence of the existence or absence of any fact,
circumstance or event unless such fact, circumstance or event, indi
vidually or when taken together with all other facts, circumstances
or events inconsistent with any representations or warranties
contained in Article V, in the case of the Company, or Article VI,
in the case of Acquiror, has had or would reasonably be expected to
have a Material Adverse Effect with respect to the Company or
Acquiror, respectively (disregarding for this purpose any
materiality qualification contained in such representations or
warranties).
(b)As used in this Agreement, the term "Material Ad
verse Effect" means, with respect to Acquiror or the Company, as
the case may be, a material adverse effect on (i) the business,
results of operations or financial condition of such party and its
subsidiaries taken as a whole, other than any such effect
attributable to or resulting from (v) any change resulting from the
public announcement of the transactions contemplated hereby, (w)
any change in banking, insurance, consumer finance, thrift, fair
lending or similar laws, rules or regulations of general
applicability or interpretations thereof by courts or governmental
authorities, (x) any change in general economic conditions, in
interest rates or in conditions affecting the banking, insurance,
consumer finance, or thrift industries generally, (y) any action or
omission of the Company or Acquiror or any subsidiary of either of
them taken with the express prior written consent of the other
party hereto, or (z) any expenses incurred by such party in connec
tion with this Agreement or the transactions contemplated hereby or
(ii) the ability of such party to perform its obligations under
this Agreement and to consummate the transactions contemplated here
by.
<PAGE>
<PAGE> 27
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to Article IV, the Company represents and
warrants to Acquiror as follows:
Section 5.1 Organization.
(a)The Company is a corporation duly organized,
validly existing and in good standing under the Laws of the State
of Delaware. The Company has the corporate power and authority to
own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature
of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect on the Company.
(b)The Company is duly registered as a bank holding
company under the BHC Act. Beneficial Savings Bank FSB is a
federal savings bank chartered by the OTS. Each of Beneficial
National Bank and Beneficial National Bank USA is a national bank
chartered by the OCC. Each of the Company's other subsidiaries is
a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or
organization. Each of the Company's subsidiaries has the corporate
power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or
the character or location of the properties and assets owned or
leased by it makes such licensing or qualification necessary,
except where the failure to be so qualified would not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company. The deposit accounts of the
Beneficial National Bank and Beneficial Savings Bank are insured by
the Federal Deposit Insurance Corporation (the "FDIC") to the
fullest extent permitted by Law, and all premiums and assessments
required to be paid in connection therewith have been paid when
due, except where the failure to make such payments when due would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company.
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<PAGE> 28
Section 5.2 Capitalization. The authorized capital
stock of the Company consists of (i) 160,000,000 shares of Company
Common Stock, (ii) 585,730 shares of Company 5% Preferred Stock,
(iii) 103,976 shares of Company $4.50 Preferred Stock, (iv)
1,069,204 shares of Company $4.30 Preferred Stock, (v) 1,164,077
shares of Company Convertible Preferred Stock, and (vi) 570,000
shares of Company Participating Preferred Stock. As of
February 28, 1998, (i) 54,365,830 shares of Company Common Stock,
(ii) 407,718 of Company 5% Preferred Stock, (iii) 103,976 shares of
Company $4.50 Preferred Stock, (iv) 836,585 shares of Company $4.30
Preferred Stock, (v) 16,414 shares of Company Convertible Preferred
Stock, and (vi) no shares of Company Participating Preferred Stock
were issued and outstanding. As of February 28, 1998, (i)
4,512,547 shares of Company Common Stock were reserved for issuance
upon exercise of Employee Stock Options outstanding under the
Company Stock Option Plans, (ii) 147,726 shares of Company Common
Stock were reserved for issuance upon the conversion of shares of
Company Convertible Preferred Stock and (iii) no shares of Company
Common Stock were reserved for issuance under the dividend
reinvestment provisions of the Direct Purchase Plan. As of
February 28, 1998, 2,507,471 shares of Company Common Stock and
178,012 shares of Company 5% Preferred Stock were held as treasury
shares. All of the issued and outstanding shares of Company Common
Stock, Company Convertible Preferred Stock and Other Company
Preferred Stock are validly issued, fully paid and nonassessable
and free of preemptive rights. Except as set forth above, as of
February 28, 1998, there were no shares of capital stock of the
Company issued or outstanding or any options, warrants,
subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating the Company to issue,
transfer, sell, redeem, repurchase or otherwise acquire any shares
of its capital stock or securities. Since February 28, 1998, no
shares of capital stock of the Company have been issued other than
shares of Company Common Stock issued (i) upon the exercise of
options pursuant to the Company Stock Option Plans, (ii) upon the
conversion of shares of Company Convertible Preferred Stock and
(iii) pursuant to the dividend reinvestment provisions of the
Direct Purchase Plan. There are no notes, bonds, debentures or
other indebtedness of the Company having the right to vote (or
convertible into or exchangeable for securities having the right to
vote) on any matters upon which stockholders of the Company may
vote.
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<PAGE> 29
Section 5.3 Authority Relative to this Agreement. The
Company has the corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly
authorized by the Board of Directors of the Company and, except for
the approval of this Agreement by the requisite vote of the
Company's stockholders (the "Company Stockholder Approval") at a
special meeting of the Company's stockholders duly called for the
purpose of obtaining such approval (the "Company Stockholders
Meeting"), no other corporate action or proceeding on the part of
the Company is necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and, assuming the due
authorization and valid execution and delivery by Acquiror,
constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium or
similar Laws now or hereafter in effect relating to creditors'
rights generally and general principles of equity.
Section 5.4 Consents and Approvals; No Violations.
(a)Except for (i) the filing of applications and
notices, as applicable, with the Federal Reserve Board under the
BHC Act and under HOLA, and/or with the OTS under HOLA or with the
OTS under the Bank Merger Act or the OCC under the Change in Bank
Control Act, as applicable, and the approval of such applications
by the Federal Reserve Board, OTS or OCC, as applicable, (ii) the
filing of applications and notices, as applicable, with the state
regulatory authorities governing consumer finance, mortgage lending
and insurance in the states in which the Company operates its
business or the filing of applications and notices with federal
housing related authorities, and the approval of such applications
by such authorities, (iii) the filing of applications and notices,
as applicable, with the foreign governmental authorities regulating
consumer finance, mortgage lending and insurance in the foreign
jurisdictions in which the Company operates its business,
including, without limitation, the Bank of England and The Minister
of Finance and the Department of Enterprise and Employment
(Insurance Division) of Ireland, and the approval of such
applications by such authorities, (iv) the filing of notification
and report forms with the United States Federal Trade Commission
and the United States Department of Justice under the HSR Act and
the expiration or termination of any applicable waiting period
<PAGE>
<PAGE> 30
thereunder, (v) the filing of applications and notices, as
applicable, with foreign governmental authorities under the
Foreign Competition Laws, and the approval of such applications
by such authorities, if required, (vi) the filing with the SEC of
a proxy statement in definitive form relating to the meetings of
the Company's stockholders and Acquiror's stockholders to be held
in connection with this Agreement and the transactions contemplated
hereby (the "Merger Proxy Statement") and the filing and declaration
of effectiveness of the registration statement on Form S-4 relating
to the shares of Acquiror Common Stock to be issued in the Merger
in which the Merger Proxy Statement will be included as a prospectus
(the "Registration Statement"), (vii) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware
pursuant to the DGCL, (viii) the approval of the listing of the
Acquiror Common Stock to be issued in the Merger on the NYSE, and
(ix) the consents of third parties under the Contracts (as defined
below) listed in Section 5.4(a)(ix) of the Company Disclosure Schedule,
no notices to, consents or approvals of, or filings or registrations
with, any court, administrative agency or commission or other
governmental authority or instrumentality (each, a "Governmental
Entity") or with any self-regulatory authority or with any third
party are necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby, except for such notices,
consents, approvals, filings or registrations, the failure of which
to be made or obtained would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company or on the ability of the Acquiror, following the Effective
Time, to conduct the business of the Company as presently conducted.
The notices, consents or approvals, filings or registrations, and
expirations or terminations of waiting periods referred in clauses
5.4(a)(i) through 5.4(a)(v) are hereinafter referred to as the
"Requisite Regulatory Approvals". As of the date hereof, the
Company knows of no reason why all Requisite Regulatory Approvals
should not be obtained.
(b)Neither the execution and delivery of this Agreement
by the Company nor the consummation by the Company of the transactions
contemplated hereby, will (i) conflict with or result in any breach of
any provisions of the certificate of incorporation or by-laws of the
Company or the certificate of incorporation or by-laws of any of the
Company's subsidiaries; (ii) subject to the obtaining the consents
listed in Section 5.4(a)(ix) of the Company Disclosure Schedule and
except as set forth in Section 5.4(b)(ii) of the Company
<PAGE>
<PAGE> 31
Disclosure Schedule, result in a violation or breach of, or
constitute (with or without due notice or lapse of time, or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, contract, agreement
or other instrument or obligation (collectively, "Contracts") to
which the Company or any of the Company's subsidiaries is a party
or by which any of them or any of their respective properties or
assets may be bound; (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time, or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of
any Company License (as hereinafter defined); or (iv) subject to
giving the notices, making the filings or registrations or
obtaining the consents or approvals referred to in paragraph (a)
above, violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company, any of the Company's
subsidiaries or any of their respective properties or assets,
except, in the case of clauses (ii), (iii) and (iv), for
violations, breaches or defaults which would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect on the Company or on the ability of the Acquiror, following
the Effective Time, to conduct the business of the Company as
presently conducted.
Section 5.5 Reports and Financial Statements.
(a)The Company and each of its subsidiaries have
timely filed all material reports, registrations and statements,
together with any amendments required to be made with respect
thereto, that they were required to file since December 31, 1995,
with (i) the Federal Reserve Board, (ii) the FDIC, (iii) the OCC,
(iv) the OTS, (v) any state banking commissions, any other state
regulatory authorities or any comparable regulatory authorities in
England or Ireland and (vi) any self-regulatory organization
(collectively, the "Regulatory Agencies"), and have paid all
material fees and assessments due and payable in connection there
with. Except for normal examinations conducted by a Regulatory
Agency in the regular course of the business of the Company and its
subsidiaries, and except as listed in Section 5.5(a) of the Company
Disclosure Schedule, no Regulatory Agency has initiated any proceed
ing or investigation or, to the knowledge of the Company,
threatened any investigation into the business or operations of the
Company or any of its subsidiaries since December 31, 1995, except
for such proceedings or investigations which would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company.
<PAGE>
<PAGE> 32
(b)The Company has filed all material reports,
forms, registrations, schedules, statements and other documents
required to be filed by it with the SEC since December 31, 1995
(the "Company SEC Reports"). As of their respective dates, the
Company SEC Reports complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case
may be, and the applicable rules and regulations promulgated
thereunder. Except to the extent that information contained in any
Company SEC Report has been revised or superseded by a later filed
Company SEC Report, none of the Company SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c)The consolidated financial statements of the
Company included in the Company SEC Reports filed and publicly
available prior to the date of this Agreement (as amended to the
date of this Agreement, the "Filed Company SEC Reports") complied
as to form in all material respects with the applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP
(except, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the
notes thereto) and fairly present the consolidated financial
position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject,
in the case of the unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein).
(d)Except for liabilities and obligations incurred
in the ordinary course of business consistent with past practice
since the date of the most recent consolidated balance sheet
included in the Filed Company SEC Reports, neither the Company nor
any of its subsidiaries has any material liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be recognized or disclosed on a consolidated
balance sheet of the Company and its consolidated subsidiaries or
in the notes thereto.
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<PAGE> 33
Section 5.6 Absence of Certain Changes or Events.
Except as set forth in the Filed Company SEC Reports and as set
forth in Section 5.6 of the Company Disclosure Schedule, the
business of the Company and its subsidiaries has been conducted
only in the ordinary course of business consistent with past prac
tice, and there has not been any event, change or development
which, individually or in the aggregate, has had or would reason
ably be expected to have a Material Adverse Effect on the Company,
and, during the period from the most recent consolidated balance
sheet included in the Filed Company SEC Reports through the date of
this Agreement, neither the Company nor any of its subsidiaries has
taken any action that, if taken during the period from the date of
this Agreement through the Effective Time, would constitute a
breach of Section 7.1 hereof.
Section 5.7 Litigation. Except as set forth in the
Filed Company SEC Reports and as set forth in Section 5.7 of the
Company Disclosure Schedule, as of the date hereof, there is no
suit, action, proceeding or regulatory investigation pending or, to
the knowledge of the Company, threatened against or affecting the
Company or any of its subsidiaries that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect on the Company, nor is there any judgment, order, decree,
statute, Law, ordinance, rule or regulation of any Regulatory
Agency or other Governmental Entity or arbitrator outstanding
against the Company or any of its subsidiaries which, individually
or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on the Company.
Section 5.8 Information in Disclosure Documents and
Registration Statement. None of the information to be supplied by
the Company for inclusion or incorporation by reference in the
Merger Proxy Statement or the Registration Statement will, in the
case of the Registration Statement, at the time it becomes
effective and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, or, in the case of the Merger Proxy Statement or any
amendments thereof or supplements thereto, at the time of the
mailing of the Merger Proxy Statement and any amendments or
supplements thereto and at the time of the Company Stockholders
Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they are made, not
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<PAGE> 34
misleading. The Merger Proxy Statement (except for such portions
thereof that relate only to Acquiror or its subsidiaries or
Affiliates) will comply as to form in all material respects with
the provisions of the Exchange Act, and the rules and regulations
promulgated thereunder.
Section 5.9 Compliance with Applicable Law. The Company
and its subsidiaries have received such certificates, permits,
licenses, franchises, consents, approvals, orders, authorizations
and clearances from appropriate Governmental Entities (the "Company
Licenses") as are necessary to own or lease and operate their
respective properties and to conduct their respective businesses
substantially in the manner described in the Company SEC Reports
and as currently owned or leased and conducted, and all such
Company Licenses are valid and in full force and effect, except for
any such Company Licenses which the failure to have or to be in
full force and effect would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the
Company. The Company and its subsidiaries are in compliance with
their respective obligations under the Company Licenses, with only
such exceptions as, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the
Company. Except as disclosed in the Company SEC Reports and as set
forth in Section 5.9 of the Company Disclosure Schedule, the
Company and its subsidiaries are in compliance with all judgments,
orders, decrees, statutes, Laws, ordinances, rules and regulations
of any Governmental Entity applicable to them, except for such
noncompliance which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the
Company.
Section 5.10 ERISA Compliance.
(a)Section 5.10(a) of the Company Disclosure
Schedule sets forth a true and complete list of each employee
benefit plan, arrangement or agreement, including each employment,
severance, compensation, retention or similar agreement, that is
maintained as of the date of this Agreement (the "Company Plans")
by the Company or any of its subsidiaries or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"),
which, together with the Company, would be deemed a "single
employer" within the meaning of Section 414(b), (c), (m) or (o) of
the Code or Section 4001 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), for the benefit of any current
or former employee, officer, director or independent contractor of
the Company or any of its subsidiaries.
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<PAGE> 35
(b) The Company has heretofore made available to
Acquiror true and complete copies of each of the Company Plans and
any material amendments and modifications thereto and all other
related documents, including, but not limited to, (i) the actuarial
report for such Company Plan (if applicable) for each of the last
two years, and (ii) the most recent determination letter from the
Internal Revenue Service (if applicable) for such Company Plan.
(c)Except as listed in Section 5.10(c) of the
Company Disclosure Schedule, (i) each of the Company Plans has been
operated and administered in all material respects in accordance
with applicable Law, including, but not limited to, ERISA and the
Code, (ii) a favorable determination letter has been issued by the
Internal Revenue Service with respect to each of the Company Plans
intended to be "qualified" within the meaning of Section 401(a) of
the Code and there are no existing circumstances nor any events
that have occurred that could adversely affect the qualified status
of any "qualified" Company Plan, (iii) with respect to each Company
Plan that is subject to Title IV of ERISA, the present value of
accrued benefits under such Company Plan, based upon actuarial
assumptions used for funding purposes in the most recent actuarial
valuation report prepared by the Company Plan's actuary with
respect to such Company Plan, did not, as of the date of such
valuation report, exceed the then current value of the assets of
such Company Plan allocable to such accrued benefits and, since the
last valuation date of each such Company Plan, no such Company Plan
has been amended to increase the benefits thereunder, (iv) no
Company Plan provides medical benefits (whether or not insured)
with respect to current or former employees of the Company or any
of its subsidiaries beyond their retirement or other termination of
service, other than coverage mandated by applicable Law or benefits
the full cost of which is borne by the current or former employee
(or his beneficiary), (v) no liability under Title IV of ERISA or
Section 412 of the Code has been incurred (directly or indirectly)
by the Company, any of its subsidiaries or any ERISA Affiliate that
has not been satisfied in full, and no condition exists that
presents a material risk to the Company, any of its subsidiaries or
any ERISA Affiliate of incurring a material liability thereunder,
(vi) no Company Plan is a "multiemployer pension plan," as such
term is defined in Section 3(37) of ERISA, or a plan described in
Section 4063 of ERISA, (vii) all contributions or other amounts
payable by the Company, any of its subsidiaries or any ERISA
Affiliate as of the Effective Time with respect to each Company
Plan in respect of current or prior plan years will have been paid
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<PAGE> 36
or accrued in accordance with GAAP and Section 412 of the Code,
(viii) neither the Company, any of its subsidiaries nor any ERISA
Affiliate has engaged in a transaction in connection with which
the Company, its subsidiaries or any ERISA Affiliate would be subject
to either a material civil penalty assessed pursuant to Section 409
or 502(i) of ERISA or a material tax imposed pursuant to Section 4975
or 4976 of the Code, and (ix) to the best knowledge of the Company,
there are no pending, threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of the
Company Plans or any trusts related thereto and no Company Plan is
presently under audit or examination (or any notice thereof).
(d)Except as listed in Section 5.10(d) of the
Company Disclosure Schedule, neither the execution and delivery of
this Agreement nor the consummation of the transactions
contemplated hereby will (either alone or in conjunction with any
other event) (i) result in any payment (including, without
limitation, severance, "excess parachute payment" within the
meaning of Section 280G of the Code, forgiveness of indebtedness or
otherwise) becoming due to any officer, director or employee of the
Company or any of its subsidiaries under any Company Plan or
otherwise, (ii) increase any benefits payable under any Company
Plan or (iii) result in any acceleration of the time of payment or
vesting of any such benefits.
Section 5.11 Opinion of Financial Advisor. The Board of
Directors of the Company has received the opinions of Goldman Sachs
and Merrill Lynch, each dated the date hereof, to the effect that
the Per Share Merger Consideration is fair to the holders of shares
of Company Common Stock from a financial point of view.
Section 5.12 Vote Required. The Company Stockholder
Approval at the Company Stockholders Meeting will require the
affirmative vote of the holders of a majority of the voting power
of all outstanding shares of Company Common Stock, Company $4.30
Preferred Stock and Company Convertible Preferred Stock, voting
together as a single class. The Company Stockholder Approval is
the only vote of the holders of any class or series of the
Company's capital stock necessary to approve and adopt this
Agreement, and approve the transactions contemplated hereby.
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<PAGE> 37
Section 5.13 Takeover Statutes, Etc. The Board of
Directors of the Company has approved the terms of this Agreement,
the consummation of the Merger and the other transactions
contemplated by this Agreement, and such approval is sufficient to
render inapplicable to the Merger and the other transactions
contemplated by this Agreement the provisions of Section 203 of the
DGCL. To the best of the Company's knowledge, no other state
takeover statute or similar statute or regulation applies or
purports to apply to the Merger, this Agreement or any of the
transactions contemplated thereby. This Agreement has been
approved by the Board of Directors of the Company for purposes of
Article VIII of the Company's Restated Certificate of
Incorporation. The Company has taken all action necessary or
appropriate so that the execution of this Agreement and the
consummation of the transactions contemplated hereby do not and
will not result in the ability of any person to exercise any
Company Rights (as defined in the Company Rights Agreement) under
the Company Rights Agreement or enable or require the Rights to
separate from the shares of Company Common Stock to which they are
attached or to be triggered or become exercisable.
Section 5.14 Agreements with Regulatory Agencies.
Except as set forth in Section 5.14 of the Company Disclosure Sched
ule, neither the Company nor any of its subsidiaries is subject to
any cease-and-desist or other order issued by, or is a party to any
written agreement, consent agreement or memorandum of understanding
with, or is a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or is a recipient
of any extraordinary supervisory letter from, or has adopted any
board resolutions at the request of (each, whether or not listed in
Section 5.14 of the Company Disclosure Schedule, a "Regulatory
Agreement"), any Regulatory Agency or other Governmental Entity
that restricts the conduct of its business or that in any manner
relates to its capital adequacy, its credit policies, its
management or its business, except for any Regulatory Agreements
that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company or on the
Acquiror's ability to conduct the business of the Company as
presently conducted. None of the Company or any of its subsidiaries
has been advised by any Regulatory Agency or other Governmental
Entity that it is considering issuing or requesting any Regulatory
Agreement, except for any such proposed Regulatory Agreements that
would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on the Company.
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<PAGE> 38
Section 5.15 Taxes.
(a) Each of the Company and its subsidiaries has
filed all material Tax returns or reports required to be filed by
it and all such returns and reports are complete and correct in all
material respects, or requests for extensions to file such returns
or reports have been timely filed, granted and have not expired,
except to the extent that such failures to file, to be complete or
correct or to have extensions granted that remain in effect,
individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on the Company. The Company and
each of its subsidiaries have paid (or the Company has paid on its
behalf) all Taxes shown as due on such returns, and, the most
recent financial statements contained in the Filed Company SEC
Reports reflect an adequate reserve in accordance with GAAP for all
Taxes payable by the Company and its subsidiaries for all taxable
periods and portions thereof accrued through the date of such
financial statements.
(b)Except as set forth in Section 5.15(b) of the
Company Disclosure Schedule, no deficiencies for any Taxes have
been proposed, asserted or assessed against the Company or any of
its subsidiaries that are not adequately reserved for, except for
deficiencies that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the
Company. The federal income tax returns of the Company and each of
its subsidiaries consolidated in such returns for tax years through
1988 have closed by virtue of the applicable statute of
limitations.
(c)Neither the Company nor any of its subsidiaries
has taken any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
(d)Except as set forth in Section 5.15(d) of the
Company Disclosure Schedule, the Company and its subsidiaries are
not a party to any Tax sharing or Tax indemnity agreements (other
than agreements between or among the Company and its subsidiaries).
Section 5.16 Accounting for the Merger. The Company has
no reason to believe that the Merger will fail to qualify for pool
ing-of-interests treatment under GAAP and applicable SEC
regulations.
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<PAGE> 39
Section 5.17 Brokers. No broker, investment banker or
other person, other than Goldman Sachs and Merrill Lynch, the fees
and expenses of which will be paid by the Company (as reflected in
agreements between Goldman Sachs and Merrill Lynch and the
Company), is entitled to any broker's, finder's or other similar
fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of
the Company.
Section 5.18 Interest Rate and Foreign Exchange
Contracts. All interest rate swaps, caps, floors and option
agreements and other interest rate risk management arrangements and
foreign exchange contracts to hedge its investments in foreign
subsidiaries, whether entered into for the account of the Company
or one of its subsidiaries, were entered into in the ordinary
course of business and, to the Company's knowledge, in accordance
with prudent business practice and applicable rules, regulations
and policies of any Governmental Entity and with counterparties
believed to be financially responsible at the time, and are valid
and binding obligations of the Company or one of its subsidiaries
enforceable in accordance with their terms (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and the
availability of equitable remedies), and are in full force and
effect. The Company and each of its subsidiaries have duly
performed in all material respects all of their material
obligations thereunder to the extent that such obligations to
perform have accrued, and, to the Company's knowledge, there are no
material breaches, violations or defaults or allegations or
assertions of such by any party thereunder.
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<PAGE> 40
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Subject to Article IV, Acquiror represents and warrants
to the Company as follows:
Section 6.1 Organization.
(a)Acquiror is a corporation duly organized, validly
existing and in good standing under the Laws of the State of
Delaware and has the corporate power and authority to own or lease
all of its properties and assets and to carry on its business as it
is now being conducted. Acquiror is duly licensed or qualified as
a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities make such
licensing or qualification necessary, except where the failure to
be so qualified would not have a Material Adverse Effect on
Acquiror.
(b)Each of Acquiror's subsidiaries, including HAC,
is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each subsidiary of
Acquiror, including HAC, has the corporate power and authority to
own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature
of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect on Acquiror.
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<PAGE> 41
Section 6.2 Capitalization. The authorized capital
stock of Acquiror consists of 250,000,000 shares of Acquiror Common
Stock, and 8,155,044 shares of Acquiror Preferred Stock. As of
April 2, 1998, (i) 107,319,277 shares of Acquiror Common Stock were
issued and outstanding; (ii) 4,072,145 shares of Acquiror Common
Stock were issuable upon exercise of employee and non-employee
stock options (the "Acquiror Stock Options") outstanding under all
stock option plans of Acquiror (the "Acquiror Stock Option Plans");
and (iii) 3,754,635 shares of Acquiror Preferred Stock were issued
and outstanding. As of April 2, 1998, 17,011,848 shares of
Acquiror Common Stock were held as treasury shares. All of the
issued and outstanding shares of Acquiror Common Stock are validly
issued, fully paid and nonassessable and free of preemptive rights.
All of the shares of Acquiror Common Stock issuable as
consideration in the Merger at the Effective Time in accordance
with this Agreement will be, when so issued, duly authorized,
validly issued, fully paid and nonassessable and free of preemptive
rights. Except as set forth above, as of April 2, 1998, there were
no shares of capital stock of Acquiror issued or outstanding or any
options, warrants, subscriptions, calls, rights, convertible
securities or other agreements or commitments obligating Acquiror
to issue, transfer, sell, redeem, repurchase or otherwise acquire
any shares of its capital stock or securities. There are no notes,
bonds, debentures or other indebtedness of Acquiror having the
right to vote (or convertible into or exchangeable for securities
having the right to vote) on any matters upon which stockholders of
Acquiror may vote. The authorized capital stock of HAC consists of
1,000 shares of common stock, par value $.01 per share, all of
which are validly issued, fully paid and nonassessable, and are
owned by Acquiror free and clear of any Lien.
Section 6.3 Authority Relative to this Agreement. Each
of Acquiror and HAC has the corporate power and authority to enter
into this Agreement and to perform its respective obligations
hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by each of Acquiror
and HAC and the consummation by each of Acquiror and HAC of the
transactions contemplated hereby have been duly authorized by the
Board of Directors of each of Acquiror and HAC and by Acquiror as
the sole stockholder of HAC. Except for the approval of this
Agreement by the requisite vote of Acquiror's stockholders (the
"Acquiror Stockholder Approval") at a special meeting of Acquiror's
stockholders duly called for the purpose of
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<PAGE> 42
obtaining such approval (the "Acquiror Stockholders Meeting"), no
other corporate action or proceeding on the part of Acquiror or HAC
is necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by each of Acquiror and HAC and, assuming the due
authorization and valid execution and delivery by the Company,
constitutes a valid and binding agreement of each of Acquiror and
HAC, enforceable against each of Acquiror and HAC in accordance
with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or similar Laws now or hereafter in effect relating to
creditors' rights generally and general principles of equity.
Section 6.4 Consents and Approvals; No Violations.
(a)Except for (i) the notices, consents or
approvals, and filings or registrations, required to obtain the
Requisite Regulatory Approvals, (ii) the filing with the SEC of the
Merger Proxy Statement and the filing and declaration of effec
tiveness of the Registration Statement, (iii) the filing of the
Certificate of Merger with the Secretary of State of the State of
Delaware, (iv) such filings and approvals as are required to be
made or obtained under the securities or "Blue Sky" Laws of various
states in connection with the issuance of the shares of Acquiror
Common Stock pursuant to this Agreement, (v) the approval of the
listing of the Acquiror Common Stock to be issued in the Merger on
the NYSE, and (vi) the consents of third parties under the
Contracts listed in Section 6.4(a)(vi) of the Acquiror Disclosure
Schedule, no notices to, consents or approvals of, or filings or
registrations with any Governmental Entity or with any self
regulatory authority or with any third party are necessary in
connection with the execution and delivery by each of Acquiror and
HAC of this Agreement and the consummation by each of Acquiror and
HAC of the transactions contemplated hereby, except for such
notices, consents, approvals, filings or registrations, the failure
of which to be made or obtained would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect
on the Acquiror. As of the date hereof, Acquiror knows of no reason
why all Requisite Regulatory Approvals will not be obtained.
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<PAGE> 43
(b)Except as listed in Section 6.4(b) of the
Acquiror Disclosure Schedule, neither the execution and delivery of
this Agreement by either Acquiror or HAC, nor the consummation by
Acquiror or HAC of the transactions contemplated hereby, will (i)
conflict with or result in any violation of or breach of any
provisions of the certificate of incorporation or by-laws of
Acquiror or the certificate of incorporation or by-laws of any of
Acquiror's subsidiaries, including HAC; (ii) subject to obtaining
the consents listed in Section 6.4(a)(vi) of the Acquiror
Disclosure Schedule, result in a violation or breach of, or
constitute (with or without due notice or lapse of time, or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of
any Contract to which Acquiror or any of Acquiror's subsidiaries,
including HAC, is a party or by which any of them or any of their
respective properties or assets may be bound; (iii) result in a
violation or breach of, or constitute (with or without due notice
or lapse of time, or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any Acquiror License (as hereinafter
defined); or (iv) subject to giving the notices, making the filings
or registrations or obtaining the consents or approvals referred to
in paragraph (a) above, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Acquiror, any of
Acquiror's subsidiaries, including HAC, or any of their respective
properties or assets, except, in the case of clauses (ii), (iii)
and (iv), for violations, breaches or defaults which would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Acquiror.
Section 6.5 Reports and Financial Statements.
(a)Acquiror and each of its subsidiaries have timely
filed all material reports, registrations and statements, together
with any amendments required to be made with respect thereto, that
they were required to file since December 31, 1995 with all
Regulatory Agencies, and have paid all material fees and assess
ments due and payable in connection therewith. Except for normal
examinations conducted by a Regulatory Agency in the regular course
of the business of Acquiror and its subsidiaries, and except as
listed in Section 6.5 of the Acquiror Disclosure Schedule, no Regu
latory Agency has initiated any proceeding or investigation or, to
the knowledge of Acquiror, threatened any investigation into the
business or operations of Acquiror or any of its subsidiaries since
December 31, 1995, except for such proceedings or investigations
which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Acquiror.
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<PAGE> 44
(b)Acquiror and each of its subsidiaries have timely
filed all material reports, forms, registrations, schedules,
statements and other documents required to be filed by it with the
SEC since December 31, 1995 (the "Acquiror SEC Reports"). As of
their respective dates, the Acquiror SEC Reports complied in all
material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the applicable rules and
regulations promulgated thereunder. Except to the extent that
information contained in any Acquiror SEC Report has been revised
or superseded by a later filed Acquiror SEC Report, none of the
Acquiror SEC Reports, when filed, contained any untrue statement of
a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
(c)The consolidated financial statements of Acquiror
included in the Acquiror SEC Reports filed and publicly available
prior to the date of this Agreement (as amended to the date of this
Agreement, the "Filed Acquiror SEC Reports") complied as to form in
all material respects with the applicable accounting requirements
and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP (except, in the
case of the unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and
fairly present the consolidated financial position of Acquiror and
its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and their consolidated
cash flows for the periods then ended (subject, in the case of the
unaudited statements, to normal year-end audit adjustments and to
any other adjustments described therein).
(d)Except as set forth in the Filed Acquiror SEC
Reports, and except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice since the
date of the most recent consolidated balance sheet included in the
Filed Acquiror SEC Reports, neither Acquiror nor any of its
subsidiaries has any material liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be recognized or disclosed on a consolidated
balance sheet of Acquiror and its consolidated subsidiaries or in
the notes thereto.
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<PAGE> 45
Section 6.6 Absence of Certain Changes or Events.
Except as set forth in the Filed Acquiror SEC Reports, the business
of Acquiror and its subsidiaries has been conducted only in the
ordinary course of business consistent with past practice, and
there has not been any event, change or development which, individ
ually or in the aggregate, has had or would reasonably be expected
to have a Material Adverse Effect on Acquiror, and, during the
period from the most recent consolidated balance sheet included in
the Filed Acquiror SEC Reports through the date of this Agreement,
neither Acquiror nor any of its subsidiaries has taken any action
that, if taken during the period from the date of this Agreement
through the Effective Time, would constitute a breach of Section
7.2 hereof.
Section 6.7 Litigation. Except as set forth in the
Filed Acquiror SEC Reports, and as set forth in Section 6.7 of the
Acquiror Disclosure Schedule, as of the date hereof, there is no
suit, action, proceeding or regulatory investigation pending or, to
the knowledge of Acquiror, threatened against or affecting Acquiror
or any of its subsidiaries that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on
Acquiror, nor is there any judgment, order, decree, statute, Law,
ordinance, rule or regulation of any Regulatory Agency or Governmen
tal Entity or arbitrator outstanding against Acquiror or any of its
subsidiaries which, individually or in the aggregate, has had or
would reasonably be expected to have a Material Adverse Effect on
Acquiror.
Section 6.8 Information in Disclosure Documents and
Registration Statement. None of the information to be supplied by
Acquiror for inclusion or incorporation by reference in the
Registration Statement or the Merger Proxy Statement will, in the
case of the Registration Statement, at the time it becomes
effective and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, or, in the case of the Merger Proxy Statement or any
amendments thereof or supplements thereto, at the time of the
mailing of the Merger Proxy Statement and any amendments or
supplements thereto and at the time of the Company Stockholders
Meeting and the Acquiror Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
are made, not misleading. The Merger Proxy Statement (except for
such portions thereof that relate only to the Company or its
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<PAGE> 46
subsidiaries or Affiliates) and the Registration Statement will
comply as to form in all material respects with the provisions
of the Exchange Act and the Securities Act, respectively, and the
rules and regulations promulgated thereunder.
Section 6.9 Compliance with Applicable Law. Acquiror
and its subsidiaries have received such certificates, permits,
licenses, franchises, consents, approvals, orders, authorizations
and clearances from appropriate Governmental Entities (the
"Acquiror Licenses") as are necessary to own or lease and operate
their respective properties and to conduct their respective
businesses substantially in the manner described in the Acquiror
SEC Reports and as currently owned or leased and conducted, and all
such Acquiror Licenses are valid and in full force and effect,
except for any such Acquiror Licenses which the failure to have or
to be in full force and effect would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect
on Acquiror. Acquiror and its subsidiaries are in compliance in
all material respects with their respective obligations under
Acquiror Licenses, with only such exceptions as, individually or in
the aggregate, would not reasonably be expected to have a Material
Adverse Effect on Acquiror. Except as disclosed in the Filed
Acquiror SEC Reports, Acquiror and its subsidiaries are in
compliance with all judgments, orders, decrees, statutes, Laws,
ordinances, rules and regulations of any Governmental Entity
applicable to them, except for such noncompliance which,
individually or in the aggregate, would not, individually or in the
aggregate have a Material Adverse Effect on Acquiror.
Section 6.10 Brokers. No broker, investment banker or
other person, other than Morgan Stanley & Co. Incorporated, the
fees and expenses of which will be paid by Acquiror (as reflected
in an agreement between Morgan Stanley & Co. Incorporated and
Acquiror), is entitled to any broker's, finder's or other similar
fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of
Acquiror.
Section 6.11 Ownership of Company Common Stock;
Affiliates and Associates. Neither Acquiror nor any of its
affiliates or associates (as such terms are defined under the
Exchange Act) (i) beneficially owns, directly or indirectly, or
(ii) is a party to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any
shares of capital stock of the Company (other than Trust Account
Shares and DPC Shares).
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Section 6.12 Agreements with Regulatory Agencies.
Except as listed in Section 6.12 of the Acquiror Disclosure
Schedule or as disclosed in Acquiror's Annual Report on Form 10-K
for the year ended December 31, 1996, neither Acquiror nor any of
its subsidiaries is subject to any cease-and-desist or other order
issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or is a party to any
commitment letter or similar undertaking to, or is subject to any
order or directive by, or is a recipient of any extraordinary
supervisory letter from, or has adopted any board resolutions at
the request of (each, whether or not set forth in Section 6.12 of
the Acquiror Disclosure Schedule, an "Acquiror Regulatory
Agreement"), any Regulatory Agency or other Governmental Entity
that restricts the conduct of its business or that in any manner
relates to its capital adequacy, its credit policies, its
management or its business, except for any Acquiror Regulatory
Agreements that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
Acquiror, nor has Acquiror or any of its subsidiaries been advised
by any Regulatory Agency or other Governmental Entity that it is
considering issuing or requesting any Acquiror Regulatory
Agreement, except for any such proposed Acquiror Regulatory
Agreements that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
Acquiror.
Section 6.13 Vote Required. The Acquiror Stockholder
Approval at the Acquiror Stockholders Meeting will require the
affirmative vote of the holders of a majority of the votes cast,
provided that the total number of votes cast represents over 50% of
the total number of outstanding shares of Acquiror Common Stock.
The Acquiror Stockholder Approval is the only vote of the holders
of any class or series of Acquiror's capital stock necessary to
approve and adopt this Agreement, and approve the transactions
contemplated hereby.
Section 6.14 Taxes.
(a)Each of Acquiror and its subsidiaries has filed
all material Tax returns or reports required to be filed by it and
all such returns and reports are complete and correct in all
material respects, or requests for extensions to file such returns
or reports have been timely filed, granted and have not expired,
except to the extent that such failures to file, to be complete or
correct or to have extensions granted that remain in effect,
individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on Acquiror.
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Acquiror and each of its subsidiaries have paid (or Acquiror has
paid on its behalf) all Taxes shown as due on such returns, and the
most recent financial statements contained in the Filed Acquiror
SEC Reports reflect an adequate reserve in accordance with GAAP for
all Taxes payable by Acquiror and its subsidiaries for all taxable
periods and portions thereof accrued through the date of such
financial statements.
(b)No deficiencies for any Taxes have been proposed,
asserted or assessed against Acquiror or any of its subsidiaries
that are not adequately reserved for, except for deficiencies that,
individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on Acquiror. The federal income
tax returns of Acquiror and each of its subsidiaries consolidated
in such returns for tax years through 1988 have closed by virtue of
the applicable statute of limitations.
(c)Neither Acquiror nor any of its subsidiaries has
taken any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
Section 6.15 Accounting for the Merger. Acquiror has no
reason to believe that the Merger will fail to qualify for pooling-
of-interests treatment under GAAP and applicable SEC regulations.
ARTICLE VII
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 7.1 Conduct of Business by the Company.
(a)During the period from the date of this Agreement
to the Effective Time, the Company shall, and shall cause its
subsidiaries to, carry on the business of the Company and its
subsidiaries in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and in compli
ance in all material respects with all applicable Laws and regula
tions and, to the extent consistent therewith, use all reasonable
efforts to preserve intact the current business organizations of
the Company and its subsidiaries, use reasonable efforts to keep
available the services of the current officers and other key
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<PAGE> 49
employees of the Company and its subsidiaries and preserve its
relationships with those persons having business dealings with
the Company and its subsidiaries to the end that the goodwill
and ongoing businesses of the Company and its subsidiaries
shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, during the period from the date of
this Agreement to the Effective Time, the Company agrees as to
itself and its subsidiaries that:
(i) Dividends. The Company and its
subsidiaries shall not (x) declare, set aside or pay any
distributions (whether in cash, stock or property) with
respect to its capital stock (other than normal quarterly
dividends on the Company Common Stock and the Company
Preferred Stock and dividends from a wholly owned
subsidiary of the Company to the Company or another
wholly owned subsidiary of the Company), (y) split,
combine, or reclassify any of the Company's capital
stock, or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution
for, shares of its capital stock or (z) repurchase,
redeem or call any of its equity securities.
(ii) Issuance of Securities. Except as
set forth in Section 7.1(a)(ii) of the Company Disclosure
Schedule, the Company and its subsidiaries shall not
issue, deliver, sell, pledge or otherwise encumber any
shares of capital stock of the Company or any of its
subsidiaries, any other voting securities or any
securities convertible into, or any options, warrants,
stock appreciation rights or rights to acquire, any such
shares, voting securities or convertible securities
(other than the issuance of Company Common Stock (i) upon
the exercise of Employee Stock Options, (ii) upon the
conversion of Company Convertible Preferred Stock and
(iii) pursuant to the dividend reinvestment provisions of
the Direct Purchase Plan (in each case outstanding on the
date of this Agreement and/or in accordance with their
present terms).
(iii) Governing Documents. The Company
shall not amend its certificate of incorporation or by-
laws, nor shall it permit any subsidiary of the Company
to amend its certificate of incorporation, by-laws or
other comparable organizational documents.
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<PAGE> 50
(iv) No Acquisitions. Except as set
forth in Section 7.1(a)(iv) of the Company Disclosure
Schedule and other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or
debt restructurings and the acquisition from time to time
of receivables in the ordinary course of business
consistent with past practice, the Company and its
subsidiaries shall not acquire or agree to acquire (x) by
merging or consolidating with, or by purchasing a substan
tial portion of the assets of, or by any other manner,
any business or any corporation, limited liability
company, partnership, joint venture, association or other
business organization or division thereof or (y) any
assets that, individually or in the aggregate, are
material to the Company and its subsidiaries.
(v) No Dispositions. Except as set
forth in Section 7.1(a)(v) of the Company Disclosure
Schedule and other than activities in the ordinary course
of business consistent with past practice, the Company
and its subsidiaries shall not sell, lease, license or
otherwise encumber or subject to any Lien or otherwise
dispose of any of the properties or assets of the Company
and its subsidiaries.
(vi) Indebtedness. Except as set forth
in Section 7.1(a)(vi) of the Company Disclosure Schedule
and other than in the ordinary course of business
consistent with past practice, the Company and its
subsidiaries shall not (x) incur any indebtedness or (y)
make any advances or capital contributions to, or invest
ments in, any other Person, other than to officers and
employees of the Company and its subsidiaries for travel,
business or relocation expenses in the ordinary course of
business.
(vii) Capital Expenditures. Except as
set forth in Section 7.1(a)(vii) of the Company
Disclosure Schedule, the Company and its subsidiaries
shall not make or agree to make any capital expenditure
or capital expenditures relating to a single project in
excess of $1,000,000 without the prior written consent of
Acquiror.
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<PAGE> 51
(viii) Tax Matters. The Company and
its subsidiaries shall not make any Tax election or
settle or compromise any material income Tax liability,
except in respect of ongoing matters or in the ordinary
course of business consistent with past practice and in
prior consultation with Acquiror.
(ix) Contracts. Except as set forth in
Section 7.1(a)(ix) of the Company Disclosure Schedule,
the Company and its subsidiaries shall not enter into any
material Contracts, except in the ordinary course of busi
ness consistent with past practice and in prior
consultation with Acquiror. The Company and its
subsidiaries shall not modify or amend in any material
respect or terminate any material Contract to which the
Company or any of its subsidiaries is a party or waive,
release or assign any material rights or claims thereun
der.
(x) Employee Matters. Except as
required by Law or in the ordinary course of business
consistent with past practice or in accordance with this
Agreement, and the Company will not, nor will it permit
any of its subsidiaries to, (a) increase the compensation
of any of its employees, (b) enter into any Contract with
any of its employees regarding his or her employment,
compensation or benefits, or (c) adopt any plan,
arrangement or policy which would become a Company Plan
or amend any Company Plan to the extent such adoption or
amendment would create or increase any material liability
or obligation on the part of the Company or its
subsidiaries.
(xi) Approvals. The Company and its
subsidiaries shall not take any action or enter into any
agreement that could reasonably be expected to materially
jeopardize or delay the receipt of any Requisite
Regulatory Approval.
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<PAGE> 52
(xii) Accounting Policies and
Procedures. The Company and its subsidiaries shall not
make any change to their accounting methods, principles
or practices, except as may be required by GAAP or
Regulation S-X promulgated by the SEC.
(xiii) Liens. The Company shall not,
and shall not permit any of its subsidiaries to, create,
incur, suffer to exist or assume any material Lien on any
of their material assets.
(xiv) Claims. The Company and its
subsidiaries shall not settle any material claim, action
or proceeding involving money damages or waive or release
any material rights or claims.
(xv) Interest Rate and Foreign
Exchange. The Company and its subsidiaries shall not
materially restructure or materially change its gap
position, through purchases, sales, hedges, swaps, caps
or collars or otherwise or the manner in which any
current hedges are classified or reported.
(xvi) No Agreements. The Company shall
not agree to commit to do any of the foregoing.
Section 7.2 Conduct of Business by Acquiror. During the
period from the date of this Agreement to the Effective Time,
Acquiror agrees as to itself and its subsidiaries that:
(i) Dividends. Except as set forth in
Section 7.2(i) of the Acquiror Disclosure Schedule,
Acquiror and its subsidiaries shall not (x) declare, set
aside or pay any distributions (whether in cash, stock or
property) with respect to its capital stock (other than
normal quarterly dividends on the Acquiror Common Stock
and the Acquiror Preferred Stock and dividends from a
wholly owned subsidiary of Acquiror to Acquiror or
another wholly owned subsidiary of Acquiror), (y) split,
combine, or reclassify any of Acquiror's capital stock,
or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution
for, shares of its capital stock.
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<PAGE> 53
(ii) Approvals. Acquiror and its
subsidiaries shall not take any action or enter into any
agreement that could reasonably be expected to jeopardize
or delay the receipt of any Requisite Regulatory
Approval.
(iii) Accounting Policies and
Procedures. Acquiror and its subsidiaries shall not make
any change to their accounting methods, principles or
practices, except as may be required by GAAP or
Regulation S-X promulgated by the SEC.
(iv) No Agreements. Acquiror shall not
agree or commit to any of the foregoing.
Section 7.3 Other Actions. During the period from the
date hereof to the Effective Time, the Company and Acquiror shall
not, and shall not permit any of their respective subsidiaries to,
take any action that would, or that could reasonably be expected
to, result in any of the conditions to the Merger set forth in
Article IX hereof not being satisfied.
Section 7.4 Advice of Changes. The Company and Acquiror
shall promptly advise the other party orally and in writing of (a)
any representation or warranty made by it contained in this Agree
ment that is qualified as to materiality becoming untrue or
inaccurate in any respect or any such representation or warranty
that is not so qualified becoming untrue or inaccurate in any
material respect, (b) the failure by it to comply with or satisfy
in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or (c) any
change or event (i) having, or which, insofar as can reasonably be
foreseen, would have, in the case of Acquiror, a Material Adverse
Effect on Acquiror, and, in the case of the Company, a Material
Adverse Effect on the Company, or (ii) which has resulted, or
which, insofar as can reasonably be foreseen, would result, in any
of the conditions set forth in Article IX not being satisfied;
provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this
Agreement.
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<PAGE> 54
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 No Solicitation. The Company shall not, and
shall use its reasonable best efforts to cause its officers, direc
tors and employees, and investment bankers, attorneys, accountants
and other agents retained by it, not to, initiate, solicit or
encourage, directly or indirectly, any inquiries relating to, or
the making of any Acquisition Proposal, or engage in negotiations
or discussions with, or furnish any information to, any third party
relating to an Acquisition Proposal. Notwithstanding the
foregoing, the Company and the Board of Directors of the Company
(a) may participate in discussions or negotiations (including, as a
part thereof, making any counterproposal) with, or furnish informa
tion to, any third party with respect to any Acquisition Proposal
if the Company's Board of Directors determines in good faith, after
consultation with its counsel, that the failure to participate in
such discussions or negotiations or to furnish such information may
constitute a breach of its fiduciary duties under, or otherwise
violate, applicable Law, and (b) shall be permitted to (i) take and
disclose to the Company's stockholders a position with respect to
an Acquisition Proposal or amend or withdraw such position or its
position with respect to the Merger, or (ii) make disclosure to the
Company's stockholders, in each case, if the Company's Board of
Directors determines in good faith, after consultation with its
counsel, that the failure to take such action may constitute a
breach of its fiduciary duties under, or otherwise violate, appli
cable Law. The Company shall promptly (within 24 hours) advise the
Acquiror of its receipt of any Acquisition Proposal, or any inquiry
that may lead to an Acquisition Proposal, including the substance
thereof and the identity of the person making such Acquisition
Proposal or inquiry.
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<PAGE> 55
Section 8.2 Preparation of the Registration Statement
and the Merger Proxy Statement; Company and Acquiror Stockholders
Meetings.
(a)As soon as reasonably practicable following the
date of this Agreement, Acquiror and the Company shall prepare and
file with the SEC the Merger Proxy Statement and Acquiror shall pre
pare and file with the SEC the Registration Statement, in which the
Merger Proxy Statement will be included as a prospectus (including
the financial statements and pro forma financial information
required to be set forth therein). Each of Acquiror and the
Company shall use all reasonable efforts to have the Registration
Statement declared effective under the Securities Act as promptly
as practicable after such filing. Each of Acquiror and the Company
will use all reasonable efforts to cause the Merger Proxy Statement
to be mailed to its respective stockholders as promptly as
practicable after it has been cleared by the SEC. Each of Acquiror
and the Company shall also take any action (other than qualifying
to do business in any jurisdiction in which it is not now so quali
fied or to file a general consent to service of process) required
to be taken under any applicable state securities Laws in
connection with the issuance of Acquiror Common Stock in connection
with the Merger. The Company shall furnish all information
concerning the Company, its subsidiaries and the holders of the
Company Common Stock, and Acquiror shall furnish all information
concerning Acquiror and its subsidiaries, in each case, as may be
reasonably requested in connection with any such action.
(b)Each of Acquiror and the Company will, as soon as
practicable following the date of this Agreement, duly call, give
notice of, convene and hold the Acquiror Stockholders Meeting and
the Company Stockholders Meeting, respectively, for the purpose of
obtaining the Acquiror Stockholder Approval and the Company Stock
holder Approval. Each of Acquiror and the Company will, through
its Board of Directors, subject in the case of the Company to its
fiduciary duties, recommend to its respective stockholders the
approval and adoption of this Agreement and the transactions contem
plated thereby. Acquiror and the Company will coordinate and
cooperate with respect to the foregoing matters, with a view
towards, among other things, holding the respective meetings of
each party's stockholders on the same day.
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<PAGE> 56
Section 8.3 Access and Information; Confidentiality.
The Company and Acquiror shall each afford to the other and to the
other's financial advisors, legal counsel, accountants, consultants
and other representatives full access at all reasonable times
throughout the period prior to the Effective Time to all of its
books, records, properties, plants and personnel and, during such
period, each shall furnish promptly to the other (a) a copy of each
report, schedule and other document filed or received by it
pursuant to the requirements of federal or state securities,
banking or insurance Laws, and (b) all other information as such
other party may reasonably request, provided that no investigation
pursuant to this Section 8.3 shall affect any representations or
warranties made herein or the conditions to the obligations of the
respective parties to consummate the Merger. Each party and their
respective affiliates, representatives and agents shall hold in
confidence all nonpublic information in accordance with the terms
of the Confidentiality Agreement (the "Confidentiality Agreement")
between Acquiror and the Company dated February 18, 1998, until
such time as such information is otherwise publicly available and,
if this Agreement is terminated, each party will deliver to the
other all documents, work papers and other material (including
copies) obtained by such party or on its behalf from the other
party as a result of this Agreement or in connection herewith,
whether so obtained before or after the execution hereof.
Section 8.4 Comfort Letters.
(a)The Company shall use its reasonable efforts to
cause to be delivered to Acquiror "comfort" letters of Deloitte &
Touche LLP, the Company's independent public accountants, dated the
date on which the Registration Statement shall become effective and
as of the Closing Date, and addressed to Acquiror and the Company,
in form and substance reasonably satisfactory to Acquiror and as is
reasonably customary in scope and substance for letters delivered
by independent public accountants in connection with transactions
such as those contemplated by this Agreement.
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<PAGE> 57
(b)Acquiror shall use its reasonable best efforts to
cause to be delivered to the Company "comfort" letters of Arthur
Andersen LLP, Acquiror's independent public accountants, dated the
date on which the Registration Statement shall become effective and
as of the Closing Date, and addressed to the Company and Acquiror,
in form and substance reasonably satisfactory to the Company and as
is reasonably customary in scope and substance for letters
delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
Section 8.5 Listing Application. Acquiror shall prepare
and submit to the NYSE a listing application covering the shares of
Acquiror Common Stock and Acquiror New Preferred Stock to be issued
in connection with the Merger, and shall use its reasonable efforts
to obtain, prior to the Effective Time, approval for the listing of
such shares of Acquiror Common Stock, subject to official notice of
issuance.
Section 8.6 Affiliates. Prior to mailing the Merger
Proxy Statement, the Company shall use its reasonable efforts to
cause to be prepared and delivered to Acquiror a list (reasonably
satisfactory to counsel for Acquiror) identifying each Person who,
at the time of the Company Stockholders Meeting, may be deemed to
be an "affiliate" of the Company, as such term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act and for
purposes of qualifying the Merger for "pooling of interests"
accounting treatment (the "Company Rule 145 Affiliates"). The
Company shall use its reasonable efforts to cause each Person who
is identified as a Company Rule 145 Affiliate in such list to
deliver to Acquiror on or prior to mailing the Merger Proxy
Statement a written agreement, in customary form, that such Company
Rule 145 Affiliate will not (i) sell, pledge, transfer or otherwise
dispose of, or in any other way reduce such Company Rule 145
Affiliate's risk relative to, any shares of Acquiror Common Stock
issued to such Company Rule 145 Affiliate in connection with the
Merger, except pursuant to an effective registration statement or
in compliance with such Rule 145 or another exemption from the
registration requirements of the Securities Act, or (ii) sell or in
any other way reduce such Rule 145 Affiliate's risk relative to any
shares of Acquiror Common Stock received in the Merger (within the
meaning of Section 201.01 of the SEC's Financial Reporting Release
No. 1) during the period commencing 30 days prior to the Effective
Time and ending at such time as the financial results (including
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<PAGE> 58
combined sales and net income) covering at least 30 days of post-
Merger operations have been published (which publication Acquiror
shall cause to occur within 15 days after the end of the first full
calendar month following the month in which the Effective Time
occurs), except as permitted by Staff Accounting Bulletin No. 76
issued by the SEC.
Section 8.7 Governmental Authorizations. The Company
and Acquiror shall cooperate with each other and use their
reasonable efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and
filings, and to obtain as promptly as practicable all Requisite
Regulatory Approvals. The Company and Acquiror shall have the
right to review in advance, and to the extent practicable each will
consult the other on, in each case, subject to applicable Laws
relating to the exchange of information, all the information
relating to the Company or Acquiror, as the case may be, and any of
their respective subsidiaries, which appears in any filing made
with, or written materials submitted to, any third parties or any
Regulatory Agencies and Governmental Entities in connection with
the transactions contemplated by this Agreement. In exercising the
foregoing right, each of the parties hereto shall act reasonably
and as promptly as practicable. The parties hereto agree that they
will consult with each other with respect to the obtaining of all
consents of third parties and the Requisite Regulatory Approvals
necessary or advisable to consummate the transactions contemplated
by this Agreement and each party will keep the other apprised of
the status of matters relating to completion of the transactions
contemplated herein.
Section 8.8 Employee Matters.
(a)Employee Benefits. From and after the
Effective Time, Acquiror shall either continue the Company
Plans or provide to Company Employees retired employees of
the Company and its subsidiaries, and individuals who are
receiving (or eligible to receive as of the date hereof) benefits
by virtue of their relationship to a deceased employee
(collectively, the "Retired Employees") the same employee
benefits, at the same level, as Acquiror provides to similarly
situated employees of Acquiror and its subsidiaries and provide
Company Employees with the same incentive opportunities as
similarly situated employees of Acquiror. Notwithstanding the
foregoing, the Acquiror shall continue the incentive programs
and other benefit arrangements which are listed in Section 8.8(a)
of the Company Disclosure Schedule on substantially the same
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<PAGE> 59
terms and conditions as are in effect at the Effective Time, until
December 31, 1998. For a period of two years following the
Effective Time (the "Continuation Period"), any Company Employee in
the United States who is involuntarily terminated, other than for
cause, who by the conclusion of such period would have accumulated
sufficient age and service credit to become eligible to retire
early under the Pension Plan, shall be entitled to elect to remain
employed, in leave status, until such time as that eligibility has
been attained. If following the Effective Time, the health benefits
provided by the Acquiror to similarly situated retired employees
are not substantially equivalent to those provided to the Retired
Employees under the Company Plans, then the Acquiror shall continue
the Company Plans, as to such Retired Employee health benefits, for
a period of two years following the Effective Time. If following
the Effective Time, the health benefits, including covered benefits
(assuming waiver of all pre-existing condition limitations as
provided for below) provided to similarly situated employees are
not substantially equivalent to those provided to Company Employees
under the Company Plans, the Acquiror shall continue the Company
Plans providing such health benefits for a period of one year
following the Effective Time. With respect to each employee benefit
plan maintained by Acquiror following the Effective Time
(including, without limitation, plans or policies providing sever
ance benefits and vacation entitlement), service with the Company
and its subsidiaries shall be treated as service with Acquiror for
all purposes, other than for purposes of benefit accrual under any
qualified retirement plans; provided, however, that such service
shall not be recognized to the extent that such recognition would
result in a duplication of benefits. Such service shall also apply
for purposes of satisfying any waiting periods, evidence of
insurability requirements, or the application of any preexisting
condition limitations. Company Employees shall be given credit for
amounts paid under a corresponding benefit plan during the same
period for purposes of applying deductibles, copayments and out-of-
pocket maximums as though such amounts had been paid in accordance
with the terms and conditions of the benefit plan maintained by
Acquiror.
(b)Severance. Without limiting the generality of
the first sentence of paragraph (a) of this Section 8.8, Acquiror
shall provide to each individual who is an employee of the Company
or any of its subsidiaries in the United States immediately prior
to the Effective Time and whose employment is involuntarily
terminated other than for cause or non-performance during the
Continuation Period, severance benefits no less favorable to such
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individual than the severance pay plan described in Section 8.8(b)
of the Company Disclosure Schedule. During the Continuation Period,
if the continuing employment of any of the Company Employees is not at
the same or higher salary or wages, and on substantially the same
terms and conditions (subject to paragraph (a) of this Section
8.8), including but not limited to reasonable geographic proximity
to a Company Employee's employment location as of the date hereof,
and any such Company Employee declines to continue employment on
that basis, the termination of such Company Employee's employment
shall be an involuntary termination, other than for cause, for
purposes of the Company Plans.
(c)Outplacement Services. During the Continuation
Period, Acquiror shall provide to employees of the Company and its
subsidiaries whose employment is terminated during the Continuation
Period under circumstances entitling the employee to severance bene
fits under paragraph (b) of this Section 8.8 or under any
applicable employment or severance agreement then in effect,
outplacement services appropriate to the employee's position, as
determined by reasonable competitive practices.
(d)Compensation Contracts. Acquiror shall assume
and honor the obligations of the Company and its subsidiaries under
all employment, severance, consulting, retirement and other
compensation contracts, arrangements, commitments or
understandings, in accordance with their terms, as disclosed in
Section 8.8(d) of the Company Disclosure Schedule. Acquiror hereby
acknowledges that the Merger will constitute a "Change in Control"
in accordance with the provisions of the Company Plans listed in
Section 5.10(d) of the Company Disclosure Schedule. Acquiror
agrees, after consummation of the Merger, to pay all amounts
provided under such Company Plans and agreements as a result of a
change in control of the Company, as applicable, in accordance with
their respective terms, and to honor all rights, privileges and
modifications to or with respect to any such Company Plans or
agreements which become effective as a result of such change in
control.
(e)The Company shall take all actions necessary to
amend the terms of the Company Stock Option Plans to eliminate the
cash settlement of options granted thereunder as a result of or in
connection with the Merger and to provide that any such right shall
be settled in stock with a fair market value equal to the cash that
would otherwise have been payable thereunder. The Company will use
all reasonable efforts to obtain the consent of certain holders of
options granted under the Company Stock Option Plans to the
foregoing treatment of such cash settlement right.
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Section 8.9 Continuance of Existing Indemnification
Rights.
(a)For six years after the Effective Time, Acquiror
shall indemnify, defend and hold harmless any Person who is now, or
has been at any time prior to the date hereof, or who becomes prior
to the Effective Time, a director or officer of the Company (an
"Indemnified Person") against all losses, claims, damages,
liabilities, costs and expenses (including attorneys' fees and
expenses), judgments, fines, losses and amounts paid in settlement
in connection with any actual or threatened action, suit, claim,
proceeding or investigation (each, a "Claim") to the extent that
any such Claim is based on, or arises out of: (i) the fact that
such Indemnified Person is or was a director or officer of the
Company or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise; or (ii) this
Agreement or any of the transactions contemplated hereby, in each
case, to the extent that any such Claim pertains to any matter or
fact arising, existing or occurring prior to or at the Effective
Time, regardless of whether such Claim is asserted or claimed prior
to, at or after the Effective Time, to the full extent permitted
under the DGCL, the Company's certificate of incorporation or by-
laws or any indemnification agreement in effect at the date hereof,
including provisions relating to advancement of expenses incurred
in the defense of any such Claim; provided, however, that neither
Acquiror nor the Surviving Corporation shall be required to
indemnify any Indemnified Person in connection with any proceeding
(or portion thereof) involving any Claim initiated by such
Indemnified Person unless the initiation of such proceeding (or
portion thereof) was authorized by the Board of Directors of the
Company or unless such proceeding is brought by an Indemnified
Person to enforce rights under this Section 8.9. Without limiting
the generality of the preceding sentence, in the event any
Indemnified Person becomes involved in any Claim, after the
Effective Time, Acquiror shall, or shall cause the Surviving
Corporation to, periodically advance to such Indemnified Person its
legal and other expenses (including the cost of any investigation
and preparation incurred in connection therewith), subject to the
providing by such Indemnified Person of an undertaking to reimburse
all amounts so advanced in the event of a final non-appealable
determination by a court of competent jurisdiction that such
Indemnified Person is not entitled thereto.
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(b)Acquiror and the Company agree that all rights to
indemnification, and all limitations with respect thereto, existing
in favor of any Indemnified Person, as provided in the Company's
certificate of incorporation or by-laws and any indemnification
agreement in effect at the date hereof, shall survive the Merger
and shall continue in full force and effect, without any amendment
thereto, for a period of six years from the Effective Time, to the
extent such rights and limitations are consistent with the DGCL;
provided, however, that in the event any Claim is asserted or made
within such six-year period, all such rights, liabilities and
limitations in respect of any such Claim shall continue until
disposition thereof; provided further, that any determination
required to be made with respect to whether an Indemnified Person's
conduct complies with the standards set forth under the DGCL, the
Company's certificate of incorporation or by-laws or any such
agreement, as the case may be, shall be made by independent legal
counsel selected by such Indemnified Person and reasonably
acceptable to Acquiror; and provided further, that nothing in this
Section 8.9 shall impair any rights or obligations of any current
or former director or officer of the Company.
(c)Acquiror shall maintain the Company's existing
directors' and officers' liability insurance policy ("D&O
Insurance") for a period of not less than six years after the
Effective Time; provided, however, that Acquiror may substitute
therefor policies of substantially similar coverage and amounts
containing terms no less advantageous to such former directors or
officers; provided further, that if the existing D&O Insurance
expires or is cancelled during such period, Acquiror or the
Surviving Corporation shall use its best efforts to obtain
substantially similar D&O Insurance; and provided further, that
neither Acquiror nor the Surviving Corporation shall be required to
pay an annual premium for D&O Insurance in excess of 200% of the
last annual premium paid prior to the date hereof, but in such case
shall purchase as much coverage as possible for such amount.
(d)The provisions of this Section 8.9 are intended
to be for the benefit of, and shall be enforceable by, each
Indemnified Person, his or her heirs and his or her personal
representatives.
Section 8.10 Expenses. Whether or not the Merger is
consummated, all costs and expenses (including transfer Taxes)
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such
expenses.
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Section 8.11 Certain Other Matters. Acquiror hereby
agrees to honor all of its obligations and commitments contained in
each of the letters, dated April 6, 1998, addressed to Mr. Finn
M.W. Caspersen, the Chairman and Chief Executive Officer of the
Company, from William F. Aldinger, the Chairman and Chief Executive
Officer of Acquiror, including, without limitation, Acquiror's
obligations and commitments contained therein to (i) retain certain
management personnel of the Company, (ii) name certain current
directors of the Company to Acquiror's Board of Directors, (iii)
continue the use of the "Beneficial" name and (iv) continue the use
of certain of the Company's facilities.
Section 8.12 Beneficial Foundation; Certain Charitable
Contributions.
(a)The Company represents and warrants to Acquiror,
and Acquiror acknowledges and agrees, that the Beneficial
Foundation, Inc. (the "Foundation"), a not-for-profit corporation
created and funded under the laws of the State of Delaware in 1951
by certain senior officers of the Company, is a separate entity
independent of the Company, and Acquiror shall not have, nor shall
Acquiror acquire as a result of the transactions contemplated by
this Agreement, any ownership interest or rights in the Foundation
and its operation or management, nor shall Acquiror have any right
to designate future officers or directors of the Foundation, or
grants by the Foundation. The Company further represents and
warrants to Acquiror that it has been advised that the Foundation
will change its name to a name not containing the word "Beneficial"
or any variant thereof at or about the Effective Time.
(b)Acquiror agrees to honor and to cause the Company
to honor the Company's obligations to pay in a timely fashion all
currently outstanding charitable pledges of the Company and its
subsidiaries to the extent they remain unpaid at the Effective
Time, and to fund by transfers to the Foundation all multi-year
scholarships awarded by the Foundation to children of employees of
the Company and its subsidiaries outstanding at the Effective Time,
up to a combined maximum of $3,000,000.
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Section 8.13 Public Announcements. Acquiror and the
Company shall consult with each other before issuing, and provide
each other the opportunity to review, comment upon and concur with,
any press release or other public statements with respect to the
transactions contemplated by this Agreement, and shall not issue
any such press release or make any such public statement prior to
such consultation, except as may be required by applicable Law or
by existing obligations pursuant to any listing agreement with any
national securities exchange. The parties agree that the initial
press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
Section 8.14 Reasonable Best Efforts. Upon the terms
and subject to the conditions set forth in this Agreement, each of
the parties hereto agrees to use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger
and the other transactions contemplated by this Agreement. The
parties will execute any additional instruments necessary to
consummate the transactions contemplated hereby. In case at any
time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall take
all such necessary action.
Section 8.15 Regulatory Filings.
(a)Without limiting the generality of Section 8.7 or
8.18 hereof, the Company and Acquiror shall (i) take promptly all
actions necessary to make the filings required of the Company,
Acquiror or any of their affiliates in order to obtain any
Requisite Regulatory Approval, (ii) comply at the earliest
practicable date with any request for information or documentary
material received by the Company, Acquiror or any of their
respective Affiliates from any Regulatory Agency and (iii)
cooperate with each other in connection with any such filing and
with resolving any investigation or other inquiry concerning the
transactions contemplated by this Agreement commenced by any
Regulatory Agency.
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(b)In furtherance and not in limitation of the
covenants of the Company and Acquiror contained in Section 8.7 and
Section 8.15(a) hereof, each of the Company and Acquiror shall use
its reasonable best efforts to resolve such objections, if any, as
may be asserted with respect to the Merger or any other
transactions contemplated by this Agreement under any applicable
Law. If any administrative, judicial or legislative action or
proceeding is instituted (or threatened to be instituted)
challenging the Merger or any other transaction contemplated by
this Agreement as violative of any applicable Law, each of the
Company and Acquiror shall cooperate and use its reasonable best
efforts vigorously to contest and resist any such action or
proceeding, and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and that restricts,
prevents or prohibits consummation of the Merger or any other
transaction contemplated by this Agreement.
(c)Each of the Company and Acquiror shall promptly
inform the other of any material communication received by such
party or any of its Affiliates from any Regulatory Agency regarding
any of the transactions contemplated hereby. Each of the Company
and Acquiror shall advise the other promptly of any understandings,
undertakings or agreements which such party or any of its
Affiliates proposes to make or enter into with any Regulatory
Agency in connection with the transactions contemplated hereby.
Section 8.16 Tax Treatment; Pooling of Interests. Each
of the Company and Acquiror shall use its respective best efforts
to (a) cause the Merger to be accounted for as a "pooling of
interests" transaction under GAAP, (b) cause the Merger to qualify
as a reorganization under Section 368(a) of the Code and (c) obtain
the opinions of counsel referred to in Sections 9.2(c) and 9.3(c).
ARTICLE IX
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 9.1 Conditions to Each Party's Obligation to
Effect the Merger. The respective obligations of each party to
effect the Merger shall be subject to the satisfaction or waiver,
to the extent permitted by Law, at or prior to the Effective Time,
of the following conditions:
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(a)Registration Statement. The Registration
Statement shall have become effective in accordance with the
provisions of the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall be in effect and
no proceeding for such purpose shall be pending before or
threatened by the SEC.
(b)Listing of Shares. The shares of Acquiror Common
Stock which shall be issued to the stockholders of the Company
shall have been approved for listing on the NYSE, subject to
official notice of issuance.
(c)Stockholder Approval. Each of the Acquiror
Stockholder Approval and the Company Stockholder Approval shall
have been obtained in accordance with applicable Law.
(d)No Injunctions or Restraints; Illegality. No
preliminary or permanent injunction or other order by any federal
or state court in the United States of competent jurisdiction
("Injunction") which prohibits the consummation of the Merger shall
have been issued and remain in effect. No statute, rule,
regulation, order, injunction or decree shall have been enacted,
entered, promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of the Merger.
(e)Regulatory Approvals. All Requisite Regulatory
Approvals listed in Section 9.1(e) of the Company Disclosure
Schedule shall have been obtained and shall remain in full force
and effect and all statutory waiting periods in respect thereof
shall have expired.
(f)No Pending Governmental Actions. No proceeding
initiated by any Governmental Entity seeking an Injunction shall be
pending.
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Section 9.2 Conditions to Obligations of Acquiror. The
obligation of Acquiror to effect the Merger is also subject to the
satisfaction or waiver by Acquiror at or prior to the Effective
Time of the following conditions:
(a)Representations and Warranties. Subject to
Section 4.2, the representations and warranties of the Company set
forth in this Agreement shall be true and correct as of the date of
this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date. Acquiror shall have re
ceived a certificate signed on behalf of the Company by an execu
tive officer of the Company to the foregoing effect.
(b)Performance of Obligations of the Company. The
Company shall have performed in all material respects all obliga
tions required to be performed by it under this Agreement at or
prior to the Closing Date, and Acquiror shall have received a
certificate signed on behalf of the Company by an executive officer
of the Company to such effect.
(c)Federal Tax Opinion. Acquiror shall have
received an opinion of Wachtell, Lipton, Rosen & Katz, tax counsel
to Acquiror, in form and substance reasonably satisfactory to
Acquiror, dated as of the date of the Effective Time, on the basis
of facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing as of the
Effective Time, substantially to the effect that the Merger will
qualify as a reorganization within the meaning of Section 368(a) of
the Code. In rendering such opinion, such tax counsel shall be
entitled to rely upon representations and covenants of officers of
Acquiror and the Company substantially in the form of Exhibits C
and D hereto.
(d)Pooling of Interests. Acquiror shall have re
ceived a letter from each of Arthur Andersen LLP and Deloitte &
Touche LLP, each addressed to Acquiror and dated the Closing Date,
in form and substance reasonably acceptable to Acquiror, confirming
that the transactions contemplated by this Agreement, if
consummated, can properly be accounted for as a pooling-of-
interests business combination in accordance with GAAP and the
criteria of Accounting Principles Board Opinion No. 16 and the
regulations of the Securities and Exchange Commission.
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Section 9.3 Conditions to Obligations of the Company.
The obligation of the Company to effect the Merger is also subject
to the satisfaction or waiver by the Company at or prior to the
Effective Time of the following conditions:
(a)Representations and Warranties. Subject to
Section 4.2, the representations and warranties of Acquiror set
forth in this Agreement shall be true and correct as of the date of
this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date. The Company shall have
received a certificate signed on behalf of Acquiror by an executive
officer of Acquiror to the foregoing effect.
(b)Performance of Obligations of Acquiror. Acquiror
shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate
signed on behalf of Acquiror by an executive officer of Acquiror to
such effect.
(c)Federal Tax Opinion. The Company shall have
received an opinion from Skadden, Arps, Slate, Meagher & Flom LLP,
tax counsel to the Company, in form and substance reasonably satis
factory to the Company, dated as of the date of the Effective Time,
on the basis of facts, representations and assumptions set forth in
such opinion which are consistent with the state of facts existing
as of the Effective Time, substantially to the effect that the
Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinion, such tax
counsel shall be entitled to rely upon representations and
covenants of officers of Acquiror and the Company substantially in
the form of Exhibits C and D hereto.
(d)Pooling of Interests. The Company shall have
received copies of the letters from Arthur Andersen LLP and
Deloitte & Touche LLP referred to in Section 9.2(d) hereof.
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ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination. This Agreement may be termi
nated at any time prior to the Effective Time, whether before or
after approval of the matters presented in connection with the
Merger by the stockholders of the Company:
(a)by mutual consent of the Company and Acquiror;
(b)by either Acquiror or the Company (i) 60 days
after the date on which any request or application for a Requisite
Regulatory Approval listed in Section 9.1(e) of the Company
Disclosure Schedule shall have been denied or withdrawn at the
request or recommendation of the Governmental Entity which must
grant such Requisite Regulatory Approval, unless within the 60-day
period following such denial or withdrawal a petition for rehearing
or an amended application has been filed with the applicable
Governmental Entity; provided, however, that no party shall have
the right to terminate this Agreement pursuant to this Section
10.1(b)(i) if such denial or request or recommendation for
withdrawal shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein or (ii) if any
Governmental Entity of competent jurisdiction shall have issued a
final nonappealable order enjoining or otherwise prohibiting the
Merger;
(c)by either Acquiror or the Company if the Merger
shall not have been consummated on or before December 31, 1998,
unless the failure of the Closing to occur by such date shall be
due to the failure of the party seeking to terminate this Agreement
to perform or observe the covenants and agreements of such party
set forth herein;
(d)by either Acquiror or the Company (provided that
the terminating party shall not be in material breach of any of its
obligations under Section 8.3), if the Company Stockholder Approval
or the Acquiror Stockholder Approval shall not have been obtained
by reason of the failure to obtain the required vote at a duly held
meeting of such stockholders or at any adjournment or postponement
thereof;
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(e)by either Acquiror or the Company (provided that
the terminating party is not then in material breach of any repre
sentation, warranty, covenant or other agreement contained herein),
if there shall have been a material breach of any of the
representations, warranties, covenants or agreements set forth in
this Agreement on the part of the other party, which breach is not
cured within thirty days following written notice to the party
committing such breach, or which breach, by its nature, cannot be
cured prior to the Closing Date; provided, however, that neither
party shall have the right to terminate this Agreement pursuant to
this Section 10.1(e) unless the breach, together with all other
such breaches, would entitle the non-breaching party not to con
summate the transactions contemplated hereby under Sections 9.2(a)
and (b) (in the case of a breach by the Company) or Sections 9.3(a)
and (b) (in the case of a breach by Acquiror);
(f)by the Company, by written notice to Acquiror at
least two days prior to the anticipated Closing Date that the
Company is unwilling to accept the Per Share Merger Consideration
calculated in accordance with Section 3.1(a), in the event that (i)
the Average Closing Price shall be less than the product of 0.80
and the Starting Price, or (ii) both of the following conditions
are satisfied:
(x) the Average Closing Price shall be less than the
product of 0.85 and the Starting Price; and
(y) (i) the number obtained by dividing the Average
Closing Price by the Starting Price (such number being
referred to herein as the "Acquiror Ratio") shall be less than
(ii) the number obtained by dividing the Index Price on the
Determination Date by the Index Price on the Starting Date and
subtracting 0.15 from such quotient (such number being
referred to herein as the "Index Ratio");
subject to the following four sentences. If the Company elects to
exercise its termination right pursuant to the immediately
preceding sentence, it shall give prompt written notice to
Acquiror, which notice shall specify which of clause (i) or (ii) is
applicable (or, if both would be applicable, which clause is being
invoked); provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned two-day period. No
right of termination shall arise under this Section 10.1(g) if
Acquiror shall have given written notice to the Company at any
time within 24 hours of its receipt of the Company's written
notice of termination that Acquiror elects (x), in the case of
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a termination invoked under clause (i), to adjust the Per Share
Merger Consideration to equal a number equal to a quotient (rounded
to the nearest one-ten-thousandth), the numerator of which is the
product of 0.80, the Starting Price and the Per Share Merger
Consideration (as then in effect), and the denominator of which is
the Average Closing Price, or (y) to adjust the Per Share Merger
Consideration to equal the lesser of (A) a number equal to a
quotient (rounded to the nearest one-ten-thousandth), the numerator
of which is the product of 0.85, the Starting Price and the Per
Share Merger Consideration (as then in effect), and the denominator
of which is the Average Closing Price, and (B) a number equal to a
quotient (rounded to the nearest one-ten-thousandth), the numerator
of which is the Index Ratio multiplied by the Per Share Merger
Consideration (as then in effect), and the denominator of which is
the Acquiror Ratio. If Acquiror makes an election contemplated by
either of the two preceding sentences, within such 24-hour period,
it shall give prompt written notice to the Company of such election
and the revised Per Share Merger Consideration, whereupon no
termination shall have occurred pursuant to this Section 10.1(g)
and this Agreement shall remain in effect in accordance with its
terms (except as the Per Share Merger Consideration shall have been
so modified), and any references in this Agreement to "Per Share
Merger Consideration" shall thereafter be deemed to refer to the
Per Share Merger Consideration as adjusted pursuant to this Section
10.1(g). For purposes of this Section 10.1(g), the following terms
shall have the meanings indicated:
"Average Closing Price" means the average of the last
reported sale prices per share of Acquiror Common Stock as reported
on the NYSE (as reported in The Wall Street Journal or, if not
reported therein, in another mutually agreed upon authoritative
source) for the 10 consecutive trading days on the NYSE ending at
the close of trading on the Determination Date.
"Index Group" means the group of companies included in
the S&P Financials Index, but excluding Acquiror and the Company,
the common stock of all of which shall be publicly traded and as to
which there shall not have been, since the Starting Date and before
the Determination Date, an announcement of a proposal for such
company to be acquired or for such company to acquire another
company or companies in transactions with a value exceeding 25% of
the acquiror's market capitalization as of the Starting Date. In
the event that the common stock of any such company ceases to be
publicly traded or any such announcement is made with respect to
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and such company, such company will be removed from the Index
Group, and the weights assigned to the remaining companies
included in the Index Group will be appropriately adjusted for
purposes of determining the Index Price.
"Determination Date" shall mean the date that is three
days prior to the anticipated Closing Date.
"Index Price" on a given date shall mean the weighted
average of the closing prices of the companies comprising the Index
Group.
"Starting Date" shall mean the last full day on which the
NYSE was open for trading prior to the execution of this Agreement.
"Starting Price" shall mean the last reported sale price
per share of Acquiror Common Stock on the Starting Date, as
reported by NYSE (as reported in The Wall Street Journal or, if not
reported therein, in another mutually agreed upon authoritative
source).
If any company belonging to the Index Group or Acquiror
declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or
similar transaction between the Starting Date and the Determination
Date, the prices for the common stock of such company or Acquiror
shall be appropriately adjusted for the purposes of applying this
Section 10.1(g).
Section 10.2 Effect of Termination. In the event of
termination of this Agreement by either Acquiror or the Company as
provided in Section 10.1, this Agreement shall forthwith become
void and have no effect except that (i) the last sentence of
Section 8.3 and this Section 10.2 shall survive any termination of
this Agreement and (ii) that notwithstanding anything to the con
trary contained in this Agreement, no party shall be relieved or
released from any liabilities or damages arising out of its willful
breach of any provision of this Agreement.
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Section 10.3 Amendment. Subject to compliance with
applicable Law, this Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters
presented in connection with the Merger by the stockholders of
either the Company or Acquiror; provided, however, that after any
approval of the transactions contemplated by this Agreement by the
Company's stockholders, there may not be, without further approval
of such stockholders, any amendment of this Agreement which reduces
the amount or changes the form of the consideration to be delivered
to the Company's stockholders hereunder other than as contemplated
by this Agreement. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties here
to.
Section 10.4 Extension; Waiver. At any time prior to
the Effective Time, each of the parties hereto, by action taken or
authorized by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other
party contained herein or in any document delivered pursuant hereto
and (c) waive compliance with any of the agreements or conditions
of the other party contained herein. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of such
party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Survival of Representations and Warranties.
No representations or warranties contained herein shall survive
beyond the Effective Time. This Section 11.1 shall not limit any
covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
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Section 11.2 Notices. All notices or other
communications hereunder shall be deemed to have been duly given
and made if in writing and if delivered personally or if sent by
registered or certified mail (return receipt requested), or by a
national courier service (providing proof of delivery) or by
telecopier (with confirmation of receipt), to the person at the
address set forth below, or such other address as may be designated
in writing hereafter, in the same manner, by such person:
(a)If to Acquiror, to:
Household International, Inc.
2700 Sanders Pond
Prospect Heights, IL 60070
Attention: Senior Vice President and
General Counsel
Facsimile: (847) 205-7452
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Andrew Brownstein, Esq.
Facsimile: (212) 403-2000
(b)if to the Company, to:
Beneficial Corporation
One Christina Center
301 N. Walnut Street
Wilmington, DE 19801
Attention: General Counsel
Facsimile: (302) 425-2512
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
One Rodney Square
Wilmington, DE 19801
Attention: Richard L. Easton, Esq.
Facsimile: (302) 651-3001
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Any such notification shall be deemed delivered (i) upon receipt,
if delivered personally, (ii) three business days after deposit in
the mails, if sent by registered or certified mail, (iii) on the
next business day, if sent by national courier service for the
next business day delivery, or (iv) the business day received, if
sent by telecopier.
Section 11.3 Descriptive Headings. The headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement.
Section 11.4 Entire Agreement; No Third-Party
Beneficiary. This Agreement (including the Exhibits, Disclosure
Schedules and other documents and instruments referred to herein)
(a) constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the
parties or any of them, with respect to the subject matter hereof;
and (b) except for the provisions of Section 8.9 hereof, is not
intended to confer upon any other person other than the signatories
to this Agreement any rights or remedies hereunder or thereunder.
Section 11.5 Interpretation. When a reference is made
in this Agreement to an Article, Section or Annex, such reference
shall be to an Article or Section of, or an Annex to, this
Agreement unless otherwise indicated. Whenever the words
"include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of
this Agreement. The phrase "made available" in this Agreement
shall mean that the information referred to has been made available
if requested by the party to whom such information is to be made
available. All terms defined in this Agreement shall have the
defined meanings used in any certificate or other document made
or delivered pursuant hereto unless otherwise defined therein.
The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such
term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to
herein means such agreement, instrument or statute as from time
to time amended, modified or supplemented, including (in the case
of agreements or instruments) by waiver or consent and (in the
case of statutes) by succession of comparable successor statutes
and references to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted successors
and assigns and, in the case of an individual, to his heirs and
estate, as applicable.
<PAGE>
<PAGE> 76
Section 11.6 Severability. If any provision of this
Agreement or the application thereof to any Person or circumstance
is determined by a court of competent jurisdiction to be invalid,
void or unenforceable, the remaining provisions hereof, or the
application of such provision to Persons or circumstances other
than those as to which it has been held invalid or unenforceable,
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby. Upon any such
determination, the parties shall negotiate in good faith in an
effort to agree upon a suitable and equitable substitute provision
to effect the original intent of the parties.
Section 11.7 Assignment. Neither this Agreement nor any
of the rights, interests or obligations under this Agreement shall
be assigned, in whole or in part, by operation of Law or otherwise
by any of the parties without the prior written consent of the
other parties. Any assignment in violation of the preceding
sentence shall be void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and
assigns.
Section 11.8 Governing Law. This Agreement shall be
governed by and construed in accordance with the Laws of the State
of Delaware, without giving effect to the provisions thereof
relating to conflicts of Law.
Section 11.9 Specific Performance. The parties hereto
agree that irreparable damage would occur in the event any of the
provisions of this Agreement were not performed in accordance with
the terms hereof and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at
Law or in equity.
Section 11.10 Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be deemed
to be an original but all of which shall constitute one and the
same agreement.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
<PAGE> 77
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed on its behalf by its officers
thereunto duly authorized, all as of the date first above written.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ William F. Aldinger
---------------------------
Name: William F. Aldinger
Title: Chairman and Chief Executive
Officer
HOUSEHOLD ACQUISITION CORPORATION II
By: /s/ John W. Blenke
---------------------------
Name: John W. Blenke
Title: Vice President and Secretary
BENEFICIAL CORPORATION
By: /s/ Finn M.W. Caspersen
---------------------------
Name: Finn M.W. Caspersen
Title: Chairman and Chief Executive
Officer
<PAGE>
<PAGE> 78
EXHIBIT A
---------
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated April 7, 1998, between
BENEFICIAL CORPORATION, a Delaware corporation ("Issuer"), and
HOUSEHOLD INTERNATIONAL, INC., a Delaware corporation
("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement
and Plan of Merger of even date herewith (the "Merger
Agreement"), which agreement has been executed by the parties
hereto immediately prior to this Stock Option Agreement (the
"Agreement"); and
WHEREAS, as a condition to Grantee's entering into the
Merger Agreement and in consideration therefor, Issuer has agreed
to grant Grantee the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the
Merger Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the
terms hereof, up to 10,818,800 fully paid and nonassessable
shares of Issuer's Common Stock, par value $.01 per share
("Common Stock"), at a price of $130.50 per share (the "Option
Price"); provided, however, that in no event shall the number of
shares of Common Stock for which this Option is exercisable
exceed 19.9% of the Issuer's issued and outstanding shares of
Common Stock without giving effect to any shares subject to or
issued pursuant to the Option. The number of shares of Common
Stock that may be received upon the exercise of the Option and
the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
either (i) issued or otherwise become outstanding after the date
of this Agreement (other than pursuant to this Agreement) or (ii)
redeemed, repurchased, retired or otherwise cease to be
outstanding after the date of the Agreement, the number of shares
of Common Stock subject to the Option shall be increased or
decreased, as appropriate, so that, after such issuance, such
number equals 19.9% of the number of shares of Common Stock then
issued and outstanding without giving effect to any shares
subject or issued pursuant to the Option. Nothing contained in
this Section 1(b) or elsewhere in this Agreement shall be deemed
to authorize Issuer or Grantee to breach any provision of the
Merger Agreement.
<PAGE>
<PAGE> 79
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if,
both an Initial Triggering Event (as hereinafter defined) and a
Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event
(as hereinafter defined), provided that the Holder shall have
sent the written notice of such exercise (as provided in
subsection (e) of this Section 2) within 90 days following such
Subsequent Triggering Event. Each of the following shall be an
"Exercise Termination Event": (i) the Effective Time (as
defined in the Merger Agreement) of the Merger; (ii) termination
of the Merger Agreement in accordance with the provisions thereof
if such termination occurs prior to the occurrence of an Initial
Triggering Event; or (iii) the passage of 12 months after
termination of the Merger Agreement if such terminations follows
the occurrence of an Initial Triggering Event (provided that if
an Initial Triggering Event continues or occurs beyond such
termination and prior to the passage of such 12 month period, the
Exercise Termination event shall be 12 months from the expiration
of the Last Triggering Event but in no event more than 18 months
after such termination). The "Last Triggering Event" shall mean
the last Initial Triggering Event to expire. The term "Holder"
shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written
consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person
(the term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and
the rules and regulations thereunder) other than Grantee or any
of its Subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer shall have recommended that the stockholders
of Issuer approve or accept any Acquisition Transaction. For
purposes of this Agreement, "Acquisition Transaction" shall mean
(w) a merger or consolidation, or any similar transaction,
involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC")) of Issuer, (x) a purchase, lease
or other acquisition or assumption of all or a substantial
portion of the assets or deposits of Issuer or any Significant
Subsidiary of Issuer, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting
power of Issuer, or (z) any substantially similar transaction;
provided, however, that in no event shall any merger,
consolidation, purchase or similar transaction involving only the
Issuer and one or more of its Subsidiaries or involving only any
two or more of such Subsidiaries, be deemed to be an Acquisition
Transaction, provided that any such transaction is not entered
into in violation of the terms of the Merger Agreement;
<PAGE>
<PAGE> 80
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized,
recommended, proposed or publicly announced its intention to
authorize, recommend or propose, to engage in an Acquisition
Transaction with any person other than Grantee or a Grantee
Subsidiary, or the Board of Directors of Issuer shall have
publicly withdrawn or modified, or publicly announced its
intention to withdraw or modify, in any manner adverse to
Grantee, its recommendation that the stockholders of Issuer
approve the transactions contemplated by the Merger Agreement in
anticipation of engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary
or any Issuer Subsidiary acting in a fiduciary capacity in the
ordinary course of its business shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 10% or
more of the outstanding shares of Common Stock (the term
"beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and
the rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its
stockholders by public announcement or written communication that
is or becomes the subject of public disclosure to engage in an
Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer
shall have breached any covenant or obligation contained in the
Merger Agreement and such breach (x) would entitle Grantee to
terminate the Merger Agreement and (y) shall not have been cured
prior to the Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has
given its prior written consent, shall have filed an application
or notice with the Federal Reserve Board, or other federal or
state bank regulatory authority, which application or notice has
been accepted for processing, for approval to engage in an
Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of
the following events or transactions occurring after the date
hereof:
(i) The acquisition by any person of beneficial ownership of
25% or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in paragraph (i) of subsection (b) of this Section 2, except that
the percentage referred to in clause (y) shall be 25%.
<PAGE>
<PAGE> 81
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent
Triggering Event of which it has notice (together, a "Triggering
Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice
(the date of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares it will purchase
pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing
Date"); provided that if prior notification to or approval of the
Federal Reserve Board or any other regulatory agency is required
in connection with such purchase, the Holder shall promptly file
the required notice or application for approval and shall
expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead
from the date on which any required notification periods have
expired or been terminated or such approvals have been obtained
and any requisite waiting period or periods shall have passed.
Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section
2, the Holder shall pay to Issuer the aggregate purchase price
for the shares of Common Stock purchased pursuant to the exercise
of the Option in immediately available funds by wire transfer to
a bank account designated by Issuer, provided that failure or
refusal of Issuer to designate such a bank account shall not
preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this
Section 2, Issuer shall deliver to the Holder a certificate or
certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable
hereunder, and the Holder shall deliver to Issuer a copy of this
Agreement and a letter agreeing that the Holder will not offer to
sell or otherwise dispose of such shares in violation of
applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall
read substantially as follows:
"The transfer of the shares represented by this certificate
is subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy of
such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon receipt
by Issuer of a written request therefor."
<PAGE>
<PAGE> 82
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933, as amended
(the "1933 Act"), in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if
the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and
substance reasonably satisfactory to Issuer, to the effect that
such legend is not required for purposes of the 1933 Act; (ii)
the reference to the provisions to this Agreement in the above
legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement
and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety
if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other
legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection
(e) of this Section 2 and the tender of the applicable purchase
price in immediately available funds, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books
of Issuer shall then be closed or that certificates representing
such shares of Common Stock shall not then be actually delivered
to the Holder. Issuer shall pay all expenses, and any and all
United States federal, state and local taxes and other charges
that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name
of the Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued
or treasury shares of Common Stock so that the Option may be
exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible
securities and other rights to purchase Common Stock; (ii) that
it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions
to be observed or performed hereunder by Issuer; (iii) promptly
to take all action as may from time to time be required
(including (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C.
Section 18a and regulations promulgated thereunder and (y) in the
event, under the Bank Holding Company Act of 1956, as amended
(the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to
the Federal Reserve Board or to any state regulatory authority is
necessary before the Option may be exercised, cooperating fully
with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such
state regulatory authority as they may require) in order to
permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
<PAGE>
<PAGE> 83
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of
Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Stock Option Agreements and
related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor and
date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option
pursuant to Section 1 of this Agreement, the number of shares of
Common Stock purchasable upon the exercise of the Option and the
Option Price shall be subject to adjustment from time to time as
provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, distributions on
or in respect of the Common Stock that would be prohibited under
the terms of the Merger Agreement, or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof
and the Option Price shall be appropriately adjusted in such
manner as shall fully preserve the economic benefits provided
hereunder and proper provision shall be made in any agreement
governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations
hereunder.
<PAGE>
<PAGE> 84
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at
the request of Grantee delivered within 90 days of such
Subsequent Triggering Event (whether on its own behalf or on
behalf of any subsequent holder of this Option (or part thereof)
or any of the shares of Common Stock issued pursuant hereto),
promptly prepare, file and keep current a shelf registration
statement under the 1933 Act covering this Option and any shares
issued and issuable pursuant to this Option and shall use its
reasonable best efforts to cause such registration statement to
become effective and remain current in order to permit the sale
or other disposition of this Option and any shares of Common
Stock issued upon total or partial exercise of this Option
("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best
efforts to cause such registration statement first to become
effective and then to remain effective for such period not in
excess of 180 days from the day such registration statement first
becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee
shall have the right to demand two such registrations. The
foregoing notwithstanding, if, at the time of any request by
Grantee for registration of the Option or Option Shares as
provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in
the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters,
of such offering the inclusion of the Holder's Option or Option
Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option
Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; and provided, however, that
after any such required reduction the number of Option Shares to
be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold
by the Holder and Issuer in the aggregate; and provided further,
however, that if such reduction occurs, then the Issuer shall
file a registration statement for the balance as promptly as
practical and no reduction shall thereafter occur. Each such
Holder shall provide all information reasonably requested by
Issuer for inclusion in any registration statement to be filed
hereunder. If requested by any such Holder in connection with
such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements
customarily included in secondary offering underwriting
agreements for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof
to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no
event shall Issuer be obligated to effect more than two
registrations pursuant to this Section 6 by reason of the fact
that there shall be more than one Grantee as a result of any
assignment or division of this Agreement.
<PAGE>
<PAGE> 85
7. (a) Immediately prior to the occurrence of a Repurchase
Event (as defined below), (i) following a request of the Holder,
delivered prior to an Exercise Termination Event, Issuer (or any
successor thereto) shall repurchase the Option from the Holder at
a price (the "Option Repurchase Price") equal to the amount by
which (A) the Market/Offer Price (as defined below) exceeds (B)
the Option Price, multiplied by the number of shares for which
this Option may then be exercised and (ii) at the request of the
owner of Option Shares from time to time (the "Owner"), delivered
within 90 days of such occurrence (or such later period as
provided in Section 10), Issuer shall repurchase such number of
the Option Shares from the Owner as the Owner shall designate at
a price (the "Option Share Repurchase Price") equal to the
Market/Offer Price multiplied by the number of Option Shares so
designated. The term "Market/Offer Price" shall mean the highest
of (i) the price per share of Common Stock at which a tender
offer or exchange offer therefor has been made, (ii) the price
per share of Common Stock to be paid by any third party pursuant
to an agreement with Issuer, (iii) the highest closing price for
shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the
required repurchase of Option Shares, as the case may be, or
(iv) in the event of a sale of all or a substantial portion of
Issuer's assets, the sum of the price paid in such sale for such
assets and the current market value of the remaining assets of
Issuer as determined by a nationally recognized investment
banking firm mutually selected by the Holder or the Owner, as the
case may be, on the one hand, and the Issuer, on the other,
divided by the number of shares of Common Stock of Issuer
outstanding at the time of such sale. In determining the
Market/Offer Price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking
firm mutually selected by the Holder or Owner, as the case may
be, on the one hand, and the Issuer, on the other.
(b) The Holder and the Owner, as the case may be, may exercise
its right to require Issuer to repurchase the Option and any
Option Shares pursuant to this Section 7 by surrendering for such
purpose to Issuer, at its principal office, a copy of this
Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the
Holder or the Owner, as the case may be, elects to require Issuer
to repurchase this Option and/or the Option Shares in accordance
with the provisions of this Section 7. Within the latter to
occur of (x) five business days after the surrender of the Option
and/or certificates representing Option Shares and the receipt of
such notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer
shall deliver or cause to be delivered to the Holder the Option
Repurchase Price and/or to the Owner the Option Share Repurchase
Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so
delivering.
<PAGE>
<PAGE> 86
(c) To the extent that Issuer is prohibited under applicable law
or regulation from repurchasing the Option and/or the Option
Shares in full, Issuer shall immediately so notify the Holder
and/or the Owner and thereafter deliver or cause to be delivered,
from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within five business days after the
date on which Issuer is no longer so prohibited; provided,
however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is
prohibited under applicable law or regulation from delivering to
the Holder and/or the Owner, as appropriate, the Option
Repurchase Price and the Option Share Repurchase Price,
respectively, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as
practicable in order to accomplish such repurchase), the Holder
or Owner may revoke its notice of repurchase of the Option or the
Option Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly
(i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new
Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the
surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator
of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, or (B) to the Owner, a
certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred (i) upon the consummation of any merger,
consolidation or similar transaction involving Issuer or any
purchase, lease or other acquisition of all or a substantial
portion of the assets of Issuer, other than any such transaction
which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) hereof or (ii) upon the
acquisition by any person of beneficial ownership of 50% or more
of the then outstanding shares of Common Stock, provided that no
such event shall constitute a Repurchase Event unless a
Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event. The parties hereto agree that
Issuer's obligations to repurchase the Option or Option Shares
under this Section 7 shall not terminate upon the occurrence of
an Exercise Termination Event unless no Subsequent Triggering
Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
<PAGE>
<PAGE> 87
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate
with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge
into Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of
the outstanding voting shares and voting share equivalents of the
merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee
or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision
so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein,
be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person
that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer
(if other than Issuer), (ii) Issuer in a merger in which Issuer
is the continuing or surviving person, and (iii) the transferee
of all or substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock issued
by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in
no event higher than the closing price of the shares of
Substitute Common Stock on the day preceding such consolidation,
merger or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with
respect to a share of common stock issued by the person merging
into Issuer or by any company which controls or is controlled by
such person, as the Holder may elect.
<PAGE>
<PAGE> 88
(c) The Substitute Option shall have the same terms as the
Option, provided, that if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the
Assigned Value multiplied by the number of shares of Common Stock
for which the Option is then exercisable, divided by the Average
Price. The exercise price of the Substitute Option per share of
Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock for which the Option is then
exercisable and the denominator of which shall be the number of
shares of Substitute Common Stock for which the Substitute Option
is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the shares of Substitute Common Stock outstanding
prior to exercise of the Substitute Option. In the event that
the Substitute Option would be exercisable for more than 19.9% of
the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the Substitute
Option (the "Substitute Option Issuer") shall make a cash payment
to Holder equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause
(e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this clause (e). This difference in
value shall be determined by a nationally recognized investment
banking firm selected by the Holder or the Owner, as the case may
be, and reasonably acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described
in subsection (a) of this Section 8 unless the Acquiring
Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer
hereunder.
<PAGE>
<PAGE> 89
9. (a) At the request of the holder of the Substitute
Option (the "Substitute Option Holder"), the Substitute Option
Issuer shall repurchase the Substitute Option from the Substitute
Option Holder at a price (the "Substitute Option Repurchase
Price") equal to (x) the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of
the Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then
be exercised plus (y) Grantee's reasonable out-of-pocket expenses
(to the extent not previously reimbursed), and at the request of
the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option
Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to (x) the Highest
Closing Price multiplied by the number of Substitute Shares so
designated plus (y) Grantee's reasonable Out-of-Pocket Expenses
(to the extent not previously reimbursed). The term "Highest
Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately
preceding the date the Substitute Option Holder gives notice of
the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of
the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to
require the Substitute Option Issuer to repurchase the Substitute
Option and the Substitute Shares pursuant to this Section 9 by
surrendering for such purpose to the Substitute Option Issuer, at
its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Shares accompanied by
a written notice or notices stating that the Substitute Option
Holder or the Substitute Share Owner, as the case may be, elects
to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with
the provisions of this Section 9. As promptly as practicable,
and in any event within five business days after the surrender of
the Substitute Option and/or certificates representing Substitute
Shares and the receipt of such notice or notices relating
thereto, the Substitute Option Issuer shall deliver or cause to
be delivered to the Substitute Option Holder the Substitute
Option Repurchase Price and/or to the Substitute Share Owner the
Substitute Share Repurchase Price therefor or, in either case,
the portion thereof which the Substitute Option Issuer is not
then prohibited under applicable law and regulation from so
delivering.
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<PAGE> 90
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing
the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer following a request for
repurchase pursuant to this Section 9 shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner
and thereafter deliver or cause to be delivered, from time to
time, to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the portion of the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited
from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any
time after delivery of a notice of repurchase pursuant to
subsection (b) of this Section 9 prohibited under applicable law
or regulation from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute
Option Repurchase Price and the Substitute Share Repurchase
Price, respectively, in full (and the Substitute Option Issuer
shall use its best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish
such repurchase), the Substitute Option Holder or Substitute
Share Owner may revoke its notice of repurchase of the Substitute
Option or the Substitute Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, the Substitute
Option Issuer shall promptly (i) deliver to the Substitute Option
Holder or Substitute Share Owner, as appropriate, that portion of
the Substitute Option Repurchase Price or the Substitute Share
Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Substitute Option Holder, a new Substitute
Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock
obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was
exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Substitute Option
Repurchase Price less the portion thereof theretofore delivered
to the Substitute Option Holder and the denominator of which is
the Substitute Option Repurchase Price, or (B) to the Substitute
Share Owner, a certificate for the Substitute Common Shares it is
then so prohibited from repurchasing.
10. The 90-day period for exercise of certain rights under
Sections 2, 6, 7 and 14 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of
such rights, and for the expiration of all statutory waiting
periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
<PAGE>
<PAGE> 91
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by
Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon
the exercise of the Option, that number of shares of Common Stock
equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto, will be duly authorized, validly
issued, fully paid, nonassessable, and will be delivered free and
clear of all claims, liens, encumbrance and security interests
and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required
redeeming all of the Rights or amending or terminating the Rights
Agreement) so that the entering into of this Option Agreement,
the acquisition of shares of Common Stock hereunder and the other
transactions contemplated hereby do not and will not result in
the grant of any rights to any person under the Rights Agreement
or enable or require the Rights to be exercised, distributed or
triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority
to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly
executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock
or other securities acquired by Grantee upon exercise of the
Option will not be, acquired with a view to the public
distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from
registration under the Securities Act.
<PAGE>
<PAGE> 92
13. (a) Notwithstanding anything to the contrary contained
herein, in no event shall Grantee's Total Profit (as defined
below in Section 13(c) hereof) exceed $240 million.
(b) Notwithstanding anything to the contrary contained
herein, the Option may not be exercised for a number of shares as
would, as of the date of exercise, result in a Notional Total
Profit (as defined below in Section 13(d) hereof) of more than
$240 million; provided, that nothing in this sentence shall
restrict any exercise of the Option permitted hereby on any
subsequent date.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount
received by Grantee pursuant to Issuer's repurchase of the Option
(or any portion thereof) pursuant to Section 7 hereof, (ii) (x)
the amount received by Grantee pursuant to Issuer's repurchase of
Option Shares pursuant to Section 7 hereof, less (y) Grantee's
purchase price for such Option Shares, (iii) (x) the net cash
amounts received by Grantee pursuant to the sale of Option Shares
(or any other securities into which such Option Shares shall be
converted or exchanged) to any unaffiliated party, less (y)
Grantee's purchase price of such Option Shares, (iv) any amounts
received by Grantee on the transfer of the Option (or any portion
thereof) to any unaffiliated party, and (v) any equivalent amount
with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee may propose
to exercise the Option shall be the Total Profit determined as of
the date of such proposed exercise assuming that the Option were
exercised on such date for such number of shares and assuming
that such shares, together with all other Option Shares held by
Grantee and its affiliates as of such date, were sold for cash at
the closing market price for the Issuer Common Stock as of the
close of business on the preceding trading day (less customary
brokerage commissions).
14. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option
created hereunder to any other person, without the express
written consent of the other party, except that in the event a
Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 90 days following such Subsequent
Triggering Event (or such later period as provided in Section
10); provided, however, that until the date 15 days following the
date on which the Federal Reserve Board approves an application
by Grantee under the BHCA to acquire the shares of Common Stock
subject to the Option, Grantee may not assign its rights under
the Option except in (i) a widely dispersed public distribution,
(ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Issuer, (iii)
an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public
distribution on Grantee's behalf, or (iv) any other manner
approved by the Federal Reserve Board.
<PAGE>
<PAGE> 93
15. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement,
including without limitation making application to list the
shares of Common Stock issuable hereunder on the New York Stock
Exchange upon official notice of issuance and applying to the
Federal Reserve Board under the BHCA for approval to acquire the
shares issuable hereunder, but Grantee shall not be obligated to
apply to state banking authorities for approval to acquire the
shares of Common Stock issuable hereunder until such time, if
ever, as it deems appropriate to do so.
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be
enforceable by either party hereto through injunctive or other
equitable relief.
17. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions and
covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be affected,
impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in
Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the
Holder to acquire or to require Issuer to repurchase such lesser
number of shares as may be permissible, without any amendment or
modification hereof.
18. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given
when delivered in person, by cable, telegram, telecopy or telex,
or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set
forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
20. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
21. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses
of its own financial consultants, investment bankers, accountants
and counsel.
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<PAGE> 94
22. Except as otherwise expressly provided herein or in the
Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings
with respect thereof, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, except as expressly provided
herein.
23. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the
Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto
duly authorized, all as of the date first above written.
BENEFICIAL CORPORATION
By:
--------------------------
Name:
Title:
HOUSEHOLD INTERNATIONAL, INC.
By:
--------------------------
Name:
Title:
<PAGE>
<PAGE> 95
EXHIBIT B
---------
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated April 7, 1998, between
HOUSEHOLD INTERNATIONAL, INC., a Delaware corporation ("Issuer"),
and BENEFICIAL CORPORATION, a Delaware corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement
and Plan of Merger of even date herewith (the "Merger
Agreement"), which agreement has been executed by the parties
hereto immediately prior to this Stock Option Agreement (the
"Agreement"); and
WHEREAS, as a condition to Grantee's entering into the
Merger Agreement and in consideration therefor, Issuer has agreed
to grant Grantee the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the
Merger Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the
terms hereof, up to 21,356,536 fully paid and nonassessable
shares of Issuer's Common Stock, par value $1.00 per share
("Common Stock"), at a price of $146.75 per share (the "Option
Price"); provided, however, that in no event shall the number of
shares of Common Stock for which this Option is exercisable
exceed 19.9% of the Issuer's issued and outstanding shares of
Common Stock without giving effect to any shares subject to or
issued pursuant to the Option. The number of shares of Common
Stock that may be received upon the exercise of the Option and
the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
either (i) issued or otherwise become outstanding after the date
of this Agreement (other than pursuant to this Agreement) or (ii)
redeemed, repurchased, retired or otherwise cease to be
outstanding after the date of the Agreement, the number of shares
of Common Stock subject to the Option shall be increased or
decreased, as appropriate, so that, after such issuance, such
number equals 19.9% of the number of shares of Common Stock then
issued and outstanding without giving effect to any shares
subject or issued pursuant to the Option. Nothing contained in
this Section 1(b) or elsewhere in this Agreement shall be deemed
to authorize Issuer or Grantee to breach any provision of the
Merger Agreement.
<PAGE>
<PAGE> 96
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if,
both an Initial Triggering Event (as hereinafter defined) and a
Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event
(as hereinafter defined), provided that the Holder shall have
sent the written notice of such exercise (as provided in
subsection (e) of this Section 2) within 90 days following such
Subsequent Triggering Event. Each of the following shall be an
"Exercise Termination Event": (i) the Effective Time (as
defined in the Merger Agreement) of the Merger; (ii) termination
of the Merger Agreement in accordance with the provisions thereof
if such termination occurs prior to the occurrence of an Initial
Triggering Event; or (iii) the passage of 12 months after
termination of the Merger Agreement if such terminations follows
the occurrence of an Initial Triggering Event (provided that if
an Initial Triggering Event continues or occurs beyond such
termination and prior to the passage of such 12 month period, the
Exercise Termination event shall be 12 months from the expiration
of the Last Triggering Event but in no event more than 18 months
after such termination). The "Last Triggering Event" shall mean
the last Initial Triggering Event to expire. The term "Holder"
shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written
consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person
(the term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and
the rules and regulations thereunder) other than Grantee or any
of its Subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer shall have recommended that the stockholders
of Issuer approve or accept any Acquisition Transaction. For
purposes of this Agreement, "Acquisition Transaction" shall mean
(w) a merger or consolidation, or any similar transaction,
involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC")) of Issuer, (x) a purchase, lease
or other acquisition or assumption of all or a substantial
portion of the assets or deposits of Issuer or any Significant
Subsidiary of Issuer, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting
power of Issuer, or (z) any substantially similar transaction;
provided, however, that in no event shall any merger,
consolidation, purchase or similar transaction involving only the
Issuer and one or more of its Subsidiaries or involving only any
two or more of such Subsidiaries, be deemed to be an Acquisition
Transaction, provided that any such transaction is not entered
into in violation of the terms of the Merger Agreement;
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<PAGE> 97
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized,
recommended, proposed or publicly announced its intention to
authorize, recommend or propose, to engage in an Acquisition
Transaction with any person other than Grantee or a Grantee
Subsidiary, or the Board of Directors of Issuer shall have
publicly withdrawn or modified, or publicly announced its
intention to withdraw or modify, in any manner adverse to
Grantee, its recommendation that the stockholders of Issuer
approve the transactions contemplated by the Merger Agreement in
anticipation of engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary
or any Issuer Subsidiary acting in a fiduciary capacity in the
ordinary course of its business shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 10% or
more of the outstanding shares of Common Stock (the term
"beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and
the rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its
stockholders by public announcement or written communication that
is or becomes the subject of public disclosure to engage in an
Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer
shall have breached any covenant or obligation contained in the
Merger Agreement and such breach (x) would entitle Grantee to
terminate the Merger Agreement and (y) shall not have been cured
prior to the Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has
given its prior written consent, shall have filed an application
or notice with the Federal Reserve Board, or other federal or
state bank regulatory authority, which application or notice has
been accepted for processing, for approval to engage in an
Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of
the following events or transactions occurring after the date
hereof:
(i) The acquisition by any person of beneficial ownership of
25% or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in paragraph (i) of subsection (b) of this Section 2, except that
the percentage referred to in clause (y) shall be 25%.
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<PAGE> 98
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent
Triggering Event of which it has notice (together, a "Triggering
Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice
(the date of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares it will purchase
pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing
Date"); provided that if prior notification to or approval of the
Federal Reserve Board or any other regulatory agency is required
in connection with such purchase, the Holder shall promptly file
the required notice or application for approval and shall
expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead
from the date on which any required notification periods have
expired or been terminated or such approvals have been obtained
and any requisite waiting period or periods shall have passed.
Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section
2, the Holder shall pay to Issuer the aggregate purchase price
for the shares of Common Stock purchased pursuant to the exercise
of the Option in immediately available funds by wire transfer to
a bank account designated by Issuer, provided that failure or
refusal of Issuer to designate such a bank account shall not
preclude the Holder from exercising the Option.
<PAGE>
<PAGE> 99
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this
Section 2, Issuer shall deliver to the Holder a certificate or
certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable
hereunder, and the Holder shall deliver to Issuer a copy of this
Agreement and a letter agreeing that the Holder will not offer to
sell or otherwise dispose of such shares in violation of
applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall
read substantially as follows:
"The transfer of the shares represented by this certificate
is subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy of
such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon receipt
by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933, as amended
(the "1933 Act"), in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if
the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and
substance reasonably satisfactory to Issuer, to the effect that
such legend is not required for purposes of the 1933 Act; (ii)
the reference to the provisions to this Agreement in the above
legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement
and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety
if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other
legend as may be required by law.
<PAGE>
<PAGE> 100
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection
(e) of this Section 2 and the tender of the applicable purchase
price in immediately available funds, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books
of Issuer shall then be closed or that certificates representing
such shares of Common Stock shall not then be actually delivered
to the Holder. Issuer shall pay all expenses, and any and all
United States federal, state and local taxes and other charges
that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name
of the Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued
or treasury shares of Common Stock so that the Option may be
exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible
securities and other rights to purchase Common Stock; (ii) that
it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions
to be observed or performed hereunder by Issuer; (iii) promptly
to take all action as may from time to time be required
(including (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C.
Section 18a and regulations promulgated thereunder and (y) in the
event, under the Bank Holding Company Act of 1956, as amended
(the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to
the Federal Reserve Board or to any state regulatory authority is
necessary before the Option may be exercised, cooperating fully
with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such
state regulatory authority as they may require) in order to
permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
<PAGE>
<PAGE> 101
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of
Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Stock Option Agreements and
related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor and
date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option
pursuant to Section 1 of this Agreement, the number of shares of
Common Stock purchasable upon the exercise of the Option and the
Option Price shall be subject to adjustment from time to time as
provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, distributions on
or in respect of the Common Stock that would be prohibited under
the terms of the Merger Agreement, or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof
and the Option Price shall be appropriately adjusted in such
manner as shall fully preserve the economic benefits provided
hereunder and proper provision shall be made in any agreement
governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations
hereunder.
<PAGE>
<PAGE> 102
6. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, Issuer shall,
at the request of Grantee delivered within 90 days of such
Subsequent Triggering Event (whether on its own behalf or on
behalf of any subsequent holder of this Option (or part thereof)
or any of the shares of Common Stock issued pursuant hereto),
promptly prepare, file and keep current a shelf registration
statement under the 1933 Act covering this Option and any shares
issued and issuable pursuant to this Option and shall use its
reasonable best efforts to cause such registration statement to
become effective and remain current in order to permit the sale
or other disposition of this Option and any shares of Common
Stock issued upon total or partial exercise of this Option
("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best
efforts to cause such registration statement first to become
effective and then to remain effective for such period not in
excess of 180 days from the day such registration statement first
becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee
shall have the right to demand two such registrations. The
foregoing notwithstanding, if, at the time of any request by
Grantee for registration of the Option or Option Shares as
provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in
the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters,
of such offering the inclusion of the Holder's Option or Option
Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option
Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; and provided, however, that
after any such required reduction the number of Option Shares to
be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold
by the Holder and Issuer in the aggregate; and provided further,
however, that if such reduction occurs, then the Issuer shall
file a registration statement for the balance as promptly as
practical and no reduction shall thereafter occur. Each such
Holder shall provide all information reasonably requested by
Issuer for inclusion in any registration statement to be filed
hereunder. If requested by any such Holder in connection with
such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements
customarily included in secondary offering underwriting
agreements for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof
to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no
event shall Issuer be obligated to effect more than two
registrations pursuant to this Section 6 by reason of the fact
that there shall be more than one Grantee as a result of any
assignment or division of this Agreement.
<PAGE>
<PAGE> 103
7. (a) Immediately prior to the occurrence of a Repurchase
Event (as defined below), (i) following a request of the Holder,
delivered prior to an Exercise Termination Event, Issuer (or any
successor thereto) shall repurchase the Option from the Holder at
a price (the "Option Repurchase Price") equal to the amount by
which (A) the Market/Offer Price (as defined below) exceeds (B)
the Option Price, multiplied by the number of shares for which
this Option may then be exercised and (ii) at the request of the
owner of Option Shares from time to time (the "Owner"), delivered
within 90 days of such occurrence (or such later period as
provided in Section 10), Issuer shall repurchase such number of
the Option Shares from the Owner as the Owner shall designate at
a price (the "Option Share Repurchase Price") equal to the
Market/Offer Price multiplied by the number of Option Shares so
designated. The term "Market/Offer Price" shall mean the highest
of (i) the price per share of Common Stock at which a tender
offer or exchange offer therefor has been made, (ii) the price
per share of Common Stock to be paid by any third party pursuant
to an agreement with Issuer, (iii) the highest closing price for
shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the
required repurchase of Option Shares, as the case may be, or
(iv) in the event of a sale of all or a substantial portion of
Issuer's assets, the sum of the price paid in such sale for such
assets and the current market value of the remaining assets of
Issuer as determined by a nationally recognized investment
banking firm mutually selected by the Holder or the Owner, as the
case may be, on the one hand, and the Issuer, on the other,
divided by the number of shares of Common Stock of Issuer
outstanding at the time of such sale. In determining the
Market/Offer Price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking
firm mutually selected by the Holder or Owner, as the case may
be, on the one hand, and the Issuer, on the other.
(b) The Holder and the Owner, as the case may be, may exercise
its right to require Issuer to repurchase the Option and any
Option Shares pursuant to this Section 7 by surrendering for such
purpose to Issuer, at its principal office, a copy of this
Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the
Holder or the Owner, as the case may be, elects to require Issuer
to repurchase this Option and/or the Option Shares in accordance
with the provisions of this Section 7. Within the latter to
occur of (x) five business days after the surrender of the Option
and/or certificates representing Option Shares and the receipt of
such notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer
shall deliver or cause to be delivered to the Holder the Option
Repurchase Price and/or to the Owner the Option Share Repurchase
Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so
delivering.
<PAGE>
<PAGE> 104
(c) To the extent that Issuer is prohibited under applicable law
or regulation from repurchasing the Option and/or the Option
Shares in full, Issuer shall immediately so notify the Holder
and/or the Owner and thereafter deliver or cause to be delivered,
from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within five business days after the
date on which Issuer is no longer so prohibited; provided,
however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is
prohibited under applicable law or regulation from delivering to
the Holder and/or the Owner, as appropriate, the Option
Repurchase Price and the Option Share Repurchase Price,
respectively, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as
practicable in order to accomplish such repurchase), the Holder
or Owner may revoke its notice of repurchase of the Option or the
Option Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly
(i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new
Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the
surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator
of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, or (B) to the Owner, a
certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be
deemed to have occurred (i) upon the consummation of any merger,
consolidation or similar transaction involving Issuer or any
purchase, lease or other acquisition of all or a substantial
portion of the assets of Issuer, other than any such transaction
which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) hereof or (ii) upon the
acquisition by any person of beneficial ownership of 50% or more
of the then outstanding shares of Common Stock, provided that no
such event shall constitute a Repurchase Event unless a
Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event. The parties hereto agree that
Issuer's obligations to repurchase the Option or Option Shares
under this Section 7 shall not terminate upon the occurrence of
an Exercise Termination Event unless no Subsequent Triggering
Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
<PAGE>
<PAGE> 105
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate
with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge
into Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of
the outstanding voting shares and voting share equivalents of the
merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee
or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision
so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein,
be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person
that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer
(if other than Issuer), (ii) Issuer in a merger in which Issuer
is the continuing or surviving person, and (iii) the transferee
of all or substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock issued
by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in
no event higher than the closing price of the shares of
Substitute Common Stock on the day preceding such consolidation,
merger or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with
respect to a share of common stock issued by the person merging
into Issuer or by any company which controls or is controlled by
such person, as the Holder may elect.
<PAGE>
<PAGE> 106
(c) The Substitute Option shall have the same terms as the
Option, provided, that if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the
Assigned Value multiplied by the number of shares of Common Stock
for which the Option is then exercisable, divided by the Average
Price. The exercise price of the Substitute Option per share of
Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock for which the Option is then
exercisable and the denominator of which shall be the number of
shares of Substitute Common Stock for which the Substitute Option
is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the shares of Substitute Common Stock outstanding
prior to exercise of the Substitute Option. In the event that
the Substitute Option would be exercisable for more than 19.9% of
the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the Substitute
Option (the "Substitute Option Issuer") shall make a cash payment
to Holder equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause
(e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this clause (e). This difference in
value shall be determined by a nationally recognized investment
banking firm selected by the Holder or the Owner, as the case may
be, and reasonably acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described
in subsection (a) of this Section 8 unless the Acquiring
Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer
hereunder.
<PAGE>
<PAGE> 107
9. (a) At the request of the holder of the Substitute
Option (the "Substitute Option Holder"), the Substitute Option
Issuer shall repurchase the Substitute Option from the Substitute
Option Holder at a price (the "Substitute Option Repurchase
Price") equal to (x) the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of
the Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then
be exercised plus (y) Grantee's reasonable out-of-pocket expenses
(to the extent not previously reimbursed), and at the request of
the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option
Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to (x) the Highest
Closing Price multiplied by the number of Substitute Shares so
designated plus (y) Grantee's reasonable Out-of-Pocket Expenses
(to the extent not previously reimbursed). The term "Highest
Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately
preceding the date the Substitute Option Holder gives notice of
the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of
the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to
require the Substitute Option Issuer to repurchase the Substitute
Option and the Substitute Shares pursuant to this Section 9 by
surrendering for such purpose to the Substitute Option Issuer, at
its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Shares accompanied by
a written notice or notices stating that the Substitute Option
Holder or the Substitute Share Owner, as the case may be, elects
to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with
the provisions of this Section 9. As promptly as practicable,
and in any event within five business days after the surrender of
the Substitute Option and/or certificates representing Substitute
Shares and the receipt of such notice or notices relating
thereto, the Substitute Option Issuer shall deliver or cause to
be delivered to the Substitute Option Holder the Substitute
Option Repurchase Price and/or to the Substitute Share Owner the
Substitute Share Repurchase Price therefor or, in either case,
the portion thereof which the Substitute Option Issuer is not
then prohibited under applicable law and regulation from so
delivering.
<PAGE>
<PAGE> 108
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing
the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer following a request for
repurchase pursuant to this Section 9 shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner
and thereafter deliver or cause to be delivered, from time to
time, to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the portion of the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited
from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any
time after delivery of a notice of repurchase pursuant to
subsection (b) of this Section 9 prohibited under applicable law
or regulation from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute
Option Repurchase Price and the Substitute Share Repurchase
Price, respectively, in full (and the Substitute Option Issuer
shall use its best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish
such repurchase), the Substitute Option Holder or Substitute
Share Owner may revoke its notice of repurchase of the Substitute
Option or the Substitute Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, the Substitute
Option Issuer shall promptly (i) deliver to the Substitute Option
Holder or Substitute Share Owner, as appropriate, that portion of
the Substitute Option Repurchase Price or the Substitute Share
Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Substitute Option Holder, a new Substitute
Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock
obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was
exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Substitute Option
Repurchase Price less the portion thereof theretofore delivered
to the Substitute Option Holder and the denominator of which is
the Substitute Option Repurchase Price, or (B) to the Substitute
Share Owner, a certificate for the Substitute Common Shares it is
then so prohibited from repurchasing.
10. The 90-day period for exercise of certain rights under
Sections 2, 6, 7 and 14 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of
such rights, and for the expiration of all statutory waiting
periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
<PAGE>
<PAGE> 109
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by
Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon
the exercise of the Option, that number of shares of Common Stock
equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto, will be duly authorized, validly
issued, fully paid, nonassessable, and will be delivered free and
clear of all claims, liens, encumbrance and security interests
and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required
redeeming all of the Rights or amending or terminating the Rights
Agreement) so that the entering into of this Option Agreement,
the acquisition of shares of Common Stock hereunder and the other
transactions contemplated hereby do not and will not result in
the grant of any rights to any person under the Rights Agreement
or enable or require the Rights to be exercised, distributed or
triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority
to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly
executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock
or other securities acquired by Grantee upon exercise of the
Option will not be, acquired with a view to the public
distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from
registration under the Securities Act.
<PAGE>
<PAGE> 110
13. (a) Notwithstanding anything to the contrary contained
herein, in no event shall Grantee's Total Profit (as defined
below in Section 13(c) hereof) exceed $240 million.
(b) Notwithstanding anything to the contrary contained
herein, the Option may not be exercised for a number of shares as
would, as of the date of exercise, result in a Notional Total
Profit (as defined below in Section 13(d) hereof) of more than
$240 million; provided, that nothing in this sentence shall
restrict any exercise of the Option permitted hereby on any
subsequent date.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount
received by Grantee pursuant to Issuer's repurchase of the Option
(or any portion thereof) pursuant to Section 7 hereof, (ii) (x)
the amount received by Grantee pursuant to Issuer's repurchase of
Option Shares pursuant to Section 7 hereof, less (y) Grantee's
purchase price for such Option Shares, (iii) (x) the net cash
amounts received by Grantee pursuant to the sale of Option Shares
(or any other securities into which such Option Shares shall be
converted or exchanged) to any unaffiliated party, less (y)
Grantee's purchase price of such Option Shares, (iv) any amounts
received by Grantee on the transfer of the Option (or any portion
thereof) to any unaffiliated party, and (v) any equivalent amount
with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee may propose
to exercise the Option shall be the Total Profit determined as of
the date of such proposed exercise assuming that the Option were
exercised on such date for such number of shares and assuming
that such shares, together with all other Option Shares held by
Grantee and its affiliates as of such date, were sold for cash at
the closing market price for the Issuer Common Stock as of the
close of business on the preceding trading day (less customary
brokerage commissions).
14. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option
created hereunder to any other person, without the express
written consent of the other party, except that in the event a
Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 90 days following such Subsequent
Triggering Event (or such later period as provided in Section
10); provided, however, that until the date 15 days following the
date on which the Federal Reserve Board approves an application
by Grantee under the BHCA to acquire the shares of Common Stock
subject to the Option, Grantee may not assign its rights under
the Option except in (i) a widely dispersed public distribution,
(ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Issuer, (iii)
an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public
distribution on Grantee's behalf, or (iv) any other manner
approved by the Federal Reserve Board.
<PAGE>
<PAGE> 111
15. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement,
including without limitation making application to list the
shares of Common Stock issuable hereunder on the New York Stock
Exchange upon official notice of issuance and applying to the
Federal Reserve Board under the BHCA for approval to acquire the
shares issuable hereunder, but Grantee shall not be obligated to
apply to state banking authorities for approval to acquire the
shares of Common Stock issuable hereunder until such time, if
ever, as it deems appropriate to do so.
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be
enforceable by either party hereto through injunctive or other
equitable relief.
17. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions and
covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be affected,
impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in
Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the
Holder to acquire or to require Issuer to repurchase such lesser
number of shares as may be permissible, without any amendment or
modification hereof.
18. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given
when delivered in person, by cable, telegram, telecopy or telex,
or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set
forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
20. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
<PAGE>
<PAGE> 112
21. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses
of its own financial consultants, investment bankers, accountants
and counsel.
22. Except as otherwise expressly provided herein or in the
Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings
with respect thereof, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, except as expressly provided
herein.
23. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the
Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto
duly authorized, all as of the date first above written.
HOUSEHOLD INTERNATIONAL, INC.
By:
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Name:
Title:
BENEFICIAL CORPORATION
By:
--------------------------
Name:
Title:
