SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ________)*
Mercury Finance Company
(Name of Issuer)
Common Stock, par value $1.00 per share
(Title of Class of Securities)
589395 10 2
(CUSIP number)
Gary A. Spiess
General Counsel and Clerk
Bank of Boston Corporation
100 Federal Street
Boston, Massachusetts 02110
(617) 434-2870
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
JANUARY 10, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
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*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Continued on following page(s))
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1. NAME OF REPORTING PERSONS
S.S. OR IRS IDENTIFICATION NOS. OF ABOVE PERSONS
Bank of Boston Corporation 04-2471221
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
N/A (A) [ ]
(B) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS (SEE INSTRUCTIONS)
OO
(See Item 3)
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E) |X|
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Massachusetts
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH:
7. SOLE VOTING POWER
32,728,708
(subject to certain agreements described in Item 6 below)
8. SHARED VOTING POWER
None
9. SOLE DISPOSITIVE POWER
32,708,333
(subject to certain agreements described in Item 6 below)
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10. SHARED DISPOSITIVE POWER
375
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
32,708,333
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES(SEE INSTRUCTIONS) [ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.5% of the Common Stock outstanding on January 10, 1997,
assuming consummation of the Merger.
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
HC
ITEM 1. SECURITY AND ISSUER.
This statement relates to the common stock, par value $1.00 per share
(the "Common Stock"), of Mercury Finance Company, a Delaware corporation (the
"Company"). The principal executive offices of the Company are located at 100
Field Drive, Suite 340, Lake Forest, Illinois 60045.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c) and (f) This statement is being filed by Bank of Boston
Corporation, a Massachusetts corporation ("BKBC"). The principal executive
offices of BKBC are located at 100 Federal Street, Boston, Massachusetts 02110.
BKBC is a registered bank holding company which, through its subsidiaries
and joint ventures, is engaged in providing a wide variety of financial
services to individuals, corporate and institutional customers, governments and
other financial institutions. These services include personal banking, consumer
finance, private banking, trust, mortgage origination, domestic corporate and
investment banking, leasing, global banking, commercial real estate lending,
correspondent banking, and securities and payments processing. The major
banking subsidiaries of BKBC include The First National Bank of Boston,
BayBank, N.A., Bank of Boston Connecticut and Rhode Island Hospital Trust
National Bank.
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Information as to each of the executive officers and directors of BKBC is
set forth on Schedule I hereto. Each of such persons is a citizen of the United
States, except for Mr. Sacerdote, who is a citizen of Argentina, and Messrs.
Craide and Meirelles who are citizens of Brazil.
(d) During the last five years, neither BKBC nor, to the best of BKBC's
knowledge, any of the individuals named in Schedule I hereto, has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the last five years, neither BKBC nor, to the best of BKBC's
knowledge, any of the individuals named in Schedule I hereto, has been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws, except that, on December 22, 1995, the
Securities and Exchange Commission issued an order pursuant to Section 21C of
the Securities Exchange Act of 1934 ("Exchange Act"), that BKBC cease and
desist from violation of Section 13(a) of the Exchange Act and Rules 12b-20 and
13a-13 thereunder. This order was based on a finding by a SEC administrative
law judge that an Exchange Act report filed by BKBC in 1989 had been
misleading.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
As more fully described in Item 4 below, pursuant to the terms of the
Merger Agreement (as defined below), BKBC will acquire, upon the occurrence of
specified events, indirect beneficial ownership of 32,708,333 shares of Common
Stock from the Company in exchange for the acquisition by the Company, through
a merger, of Fidelity Acceptance Corporation, a Minnesota corporation and an
indirect, wholly-owned subsidiary of BKBC ("Fidelity").
ITEM 4. PURPOSE OF TRANSACTION.
On January 10, 1997, BKBC, Fidelity and the Company entered into an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which,
subject to the satisfaction of certain conditions precedent, a wholly owned
subsidiary of the Company to be organized under the laws of the State of
Minnesota (the "Merger Subsidiary") will be merged into Fidelity (the
"Merger"). Pursuant to the Merger Agreement, all of the shares of Fidelity
capital stock outstanding at the effective time of the Merger (other than
shares held by Fidelity as treasury stock) shall become and be converted into
32,708,333 shares of Common Stock. At present, all of the outstanding stock of
Fidelity is held by Bank of Boston Connecticut, an indirect, wholly owned
subsidiary of BKBC, so that the foregoing shares of Common Stock of the Company
would be issued to Bank of Boston Connecticut upon the closing of the Merger.
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BKBC has, however, reserved the right to cause those shares of Common Stock to
be issued instead to any other subsidiary of BKBC.
A copy of the Merger Agreement is included as an Exhibit hereto and
incorporated herein by reference. Capitalized terms that are used but not
defined herein are defined in the Merger Agreement. Fidelity will be the
surviving corporation of the Merger with Merger Subsidiary and will continue
its corporate existence under the laws of the State of Minnesota as a wholly
owned subsidiary of the Company.
Pursuant to the Merger Agreement, so long as BKBC shall hold (directly or
indirectly) at least 10% of the issued and outstanding shares of the Company's
Common Stock, BKBC shall be entitled to designate at least two, and in any
event not less than a proportional number (based upon the percentage of the
issued and outstanding shares of the Company's Common Stock held (directly or
indirectly) by BKBC), of the members of the Board of Directors of the Company.
So long as BKBC shall hold (directly or indirectly) less than 10% but at least
5% of the issued and outstanding shares of the Company's Common Stock, BKBC
shall be entitled to designate one member of the Board of Directors. All
persons to be so designated by BKBC shall be subject to the approval of the
Company. As soon as practicable after the Effective Time, BKBC's designees
shall become members of the Board of Directors of the Company and the Board of
Directors of the Company shall be expanded to the extent necessary to permit
such designees to become members of the Board of Directors of the Company.
See Item 6 below with respect to certain covenants made by BKBC with
respect to its ownership of Common Stock.
Except as set forth in this Item 4 or the Merger Agreement, neither BKBC
nor, to the best of BKBC's knowledge, any of the individuals named in Schedule
I hereto, has any plans or proposals which relate to or which would result in
any of the actions specified in clauses (a) through (j) of Item 4 of Schedule
13D.
Consummation of the Merger is subject to the receipt of regulatory
approvals and certain other conditions customary in transactions of this
nature.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) By reason of its execution of the Merger Agreement, pursuant to
Rule 13d-3(d)(1)(i) promulgated under the Act, BKBC may be deemed to have the
right to acquire the Common Stock described in the Merger Agreement, as to
which it would indirectly have sole voting and dispositive power and,
accordingly, may be deemed to beneficially own 32,708,333 shares of Common
Stock, or approximately 15.5% of the Common Stock outstanding on January 10,
1997, assuming consummation of the Merger. Certain of BKBC's subsidiary banks
act as trustees under trusts established by their customers. In that capacity,
BKBC's subsidiary banks, in the aggregate, have (i) shared investment power
over 375 shares of Common Stock and (ii) sole voting power over 20,375 shares
<PAGE>
of Common Stock, and have neither sole investment power nor shared voting power
over any shares of Common Stock.
Except as set forth above, neither BKBC nor, to the best of BKBC's
knowledge, any of the individuals named in Schedule I hereto, owns any Common
Stock.
(c) Other than transactions in the ordinary course by one of BKBC's
subsidiary banks as trustee for any of the trust accounts described above that
may have occurred during the past 60 days, neither BKBC nor, to the best of
BKBC's knowledge, any of the individuals named in Schedule I hereto, has
effected any transaction in the Common Stock during the past 60 days.
(d) Other than as may be provided in the applicable instrument with
respect to each of the trusts described above, so long as the Merger has not
been consummated pursuant to the Merger Agreement, BKBC does not have the right
to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, any of the Common Stock.
(e) Inapplicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Pursuant to the Merger Agreement, BKBC has agreed that, following
consummation of the Merger, BKBC and/or its affiliates (i) will not directly of
indirectly acquire beneficial ownership of any additional shares of any class
of capital stock of the Company or other securities of the Company which are
entitled to vote generally in the elections of directors ("Voting Stock"), any
securities convertible into or exchangeable for Voting Stock, or any other
right to acquire Voting Stock or authorize or make a tender, exchange or other
offer for any Voting Stock; provided, however, that BKBC or its affiliates may
acquire Voting Stock to obtain "Equity Accounting" treatment so long as such
acquisition does not result in BKBC or its affiliates owning more than 20% of
the Voting Stock then outstanding; (ii) will take such actions as may be
required so that all shares of Voting Stock owned by BKBC and/or its affiliates
are voted for nominees to the Board of Directors of the Company in accordance
with the recommendation of the Board of Directors and, unless the Company
otherwise consents in writing, take such actions as may be required so that all
shares of Voting Stock owned by BKBC and its affiliates are voted in accordance
with the recommendation of the Board of Directors of the Company; (iii) will be
present, in person or by proxy, at all meetings of shareholders of the Company
so that all shares of Common Stock held by BKBC and/or its affiliates may be
counted for quorum purposes; (iv) will not deposit any shares of Voting Stock
in a voting trust or, except as otherwise provided in the Merger Agreement,
subject any Voting Stock to any arrangement or agreement with respect to the
voting of such stock; (v) will not, without the Company's prior written
consent, (a) solicit proxies with respect to any Voting Stock, become a
"participant" in any "election contest", seek to advise, encourage or influence
any Person with respect to the voting of any Voting Stock, initiate, propose or
<PAGE>
otherwise solicit stockholders of Company for the approval of one or more
stockholder proposals or induce or attempt to induce any other Person to
initiate any stockholder proposal, or (b) make any proposal, whether written or
oral, to the Board of Directors of Company, any director or officer of Company,
or make any public announcement concerning such a proposal, with respect to a
tender offer for any Voting Stock, a merger or other similar business
combination, sale or transfer of all or substantially all of the assets,
liquidation or other extraordinary corporate transactions, in each case,
involving Company, or seek to affect or influence control of the Board of
Directors of Company or make any public statement with respect thereto; (vi)
will not join a partnership, limited partnership, syndicate or other group, or
otherwise act in concert with any third person, for the purpose of acquiring or
holding Voting Stock; and (vii) will not transfer any shares of Voting Stock
except as in accordance with the terms of the Merger Agreement. None of the
foregoing shall apply to any Voting Stock held by BKBC or its affiliates as
trustee or in any other fiduciary capacity for the benefit of an unaffiliated
third party. Furthermore, the foregoing obligations of BKBC or its affiliates
concerning the Company's Voting Stock shall terminate upon BKBC and its
affiliates owning Voting Stock having less than 3% of the combined voting power
of all Voting Stock then outstanding.
In addition, the Merger Agreement contains certain customary restrictions
on the conduct of the business of the Company pending the Merger, including
certain customary restrictions relating to the Common Stock. Except as provided
in the Merger Agreement or as set forth herein, neither BKBC nor, to the best
of BKBC's knowledge, any of the individuals named in Schedule I hereto, has any
contracts, arrangements, understandings or relationships (legal or otherwise)
with any person with respect to any securities of the Company, including, but
not limited to, transfer or voting of any securities, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
division of profits or losses, or the giving or withholding of proxies.
The summaries of provisions of the Merger Agreement in this Schedule are
qualified in their entirety by reference to the Merger Agreement, which is
filed as an Exhibit to this Schedule.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT 1: Agreement and Plan of Merger, dated as of January 10, 1997,
by and among Bank of Boston Corporation, Fidelity Acceptance
Corporation and Mercury Finance Company.
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SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, each
of the undersigned certifies that the information set forth in this Statement
is true, complete, and correct.
BANK OF BOSTON CORPORATION
By: /s/ Michael R. Garfield
Michael R. Garfield
Assistant Clerk
Dated: January 17, 1997
<PAGE>
SCHEDULE I
Directors and Executive Officers
Bank of Boston Corporation
The name, business address, present principal occupation or employment,
and the name, principal business and address of any corporation or other
organization in which such employment is conducted, of each of the directors
and executive officers of Bank of Boston Corporation ("BKBC") is set forth
below. If no business address is given, the director's or officer's address is
Bank of Boston Corporation, 100 Federal Street, Boston, Massachusetts 02110.
Directors
Wayne A. Budd, Senior Vice President
NYNEX Corp.
185 Franklin Street
Boston, Massachusetts 02107
John A. Cervieri Jr., Chairman and President
Property Capital Associates, Inc.
(real estate investment and consulting firm),
Managing Trustee, Property Capital Trust, and
Chairman of the Board
and Chief Executive officer,
Americana Hotels and Realty Corporation
P.O. Box 554
Narragansett, Rhode Island 02882
William F. Connell, Chairman and Chief Executive Officer
Connell Limited Partnership
(metals recycling and manufacture of industrial products)
One International Place
Boston, Massachusetts 02110
Gary L. Countryman, Chairman and Chief Executive Officer
Liberty Mutual Insurance Company
175 Berkeley Street
Boston, Massachusetts 02117
William M. Crozier, Jr., Chairman of the Board of Bank of Boston
Corporation
<PAGE>
Alice F. Emerson, Senior Fellow
The Andrew W. Mellon Foundation
President Emerita of Wheaton College
140 East 62nd Street
New York, New York 10021
Charles K. Gifford, Chief Executive Officer
Bank of Boston Corporation
Thomas J. May, Chairman and Chief Executive Officer
Boston Edison Company
800 Boylston Street
Boston, Massachusetts 02199
Donald F. McHenry
University Research Professor of Diplomacy
School of Foreign Services and International Relations
Georgetown University, Room 301
Washington, DC 20057
Henrique de Campos Meirelles, President and Chief
Operating Officer
Bank of Boston Corporation
Paul C. O'Brien
President of The O'Brien Group, Inc.
(consulting services in community relations and
external affairs)
Two International Place, 23rd Floor
Boston, Massachusetts 02110
Thomas R. Piper, Lawrence E. Fowraker Professor of Business
Administration, Harvard University,
Graduate School of Business Administration
Morgan Hall-469
Soldiers Field Road
Boston, Massachusetts 92163
John W. Rowe
President and Chief Executive Officer
New England Electric System
25 Research Drive
Westborough, Massachusetts 01582
<PAGE>
Richard A. Smith, Chairman of the Board
Hartcourt General Inc.
(international and domestic publishing and executive outplacement)
and The Neiman-Marcus Group, Inc. (retail specialty stores);
Chairman and Chief Executive Officer of GC Companies Inc.
(exhibition of motion pictures)
27 Boylston Street
Chestnut Hill, Massachusetts 02167
Glenn P. Strehle, Vice President for Finance and Treasurer
Massachusetts Institute of Technology
Building 4, Room 10
77 Massachusetts Avenue
Cambridge, Massachusetts 02139
William C. Van Faasen, President and Chief
Executive Officer of Blue Cross and Blue Shield of
Massachusetts, Inc.
(non-profit health services company)
100 Summer Street, 01-31
Boston, MA 02110
Thomas B. Wheeler, Chairman and Chief Executive Officer
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, Massachusetts 02111
Alfred M. Zeien, Chairman of the Board and Chief
Executive Officer
The Gillette Company (manufacturer of consumer products)
Prudential Tower Building
Boston, Massachusetts 02199
Executive Officers
Guilliaem Aertsen IV
Melville E. Blake III
Robert L. Champion, Jr.
Barbara F. Clark
Edward P. Collins
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Carlos Craide
William M. Crozier, Jr.
Helen G. Drinan
Robert E. Gallery
Charles K. Gifford
Paul F. Hogan
Thomas J. Hollister
Ali Inanilan
Ira A. Jackson
Robert T. Jefferson
John A. Kahnaty
Lindsey C. Lawrence
Michael R. Lezenski
Mark A. MacLennan
Peter J. Manning
John L. Mastromarino
Kathleen M. McGillycuddy
David E. McKown
Henrique de Campos Meirelles
Joanne E. Nuzzo
Richard A. Remis
Manuel R. Sacerdote
William J. Shea
<PAGE>
Gary A. Spiess
Susannah M. Swihart
Eliot N. Vestner
Bradford H. Warner
EXHIBIT 1 to Schedule 13D
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 10, 1997 (together with
all Schedules and Exhibits hereto, this "Agreement"), by and among Bank of
Boston Corporation, a Massachusetts corporation ("Seller"), Mercury Finance
Company, a Delaware corporation ("Buyer"), and Fidelity Acceptance Corporation,
a Minnesota corporation (the "Company").
The respective Boards of Directors of Buyer and Company deem it advisable
and in the best interests of their respective stockholders to consummate, and
have approved, and Seller, as the indirect holder of all of the issued and
outstanding shares of capital stock of Company, has likewise approved, the
acquisition transaction provided for herein.
In consideration of the premises and the mutual covenants, representations,
warranties and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
Except as otherwise provided herein or as otherwise clearly required by the
context, the following terms shall have the respective meanings indicated when
used in this Agreement:
"Acquisition Consideration" shall have the meaning ascribed thereto in
Section 2.05(b).
"Acquisition Merger" shall have the meaning ascribed thereto in Section
2.01 hereof.
"Acquisition Subsidiary" shall mean that certain business corporation that
has been or shall be organized as a direct wholly-owned subsidiary of Buyer
under the laws of the State of Minnesota for the purpose of merging with Company
pursuant to the terms hereof.
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"Acquisition Subsidiary Common Stock" shall have the meaning ascribed
thereto in Section 2.05(a) hereof.
"Agreement" shall have the meaning ascribed thereto in the preamble hereto.
"Articles of Merger" shall have the meaning ascribed thereto in Section
2.04 hereof.
"Assistant Attorney General" shall mean the Assistant Attorney General in
charge of the Antitrust Division of the United States Department of Justice.
"Buyer" shall have the meaning ascribed thereto in the preamble hereto.
"Buyer Balance Sheet" shall have the meaning ascribed thereto in Section
4.06 hereof.
"Buyer Common Stock" shall have the meaning ascribed thereto in Section
4.02 hereof.
"Buyer Disclosure Schedule" shall mean the Buyer Disclosure Schedule
attached hereto and made a part hereof.
"Buyer Reports" shall have the meaning ascribed thereto in Section 4.05
hereof.
"Buyer Stock Option Plan" shall mean the Stock Option Plan of the Buyer, as
in effect on the date hereof.
"Certificates" shall have the meaning ascribed thereto in Section 2.05(b)
hereof.
"Closing" shall mean the consummation of the Acquisition Merger.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning ascribed thereto in the preamble hereto.
"Company Balance Sheet" shall have the meaning ascribed thereto in Section
3.05 hereof.
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"Company Benefit Plans" shall have the meaning ascribed thereto in Section
3.11 hereof.
"Company Capital Stock" shall have the meaning ascribed thereto in Section
3.02 hereof.
"Company Common Stock" shall have the meaning ascribed thereto in Section
3.02 hereof.
"Company Disclosure Schedule" shall mean the Company Disclosure Schedule
attached hereto and made a part hereof.
"Company Employees" shall have the meaning ascribed thereto in Section 3.11
hereof.
"Company Preferred Stock" shall have the meaning ascribed thereto in
Section 3.02 hereof.
"Confidential Information" shall have the meaning ascribed thereto in
Section 5.03(b).
"Damages" shall have the meaning ascribed thereto in Section 9.05.
"Disclosure Schedules" shall mean, collectively, the Buyer Disclosure
Schedule and the Company Disclosure Schedule.
"Effective Time" shall have the meaning ascribed thereto in Section 2.04
hereof.
"Encumbrance" shall mean a pledge, security interest, lien, mortgage or
other encumbrance.
"EPA" shall mean the United States Environmental Protection Agency.
"ERISA" shall have the meaning ascribed thereto in Section 3.11 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve" shall mean the Board of Governors of the Federal Reserve
System or the Federal Reserve Bank of Boston, as applicable.
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"FTC" shall mean the Federal Trade Commission.
"GAAP" shall mean generally accepted accounting principles and practices in
effect from time to time within the United States applied consistently
throughout the period involved.
"HSRA" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Injunction" shall have the meaning ascribed thereto in Section 6.01(b)
hereof.
"IRS" shall mean the United States Internal Revenue Service.
"Loans" shall have the meaning ascribed thereto in Section 3.19 hereof.
"Material Adverse Effect" shall mean, with respect to any Person, a
material adverse effect on the assets, business, operations, results of
operations or financial condition of such Person and its subsidiaries, taken as
a whole.
"MBCA" shall have the meaning ascribed thereto in Section 2.01 hereof.
"NYSE" shall mean the New York Stock Exchange, Inc.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Person" means any individual, partnership, joint venture, corporation,
limited liability company, trust, unincorporated organization, government or
other entity.
"Records" means, with respect to any Person, all records and original
documents in such Person's possession which pertain to and are utilized by such
Person to administer, reflect, monitor, evidence or record information
respecting its business and operations, including but not limited to, all
records and documents relating to (i) corporate, regulatory, supervisory and
litigation matters, (ii) tax planning and payment of taxes, (iii) personnel and
employment matters and (iv) the business or conduct of the business of such
Person and its subsidiaries.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated as of the Closing Date, between Buyer and Seller, in
substantially the form attached hereto as Exhibit A.
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"Related Agreements" shall mean this Agreement, the Registration Rights
Agreement, the Tax Agreement and any other agreement between Buyer, Seller
and/or Company that specifies that it is a Related Agreement for purposes of
this Agreement.
"Representatives" shall have the meaning ascribed thereto in Section
5.03(b) hereof.
"Requisite Regulatory Approvals" shall have the meaning ascribed thereto in
Section 6.01(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"SEC" shall mean the United States Securities and Exchange Commission.
"Seller" shall have the meaning ascribed thereto in the preamble hereto.
"subsidiary" shall mean, with respect to any Person, any other Person of
which at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of directors or
others performing similar functions is directly or indirectly owned or
controlled by such Person or by any one or more of such Person's subsidiaries,
or by such Person and one or more of its subsidiaries.
"Surviving Corporation" shall have the meaning ascribed thereto in Section
2.01.
"Surviving Corporation Common Stock" shall have the meaning ascribed
thereto in Section 2.05(a) hereof.
"Tax Disaffiliation Agreement" shall mean the Tax Disaffiliation Agreement,
dated as of the Closing Date, in substantially the form attached hereto as
Exhibit B.
"Termination Date" shall have the meaning ascribed thereto in Section
8.01(b) hereof.
ARTICLE II
THE ACQUISITION MERGER
2.01 The Acquisition Merger. In accordance with the provisions of this
Agreement and the Minnesota Business Corporation Act (the "MBCA"), at the
<PAGE>
Effective Time, Acquisition Subsidiary shall be merged with and into Company
(the "Acquisition Merger") with the effect provided in the MBCA, and the
separate corporate existence of Acquisition Subsidiary shall cease. Company
shall be the surviving corporation in the Acquisition Merger (hereinafter
sometimes referred to as the "Surviving Corporation") and shall continue its
corporate existence under the laws of the State of Minnesota. The name of the
Surviving Corporation shall initially be "Fidelity Acceptance Corporation".
2.02 Articles of Incorporation. The Articles of Incorporation and By-Laws
of Company, as in effect at the Effective Time, shall be the Articles of
Incorporation and By-Laws of the Surviving Corporation and shall thereafter
continue to be the Articles of Incorporation and By-Laws of the Surviving
Corporation until amended as provided therein or by law.
2.03 Directors and Officers. From and after the Effective Time, the
directors and officers of the Surviving Corporation shall be those individuals
listed on Schedule 2.03 hereto, each to serve in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation and applicable law.
2.04 Effective Time; Conditions. If all of the conditions precedent set
forth in Article VI of this Agreement have been satisfied or waived, and this
Agreement has not been terminated under Section 8.01 hereof, articles of merger
(the "Articles of Merger") with respect to the Acquisition Merger shall be
prepared by Acquisition Subsidiary and Company and filed pursuant to Section
302A.615(2) of the MBCA. The Acquisition Merger shall become effective at, and
the Effective Time shall be, the time of filing of the Articles of Merger or
such other time as agreed to by Buyer and Seller (such time is herein referred
to as the "Effective Time").
2.05 Effect on Outstanding Shares.
(a) Acquisition Subsidiary Common Stock. By virtue of the
Acquisition Merger, automatically and without any action on the part of
any Person, including, without limitation, the Buyer, each share of
common stock of Acquisition Subsidiary ("Acquisition Subsidiary Common
Stock"), issued and outstanding immediately prior to the Effective Time
shall become and be converted into one share of Common Stock of the
Surviving Corporation, par value $1 per share ("Surviving Corporation
Common Stock"). Each certificate which immediately prior to the
Effective Time represented outstanding shares of Acquisition Subsidiary
Common Stock shall on and after the Effective Time be deemed for all
purposes to represent the number of shares of Surviving Corporation
<PAGE>
Common Stock into which the shares of Acquisition Subsidiary Common
Stock represented by such certificate shall have been converted
pursuant to this Section 2.05(a).
(b) Company Capital Stock. By virtue of the Acquisition
Merger, automatically and without any action on the part of any Person,
including, without limitation, the holder thereof, all of the shares of
Company Capital Stock issued and outstanding immediately prior to the
Effective Time (other than any such shares held as treasury stock by
Company, which shares shall be cancelled, retired and cease to exist,
and for which no payment shall be made hereunder) shall become and be
converted into 32,708,333 shares of Buyer Common Stock (such shares of
stock being referred to herein as the "Acquisition Consideration").
Seller shall deliver or cause to be delivered to Buyer on the Closing
Date the certificates representing all of the issued and outstanding
shares of Company Capital Stock (the "Certificates"). Such Certificates
shall be exchanged for the Acquisition Consideration to be paid by
Buyer pursuant to this Section 2.05(b).
2.06 Adjustment for Stockholders Equity.
(a) Within 10 business days after the Measurement Date (as
defined below), the Seller will prepare and deliver to the Buyer a
draft consolidated balance sheet (the "Draft Measurement Date Balance
Sheet") for the Company as of the close of business on the Measurement
Date. For purposes hereof, the term "Measurement Date" shall mean the
last day of the month most recently ended prior to the Effective Time
which would not result in the Measurement Date being less than 28 days
prior to the Effective Time. The Seller will prepare the Draft
Measurement Date Balance Sheet on a basis consistent with the Seller's
preparation of the Company Balance Sheet; provided, that (i) the amount
of the loan loss reserve reflected in the Draft Measurement Date
Balance Sheet shall be not less than $94,656,400 and (ii) (A) all
amounts ultimately payable under the Company's currently existing
annual incentive plan and long-term value growth incentive plan, in
each case as modified by the Change Arrangements, (B) $2.5 million in
respect of severance obligations described in the Change Arrangements
and (C) $3 million in respect of obligations relating to the Supreme
Services Agreement dated as of October 16, 1995 between the Company and
Norwest Financial Information Services, Group, Inc., as amended, shall
<PAGE>
be accrued and reflected in the Draft Measurement Date Balance Sheet;
and provided, further, that the reserves for taxes (excluding deferred
taxes) and litigation reflected in the Draft Measurement Date Balance
Sheet shall each be reduced to zero. Seller represents that as of
December 31, 1996, the aggregate outstanding amount of the Loan
portfolio (net of unearned discounts and deferred income items) held by
Company and its subsidiaries was approximately $1 billion.
(b) If the Buyer has any objections to the Draft Measurement
Date Balance Sheet, it will deliver a detailed statement describing its
objections to the Seller within 5 business days after receiving the
Draft Measurement Date Balance Sheet. The Buyer and the Seller will use
reasonable efforts to resolve any such objections themselves. If the
parties do not obtain a final resolution within 2 business days after
the Seller has received the statement of objections, however, the
Seller and the Buyer will select an accounting firm mutually acceptable
to them to resolve any remaining objections. If the Buyer and the
Seller are unable to agree on the choice of an accounting firm, they
will select a "big-six" accounting firm (other than Coopers & Lybrand,
L.L.P. or KPMG Peat Marwick LLP) by lot (the "Accountant"), which shall
be jointly instructed by the Buyer and the Seller to determine the
Stockholder's Equity as of the Measurement Date in accordance with the
provisions of paragraph (a) above. The Accountant shall deliver to each
of the Buyer and the Seller its determinations within 5 business days
after receiving the joint instructions from the Buyer and the Seller,
and the determinations of the Accountant will be set forth in writing
and will be conclusive and binding upon the parties. The expenses of
the Accountant shall be borne equally by the Buyer and the Seller. The
Seller will give the Buyer the Draft Measurement Date Balance Sheet,
revised to reflect the Accountant's determinations. The "Measurement
Date Balance Sheet" shall mean the Draft Measurement Date Balance
Sheet, together with any revisions thereto pursuant to this Section
2.06(b), including the determination of the Accountant.
(c) If the Stockholder's Equity of the Company as set forth on
the Measurement Date Balance Sheet is greater than $277,463,627, the
Company shall dividend to the Seller an amount in cash equal to such
excess by delivery of cash payable by wire transfer or delivery of
other immediately available funds. If the Stockholder's Equity of the
Company as set forth on the Measurement Date Balance Sheet is less than
$277,463,627, the Seller shall contribute to the Company an amount in
<PAGE>
cash equal to such deficiency by delivery of cash payable by wire
transfer or delivery of other immediately available funds. Any such
payment shall be made at the Closing.
(d) Notwithstanding the foregoing, in the event that the
Accountant shall be unable to deliver its determinations as set forth
above on or prior to the Closing Date, then, any dividend or
contribution to be made by Company or Seller pursuant to paragraph (c)
above shall be made, together with interest thereon from the Closing
Date to the date of such payment, at a rate per annum equal to the
federal funds rate as of each day during such period, after the Closing
within 2 business days after delivery of such determinations by the
Accountant.
(e) Within 20 business days after the Closing Date, the Buyer
will prepare and deliver to the Seller a draft consolidated balance
sheet (the "Draft Closing Date Balance Sheet") for the Company as of
the close of business on the Closing Date. Such Draft Closing Date
Balance Sheet shall be the Measurement Date Balance Sheet, updated to
reflect changes occurring between the Measurement Date and the Closing
Date in a manner consistent with the preparation of the Measurement
Date Balance Sheet and, without limiting the foregoing, the proviso to
the last sentence of Section 2.06(a) shall apply to the Draft Closing
Date Balance Sheet. If the Seller has any objections to the Draft
Closing Date Balance Sheet, such objections shall be resolved in the
same manner and within the same time periods (such time periods being
determined with reference to the Closing Date instead of the
Measurement Date) as set forth above for the resolution of objections
to the Draft Measurement Data Balance Sheet; provided, that if an
Accountant is selected pursuant to Section 2.06(b) above in connection
with the Measurement Date Balance Sheet, then the same Accountant shall
make any and all determinations in connection with the Closing Date
Balance Sheet. The Closing Date Balance Sheet shall mean the Draft
Closing Date Balance Sheet, together with any revisions thereto
pursuant to this Section 2.06(e), including any determination of the
Accountant.
(f) If Stockholder's Equity of the Company as set forth on the
Closing Date Balance Sheet is greater than $277,463,627, the Buyer or
Company shall pay to the Seller an amount in cash equal to such excess
by delivery of cash payable by wire transfer or delivery of other
immediately available funds. If Stockholder's Equity of the Company as
set forth on the Closing Date Balance Sheet is less than $277,463,627,
<PAGE>
the Seller shall pay to the Buyer or the Company an amount in cash
equal to such deficiency by delivery of cash payable by wire transfer
or delivery of other immediately available funds. Any such payment
shall be made within 2 business days after final determination of the
Closing Date Balance Sheet.
(g) Seller and Buyer will make the work papers and back-up
materials used in preparing the Draft Measurement Date Balance Sheet
and Draft Closing Date Balance Sheet available to the other and its
accountants and other representatives at reasonable times and upon
reasonable notice at any time during (A) the preparation and review of
the Draft Measurement Date Balance Sheet and the Draft Closing Date
Balance Sheet and (B) the resolution by the Buyer and the Seller of any
objections to any of the foregoing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND COMPANY
Seller and Company hereby represent and warrant to Buyer as follows:
3.01 Corporate Organization.
(a) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of
Massachusetts.
(b) Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Minnesota. Company
has the corporate power and authority to own, lease and operate 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, leased
and operated by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not
result in, with respect to Company, any Material Adverse Effect.
Section 3.01(b) of the Company Disclosure Schedule sets forth each
state in which the Company is licensed and a description of such
licenses.
(c) Each subsidiary of Company is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
<PAGE>
incorporation or organization, except where the failure to be so duly
organized, validly existing or in good standing would not, individually
or in the aggregate, result in, with respect to Company, any Material
Adverse Effect. Each subsidiary of Company has the corporate power and
authority to own, lease and operate 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, leased and operated by it makes such
licensing or qualification necessary, except where the failure to be so
licensed or qualified would not, individually or in the aggregate,
result in, with respect to Company, any Material Adverse Effect.
Section 3.01(c) of the Company Disclosure Schedule sets forth each
state in which each Company subsidiary is licensed and a description of
such licenses.
(d) Company has made available to Buyer the minute books of
Company from May 1936 through the date hereof, and such minute books
contain complete and accurate records of all meetings held since the
date of Company's incorporation by the stockholders and Board of
Directors of Company and of all corporate actions authorized at such
meetings.
3.02 Capitalization.
(a) The authorized capital stock of Company consists of (i)
100,000 shares of Class B Common Stock, par value $1 per share (the
"Company Common Stock"), and (ii) 100,000 shares of Preferred Stock,
par value $100 per share (the "Company Preferred Stock" and, together
with the Company Common Stock, the "Company Capital Stock"). There are
(i) 89,800 shares of Company Common Stock and (ii) 84,072 shares of
Company Preferred Stock issued and outstanding, and (x) no shares of
Company Common Stock and (y) no shares of Company Preferred Stock are
held in Company's treasury. As of the date hereof, the Seller's
indirect wholly-owned subsidiary, Bank of Boston Connecticut is the
sole lawful record and beneficial owner of all of the Company Capital
Stock. All issued and outstanding shares of Company Capital Stock have
been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights. Company does not have and
is not bound by any outstanding subscriptions, options, warrants, calls
or other commitments calling for Company to issue, deliver or sell, or
<PAGE>
cause to be issued, delivered or sold, any shares of Company Capital
Stock or any other equity security of Company or any Company subsidiary
or any securities convertible into, exchangeable for or representing
the right to subscribe for, purchase or otherwise receive any shares of
Company Capital Stock or any other equity security of Company or any
Company subsidiary. There are no outstanding contractual obligations of
Company to repurchase, redeem or otherwise acquire any shares of
capital stock of Company or any Company subsidiary or relating to the
voting of any shares of Company Capital Stock in any particular manner.
(b) Except as described in Section 3.02(b) of the Company
Disclosure Schedule, Company does not own, control or hold, directly or
indirectly, beneficially or otherwise, any capital stock or other
equity or ownership interest in any Person or any securities
convertible into any such equity or ownership interests or any other
rights to purchase or acquire any such equity or ownership interests.
Except as described in Section 3.02(b) of the Seller Disclosure
Schedule, Company owns, directly or indirectly, all of the issued and
outstanding shares of capital stock or other ownership interests of
each subsidiary of Company, free and clear of any Encumbrances, and all
such shares or other ownership interests are fully paid, nonassessable
and free of preemptive rights.
(c) As of the Closing Date, the shares of Company Capital
Stock will be held by a direct or indirect wholly-owned subsidiary of
the Seller (the "Shareholder").
3.03 Authority; No Violation.
(a) Each of Seller and Company 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 approved by the Board of Directors of
Company and Seller. As of the Effective Time, the Acquisition Merger
will have been duly and validly approved by all of the then holders of
shares of Company Capital Stock. No other corporate proceedings on the
part of Seller or Company are necessary to consummate any of the
transactions contemplated by this Agreement. This Agreement has been
duly and validly executed and delivered by Seller and Company and
(assuming due authorization, execution and delivery by Buyer)
constitutes the valid and binding obligations of such Persons,
enforceable against such Persons in accordance with their respective
<PAGE>
terms, except as enforcement may be limited by receivership,
conservatorship and supervisory powers of bank and bank holding company
regulatory agencies generally and by general principles of equity
whether applied in a court of law or a court of equity and by
bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(b) Neither the execution and delivery of this Agreement by
Seller or Company, nor the consummation by Seller, Shareholder or
Company of the transactions contemplated hereby nor compliance by
Seller, Shareholder or Company with any of the terms or provisions
hereof, will (i) assuming that the consents and approvals referred to
in Section 3.04 are duly obtained, violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Seller, Shareholder or Company or any Company
subsidiary or any of their respective properties or assets, or (ii)
violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, result in the termination
of, accelerate the performance required by, or result in a right of
termination or acceleration or the creation of any lien, security
interest, charge or other encumbrance upon any of the properties or
assets of Seller, Shareholder or Company or any Company subsidiary
under, any of the terms, conditions or provisions of (x) the Articles
of Incorporation, Articles of Organization or other charter document of
like nature or By-laws of Seller, Shareholder or Company or any Company
subsidiary or (y) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which
Seller, Shareholder or Company or any Company subsidiary is a party as
issuer, guarantor or obligor, or by which Seller, Shareholder or
Company or any Company subsidiary or any of their respective properties
or assets may be bound or affected, except (i) in the case of Company
or any Company subsidiary and with respect to clause (y) above, for
such violations, conflicts, breaches or defaults which either
individually or in the aggregate would not, with respect to Company,
result in any Material Adverse Effect, and (ii) in the case of Seller
or Shareholder, for such violations, conflicts, breaches or defaults
which either individually or in the aggregate would not prevent Seller
from consummating the transactions contemplated hereby.
3.04 Consents and Approvals. Except for consents, waivers or approvals
of, notices to or filings with the Federal Reserve, the Assistant Attorney
<PAGE>
General and the FTC under the HSRA, the Secretary of State of the State of
Minnesota under the MBCA, the SEC and the NYSE under Section 13(d) of the
Securities Exchange Act of 1934, as amended, and various state agencies and
authorities, and those referred to in Section 3.04 of the Company Disclosure
Schedules no consents, waivers or approvals of, notices to or filings with, any
public body or authority are necessary, and no consents or approvals of any
third parties (which term does not include the Board of Directors of Seller or
Company or the Shareholder) are necessary, in connection with (a) the execution
and delivery by Seller or Company of this Agreement or (b) the consummation by
Seller and Company of the transactions contemplated by this Agreement,
including, without limitation, the Acquisition Merger, other than any such
consents, waivers or approvals of, or notices to or filings with, any such
public body or authority or any such consents or approvals of any third parties
required to be obtained by Seller or Company, the failure of which to obtain
would not, with respect to Company, result in any Material Adverse Effect or
prevent Seller from consummating the transactions contemplated hereby.
3.05 Financial Statements. Company has previously made available to
Buyer copies of the unaudited consolidated balance sheets of Company and its
subsidiaries as of December 31, 1995 and September 30, 1996, and the related
unaudited consolidated statements of income, changes in stockholders' equity and
cash flows for fiscal year 1995 and for the nine months ended September 30,
1996. The December 31, 1995 unaudited consolidated balance sheet of Company
(including the related notes, where applicable) (the "Company Balance Sheet")
and the other financial statements referred to herein (including the related
notes, where applicable) fairly present, and the financial statements to be
provided to Buyer pursuant to Section 5.12 hereof or to be included in any
reports or statements to be filed by Company with any state or federal
governmental agency or authority or otherwise prepared by Company after the date
hereof will fairly present, the consolidated financial position and results of
the consolidated operations and cash flows and changes in shareholders' equity
of Company and its subsidiaries for the respective fiscal periods or as of the
respective dates therein set forth; and each of such statements (including the
related notes, where applicable) has been and will be prepared in accordance
with GAAP consistently applied during the periods involved, except as otherwise
set forth in the notes thereto (subject, in the case of unaudited interim
statements, to normal year-end adjustments and the absence of footnotes
thereto). The books and records of Company and its subsidiaries have been, and
are being, maintained in accordance with GAAP and applicable legal and
regulatory requirements.
<PAGE>
3.06 Absence of Undisclosed Liabilities. Except as disclosed or
reflected in the Company Balance Sheet and the September 30, 1996 balance sheet
and except those that have arisen in the ordinary course of the Company's
business, neither Company nor any of its subsidiaries has any obligation or
liability (contingent or otherwise), that when combined with all similar
obligations and liabilities, with respect to Company, have had, or are
reasonably likely to have, a Material Adverse Effect.
3.07 Broker's Fees. Except as described in Section 3.07 of the Company
Disclosure Schedule, neither Seller nor Company nor any of their respective
affiliates nor any of their respective officers or directors has employed any
broker or finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with any of the transactions contemplated by this
Agreement.
3.08 Absence of Certain Changes or Events. Since December 31, 1995,
except as set forth in Section 3.08 of the Company Disclosure Schedule and
except in the ordinary course of Company's business consistent with its past
practices, neither Company nor any of its subsidiaries has incurred any material
liability, nor has there been any change in the assets, business, operations,
results of operations or financial condition of Company or its subsidiaries,
which has had, or is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Company.
3.09 Legal Proceedings. Except as set forth in Section 3.09 of the
Company Disclosure Schedule, there is no suit, action or proceeding pending or,
to the knowledge of Seller or Company, threatened, against Seller or Company or
any subsidiary of Company or challenging the validity or propriety of the
transactions contemplated by this Agreement, as to which there is a reasonable
probability of an adverse determination and which, if adversely determined,
would, individually or in the aggregate, have a Material Adverse Effect on
Company or otherwise materially adversely affect Seller's or Company's ability
to perform its obligations under this Agreement, nor is there any judgment,
decree, injunction, rule or order of any legal or administrative body or
arbitrator outstanding against Seller or Company or any subsidiary of Company
having, or which insofar as reasonably can be foreseen, in the future could
have, any such effect.
3.10 Taxes and Tax Returns. Except as otherwise described in Section
3.10 of the Disclosure Schedule:
(a) The Company has timely filed all material Tax Returns that
were required to be filed by it on or prior to the date hereof (the
<PAGE>
"Company Filed Tax Returns"), each Company Filed Tax Return has been
prepared in compliance with all applicable laws and regulations, and
all Company Filed Tax Returns are true and accurate in all respects
material to the financial condition of the Company.
(b) The Company has paid all Taxes shown as being due on
the Company Filed Tax Returns.
(c) Following the Effective Time, the Company will not be a
party to or bound by any Tax indemnification, Tax allocation or Tax
sharing agreement with any Person or have any contractual obligation to
indemnify any other Person with respect to any Taxes.
(d) Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party, except
where the failure to do so would not have a Material Adverse Effect on
the Company.
(e) Except as set forth in Section 3.10 of the Company
Disclosure Schedule:
(i) the Company is not a party to any agreement,
contract, arrangement or plan that as a result of the
transactions contemplated by this Agreement would result,
separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the
Code; and
(ii) the Company has not agreed to make any
adjustment under Section 481(a) of the Code (or any
corresponding provision of state, local or foreign tax law) by
reason of a change in accounting method or otherwise.
(f) For purposes of this Section 3.10 and Section 4.11:
(A) "Tax" means any federal, state, local or foreign
income, gross receipts, franchise, estimated, alternative
minimum, add-on minimum, sales, use, transfer, registration,
value added, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, environmental (including
Code Section 59A), customs, duties, real property, personal
property, capital stock, intangibles, social security,
employment, unemployment, disability, payroll, license,
<PAGE>
employee or other tax, withholding tax or levy, of any kind
whatsoever, including any interest, penalties or additions to
tax in respect of the foregoing.
(B) "Tax Return" means any return, declaration,
report, claim for refund, information return or other document
including any related or supporting estimates, elections,
schedules, statements or information) filed or required to be
filed in connection with the determination, assessment or
collection of any Tax or the administration of any laws,
regulations or administrative requirements relating to any
Tax.
3.11. Employees; Benefit Plans.
(a) The Seller has made available to the Buyer a list of all
employees of the Company ("Company Employees"), showing for each the
position held, the period employed by the Company and current salary or
rate of pay. None of the Company Employees is covered by a collective
bargaining or similar agreement. There is no strike or other labor
dispute pending or, to the knowledge of the Seller or the Company,
threatened, against the Company. Section 3.11 of the Company Disclosure
Schedule lists all of the employee pension benefit plans within the
meaning of Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), which the Company maintains or has
maintained, to which the Company contributes or has contributed, or
which covers or has covered employees of the Company, including all
pension, retirement, profit-sharing, and employee stock ownership
plans, all employee welfare benefit plans within the meaning of Section
3(1) of ERISA, which the Company maintains or has maintained, to which
the Company contributes or has contributed, or which covers or has
covered employees of the Company, including all vacation, sick leave,
medical, hospitalization, life insurance and other insurance plans, and
all deferred compensation, bonus, stock option, stock purchase,
incentive plans or employee benefit or fringe benefit arrangements,
which the Company maintains or has maintained, to which the Company
contributes or has contributed, or which covers or has covered
employees of the Company (collectively, the "Company Benefit Plans").
Section 3.11 of the Company Disclosure Schedule identifies each Company
Benefit Plan that will be sponsored by the Company (and not by the
Seller) as of the Closing Date (collectively, the "Transferred Company
Benefit Plans").
<PAGE>
(b) Seller has provided or will promptly provide to Buyer
accurate and complete copies of each of the following with respect to
each Transferred Company Benefit Plan: plan documents with all
amendments since the plan was adopted; each Internal Revenue Service
determination letter with respect to the plan, where applicable; Form
5500 for the past five years; actuarial reports for the last five
years, where applicable; copies of beneficiary designation forms,
benefit election forms and any other forms and records necessary for
Buyer to administer each such plan; and records relating to
discrimination testing, where applicable.
(c) Each Company Benefit Plan has been maintained and operated
in compliance with its terms and with the applicable provisions of
ERISA, the Internal Revenue Code of 1986, as amended, all regulations
promulgated thereunder, and all other applicable governmental laws and
regulations. The Company has paid to all Company Benefit Plans or has
accrued on the Company Balance Sheet all contributions for periods
prior to the Closing Date. The Company has never maintained or
contributed to any Employee Pension Benefit Plan (as defined in Section
3(2) of ERISA) that has been terminated or partially terminated, and no
proceeding by the Pension Benefit Guaranty Corporation ("PBGC") has
been instituted or threatened with respect to such plan. The Company
has never contributed to any Multiemployer Plan or incurred any
liability under any such plan. The Company has never maintained any
employee welfare benefit plan (as defined in Section 3(1) of ERISA)
providing medical, life or other welfare type benefits to current or
future retired or terminated employees, their spouses or dependents
(other than in accordance with Internal Revenue Code Section 4980(B)).
Except as set forth on Section 3.11(c) of the Company Disclosure
Schedule, as of the Closing Date, the market value of assets under each
Company Benefit Plan that is an Employee Pension Benefit Plan equals or
exceeds the present value of all vested and nonvested liabilities
thereunder determined in accordance with PBGC methods, factors and
assumptions applicable to a plan terminating on the Closing Date. As of
the Closing Date, the funding status of the Company's Defined Pension
Benefit Plan will be no less favorable to the Company than at December
31, 1995 as reflected in the Company Balance Sheet at December 31,
1995. Each Transferred Company Benefit Plan that is intended to be
qualified under Section 401(a) of the Internal Revenue Code is so
qualified. With respect to each Transferred Company Benefit Plan, there
has been no prohibited transaction (as defined in Section 4975 of the
Internal Revenue Code or Section 406 of ERISA). No action, suit or
<PAGE>
investigation with respect to the Transferred Company Benefit Plans
(other than routine claim for benefits) is pending or threatened, and
Seller has no knowledge of any basis for any such action, suit or
investigation.
3.12 Agreements with Governmental Authorities. Neither Company nor any
of its subsidiaries is a party to any commitment, letter, written agreement,
memorandum of understanding or order to cease and desist with any federal or
state governmental agency or authority charged with the supervision or
regulation of banking, credit, finance or lending institutions which restricts
the conduct of its business, or in any manner relates to its capital adequacy,
credit policies or practices, management or overall safety and soundness or the
Company's ability to perform its obligations hereunder or to consummate the
transactions contemplated hereby.
3.13 Material Agreements. Section 3.13 of the Company Disclosure
Schedule lists the following contracts and other agreements to which the
Company is currently a party:
(i) any agreement (or group of related agreements)
for the lease of personal property to or from any Person providing
for lease payments in excess of $100,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase of supplies, products or other personal property, or for the
furnishing or receipt of services that involves consideration in excess
of $100,000 per annum;
(iii) any agreement constituting a partnership or joint
venture;
(iv) any agreement (or group of related agreements) under
which the Company has created, incurred, assumed or guaranteed any
indebtedness for borrowed money in excess of $100,000 or under which it
has imposed a security interest on any of its assets, tangible or
intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with the Seller or any of its
affiliates (other than the Company);
<PAGE>
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other plan or
arrangement for the benefit of its current or former directors,
officers and employees;
(viii) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis providing annual
compensation in excess of $100,000 or providing severance benefits;
(ix) any agreement under which it has advanced or
loaned any amount to any of its directors, officers and employees
outside the ordinary course of business;
(x) any agreement under which the consequences of a
default or termination could have a Material Adverse Effect on
Company; or
(xi) any other agreement (or group of related agreements),
the performance of which involves consideration in excess of $100,000.
The Company has made available to the Buyer a correct and complete copy of each
written agreement listed in Section 3.13 of the Company Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions of
each oral agreement, if any, referred to in Section 3.13 of the Company
Disclosure Schedule. Company is not in breach in any material respect of any
such agreement and, to the knowledge of Company, no other party is in breach in
any material respect of any such agreement. Each such written agreement
constitutes the legal, valid and binding obligation of the parties thereto,
enforceable against such obligor in accordance with the terms thereof (except as
enforcement may be limited by general principles of equity whether applied in a
court of law or equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally), except where the failure thereof
would not, individually or in the aggregate, have a Material Adverse Effect on
Company.
3.14 Ownership of Property. Except as otherwise set forth on Section
3.14 of the Company Disclosure Schedule, Company and its subsidiaries have good
title to all of their assets and properties, whether real or personal, tangible
or intangible, including, without limitation, all assets and properties
reflected in the Company Balance Sheet or acquired subsequent thereto, subject
to no Encumbrances, except (a) those items that secure liabilities that are
reflected in said balance sheet or the notes thereto or incurred in the ordinary
<PAGE>
course of business after the date of such balance sheet, (b) statutory liens for
amounts not yet delinquent or which are being contested in good faith, (c) liens
and security interests in favor of the Seller securing the credit facility
between the Company and the Seller, (d) such imperfections of title, easements
and Encumbrances, if any, as are not material in character, amount or extent and
(e) dispositions and Encumbrances in the ordinary course of business after the
date of such Company Balance Sheet.
3.15 Compliance with Applicable Laws. Except as otherwise set forth on
Section 3.15 of the Company Disclosure Schedule, Company and its subsidiaries
hold all material licenses, franchises, permits and authorizations necessary for
the lawful conduct of their businesses as presently conducted, and Company and
its subsidiaries have complied with every, and are not in default under any,
applicable law, statute, order, rule, regulation or policy of, or agreement
with, any federal, state or local governmental agency or authority relating to
Company and its subsidiaries, other than where such default or noncompliance
would not reasonably be expected to result, with respect to Company, in any
Material Adverse Effect, and, no action, suit, proceeding, hearing, complaint,
claim, demand, notice or, to the knowledge of the Company, investigation has
been filed, commenced or, to the knowledge of the Company, threatened against
the Company alleging any failure so to comply as to which there is a reasonable
probability of an adverse determination and which, if adversely determined,
would, individually or in the aggregate, have a Material Adverse Effect on
Company.
3.16 Environmental Matters. Company and its subsidiaries are in
compliance with all environmental laws, rules, regulations and standards
promulgated, adopted or enforced by the EPA and of similar agencies in states in
which they conduct their respective businesses, other than where such
noncompliance would not reasonably be expected to result, with respect to
Company, in any Material Adverse Effect. There is no suit, claim, action or
proceeding now pending before any court, governmental agency or board or other
forum or, to the knowledge of Seller or Company, threatened by any Person, which
taken singularly or as a whole, if adversely determined, would have a Material
Adverse Effect on Company (a) for alleged noncompliance with any environmental
law, rule or regulation or (b) relating to the discharge or release into the
environment of any hazardous material or waste at or on a site presently or
formerly owned, leased or operated by Company or any subsidiary of Company.
3.17 Insurance. Section 3.17 of the Company Disclosure Schedule sets
forth an accurate description of each insurance policy providing coverage for
<PAGE>
over $50,000 of liability exposure (including policies providing property,
casualty, liability and workers' compensation coverage and bond and surety
arrangements) to which the Company is currently, or has been during the past
three years, a party, a named insured or otherwise the beneficiary of coverage.
With respect to each such insurance policy: to the knowledge of the Company, (A)
the policy is legal, valid, binding, enforceable and in full force and effect;
(B) there will be no breach or other violation of the policy resulting from the
consummation of the transactions contemplated hereby; and (C) the Company is not
in breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification or acceleration, under the policy; in each case, except for the
termination of, or the removal of Company from, policies to which Seller is a
party effective at or after the Effective Time.
3.18 Labor. Except as otherwise set forth in Section 3.18 of the
Company Disclosure Schedule, neither Company nor any of its subsidiaries is
involved in, or, to the knowledge of Seller or Company, threatened with or
affected by, any dispute, arbitration, lawsuit or administrative proceeding
relating to labor or employment matters. No employees of Company or any of its
subsidiaries are represented by any labor union, and, to the knowledge of Seller
and Company, no labor union is attempting to organize employees of Company or
any of its subsidiaries.
3.19 Loans. All currently outstanding loans of, or current extensions
of credit by, including retail installment contracts held by, Company
(individually, a "Loan," and collectively, the "Loans") were solicited,
originated and currently exist in material compliance with all applicable
requirements of federal and state law and regulations promulgated thereunder.
Each note evidencing a Loan or loan or credit agreement or security instrument
or retail installment contract related to the Loans constitutes a valid, legal
and binding obligation of the obligor thereunder, enforceable against such
obligor in accordance with the terms thereof (except as enforcement may be
limited by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally), except where the failure thereof,
individually or in the aggregate, would not have a Material Adverse Effect with
respect to Company. To the knowledge of Seller and Company, there are no oral
modifications or amendments related to the Loans that are not reflected in
Company's records, no defenses as to the enforcement of any Loan have been
asserted and there have been no acts or omissions which would give rise to any
claim or right of rescission, set-off, counterclaim or defense, except where any
<PAGE>
of the foregoing would not have, either individually or in the aggregate, a
Material Adverse Effect with respect to Company. Except as disclosed in Section
3.19 of the Company Disclosure Schedule, none of the Loans are presently
serviced by third parties and there is no obligation which could result in any
Loan becoming subject to any third party servicing. The reserves established
against the Loans have been established consistent with the Company's prior loss
experience in accordance with GAAP.
3.20 Intellectual Property.
(a) The Company owns or has the right to use pursuant to
license, sublicense, agreement, permission or otherwise all trademarks,
service marks, trade dress, logos, trade names and corporate names and
all applications, registrations and renewals in connection therewith
and all other proprietary rights ("Intellectual Property"), in each
case to the extent necessary for the operation of its business as
presently conducted and except where the failure to own or have such
right would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Company. Each such item
of Intellectual Property owned or used by the Company immediately prior
to the Closing hereunder will continue to be owned or available for use
by the Company on identical terms and conditions immediately subsequent
to the Closing hereunder.
(b) To the knowledge of the Company, the Company has not
interfered with, infringed upon or misappropriated any Intellectual
Property rights of third parties, and has not received any complaint,
claim, demand or notice alleging any such interference, infringement or
misappropriation (including any claim that the Company must license or
refrain from using any Intellectual Property rights of any third party)
within the last three years. To the Company's knowledge, no third party
has interfered with, infringed upon, misappropriated or otherwise come
into conflict with any Intellectual Property rights of the Company.
3.21 No Distribution. Seller is acquiring Buyer Common Stock for
investment purposes only and is not acquiring Buyer Common Stock with a view to
the public distribution thereof. Seller acknowledges that the Buyer Common Stock
has not been registered under the Securities Act and that the Buyer Common Stock
may not be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act. Seller
<PAGE>
acknowledges that the certificates evidencing the Buyer Common Stock will bear
legends reflecting such restrictions.
For the purposes of this Article IV, all references to "the knowledge
of Seller", "the knowledge of Company" or other words of similar import shall
mean the knowledge of the officers of the Company listed in Section 3.22 of the
Company Disclosure Schedule.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller and Company as follows:
4.01 Corporate Organization.
(a) Acquisition Subsidiary is or will be a corporation duly
organized, validly existing and in good standing under the laws of the
State of Minnesota.
(b) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Buyer has
the corporate power and authority to own, lease and operate 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, leased and
operated by it makes such licensing or qualification necessary, except
where the failure to be so licensed or qualified would not result in,
with respect to Buyer, any Material Adverse Effect.
(c) Each subsidiary of Buyer is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization. Each subsidiary of Buyer has the power
and authority to own, lease and operate 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, leased and operated by it
makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified would not, individually or in
the aggregate, result in, with respect to Buyer, any Material Adverse
Effect.
<PAGE>
(d) Buyer has made available to Company the minute books of
Buyer from the date of incorporation through the date hereof, and such
minute books contain complete and accurate records of all meetings held
since the date of Buyer's incorporation by the stockholders and Board
of Directors of Buyer and of all corporate actions authorized at such
meetings.
4.02 Capitalization.
(a) As of December 31, 1996, the authorized capital stock of
Buyer consists of 500,000,000 shares of voting Common Stock, par value
$1 per share (the "Buyer Common Stock"). As of the date of this
Agreement, there are 177,719,447 shares of Buyer Common Stock issued
and outstanding and 5,452,907 shares of Buyer Common Stock held in
Buyer's treasury. All issued and outstanding shares of Buyer Common
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights. Except as provided in the
Buyer Stock Option Plan, Buyer does not have and is not bound by any
outstanding subscriptions, options, warrants, calls or other
commitments calling for Buyer to issue, deliver or sell, or cause to be
issued, delivered or sold, any shares of Buyer Common Stock or any
other equity security of Buyer or any Buyer subsidiary or any
securities convertible into, exchangeable for or representing the right
to subscribe for, purchase or otherwise receive any shares of Buyer
Common Stock or any other equity security of Buyer or any Buyer
subsidiary. There are no outstanding contractual obligations of Buyer
to repurchase, redeem or otherwise acquire any shares of capital stock
of Buyer or any Buyer subsidiary.
(b) Except as described in Section 4.02(b) of the Buyer
Disclosure Schedule, Buyer does not own, control or hold, directly or
indirectly, beneficially or otherwise, any capital stock or other
equity or ownership interest in any Person or any securities
convertible into any such equity or ownership interests or any other
rights to purchase or acquire any such equity or ownership interests.
Buyer owns, directly or indirectly, all of the issued and outstanding
shares of capital stock or other ownership interests of each Buyer
subsidiary, free and clear of any Encumbrances, and all such shares or
other ownership interests are fully paid, nonassessable and free of
preemptive rights.
<PAGE>
4.03 Authority; No Violation.
(a) Buyer has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. Acquisition Subsidiary has or will have all
necessary corporate power and authority 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 approved by the Board of Directors of Buyer. The
consummation of the transactions contemplated hereby have been duly and
validly approved by Buyer, as sole stockholder of Acquisition
Subsidiary, and will be approved by the Board of Directors of
Acquisition Subsidiary. No consents, approvals or other actions by any
stockholders of Buyer are necessary to consummate the transactions
contemplated by this Agreement, including, without limitation, the
Acquisition Merger. No other corporate proceedings on the part of Buyer
or Acquisition Subsidiary are necessary to consummate the transactions
contemplated by this Agreement, including, without limitation, the
Acquisition Merger. This Agreement has been duly and validly executed
and delivered by Buyer and (assuming due authorization, execution and
delivery by Company and Seller) constitutes the valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms, except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by
bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(b) Neither the execution and delivery of this Agreement by
Buyer nor the consummation by Buyer and Acquisition Subsidiary of the
transactions contemplated hereby, nor compliance by Buyer and
Acquisition Subsidiary with any of the terms or provisions hereof, will
(i) assuming that the consents and approvals referred to in Section
4.04 hereof are duly obtained, violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction
applicable to Buyer or Acquisition Subsidiary or (ii) violate, conflict
with, result in a breach of any provisions of, constitute a default (or
an event which, with notice or lapse of time, or both, would constitute
a default) under, result in the termination of, accelerate the
performance required by, or result in a right of termination or
acceleration or the creation of any lien, security interest, charge or
other encumbrance upon any of the respective properties or assets of
Buyer or Acquisition Subsidiary under, any of the terms, conditions or
provisions of (x) the Articles of Incorporation, Certificate of
Incorporation or other charter document of like nature or By-laws of
<PAGE>
Buyer or Acquisition Subsidiary, as the case may be, or (y) any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Buyer or Acquisition Subsidiary
is a party as issuer, guarantor or obligor, or by which they or any of
their respective properties or assets may be bound or affected, except,
in the case of clause (y), for such violations, conflicts, breaches or
defaults which either individually or in the aggregate would not result
in a Material Adverse Effect with respect to Buyer or materially
adversely affect Buyer's or Acquisition Subsidiary's ability to perform
its obligations under this Agreement or to enter into the transactions
contemplated hereby.
4.04 Consents and Approvals. Except for consents, waivers or approvals
of, notices to or filings set forth in Section 4.04 of the Buyer Disclosure
Schedule, no consents, waivers or approvals of, notices to or filings with, any
public body or authority are necessary, and no consents or approvals of any
third parties (which term does not include the Board of Directors of Buyer or
Acquisition Subsidiary) are necessary, in connection with (a) the execution and
delivery by Buyer of this Agreement or (b) the consummation by Buyer and
Acquisition Subsidiary of the transactions contemplated by this Agreement,
including, without limitation, the Acquisition Merger, other than any such
consents, waivers or approvals of, or notices to or filings with, any such
public body or authority or any such consents or approvals of any such third
parties required to be obtained by Buyer, the failure of which to obtain would
not, with respect to Buyer, have a Material Adverse Effect or have a material
adverse effect on Buyer's or Acquisition Subsidiary's ability to perform its
obligations hereunder or to enter into the transactions contemplated hereby.
4.05 SEC Reports. No report, registration statement, prospectus,
schedule, definitive proxy statement or other document, each as amended, filed
by Buyer with the SEC pursuant to the Securities Act or the Exchange Act (the
"Buyer Reports") since January 1, 1996 and prior to the date hereof contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
except to the extent corrected in a subsequent Buyer Report. Buyer has timely
filed all Buyer Reports and other documents required to be filed by it under the
Securities Act and the Exchange Act, and, as of their respective dates, all
Buyer Reports complied in all material respects with the published rules and
regulations of the SEC with respect thereto.
<PAGE>
4.06 Financial Statements. Buyer has previously made available to
Seller and Company copies of (a) the consolidated balance sheets of Buyer and
its subsidiaries as of December 31, 1993, December 31, 1994 and December 31,
1995, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the fiscal years 1993 through 1995,
inclusive, as reported in Buyer's Annual Report on Form 10-K/A No. 1 for the
fiscal year ended December 31, 1995 filed with the SEC under the Exchange Act,
in each case accompanied by the audit report of KPMG Peat Marwick LLP,
independent accountants for Buyer, and (b) the unaudited consolidated balance
sheets of Buyer and its subsidiaries as of September 30, 1996 and September 30,
1995, and the related unaudited consolidated statements of income, changes in
stockholders' equity and cash flows for the nine months ended September 30, 1995
and September 30, 1995, as reported in Buyer's Quarterly Report on Form 10-Q for
the period ended September 30, 1996 filed with the SEC under the Exchange Act.
The September 30, 1996 consolidated balance sheet of Buyer (including the
related notes, where applicable) (the "Buyer Balance Sheet") and the other
financial statements referred to herein (including the related notes, where
applicable) fairly present, and the financial statements to be included in any
reports or statements to be filed by Buyer with any state or federal
governmental agency or authority or otherwise prepared by Buyer after the date
hereof will fairly present, the consolidated financial position and results of
the consolidated operations and cash flows and changes in shareholders' equity
of Buyer and its subsidiaries for the respective fiscal periods or as of the
respective dates therein set forth; and each of such statements (including the
related notes, where applicable) complies in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto and each of such statements has been or will be
prepared in accordance with GAAP consistently applied during the periods
involved, except as otherwise set forth in the notes thereto or, in the case of
unaudited interim statements, as permitted by Form 10-Q (subject, in the case of
unaudited interim statements, to normal year-end adjustments and the absence of
footnotes thereto). The books and records of Buyer and its subsidiaries have
been, and are being, maintained in accordance with GAAP and applicable legal and
regulatory requirements.
4.07 Absence of Undisclosed Liabilities. Except as disclosed or
reflected in the Buyer Balance Sheet, any of the other financial statements
described in Section 4.06 above or in the Buyer Disclosure Schedule and except
those that have arisen in the ordinary course of the Buyer's business, neither
Buyer nor any of its subsidiaries has any obligation or liability (contingent or
otherwise), that when combined with all similar obligations and liabilities,
<PAGE>
with respect to Buyer, have had, or are reasonably likely to have, a Material
Adverse Effect.
4.08 Broker's Fees. Except as disclosed in Section 4.08 of the Buyer
Disclosure Schedule, neither Buyer nor any of its affiliates nor any of their
respective officers, directors or affiliates has employed any broker or finder
or incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated by this Agreement.
4.09 Absence of Certain Changes or Events. Since September 30, 1996,
except as set forth in Section 4.09 of the Buyer Disclosure Schedule, Buyer and
its subsidiaries have conducted their businesses in the ordinary course
consistent with past practice and neither Buyer nor any of its subsidiaries has
incurred any material liability, nor has there been any change in the assets,
business, operations, results of operations or financial condition of Buyer or
its subsidiaries, which has had, or is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Buyer.
4.10 Legal Proceedings. There is no suit, action or proceeding pending
or, to the knowledge of Buyer, threatened, against Buyer or any of its
subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement, as to which there is a reasonable probability of
an adverse determination and which, if adversely determined, would, individually
or in the aggregate, with respect to Buyer, have a Material Adverse Effect or
materially adversely affect Buyer's or Acquisition Subsidiary's ability to
perform its obligations under this Agreement or to consummate the transaction
contemplated hereby, nor is there any judgment, decree, injunction, rule or
order of any legal or administrative body or arbitrator outstanding against
Buyer or any of its subsidiaries having, or which insofar as reasonably can be
foreseen, in the future could have, any such effect.
4.11 Taxes and Tax Returns. Except as otherwise described
in Section 4.11 of the Disclosure Schedule:
(a) Buyer has timely filed all material Tax Returns that were
required to be filed by it on or prior to the date hereof (the "Buyer
Filed Tax Returns"), each Buyer Filed Tax Return has been prepared in
compliance with all applicable laws and regulations, and all Buyer
Filed Tax Returns are true and accurate in all respects material to the
financial condition of Buyer.
<PAGE>
(b) Buyer has paid all Taxes shown as being due on the Buyer
Filed Tax Returns and Buyer will not be liable for any additional Taxes
for any taxable period ending on or before the Effective Time in excess
of amounts reserved for taxes on its books of account, if any.
(c) Buyer is not a party to or bound by any Tax
indemnification, Tax allocation or Tax sharing agreement with any
Person and Buyer has no contractual obligation to indemnify any other
Person with respect to any Taxes.
(d) Buyer has not filed or been included in a combined,
consolidated or unitary income Tax Return (including any consolidated
federal income Tax Return), other than one of which the common parent
was Buyer.
(e) Buyer has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party except
where the failure to do so would not have a Material Adverse Effect on
the Buyer.
4.12 Agreements with Governmental Authorities. Neither Buyer nor any of
its subsidiaries is a party to any commitment, letter, written agreement,
memorandum of understanding or order to cease and desist with any federal or
state governmental agency or authority charged with the supervision or
regulation of banking, credit, finance or lending institutions which restricts
the conduct of its business, or in any manner relates to its capital adequacy,
credit policies or practices, management or overall safety and soundness or the
Buyer's ability to perform its obligations hereunder or to consummate the
transactions contemplated hereby.
4.13 Compliance with Applicable Laws. Buyer and its subsidiaries hold
all material licenses, franchises, permits and authorizations necessary for the
lawful conduct of their businesses as presently conducted, and Buyer and its
subsidiaries have complied with every, and are not in default under any,
applicable law, statute, order, rule, regulation or policy of, or agreement
with, any federal, state or local governmental agency or authority relating to
Buyer and its subsidiaries, other than where such default or noncompliance would
not reasonably be expected to result, with respect to Buyer, in any Material
Adverse Effect.
4.14 Labor. Neither Buyer nor any of its subsidiaries is involved in,
or, to the knowledge of Buyer, threatened with or affected by, any dispute,
<PAGE>
arbitration, lawsuit or administrative proceeding relating to labor or
employment matters. No employees of Buyer or any of its subsidiaries are
represented by any labor union, and, to the knowledge of Buyer, no labor union
is attempting to organize employees of Buyer or any of its subsidiaries.
ARTICLE V
COVENANTS OF THE PARTIES
5.01 Conduct of the Business of Company. During the period from the
date of this Agreement to the Effective Time, and except as may be required or
specifically permitted pursuant to this Agreement, Seller covenants that the
Company:
(a) shall, and shall cause each of its subsidiaries to,
conduct its business and engage in transactions only in the ordinary
course of business consistent with past practices;
(b) shall use reasonable efforts, and cause each of its
subsidiaries to use reasonable efforts, to preserve intact its business
organization and goodwill, keep available the services of its officers
and employees as a group and maintain satisfactory relationships with
borrowers, other customers and others having business relationships
with it;
(c) shall, at Buyer's request and expense, reasonably
cooperate with Buyer with respect to preparation for the acquisition
and integration of Company by Buyer, and Company shall cause its
officers and employees to confer on a regular basis with one or more
representatives of Buyer to report on operational and related matters;
(d) shall not declare or pay any dividends on or make any
other distributions in respect of any shares of Company Capital Stock,
except for (i) dividends by Company after the date hereof and prior to
the Closing Date in an aggregate amount not in excess of the sum of (A)
consolidated net income of the Company and its subsidiaries for the
period commencing on October 1, 1996 and ending on the Closing Date,
plus (B) all litigation reserves of the Company and its subsidiaries as
of the Closing Date, plus (C) all reserves for taxes (excluding
deferred taxes) of the Company and its subsidiaries as of the Closing
Date, and (ii) dividends by any wholly-owned subsidiary of Company to
Company or any other wholly-owned subsidiary of Company;
<PAGE>
(e) shall not adopt any amendments to its Articles
of Incorporation or other charter documents or by-laws;
(f) shall not issue, deliver or sell any shares (whether
original issuance or from treasury shares) of its capital stock or
securities convertible into or exercisable for shares of its capital
stock (or permit any of its subsidiaries to issue, deliver or sell any
shares of such subsidiaries' capital stock or securities convertible
into or exercisable for shares of such subsidiaries' capital stock), or
effect any stock split, reverse stock split, recapitalization,
reclassification or similar transaction or otherwise change its equity
capitalization as it exists on the date hereof;
(g) shall not, and shall not permit any of its subsidiaries
to, (i) implement any increase or improvement in base compensation,
bonuses of any kind or benefits under Company Benefit Plans, except as
contemplated by the Company/Seller Change of Control Arrangements dated
December 17, 1996 (the "Change Arrangements") and except normal merit
increases in accordance with present practices; or (ii) grant or award
any options, warrants, conversion rights or other rights not existing
on the date hereof to acquire any shares of its capital stock;
(h) shall not purchase, redeem or otherwise acquire, or permit
any of its subsidiaries to purchase, redeem or otherwise acquire, any
shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock;
(i) shall not incur, or permit any of its subsidiaries to
incur, any additional debt obligation or other obligation for borrowed
money, or guaranty, or permit any of its subsidiaries to guaranty, any
additional debt obligation or other obligation for borrowed money,
except in the ordinary course of business consistent with past
practices;
(j) shall not, and shall not permit any of its subsidiaries
to, change its methods of accounting in effect at December 31, 1995,
except as may be required by changes in GAAP as concurred in by
Seller's independent auditors, and Company shall not, and shall not
permit any of its subsidiaries to, change its fiscal year;
(k) shall not, with respect to itself or any of its
subsidiaries, authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement with
respect to, any merger, consolidation, purchase and assumption
<PAGE>
transaction or business combination (other than the Acquisition
Merger), any acquisition of a material amount of assets or securities
or assumption of liabilities or any disposition of a material amount of
assets or securities;
(l) shall not, and shall not permit any of its subsidiaries
to, take any action that is intended or would reasonably be expected to
result in (i) any of Seller's or Company's representations or
warranties contained in this Agreement being or becoming untrue in any
material respect at any time prior to the Effective Time, (ii) any of
the conditions to the obligations of the parties set forth in Article
VI not being satisfied or (iii) any violation of any of its other
agreements or commitments contained in this Agreement; and
(m) shall not, and shall not permit any of its subsidiaries
to, agree, in writing or otherwise, to take any of the actions that are
described above in this Section 5.01 as prohibited hereunder.
5.02 Conduct of the Business of Buyer. During the period from the date
of this Agreement to the Effective Time, and except as may be required or
specifically permitted pursuant to this Agreement, Buyer:
(a) shall, and shall cause each of its subsidiaries to,
conduct its business and engage in transactions only in the ordinary
course of business consistent with past practices;
(b) shall use reasonable efforts, and cause each of its
subsidiaries to use reasonable efforts, to preserve intact its business
organization and goodwill, keep available the services of its officers
and employees as a group and maintain satisfactory relationships with
borrowers, other customers and others having business relationships
with it;
(c) shall, at Seller's or Company's request and expense,
reasonably cooperate with Seller and Company with respect to
preparation for the acquisition and integration of Company by Buyer,
and Buyer shall cause its officers and employees to confer on a regular
basis with one or more representatives of Seller and Company to report
on operational and related matters;
(d) shall not declare or pay any dividends on or make any
other distributions in respect of any shares of Buyer Common Stock,
except for (i) regular quarterly cash dividends at a rate not in excess
of $.10 per share per quarter and (ii) dividends by any wholly-owned
<PAGE>
subsidiary of Buyer to Buyer or any other wholly-owned subsidiary of
Buyer;
(e) shall not amend its Certificate of Incorporation or
other charter documents or by-laws;
(f) shall not issue, deliver or sell any shares (whether
original issuance or from treasury shares) of its capital stock or
securities convertible into or exercisable for shares of its capital
stock (or permit any of its subsidiaries to issue, deliver or sell any
shares of such subsidiaries' capital stock or securities convertible
into or exercisable for shares of such subsidiaries' capital stock),
except upon exercise or fulfillment of stock options granted under the
Buyer Stock Option Plan, or effect any stock split, reverse stock
split, recapitalization, reclassification or similar transaction or
otherwise change its equity capitalization as it exists on the date
hereof;
(g) shall not, and shall not permit any of its subsidiaries
to, grant, confer or award or change any of the terms of (including
changes to or accelerations of the period for exercise thereof) any
options, warrants, conversion rights or other rights not existing on
the date hereof to acquire any shares of its capital stock, except for
the granting of options under and in accordance with the Buyer Stock
Option Plan;
(h) shall not purchase, redeem or otherwise acquire, or permit
any of its subsidiaries to purchase, redeem or otherwise acquire, any
shares of the Buyer's capital stock or any securities convertible into
or exercisable for any shares of its capital stock, if the effect of
such purchase, redemption or acquisition shall be to cause Seller and
its affiliates to own more than 20% of the outstanding Buyer Common
Stock on the Closing Date;
(i) shall not, and shall not permit any of its subsidiaries
to, change its methods of accounting in effect at December 31, 1995,
except to the extent set forth in the notes to the Buyer Balance Sheet
and as may be required by changes in GAAP as concurred in by Buyer's
independent auditors, and Buyer shall not, and shall not permit any of
its subsidiaries to, change its fiscal year;
(j) shall not, with respect to itself or any of its
subsidiaries, authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement with
respect to, any merger, consolidation, purchase and assumption
<PAGE>
transaction or business combination (other than the Acquisition
Merger), any acquisition of a material amount of assets or securities
or assumption of liabilities or any disposition of a material amount of
assets or securities;
(k) shall not, and shall not permit any of its subsidiaries
to, take any action that is intended or would reasonably be expected to
result in (i) any of Buyer's representations or warranties contained in
this Agreement being or becoming untrue in any material respect at any
time prior to the Effective Time, (ii) any of the conditions to the
obligations of the parties set forth in Article VI not being satisfied
or (iii) any violation of any of its other agreements or commitments
contained in this Agreement; and
(l) shall not, and shall not permit any of its subsidiaries
to, agree, in writing or otherwise, to take any of the actions that are
described above in this Section 5.02 as prohibited hereunder.
5.03 Access to Properties and Records; Confidentiality.
(a) Each of Company and Buyer shall permit the other parties
hereto reasonable access to its properties and those of its
subsidiaries during normal business hours and at other reasonable
times, and each of Company and Buyer shall make available to the other
parties all Records, including all books, papers and records relating
to its and its subsidiaries assets, stock ownership, properties,
operations, obligations and liabilities, including, but not limited to,
all books of account (including the general ledger), tax records,
minute books of directors and stockholders meetings, organizational
documents, by-laws, material contracts and agreements, filings with any
regulatory authorities, accountants' work papers, litigation files,
plans affecting employees, and any other business activities or
prospects in which the other parties may reasonably have an interest in
light of the transactions contemplated hereby, and each of Company and
Buyer shall provide to the other party such financial and other
information as the other party may reasonably request and in which such
other party may reasonably have an interest in light of the
transactions contemplated hereby and/or the relationships between the
parties hereto. Company and Buyer shall, upon the request of the other
parties, use reasonable efforts to make arrangements with each third
party provider of services to Company or Buyer or their respective
subsidiaries, as the case may be, to permit the other parties
reasonable access to all Records held by each such third party. Neither
<PAGE>
Buyer nor Company shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice
the rights of any customer, would jeopardize the attorney-client
privilege of the institution in possession or control of such
information, or would contravene any law, rule, regulation, order,
judgment, decree or binding agreement. The parties will use reasonable
efforts to make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence
apply.
(b) All Confidential Information, as such term is defined
further below, furnished by each party hereto to the other or to any of
its affiliates or to any of its or any of its affiliates' directors,
officers, employees, representatives or agents (such persons being
referred to herein as "Representatives"), shall be treated as the sole
property of the party furnishing the information, and the party
receiving the information or any of its affiliates or Representatives,
as the case may be, shall keep confidential all such information, and
shall not directly or indirectly at any time use such information for
any competitive or other commercial purpose or otherwise to the
detriment of the party furnishing such information and, if the
transactions contemplated hereby shall not occur, shall, upon request,
return to the party which furnished such information all documents or
other materials containing, reflecting or referring to such
information, provided, however, that the parties hereto and their
respective affiliates shall be permitted to retain and share with their
regulators, examiners and auditors (who need to know such information
and are informed of the confidential nature thereof and directed to
treat such information confidentially) such materials, files and
information relating to or constituting such party's or any of its
affiliates' or Representatives' work product, presentations or
evaluation materials as such party reasonably deems necessary or
advisable in connection with auditing or examination purposes. The
obligation to keep such information confidential shall continue forever
except as otherwise expressly set forth herein. In the event that
either party or any of its affiliates or Representatives is requested
or required in the context of a litigation, governmental, judicial or
regulatory investigation or other similar proceeding (by oral
questions, interrogatories, requests for information or documents,
subpoenas, civil investigative demands or similar process) to disclose
any Confidential Information, the party or its affiliate or its
Representative so requested or required will, promptly and if
<PAGE>
practicable and legally permitted, prior to providing such information,
provide the other party with notice of each such request or requirement
so that the other party may seek an appropriate protective order or
other remedy or, if appropriate, waive compliance with the provisions
of this Agreement. If, in the absence of a protective order or the
receipt of a waiver hereunder, the party or affiliate or Representative
so requested or required is, in the written opinion of its counsel,
legally required to so disclose Confidential Information to any
tribunal, governmental or regulatory authority, or similar body, the
party or affiliate or Representative so required may disclose that
portion of the Confidential Information which it is advised in writing
by such counsel it is legally required to so disclose to such tribunal
or authority or similar body without liability to the other party
hereto for such disclosure. The parties and their affiliates and
Representatives will exercise reasonable efforts, at the expense of the
party who disclosed such Confidential Information to the other party,
to obtain assurance that confidential treatment will be accorded the
information so disclosed.
As used in this Section 5.03(b), "Confidential Information"
means all data, reports, interpretations, forecasts and records
(whether in written form, electronically stored or otherwise)
containing or otherwise reflecting information concerning the
disclosing party or its affiliates which is not available to the
general public and which the disclosing party or any affiliate or any
of their respective Representatives provides or has previously provided
to the receiving party or to the receiving party's affiliates or
Representatives at any time in connection with the transactions
contemplated by this Agreement, including but not limited to, any
information obtained by meeting with Representatives of the disclosing
party or its affiliates, together with summaries, analyses, extracts,
compilations, studies, personal notes or other documents or records,
whether prepared by the receiving party or others, which contain or
otherwise reflect such information. Notwithstanding the foregoing, the
following information will not constitute "Confidential Information":
(i) information that is or becomes generally available to the public
other than as a result of a disclosure by the receiving party or any
affiliate or Representative of the receiving party, (ii) information
that was previously known to the receiving party or its affiliates or
Representatives on a nonconfidential basis prior to its disclosure by
the disclosing party, its affiliates or Representatives, (iii)
information that became or becomes available to the receiving party or
any affiliate or Representative thereof on a nonconfidential basis from
<PAGE>
a source other than the disclosing party or any affiliate or
Representatives of the disclosing party, provided that such source is
not known by the disclosing party or its affiliates or Representatives
to be subject to any confidentiality agreement or other legal
restriction on disclosing such information or (iv) information that has
been independently acquired or developed by the receiving party or its
affiliates or Representatives without violating the terms of this
Section 5.03(b).
5.04 Consents. Each of the parties hereto will cooperate with the other
and use all reasonable efforts to prepare all documentation, to effect all
filings and to obtain all permits, consents, approvals and authorizations of
governmental agencies and authorities and nongovernmental third parties, which
are necessary or appropriate to consummate the transactions contemplated by this
Agreement.
5.05 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to, as
promptly as practicable, take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations, including, without limitation, the making of the
regulatory filings referred to in Sections 3.04 and 4.04 hereof, to consummate
and make effective the transactions contemplated by this Agreement; provided
that neither Buyer nor any subsidiary of Buyer shall have any obligation under
any circumstance to sell any business or discontinue any lines of business to
enable Seller to obtain any regulatory approval to consummate the transactions
contemplated hereunder. 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 Buyer, the Company and Seller shall take
all such necessary action.
5.06 Disclosure Supplements. From time to time prior to the Effective
Time, and in any event on the Closing Date prior to the Effective Time, each
party will promptly give notice to the other party of any matter hereafter
arising which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described by such party in its
Disclosure Schedule or which is necessary to correct any information provided in
the Disclosure Schedule or any representation or warranty of such party which
has become inaccurate; such notice shall not be deemed to supplement or amend
such party's Disclosure Schedule.
<PAGE>
5.07 Public Announcements. Upon execution of this Agreement by each of
the parties hereto, Seller and Buyer shall issue a joint news release regarding
such execution and regarding the transactions contemplated hereby. Such news
release shall be in form mutually acceptable to both Buyer and Seller. Except as
otherwise required by law or the rules of the NYSE, Seller and Buyer will
cooperate with each other in the development and distribution of any other news
releases or other public information disclosures with respect to this Agreement
or any of the terms hereof or any of the transactions contemplated hereby.
5.08. Employment; Employee Benefits.
(a) Post-Closing Date Employment. The Company will continue to
offer employment at sufferance to all of the Company Employees who are
at work on the Closing Date, including those Company Employees on
vacation, absent due to a sick or personal day, family leave or
workers' compensation claim, but not Company Employees who at the
Closing Date are on a leave of absence and are not expected to be
reinstated. Each Company Employee's salary (or rate of pay) shall be at
least as great as his/her salary (or rate of pay) immediately prior to
the Closing Date, and the location of the employment shall be within a
twenty-five mile radius of the location where the Company Employee is
employed immediately prior to the Closing Date. The Company shall have
no obligation to employ any Company Employee for any specific term
after the Closing Date, provided that the Buyer agrees that, for a
period of 60 days after the Closing Date, it will not cause any of the
Company Employees to suffer "employment loss" for purposes of the
Worker Adjustment and Retraining Notification Act and related
regulations (the "WARN Act") if such employment loss could create any
liability for the Seller unless the Buyer or the Company delivers
notices under the WARN Act in such a manner and at such time that the
Seller bears no liability with respect thereto.
(b) Benefits After the Closing Date. For a period of two years
after the Closing Date, the Buyer will cause the Company to provide
benefits in the aggregate substantially equivalent to the benefits
under the Company Benefit Plans maintained by the Company before the
Closing Date. The Buyer will waive any exclusion for an existing
condition and any waiting period under any health plan extended to the
Company Employees and will treat the service of Company Employees with
the Company as service rendered to the Buyer for purposes of
eligibility to participate, vesting and for other appropriate benefits,
but not for benefit accrual or benefit payment, under any pension
<PAGE>
benefit plan or welfare benefit plan of the Buyer extended to Company
Employees.
(c) Benefits Before the Closing Date. Before the Closing Date,
the Seller will accelerate vesting in all outstanding stock options
granted to Company Employees. Effective as of the Closing Date, the
Seller will cause all outstanding restricted stock awarded to Company
Employees to become free of all restrictions. After the Closing Date,
the Buyer will cause the Company to pay to eligible Company Employees
amounts payable under the Change Arrangements in accordance with their
terms; provided, that such amounts referred to in Section
2.06(a)(ii)(A) and (a)(ii)(B), shall be accrued on the Measurement Date
Balance Sheet and the Closing Date Balance Sheet. Effective as of the
Closing Date, Company Employees will cease to be active participants in
the Company Benefit Plans that are not Transferred Company Benefit
Plans, and Seller will retain all liabilities with respect to such
plans (other than Transferred Company Benefit Plans). Effective as of
the Closing Date, only Company Employees will be active participants in
the Transferred Company Benefit Plans.
5.09 Board of Directors of Buyer. So long as Seller shall hold
(directly or indirectly) at least 10% of the issued and outstanding shares of
Buyer Common Stock, Seller shall be entitled to designate at least two, and in
any event not less than a proportional number (based upon the percentage of the
issued and outstanding shares of Buyer Common Stock held (directly or
indirectly) by Seller), of the members of the Board of Directors of Buyer. So
long as Seller shall hold (directly or indirectly) less than 10% but at least 5%
of the issued and outstanding shares of Buyer Common Stock, Seller shall be
entitled to designate one member of the Board of Directors. All persons to be so
designated by the Seller shall be subject to the approval of the Buyer (which
approval shall not be unreasonably withheld); provided, that Buyer hereby
approves Peter J. Manning and David K. McKown. As soon as practicable after the
Effective Time, Seller's designees shall become members of the Board of
Directors of Buyer and the Board of Directors of Buyer shall be expanded to the
extent necessary to permit such designees to become members of the Board of
Directors of Buyer. From and after the date that Seller's designees become
members of the Board of Directors of Buyer, such designees shall continue to be
members of the Board of Directors of Buyer; provided, however, that Seller may
change any of its designees at any time and any new designee shall replace the
<PAGE>
applicable existing designee as a member of the Board of Directors of Buyer as
soon as practicable after Buyer receives notice of such change. For purposes of
this Section 5.09, any such new designee shall, for all purposes, be treated as
if he or she were an initial designee of Seller hereunder. From and after the
date that Seller's designees become members of the Board of Directors of Buyer,
at least one such designee shall be a member of each of the Executive Committee
and the Audit Committee of such Board. Seller's rights and Buyer's obligations
under this Section 5.09 shall terminate in the event that Seller shall at any
time after the Effective Time (directly or indirectly) hold less than five
percent of the issued and outstanding shares of Buyer Common Stock. None of
Seller's rights under this Section 5.09 shall be assignable to any other Person,
including, without limitation, to any transferee of Voting Stock in connection
with any sale or transfer of such Voting Stock pursuant to Section 5.19 thereof.
For purposes of this Section 5.09, neither Seller nor any affiliate owning Buyer
Common Stock shall be deemed to own Buyer Common Stock to the extent that such
Buyer Common Stock is subject to an arrangement for the issuance of any debt,
equity or other securities that are convertible into (whether mandatory or
optional), or payable in shares of such Buyer Common Stock.
5.10 Tax Treatment. The parties intend that the Acquisition Merger
constitute a "reorganization" within the meaning of Section 368(a) of the Code
and that each of Buyer, Acquisition Subsidiary and the Company are parties to
such a reorganization within the meaning of Section 368(b) of the Code. Each of
the parties hereto agrees to report the Acquisition Merger and related
transactions consistent with said intention and further agrees not to take any
action which, on the basis of the Code, applicable Treasury Regulations and
relevant rulings and procedures issued thereunder, all as in effect from time to
time, would cause the Acquisition Merger to fail to qualify as a reorganization.
5.11 Agreement Not to Compete. Upon the consummation of the
transactions contemplated hereby and until the later of (i) five years from the
Closing Date or (ii) two years from the date a designee of Seller no longer
serves on the Board of Directors of the Buyer, neither Seller nor any of its
subsidiaries or affiliates shall compete anywhere in the United States with
Buyer, its subsidiaries or affiliates in the business of financing or purchasing
retail installment contracts from automobile dealers relating to the sale of
used automobiles to consumers whereby the annual percentage rate paid by the
consumer exceeds the higher of (x) 18% and (y) the "base rate" of The First
National Bank of Boston at such time plus 8% (the "Sub-Prime Auto Business");
provided, however, that this Section 5.11 shall not prohibit Seller or any of
its subsidiaries or affiliates from owning and operating a Sub-Prime Auto
<PAGE>
Business as a result of Changed Circumstances (as defined below) so long as, to
the extent that such Sub-Prime Auto Business includes originations of loans or
acquisitions of retail installment contracts exceeding $100 million in the
aggregate on an annual basis, Seller or such subsidiary or affiliate sells or
otherwise disposes of such Sub-Prime Auto Business within 12 months after the
date of acquisition thereof. In the event that the Seller or any of its
subsidiaries or affiliates shall not sell or otherwise dispose of any such
Sub-Prime Auto Business in accordance with the immediately preceding sentence,
then Seller shall have no rights under Section 5.09 hereof until such sale or
other disposition has been completed. For purposes hereof, the term "Changed
Circumstances" shall mean (i) any acquisition of Seller or any subsidiary or
affiliate of Seller by a previously unaffiliated Person, (ii) any acquisition by
Seller or any subsidiary or affiliate of Seller of a previously unaffiliated
Person or (iii) any merger, consolidation or other business combination between
Seller or any subsidiary or affiliate of Seller and a previously unaffiliated
Person and, in the case of clauses (ii) and (iii)) above, the acquisition of the
Sub-Prime Auto Business is incidental to the contemplated transaction.
5.12 Delivery of Audited Financial Statements. As soon as they are
available but in any event not later than 45 days after the date hereof, Company
shall deliver to Buyer audited financial statements prepared in accordance with
the rules and regulations of the SEC for the Company's fiscal years 1994, 1995
and 1996, together with an unqualified report of Company's auditors and an
auditor's consent for the inclusion of their report in any registration
statement to be filed by Buyer with the SEC under the Securities Act
(collectively, the "Audited Financial Statements"). Seller and the Company shall
use reasonable efforts to cooperate with Buyer in connection with any such
filing and to assist Buyer in responding to any comments by the SEC relating to
such financial statements or in the preparation of pro forma financial
statements necessary to be included in such registration statement. Company
shall use all reasonable efforts to cooperate with Buyer to provide the Buyer
with any other information required to make any filings with the SEC.
5.13 Exclusivity. Neither Seller nor any affiliate or representative of
Seller will (i) solicit, initiate or encourage the submission of any proposal or
offer from any Person relating to the acquisition of any capital stock or other
voting securities, or any substantial portion of the assets, of the Company
(including any acquisition structured as a merger, consolidation or share
exchange), or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
<PAGE>
foregoing. Seller will notify the Buyer as soon as practicable after any Person
makes any proposal, offer or a bona fide inquiry with respect to any of the
foregoing.
5.14 Bank Regulation. From and after the Closing Date, neither Seller
nor any of its affiliates will enter into any agreement with any regulatory
authority which would require the Buyer or any subsidiary of Buyer to cease
conducting any business or activity then being conducted by such Person.
5.15 Limitation on Ownership of Capital Stock.
(a) Except as provided in this Agreement or unless Buyer
otherwise agrees in writing, Seller shall not and shall not permit any
affiliate of Seller to (i) directly or indirectly acquire beneficial
ownership of any shares of any class of capital stock of Buyer or other
securities of Buyer which are entitled to vote generally in the
elections of directors ("Voting Stock"), any securities convertible
into or exchangeable for Voting Stock, or any other right to acquire
Voting Stock (except, in any case, by way of stock dividends or other
distributions or offerings made available to holders of any Voting
Stock generally) or (ii) authorize or make a tender, exchange or other
offer for any Voting Stock. In the event that at any time the Voting
Stock of Buyer held by Seller and its affiliates shall exceed 20% of
the outstanding Voting Stock of Buyer, then, at the request of Buyer,
Seller shall sell, or shall cause its affiliates to sell, Voting Stock
pursuant to Section 5.20(a) hereof in order to reduce Seller's and its
affiliates' ownership of Voting Stock below 20% of the then outstanding
Voting Stock as soon as practicable after receiving such request from
Buyer; provided that the limitation in the first sentence of Section
5.20(a) precluding any sale of Voting Stock within a period of one year
after the date hereof shall not apply to any such sale so long as such
sale complies with other provisions of Section 5.20(a). Notwithstanding
the foregoing, in the event that Seller shall reasonably determine that
it is necessary or advisable to acquire additional share of Voting
Stock for purposes of obtaining "Equity Accounting" treatment for
Seller's ownership interest in Buyer, Seller shall advise management of
the Buyer of Seller's plans to acquire additional shares of Voting
Stock, and, thereafter, Seller and/or its affiliates may acquire
additional Voting Stock so long as such acquisition would not result in
Seller and its affiliates owning more than 20% of the Voting Stock then
outstanding. All of Seller's purchases of Buyer Voting Stock shall be
in compliance with applicable laws and regulations. All of the shares
<PAGE>
of Voting Stock so acquired shall become subject to the provisions of
Sections 5.16 through 5.23 hereof..
(b) Notwithstanding the limitations contained in Section
5.15(a), if (i) Buyer's Board of Directors determines to sell the Buyer
and to seek offers to purchase the Buyer pursuant to established
procedures, Seller may submit a proposal to Buyer's Board of Directors
to acquire Buyer provided that such proposal must be submitted in
accordance with the procedures established by Buyer's Board of
Directors in connection with its determination to effect such a sale or
(ii) Buyer's Board of Directors approves a transaction for the
acquisition by a Person or Persons of Voting Stock representing 50% or
more of the combined voting power of the then outstanding Voting Stock,
Seller may seek to acquire Voting Stock on terms and conditions no less
favorable to Buyer's stockholders than the terms and conditions
provided for in such transaction.
5.16 Voting. Seller and its affiliates shall take such actions as may
be required so that all shares of Voting Stock owned by Seller and its
affiliates are voted for nominees to the Board of Directors of Buyer in
accordance with the recommendation of the Board of Directors consistent with the
provisions of Section 5.09 hereof. Unless Buyer otherwise consents in writing,
Seller and its affiliates shall take such actions as may be required so that all
shares of Voting Stock owned by Seller and its affiliates are voted in
accordance with the recommendation of the Board of Directors on all other
matters to be voted on by holders of Voting Stock. Seller and/or its affiliates,
as the holder(s) of shares of Voting Stock, shall be present, in person or by
proxy, at all meetings of shareholders of Buyer so that all shares of Voting
Stock beneficially owned by Seller and its affiliates may be counted for the
purposes of determining the presence of a quorum at such meetings.
5.17 Voting Trust, etc. Neither Seller nor any affiliates of the Seller
shall deposit any shares of Voting Stock in a voting trust or, except as
otherwise provided herein, subject any Voting Stock to any arrangement or
agreement with respect to the voting of such Voting Stock.
5.18 Solicitation of Proxies and Proposals. Without Buyer's prior
written consent, Seller shall not, directly or indirectly, and shall cause each
of its affiliates and any other Person acting on its behalf not to (a) solicit
proxies with respect to any Voting Stock, become a "participant" in any
"election contest" (as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act relating to the election of directors of Buyer), seek to
<PAGE>
advise, encourage or influence any Person with respect to the voting of any
Voting Stock, initiate, propose or otherwise solicit stockholders of Buyer for
the approval of one or more stockholder proposals or induce or attempt to induce
any other Person to initiate any stockholder proposal; provided, however, that
Seller shall not be deemed to be a "participant" by reason of the membership on
Buyer's Board of Directors of any member designated by Seller as permitted by
Section 5.09 hereof; or (b) make any proposal, whether written or oral, to the
Board of Directors of Buyer, any director or officer of Buyer, or make any
public announcement concerning such a proposal, with respect to a tender offer
for any Voting Stock, a merger or other similar business combination, sale or
transfer of all or substantially all of the assets, liquidation or other
extraordinary corporate transactions, in each case, involving Buyer, or seek to
affect or influence control of the Board of Directors of Buyer or make any
public statement with respect thereto; provided, further, that nothing in this
Section 5.18 or any other provision hereof shall prohibit or limit in any manner
(i) the ability of any designee on the Board of Directors of Buyer to perform
his or her duties as a member of such Board as such designee shall, in his or
her sole discretion, deem necessary or appropriate, or (ii) the ability of
Seller and its affiliates to communicate with Seller's designees on the Board of
Directors of Buyer.
5.19 Acts in Concert with Others. Except as otherwise contemplated
hereby, Seller shall not join a partnership, limited partnership, syndicate or
other group, or otherwise act in concert with any third person, for the purpose
of acquiring or holding Voting Stock.
5.20 Restrictions on Transfer of Voting Stock.
(a) Except as provided in Section 5.15(a) hereof, Seller and
its affiliates shall not, without the prior written consent of Buyer,
directly or indirectly, sell or transfer any Voting Stock for a period
of one year after the Closing Date. After the first anniversary of the
Closing Date, subject to Section 5.21 hereof, Seller and its affiliates
may sell or transfer Voting Stock (i) pursuant to a public offering so
long as (A) the investment banker(s) and managing underwriter(s)
administering such offering are mutually acceptable to Buyer and Seller
and (B) such investment banker(s) and managing underwriter(s) agree to
use reasonable efforts to effect a broad distribution of the Voting
Stock being sold in such offering, and (ii) pursuant to Rule 144 or
other transactions (other than public offerings) so long as (A) the
Seller provides Buyer with a letter from its investment banker or
underwriter stating that a public offering would be impracticable or
<PAGE>
inadvisable to proceed at such time, (B) such sale or transfer would
not result in any Person or group owning or having the right to acquire
Voting Stock with aggregate voting power of 10% or more of the combined
voting power of Voting Stock then outstanding, and (C) if such sale or
transfer would result in any Person or group owning or having the right
to acquire voting Stock with aggregate Voting power of 5% or more of
the combined voting power of Voting Stock then outstanding, the
transferee that would own such amount agrees in writing to hold such
Voting Stock subject to all of the provisions of this Agreement,
including, without limitation, this Section 5.20(a). In the case of a
transfer of Voting Stock pursuant to clause (i) above, the Voting Stock
being transferred will, after transfer, be free of all restrictions
under this Agreement. In the case of a transfer of Voting Shares
pursuant to clause (ii) above to a person or group which, after such
transfer, would not own or have the right to acquire Voting Stock with
aggregate voting power of 5% or more of the Voting Stock combined
voting power of Voting Stock then outstanding, the Voting Stock being
transferred will, after transfer, be free of all restrictions under
this Agreement.
(b) Notwithstanding anything herein to the contrary, Seller
and its affiliates may sell or transfer Voting Stock in the following
cases: (i) to Buyer or any Person or group approved in writing by
Buyer, or (ii) to a Person 80% or more of the combined voting power of
all voting securities of which are owned, directly or indirectly, by
Seller, (a "Controlled Corporation"), so long as such Controlled
Corporation agrees to hold such Voting Stock subject to all the
provisions of this Agreement, including this Section 5.20, and agrees
to transfer such Voting Stock to Seller or another Controlled
Corporation of Seller if it ceases to be a Controlled Corporation of
Seller, or (iii) in response to an offer to purchase or exchange for
cash or other consideration any Voting Stock (a) which is made by or on
behalf of Buyer, or (b) which is made by another Person or group and is
not opposed by the Board of Directors of Buyer within the time such
Board is required, pursuant to regulations under the Exchange Act, to
advise Buyer's stockholders of such Board's position on such offer, or
(iv) pursuant to a bona fide pledge of such Voting Stock to an
institutional lender to secure a loan, guarantee or other financial
support, provided that such lender agrees to hold such Voting Stock
subject to all provisions of this Agreement and any sale or disposition
by such lender of such pledged Voting Stock shall be subject to the
limitations of this Section 5.20, or (v) in the event of a merger or
consolidation of Buyer or pursuant to a plan of liquidation of Buyer or
<PAGE>
(vi) in the event that Seller and/or its affiliates are required by the
Federal Reserve Board or applicable law or regulation to sell all or
any portion of the Voting Stock prior to the first anniversary of the
Closing Date, then Seller and/or its affiliates shall be permitted to
sell such shares of Voting Stock in accordance with Section 5.20(a)
prior to the first anniversary date of the Closing Date.
5.21 Right of First Purchase. Prior to Seller and/or its affiliates
making any sale or transfer of Voting Stock of Buyer permitted under Section
5.20(a), Buyer shall be entitled to purchase such Voting Stock in the following
manner:
(a) Seller and/or its affiliates owning Buyer Common Stock
shall give notice (the "Transfer Notice") to Buyer in writing of its
desire to sell or transfer Voting Stock specifying the amount of Voting
Stock proposed to be sold or transferred.
(b) Buyer shall have the right, exercisable by giving written
notice (the "Purchase Notice") to Seller and/or such affiliate within
30 calendar days after receipt of such Transfer Notice to purchase all
but not less than all (unless otherwise mutually agreed by Buyer and
Seller and/or such affiliate) of the amount of Voting Stock specified
in such Transfer Notice for cash in an amount per share equal to 97% of
the average closing price of Buyer Common Stock for the 10 consecutive
trading day period immediately preceding the date of the Buyer's
Purchase Notice. If Buyer exercises its right of first purchase, within
30 days after receipt by Buyer of the Transfer Notice, Buyer shall
deliver to Seller evidence reasonably satisfactory to Seller and/or its
affiliate (by written commitment letter subject only to customary
representations, diligence and documentation or otherwise) of Buyer's
ability to finance such repurchase.
(c) If Buyer exercises its right of first purchase hereunder,
the closing of the purchase of the applicable Voting Stock shall take
place within 60 calendar days after the date of receipt by Buyer of the
Transfer Notice, which period of time shall be extended to the extent
necessary to comply with applicable securities laws and regulations.
Upon exercise by Buyer of its right of first purchase in accordance
with the terms hereof, Buyer and Seller and/or its affiliate shall be
legally obligated to consummate the purchase contemplated thereby and
shall use all reasonable best efforts to secure any approvals required
in connection therewith.
<PAGE>
(d) If Buyer does not exercise its right of first purchase
hereunder within the time specified for such exercise, Seller shall be
free, during the period of 90 calendar days following the expiration of
the time for exercise of Buyer's right of first purchase (or, in the
case of a registered public offering, such longer period of time as the
underwriter may reasonably determine is required to effect such
offering), to sell the amount of Voting Stock specified in such
Transfer Notice in accordance with the provisions set forth in Section
5.20 hereof; provided, that Seller may sell such Voting Stock at such
price and on such terms as Seller, in its sole discretion, may deem
appropriate.
(e) In the event that Buyer elects to exercise a right of
first purchase under this Section 5.21, Buyer may specify prior to
closing such purchase another Person as its designee to purchase such
Voting Stock. If Buyer shall designate another person as the purchaser
pursuant to this Section 5.21, the giving of the Purchase Notice by
Buyer shall constitute a legally binding obligation of Buyer to
complete such purchase if such person shall fail to do so.
5.22 Fiduciary Capacity. Notwithstanding anything herein to the
contrary, Sections 5.15 through 5.21 hereof shall not apply to any Voting Stock
of Buyer held by Seller or any of its affiliates as trustee or in any other
fiduciary capacity for the benefit of an unaffiliated third party.
5.23 Expiration of Provisions. Upon Seller and all of its affiliates
owning Voting Stock having less than 3% of the combined voting power of all
Voting Stock then outstanding, the obligations of Seller under Sections 5.15
through 5.21 hereof shall terminate and be of no further effect.
5.24 Tax Disaffiliation Agreement. Buyer and Seller covenant and agree
that they shall comply in all material respects with the terms and provisions
of the Tax Disaffiliation Agreement.
ARTICLE VI
CLOSING CONDITIONS
6.01 Conditions to Each Party's Obligations. The respective obligations
of each party to effect the Acquisition Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions, none
of which may be waived, except as provided for below:
(a) Governmental Consents. All authorizations, consents,
orders or approvals of, declarations or filings with or notices to, and
<PAGE>
all expirations of waiting periods imposed by, any governmental or
regulatory authority or agency, which are necessary for the
consummation of the Acquisition Merger, shall have been filed, occurred
or obtained (all such authorizations, orders, declarations, approvals,
filings, notices and consents and the lapse of all such waiting periods
being referred to as the "Requisite Regulatory Approvals"), and all
such Requisite Regulatory Approvals shall be in full force and effect.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
(an "Injunction") preventing the consummation of the Acquisition Merger
shall be in effect.
6.02 Conditions to the Obligations of Buyer. The obligations of Buyer
to effect the Acquisition Merger shall be further subject to the satisfaction or
waiver by Buyer, at or prior to the Effective Time, of the following conditions:
(a) Absence of Material Adverse Changes. There shall not have
occurred any change in the assets, business, operations, results of
operations or financial condition of Company or any of its subsidiaries
which has had, or is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Company.
(b) Representations and Warranties; Performance of
Obligations. The obligations of Company and Seller required to be
performed by each of them at or prior to the Closing pursuant to the
terms of this Agreement shall have been duly performed and complied
with in all material respects and the representations and warranties of
Company and Seller contained in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
as of the Effective Time as though made at and as of the Effective Time
(except as otherwise specifically contemplated by this Agreement and
except as to any representation or warranty which specifically relates
to an earlier date) and Buyer shall have received a certificate to that
effect signed by an authorized officer of each of Seller and of
Company.
(c) Third-Party Approvals. Any and all permits, consents,
waivers, clearances, approvals and authorizations of or notices to any
nongovernmental and nonregulatory third parties which are disclosed in
<PAGE>
Section 3.04 of the Company Disclosure Schedule shall have been
received, obtained or made and shall be in full force and effect.
(d) Registration Rights Agreements. The Registration Rights
Agreement shall have been duly executed and delivered by each party
thereto and shall be in full force and effect as of the Effective Time.
(e) Tax Disaffiliation Agreement. The Tax Disaffiliation
Agreement shall have been duly executed and delivered by each party
thereto and shall be in full force and effect as of the Effective Time.
(f) Stockholder Approval. In the event a vote of the
shareholder of Buyer is required under the rules of the NYSE to permit
the issuance of Buyer Common Stock to Seller, the shareholders of Buyer
shall have approved the transactions contemplated hereunder.
(g) Bank Regulation. Immediately following the Closing, Buyer
shall not, by virtue of Seller's ownership of Buyer Common Stock or
Seller's right to designate directors to the Board of the Buyer, be
subject to any regulations applicable to banks or bank holding
companies which would require the Buyer or any of its affiliates to
cease conducting any business or activity then being conducted by such
Person or to take or omit to take any action which act or omission
would be adverse to the business of Buyer.
(h) Audited Financial Statements. The Audited
Financial Statements shall have been delivered to Buyer.
In addition to the foregoing, Seller and Company will furnish
Buyer with such additional certificates, instruments or other documents
in the name or on behalf of Seller and Company, executed by appropriate
officers or others, including, without limitation, certificates or
correspondence of governmental agencies or authorities or
nongovernmental third parties, to evidence fulfillment of the
conditions set forth in this Section 6.02 as Buyer may reasonably
request.
Notwithstanding anything herein to the contrary, in the event
that the conditions to the Buyer's obligation to effect the Acquisition
Merger set forth in Section 6.02(a) and/or (b) hereof shall not be
satisfied and the Buyer shall determine not to effect the Acquisition
Merger pursuant to such Section 6.02(a) and/or (b), then Buyer shall
<PAGE>
notify Seller immediately upon making such determination and Seller
shall have 30 days from the date of receipt of such notice to cure the
event causing such condition(s) not to be satisfied and any adverse
consequences resulting from such event.
6.03 Conditions to the Obligations of Company. The obligations of
Seller and Company to effect the Acquisition Merger shall be further subject to
the satisfaction or waiver by Seller and Company, at or prior to the Effective
Time, of the following conditions:
(a) Absence of Material Adverse Changes. There shall not have
occurred any change in the assets, business, operations, results of
operations or financial condition of Buyer or any of its subsidiaries
which has had, or is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Buyer.
(b) Representations and Warranties; Performance of
Obligations. The obligations of Buyer required to be performed by it at
or prior to the Closing pursuant to the terms of this Agreement shall
have been duly performed and complied with in all material respects and
the representations and warranties of Buyer contained in this Agreement
shall be true and correct in all material respects as of the date of
this Agreement and as of the Effective Time as though made at and as of
the Effective Time (except as otherwise specifically contemplated by
this Agreement and except as to any representation or warranty which
specifically relates to an earlier date) and Seller and Company shall
have received a certificate to that effect signed by an authorized
officer of Buyer.
(c) Third-Party Approvals. Any and all permits, consents,
waivers, clearances, approvals and authorizations of or notices to any
nongovernmental and nonregulatory third parties which are set forth in
Section 4.04 hereto shall have been received, obtained or made and
shall be in full force and effect.
(d) Intercompany Debt. All indebtedness owing from Company or
any of its subsidiaries to Seller and/or any of its affiliates (other
than Company and its subsidiaries) shall have been repaid or prepaid in
full in immediately available funds.
(e) Registration Rights Agreements. The Registration
Rights Agreement shall have been duly executed and delivered by each
party thereto and shall be in full force and effect as of the
Effective Time.
<PAGE>
(f) Tax Disaffiliation Agreement. The Tax Disaffiliation
Agreement shall have been duly executed and delivered by each party
thereto and shall be in full force and effect as of the Effective Time.
(g) Federal Tax Opinion. Seller shall have received an opinion
of its counsel, Bingham, Dana & Gould LLP, in form and substance
reasonably satisfactory to Seller, dated as of the Effective Time,
substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, the
Acquisition Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368 of the Code and
addressing such other tax consequences as Seller may request and are
customary in transactions of a like character. In rendering such
opinion, counsel may require and rely upon representations contained in
certificates of Seller, Buyer, the Company, Acquisition Subsidiary and
others.
In addition to the foregoing, Buyer will furnish Seller and Company
with such additional certificates, instruments or other documents in the name or
on behalf of Buyer, executed by appropriate officers or others, including
without limitation certificates or correspondence of governmental agencies or
authorities or nongovernmental third parties, to evidence fulfillment of the
conditions set forth in this Section 6.03 as Seller or Company may reasonably
request.
Notwithstanding anything herein to the contrary, in the event the
conditions to the Seller's obligation to effect the Acquisition Merger set forth
in Section 6.03(a) and/or (b) hereof shall not be satisfied and the Seller shall
determine not to effect the Acquisition Merger pursuant to such Section 6.03(a)
and/or(b), then Seller shall notify Buyer immediately upon making such
determination and Buyer shall have 30 days from the date of receipt of such
notice to cure the event causing such condition(s) not to be satisfied and any
adverse results of such event.
ARTICLE VII
CLOSING
7.01 Time and Place. Subject to the provisions of Articles VI and VIII
hereof, the Closing of the transactions contemplated hereby shall take place at
the Boston, Massachusetts offices of Bingham, Dana & Gould at 10:00 A.M., local
time, on the first business day after the date on which all of the conditions
contained in Article VI are satisfied or waived; or at such other place, at such
<PAGE>
other time, or on such other date as Seller and Buyer may mutually agree upon
for the Closing to take place. The parties intend for the Closing to occur as
soon as practicable after the date hereof.
7.02 Deliveries at the Closing. Subject to the provisions of Articles
VI and VIII hereof, at the Closing there shall be delivered to Seller, Company
and Buyer, the opinions, certificates, and other documents and instruments
required to be delivered under Article VI hereof.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated at any time prior to
the Effective Time in accordance with the following provisions:
(a) by mutual written consent of Seller and Buyer authorized
by their respective Boards of Directors;
(b) by Seller or Buyer if the Effective Time shall not have
occurred on or prior to September 30, 1997 (the "Termination Date") or
such later date as shall have been agreed to in writing by Buyer and
Seller, 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 in any material respect the covenants and
agreements of such party set forth herein;
(c) by Buyer or Seller (i) thirty days after the date on which
any request or application for a Requisite Regulatory Approval shall
have been denied, unless within the thirty day period following such
denial a petition for rehearing or an amended application has been
filed with such governmental regulatory authority or agency; provided,
however, that no party shall have the right to terminate this Agreement
pursuant to this Section 8.01(c) if such denial shall be due to the
failure of the party seeking to terminate this Agreement to perform or
observe in any material respect the covenants and agreements of such
party set forth herein, or (ii) if any governmental or regulatory
authority or agency, or court of competent jurisdiction, shall have
issued a final permanent order or Injunction enjoining, denying
approval of, or otherwise prohibiting the consummation of the
Acquisition Merger and the time for appeal or petition for
<PAGE>
reconsideration of such order or Injunction shall have expired without
such appeal or petition being granted or such order or Injunction shall
otherwise have become final and non-appealable; or
(d) by the Board of Directors of Buyer or the Board of
Directors of Seller (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other
agreement contained herein), in the event of a material breach by the
other party of any representation, warranty, covenant or other
agreement contained herein which breach is not cured within 30 days
after written notice thereof is given to the party committing such
breach.
8.02 Effect of Termination. In the event of termination of this
Agreement by either Seller or Buyer as provided above, this Agreement shall
forthwith become null and void (other than Sections 5.03(b) and 10.01 hereof,
which shall remain in full force and effect) and there shall be no further
liability on the part of Seller, Company or Buyer or their respective officers
or directors to the other parties, except (i) any liability of Seller, Company
or Buyer under said Sections 5.03(b) and 10.01, and (ii) in the event of a
willful breach of any representation, warranty, covenant or agreement contained
in this Agreement, in which case, the breaching party shall remain liable for
any and all damages, costs and expenses, including all reasonable attorneys'
fees, sustained or incurred by the nonbreaching party as a result thereof or in
connection therewith or with the enforcement of its rights hereunder.
8.03 Amendment, Extension and Waiver. Subject to applicable law and as
may be authorized by their respective Boards of Directors, at any time prior to
the consummation of the transactions contemplated by this Agreement or
termination of this Agreement in accordance with the provisions of Section 8.01
hereof, Buyer, Seller and Company may, (a) amend this Agreement, (b) extend the
time for performance of any of the obligations or other acts of any other party
hereto, (c) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, or (d) waive
compliance with any of the agreements or conditions contained in Articles V and
VI (other than Section 6.01) hereof. This Agreement may not be amended or
otherwise modified except by an instrument in writing signed on behalf of each
of the parties hereto. Any agreement on the part of a party hereto to any
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party, but such waiver or failure to insist on strict
compliance with such obligation, covenant, agreement or condition shall not
<PAGE>
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE IX
INDEMNIFICATION
9.01 Survival of Representations, Warranties and Covenants. Except as
otherwise specifically provided in this Agreement, all representations,
warranties, covenants and other agreements contained in or incorporated into
this Agreement or in any instrument delivered pursuant hereto shall survive the
Closing and any investigation or inquiry made by the Seller, the Company or the
Buyer, as the case may be; provided, that the representations and warranties set
forth in Section 3.10(a), (b) and (d) and Sections 4.10 through 4.14 shall
terminate upon Closing.
9.02 Survival Period. Any claim for a breach of any representation or
warranty contained in this Agreement must be made within the following periods:
(a) with respect to the matters addressed in Section 3.10(c)
and (e), prior to the thirtieth (30th) day following the lapse of time
within which federal, state or local taxing authorities are entitled to
assert any Tax liability on the part of Company for Tax periods ending
at or prior to the Closing Date; and
(b) with respect to all other representations and warranties
contained in Article III of this Agreement (other than Section 3.10)
and in Sections 4.01 through 4.09 hereof, within twenty-four months
after the Closing Date.
9.03 Terms of Indemnification.
(a) Subject to Section 9.06 below, Seller agrees to indemnify
the Buyer and its affiliates (and their respective directors, officers,
agents and employees) against, and to protect, defend and hold harmless
the Buyer and its affiliates (and their respective directors, officers,
agents and employees) from, and Buyer agrees to indemnify the Seller
and its affiliates (and their respective directors, officers, agents
and employees) against, and to protect, defend and hold harmless the
Seller and its affiliates (and their respective directors, officers,
agents and employees) from, all Damages (as such term is defined in
Section 9.05 below) arising out of or resulting from any inaccuracy in,
<PAGE>
or breach of, any of their respective representations, warranties,
covenants or other agreements of each of them contained in or
incorporated into this Agreement or any Related Agreement or in any
certificate or instrument delivered in connection herewith or therewith
(with any representations, warranties, covenants and other agreements
of Company through the Effective Time being deemed to be of Seller for
purposes of this indemnification), which inaccuracy or breach is
asserted and a claim for indemnification with respect thereto is made
within the applicable survival period, if any, set forth in Section
9.02 above.
(b) In addition, Seller agrees to indemnify Buyer and its
affiliates (and their respective directors, officer, agents and
employees) against, and to protect, defend and hold harmless the Buyer
and its affiliates (and their respective directors, officers, agents
and employees) from, all Damages (as such term is defined in Section
9.05 below) arising out of or resulting from any claim, suit, action or
proceeding against the Company, whether pending prior to Closing or
brought against the Company after the Closing, or whether or not
disclosed to Buyer or known to Seller or Company prior to Closing,
relating to or arising out of any actionable or allegedly actionable
act or omission by the Company or any Company subsidiary or the
Company's or any Company subsidiary's agents, officers or employees in
conducting the business of the Company or a subsidiary on or before the
Closing Date, which claim, suit, action or proceeding is commenced and
a claim for indemnification with respect thereto is made within
twenty-four months after the Closing Date. Claims for indemnification
pursuant to this Section 9.03(b) shall not be subject to the provisions
of Section 9.06 hereof.
(c) In addition, subject to Section 9.06 below, Seller agrees
to indemnify Buyer and its affiliates (and their respective directors,
officer, agents and employees) against, and to protect, defend and hold
harmless the Buyer and its affiliates (and their respective directors,
officers, agents and employees) from, all Damages (as such term is
defined in Section 9.05 below) arising out of or resulting from any
Loan intentionally not having been made to the obligor or in the amount
or on the terms identified in the applicable Loan documentation and a
claim for indemnification with respect to which is made within twelve
(12) months after the Closing Date.
(d) Damages arising out of a breach of any representation or
warranty in this Agreement shall be determined without giving effect to
<PAGE>
any exception or qualification of such representation or warranty as to
the materiality of the breach thereof or the Material Adverse Effect on
any Person of such breach; provided, however, that in the event that
Company delivers to Buyer its certificate pursuant to Section 6.02(b)
hereof and such certificate accurately states that there has occurred
any change(s) in assets, business, operations, results of operations or
financial condition of Company or any of its subsidiaries since the
date hereof which has had or is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on the Company and Buyer
shall elect to waive any closing condition not satisfied as a result
thereof and effect the Acquisition Merger despite such event, then
Damages shall for all purposes hereof be determined without giving
effect to the event causing such Material Adverse Effect on the
Company.
9.04 Procedures. In any case under this Agreement where one party has
indemnified the other against any claim or legal action, indemnification shall
be provided in accordance with the procedure outlined below:
(a) Provided that notice is given by the indemnified party to
the indemnifying party promptly upon the commencement of a legal
proceeding or the indemnified party becoming aware of a material claim
for which indemnification might be claimed, except to the extent the
failure to provide such notice does not prejudice the interests of the
indemnifying party, the indemnifying party promptly will defend,
contest, or otherwise protect the indemnified party against any such
claim or suit at its own cost and expense.
(b) The indemnified party may, but will not be obligated to,
participate at its own expense in a defense thereof by counsel of its
own choosing, but the indemnifying party shall be entitled to control
the defense unless (i) in the case where only money damages are sought,
the indemnified party has relieved the indemnifying party from
liability with respect to the particular matter or (ii) in the case
where equitable relief is sought, the indemnified party elects to
participate in and jointly control the defense thereof; provided, that
the indemnifying party may only settle or compromise the matter subject
to indemnification without the consent of the indemnified party if such
settlement includes a complete release of all indemnified parties as to
the matters in dispute and relates solely to money damages; and
provided, further, that the indemnified party will not unreasonably
withhold consent to any settlement or compromise that requires its
<PAGE>
consent. It is specifically agreed that the Buyer, its subsidiaries or
affiliates may withhold its consent to any settlement or compromise of
a matter subject to indemnification, if in its reasonable opinion the
terms of such settlement or compromise will materially adversely affect
its ability to conduct future business.
(c) In the event the indemnifying party fails to timely
defend, contest, or otherwise protect the indemnified party against any
such claim or suit, the indemnified party may, but will not be
obligated to, defend, contest, or otherwise protect against the same,
and make any compromise or settlement thereof, and in such event, or in
the case where the indemnified party jointly controls such claim or
suit, the indemnified party shall be entitled to recover its costs
thereof from the indemnifying party, including reasonable attorneys'
fees, disbursements and all amounts paid as a result of such claim or
suit or the compromise or settlement thereof; provided, however, that
if the indemnifying party timely undertakes the defense of such matter
and the indemnified party does not jointly control such matter, the
indemnified party shall not be entitled to recover from the
indemnifying party for its costs incurred in the defense thereof other
than the reasonable costs of investigation undertaken by the
indemnified party and reasonable costs of providing assistance.
(d) The indemnified party shall cooperate and provide such
assistance as the indemnifying party may reasonably request in
connection with the defense of the matter subject to indemnification
and in connection with recovering from any third parties amounts that
the indemnifying party may pay or be required to pay by way of
indemnification hereunder. The indemnified party shall be required to
file a claim with its third-party insurers as to any matter subject to
indemnification that is covered by insurance; provided, however, that
neither the filing of any such claim nor the insurer's rejection
thereof in whole or in part shall be a condition to the indemnifying
party's obligations under this Article IX. The indemnified party shall
protect its position with respect to any matter that may be the subject
of indemnification hereunder in the same manner as it would any similar
matter where no indemnification is available.
9.05 Damages. As used in this Article IX, the term "Damages" means any
and all losses, claims, damages, liabilities, obligations, judgments,
settlements, awards, demands, offsets, reasonable out-of-pocket costs, expenses
and attorneys' fees (including any such reasonable costs, expenses and
attorneys' fees incurred in enforcing a party's right of indemnification against
<PAGE>
any indemnifying party or with respect to any appeal) and penalties and
interest, if any, but shall not include any such amounts for which the
indemnified party receives payment from a third party (including insurers)
(after associated collection expenses) and shall be net of any associated Tax
benefit. For purposes of this Section 9.05, "associated Tax benefit" means the
reduction in Taxes enjoyed by an indemnified party in any taxable year of that
party as a result of the Tax treatment of the Damages, such reduction to be
reduced (but not below zero) by any incremental Taxes paid by the indemnified
party by reason of the inclusion of the indemnification payment in income if and
to the extent required by applicable law. The amount of any associated Tax
benefit shall be deducted from an indemnifying payment when such payment is
otherwise to be made, and shall be computed by the indemnifying party on such
reasonable assumptions as it may select. Each indemnification payment from which
an associated Tax benefit has been deducted shall be accompanied by a
computation of such benefit sufficient in detail to enable the indemnified party
to assess the basis of the computation. If the indemnified party disagrees with
the indemnifying party's computation, it shall provide the indemnifying party
with its computation and sufficient information to enable the indemnifying party
to assess its computation, and the parties shall thereafter work together in
good faith to resolve the matter and develop a framework for future adjustments
consistent with the principles of this subsection (with any differences to be
resolved by applying the principles of Section 4(b) of the Tax Disaffiliation
Agreement). Any payment (including insurance proceeds) received by the
indemnified party with respect to any matter that has been the subject of any
prior indemnification payment(s) by the indemnifying party shall be promptly
remitted (net of collection expenses) to the indemnifying party up to the
aggregate amount of such prior indemnification payment(s).
9.06 Maximum Indemnification/ Threshold. Notwithstanding any other
provision of this Agreement, with respect to breaches of representations and
warranties that survive the Closing and Section 9.03(c) hereof (a) the maximum
aggregate liability of Seller to the Buyer or Buyer to Seller shall be
$100,000,000 and (b) no indemnified party shall be entitled to any
indemnification unless, and only to the extent that, the aggregate Damages to
such indemnified party exceed $2,000,000.
<PAGE>
ARTICLE X
MISCELLANEOUS
10.01 Expenses. Except as otherwise expressly set forth herein, all
legal and other costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses; provided, that any such expenses incurred by the
Company shall have been accrued as of the Closing on the Closing Date Balance
Sheet.
10.02 Notices. All notices or other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by a nationally
recognized overnight courier addressed as follows:
(a) If to Buyer, to:
Mercury Finance Company
100 Field Drive, Suite 340
Lake Forest, Illinois 60045
Attention: John Brincat, Chairman
and
Mark Dapier, General Counsel
Copy to:
McDermott, Will & Emery
227 West Monroe
Chicago, Illinois 60606
Attention: Bernard Kramer, Esq.
and
Grant A. Bagan, Esq.
(b) If to Company or Seller, to:
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attention: Peter J. Manning,
Executive Vice President
and
Gary A. Spiess, General Counsel
<PAGE>
Copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Norman J. Shachoy, Esq.
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
10.03 Parties in Interest. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that neither this Agreement nor any of the
rights, interests or obligations of any party hereunder shall be assigned by any
party hereto without the prior written consent of the other parties, and that
nothing in this Agreement, other than as expressly set forth in Article IX, is
intended to confer, expressly or by implication, upon any other person any
rights or remedies under or by reason of this Agreement.
10.04 Complete Agreement. This Agreement, including the documents and
other writings referred to herein or delivered pursuant hereto, contains the
entire agreement and understanding of the parties with respect to its subject
matter. There are no restrictions, agreements, promises, warranties, covenants
or undertakings between the parties other than those expressly set forth herein
or therein. This Agreement supersedes all prior agreements and understandings
between the parties, both written and oral, with respect to its subject matter.
10.05 Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and each of which shall
be deemed to be an original and shall become effective when a counterpart has
been signed by each of the parties and delivered to each of the other parties.
10.06 Governing Law. This Agreement shall be governed by the laws of
the State of Delaware, without giving effect to the principles of conflicts of
laws thereof.
10.07 Captions. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
<PAGE>
10.08 Effect of Investigations. No investigation by the parties hereto
made heretofore or hereafter, whether pursuant to this Agreement or otherwise
shall affect the representations and warranties of the parties which are
contained herein and each such representation and warranty shall survive such
investigation, subject, however, to Article IX hereof.
10.09 Severability. In the event that any one or more provisions of
this Agreement shall for any reason be held invalid, illegal or unenforceable in
any respect, by any court of competent jurisdiction, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Agreement and
the parties shall use their best efforts to substitute a valid, legal and
enforceable provision which, insofar as practicable, implements the purposes and
intents of this Agreement.
10.10 Specific Enforceability. The parties recognize and hereby
acknowledge that it is impossible to measure in money the damages that would
result to a party by reason of the failure of any of the parties to perform any
of the obligations imposed on it by this Agreement. Accordingly, if any party
should institute an action or proceeding seeking specific enforcement of the
provisions hereof, each party against which such action or proceeding is brought
hereby waives the claim or defense that the party instituting such action or
proceeding has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defense that such a remedy at law exists.
10.11 Alternative Structure. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Effective Time, Seller shall be
entitled to cause all of the Company Capital Stock to be transferred to any
subsidiary of Seller so long as, after such transfer, the transactions
contemplated hereby will be capable of consummation in as timely a manner as if
such Company Capital Stock continued to be held by Bank of Boston Connecticut.
This Agreement and any related documents shall be appropriately amended in order
to reflect any such transfer.
<PAGE>
IN WITNESS WHEREOF, Company, Seller and Buyer have caused this
Agreement to be executed as a sealed instrument by their duly authorized
officers, all as of the day and year first above written.
BANK OF BOSTON CORPORATION
By: /s/ PETER J. MANNING
Name: Peter J. Manning
Title: Executive Vice President
MERCURY FINANCE COMPANY
By: /s/ JOHN N. BRINCAT
Name: John N. Brincat
Title: Chairman and CEO
FIDELITY ACCEPTANCE
CORPORATION
By: /s/ ALAN REESE
Name: Alan Reese
Title: Chairman
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of [ ],
1997, is by and between (a) Mercury Finance Company, a Delaware corporation (the
"Company"), and (b) [ ], a [ ] (the "Investor").
In consideration of the mutual covenants and agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. As used herein, the following terms have the following
meanings:
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, $1 par value per share.
"Company" has the meaning specified in the preamble hereto.
"Demand Registration" has the meaning specified in Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means Investor and any other Person or Persons to whom any
Registrable Securities shall have been assigned or transferred in accordance
with Section 13(g) of this Agreement.
"Indemnified Party" has the meaning specified in Section 9(c) hereof.
"Indemnifying Party" has the meaning specified in Section 9(c) hereof.
"Investor" has the meaning specified in the preamble hereto.
"Major Holder" means any Holder holding at the relevant time of
determination at least 6,500,000 shares of Registrable Securities (such number
of shares shall automatically be adjusted to reflect any stock split, reverse
stock split, recapitalization, reclassification or similar transaction).
<PAGE>
"Merger Agreement" shall mean the Agreement and Plan of Merger, dated
as of January 10, 1997, by and among Company, Investor and Fidelity Acceptance
Corporation, as amended and in effect from time to time.
"Person" means any individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"Piggyback Registration" has the meaning specified in Section 3(a).
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any Prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all material
incorporated by reference in such Prospectus.
"Public Sale" means any sale of Common Stock to the public pursuant to
a public offering registered under the Securities Act, or to the public through
a broker or market-maker pursuant to the provisions of Rule 144 (or any
successor rule) adopted under the Securities Act.
"registered" and "registration" means a registration for a public
offering effected by preparing and filing a Registration Statement in compliance
with the Securities Act and the declaration or ordering by the Commission of
effectiveness of such Registration Statement.
"Registrable Securities" means, at any time, all of the then issued and
outstanding (a) shares of Common Stock issued to Investor pursuant to the Merger
Agreement, (b) other shares of Common Stock purchased by or issued from time to
time to Investor, (c) capital stock or other securities into which or for which
any such shares of Common Stock shall have been converted or exchanged pursuant
to any recapitalization, reorganization or merger of the Company or otherwise,
or (d) shares of capital stock issued with respect to the foregoing pursuant to
a stock split or stock dividend or otherwise, provided, however, that the
foregoing capital stock shall be Registrable Securities only so long as such
capital stock has not been (i) sold pursuant to a Public Sale or (ii) otherwise
transferred and new certificates or other evidences of ownership for such
capital stock (not bearing a legend to the effect that such securities have not
been registered under the Securities Act and may not be sold or transferred in
the absence of registration or an exemption therefrom under the Securities Act,
and not subject to any stop transfer order or other restriction on transfer)
shall have been delivered by or on behalf of the Company and such capital stock
is able to be resold without subsequent registration under the Securities Act.
"Registration Expenses" has the meaning specified in Section 8.
<PAGE>
"Registration Statement" means any registration statement of the
Company under the Securities Act which covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all material incorporated by
reference in such Registration Statement.
"Securities Act" means the Securities Act of 1933, as amended.
"Underwriters' Maximum Number" means, for any Piggyback Registration,
Demand Registration or other registration which is an underwritten registration,
the maximum number of securities which, in the opinion of the managing
underwriters of such registration in the light of marketing factors, can be sold
in such offering without materially and adversely affecting the success or
offering price of such offering.
2. Demand Registration.
(a) Request for Demand Registration.
(i) Subject to the limitations contained in the following
paragraphs of this Section 2, any Major Holder may, at any time and
from time to time give to the Company, pursuant to this subparagraph
(i), a written request for the registration by the Company under the
Securities Act of all or any part of the Registrable Securities of such
Major Holder (such registration being herein called a "Demand
Registration"); provided, that no such Demand Registration shall become
effective prior to the first anniversary of the date hereof. Within ten
(10) days after receipt by the Company of any such written request, the
Company will give written notice of such registration request to all
Holders of Registrable Securities.
(ii) Subject to the limitations contained in the following
paragraphs of this Section 2, after receipt of such written request for
a Demand Registration, (A) the Company will be obligated and required
to include in such Demand Registration all Registrable Securities with
respect to which the Company shall receive from Holders of Registrable
Securities, within thirty (30) days after the date on which the Company
shall have given to all Holders written notice of the registration
request pursuant to Section 2(a)(i) hereof, the written requests of
such Holders for inclusion in such Demand Registration, and (B) the
Company will use its reasonable efforts in good faith to effect
promptly the registration of all such Registrable Securities; provided,
however, that the Company will not be obligated to effect any Demand
Registration unless Holders have requested that such Demand
Registration include an aggregate number of Registrable Securities at
least equal to 20% of the aggregate number of Registrable Securities
initially issued to Investor pursuant to the Merger Agreement; and
provided, further, that, as and to the extent set forth in Section 8
<PAGE>
hereof, the Company shall only bear the Registration Expenses for two
Demand Registrations requested by the Holders. All written requests
made by Holders of Registrable Securities pursuant to this subparagraph
(ii) will specify the number of shares of Registrable Securities to be
registered and will also specify the intended method of disposition
thereof. Such method of disposition shall, in any case, be an
underwritten offering if an underwritten offering is requested by
Holders of a majority of the Registrable Securities to be included in
such Demand Registration.
(b) Effective Registration. Any registration initiated by Holders of
Registrable Securities as a Demand Registration pursuant to Section 2(a) hereof
shall not count as a Demand Registration for any purposes hereof (i) unless and
until such registration shall have become effective and all Registrable
Securities requested to be included in such registration shall have been
actually sold and (ii) if such Holders withdraw their request for a Demand
Registration at any time because such Holders (A) reasonably believed that the
Registration Statement or Prospectus contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein (in the case of Prospectus, in the
light of the circumstances under which they were made) not misleading, (B)
notified the Company of such fact and requested that the Company correct such
alleged misstatement or omission and (C) the Company has refused to correct such
alleged misstatement or omission.
(c) Priority on Demand Registrations. If the managing underwriters in
any underwritten Demand Registration shall give written advice to the Company
and the Holders of Registrable Securities to be included in such registration of
an Underwriters' Maximum Number, then: (i) the Company will be obligated and
required to include in such registration the maximum number of Registrable
Securities requested by the Holders thereof to be included in such registration
which does not exceed the Underwriters' Maximum Number, and such number of
Registrable Securities shall be allocated pro rata among the Holders of such
Registrable Securities on the basis of the number of Registrable Securities
requested to be included therein by each such Holder; (ii) if the Underwriters'
Maximum Number exceeds the number of Registrable Securities requested by the
Holders thereof to be included in such registration, then the Company will be
entitled to include in such registration that number of securities which shall
have been requested by the Company to be included in such registration for the
account of the Company and which shall not be greater than such excess; and
(iii) if the Underwriters' Maximum Number exceeds the sum of the number of
Registrable Securities which the Company shall be required to include in such
Demand Registration and the number of securities which the Company proposes to
offer and sell for its own account in such registration, then the Company may
include in such registration that number of other securities which Persons
(other than the Holders as such) shall have requested be included in such
<PAGE>
registration and which shall not be greater than such excess. Neither the
Company nor any of its stockholders (other than Holders of Registrable
Securities) shall be entitled to include any securities in any underwritten
Demand Registration unless the Company or such stockholders (as the case may be)
shall have agreed in writing to sell such securities on the same terms and
conditions as shall apply to the Registrable Securities to be included in such
Demand Registration.
(d) Selection of Underwriters. The Holders of a majority of the
Registrable Securities to be included in any Demand Registration shall determine
whether or not such Demand Registration shall be underwritten and such Holders
and the Company shall mutually agree upon the investment banker(s) and managing
underwriter(s) to administer such offering.
(e) Timing of Demand Registrations. The Holders of the
Registrable Securities shall not be entitled to request more than one Demand
Registration under this Agreement in any 6-month period.
3. Piggyback Registrations.
(a) Rights to Piggyback.
(i) If (and on each occasion that) the Company proposes to
register any of its securities under the Securities Act either for the
Company's own account or for the account of any of its stockholders
(other than Holders in their capacity as such) (each such registration
not withdrawn or abandoned prior to the effective date thereof being
herein called a "Piggyback Registration"), the Company will give
written notice to all Holders of Registrable Securities of such
proposal not later than the earlier to occur of (A) the tenth day
following the receipt by the Company of notice of exercise of any
registration rights by any Persons, and (B) the thirtieth day prior to
the anticipated filing date of such Piggyback Registration. The Company
will not be obligated or required to include any Registrable Securities
in any registration effected solely to implement an employee benefit
plan or a transaction to which Rule 145 of the Commission is
applicable.
(ii) Subject to the provisions contained in paragraph (b) of
this Section 3 and in the last sentence of this subparagraph (ii), (A)
the Company will be obligated and required to include in each Piggyback
Registration all Registrable Securities with respect to which the
Company shall receive from Holders of Registrable Securities, within
fifteen (15) days after the date on which the Company shall have given
written notice of such Piggyback Registration to all Holders of
Registrable Securities pursuant to Section 3(a)(i) hereof, the written
requests of such Holders for inclusion in such Piggyback Registration,
and (B) the Company will use its reasonable efforts in good faith to
<PAGE>
effect promptly the registration of all such Registrable Securities.
The Company shall register such Registrable Securities on the same
terms and subject to the same conditions as the other securities of the
Company being included in such registration. The Holders of Registrable
Securities shall be permitted to withdraw all or any part of the
Registrable Securities of such Holders from any Piggyback Registration
at any time prior to the effective date of such Piggyback Registration
unless such Holders of Registrable Securities shall have entered into a
written agreement with the Company's underwriters establishing the
terms and conditions under which such Holders would be obligated to
sell such securities in such Piggyback Registration.
(b) Priority on Piggyback Registrations. If a Piggyback Registration is an
underwritten registration, and the managing underwriters shall give written
advice to the Company of an Underwriters' Maximum Number, then:
(i) if the initial proposal to register securities was made
for the Company's own account, then (A) the Company shall be entitled
to include in such registration that number of securities which the
Company proposes to offer and sell for its own account in such
registration and which does not exceed the Underwriters' Maximum
Number; (B) if the Underwriters' Maximum Number exceeds the number of
securities which the Company proposes to offer and sell for its own
account in such registration, then the Company will be obligated and
required to include in such registration that number of Registrable
Securities requested by the Holders thereof to be included in such
registration and which does not exceed such excess and such Registrable
Securities shall be allocated pro rata among the Holders thereof on the
basis of the number of Registrable Securities requested to be included
therein by each such Holder; and (C) if the Underwriters' Maximum
Number exceeds the sum of the number of Registrable Securities which
the Company shall be required to include in such registration pursuant
to clause (B) and the number of securities which the Company proposes
to offer and sell for its own account in such registration, then the
Company may include in such registration that number of other
securities which Persons shall have requested be included in such
registration and which shall not be greater than such excess.
(ii) if the initial proposal to register securities was made
by the Company for the account of any stockholder (other than a
Holder), then (A) such other stockholder (other than a Holder) on whose
behalf the Company proposes to file a Registration Statement shall be
entitled to include in such registration that number of securities
which such other stockholder proposes to offer and sell in such
registration and which does not exceed the Underwriters' Maximum
Number; (B) if the Underwriters' Maximum Number exceeds the number of
securities which such other stockholder proposes to offer and sell in
<PAGE>
such registration, then the Company shall be entitled to include in
such registration that number of securities which the Company proposes
to offer and sell in such registration and which shall not be greater
than such excess; (C) if the Underwriters' Maximum Number exceeds the
number of securities which the Company shall be required or propose to
include in such registration pursuant to clauses (A) and (B) above,
then the Company will be obligated and required to include in such
registration that number of Registrable Securities requested by the
Holders thereof to be included in such registration and which shall not
be greater than such excess and such Registrable Securities shall be
allocated pro rata among the Holders thereof on the basis of the number
of Registrable Securities requested to be included therein by each such
Holder; and (D) if the Underwriters' Maximum Number exceeds the sum of
the number of Registrable Securities which the Company shall be
required or propose to include in such registration pursuant to clauses
(A), (B) and (C) above, then the Company may include in such
registration that number of other securities which Persons shall have
requested be included in such registration and which shall not be
greater than such excess.
(c) Selection of Underwriters. In any Piggyback Registration, the
Company shall (unless the Company shall otherwise agree) have the right to
select the investment bankers and managing underwriters in such registration.
4. Form S-3. The Company will use its reasonable efforts in good faith
to ensure that the Company will be eligible to register securities on Form S-3
(or any comparable form adopted by the Commission) at all times after the date
hereof.
5. Lockup Agreements.
(a) Restrictions on Public Sale by Holders of Registrable Securities.
No Holder of Registrable Securities, if the Company or the managing underwriters
so request in connection with any underwritten registration of the Company's
securities, will, without the prior written consent of such underwriters, effect
any public sale or other distribution of any equity securities of the Company,
including any sale pursuant to Rule 144, during the seven (7) days prior to, and
during the ninety (90) day period commencing on, the effective date of such
underwritten registration, except in connection with such underwritten
registration.
(b) Restrictions on Public Sale by the Company. The Company agrees
that, without the consent of the underwriters, (i) it will not effect any public
sale or other distribution of its equity securities, or any securities
convertible into or exchangeable or exercisable for such equity securities,
<PAGE>
during the period commencing on the seventh (7th) day prior to, and ending on
the ninetieth (90th) day following, the effective date of any underwritten
registration pursuant to Sections 2 or 3 hereof (the "Holdback Period"), except
in connection with any such underwritten registration and except for any
offering pursuant to an employee benefit plan and registered on Form S-8 (or any
successor form), and (ii) each agreement entered into after the date of this
Agreement pursuant to which the Company issues or agrees to issue any privately
placed securities shall contain a provision under which holders of such
securities agree not to effect any public sale pursuant to a registration
statement during the Holdback Period; provided, however, that the provisions of
this Section 5 shall not prevent the conversion or exchange of any securities
pursuant to their terms into or for other securities.
6. Registration Procedures.
(a) Whenever the Holders of Registrable Securities have requested that
any Registrable Securities be registered pursuant to this Agreement (whether a
Demand Registration or a Piggyback Registration), the Company will use its
reasonable efforts to effect the registration and the sale of such Registrable
Securities in accordance with the intended method of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible:
(i) prepare and file with the Commission a Registration
Statement with respect to such Registrable Securities and use its
reasonable efforts to cause such Registration Statement to become
effective (provided, that before filing a Registration Statement or
Prospectus or any amendments or supplements thereto, the Company will
furnish to counsel selected by the Holders of a majority of the
Registrable Securities covered by such Registration Statement, copies
of all such documents proposed to be filed, which documents will be
subject to the timely review of such counsel and the Company will not
file any Registration Statement or amendment thereto or any Prospectus
or any supplement thereto, including documents incorporated by
reference, to which the Holders of a majority of the Registrable
Securities covered by such Registration Statement shall reasonably
object);
(ii) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective for a period of not less than one hundred twenty
(120) days and, comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
Registration Statement during such effective period in accordance with
the intended methods of disposition by the sellers thereof set forth in
such Registration Statement and cause the Prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act;
<PAGE>
(iii) upon request, furnish to each seller of Registrable
Securities such number of copies of such Registration Statement, each
amendment and supplement thereto, the Prospectus included in such
Registration Statement (including each preliminary Prospectus and each
Prospectus filed under Rule 424 of the Securities Act) and such other
documents as each such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by each
such seller (it being understood that the Company consents to the use
of the Prospectus and any amendment or supplement thereto by such
seller in connection with the offering and sale of the Registrable
Securities covered by the Prospectus or any amendment or supplement
thereto);
(iv) use its reasonable efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of
such jurisdictions as any seller reasonably requests, use its
reasonable efforts to keep each such registration or qualification
effective, including through new filings, amendments or renewals,
during the period such Registration Statement is required to be kept
effective, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate
the disposition in such jurisdictions of the Registrable Securities
owned by such seller; provided that the Company will not be required
(A) to qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph
(a)(iv), (B) to subject itself to taxation in any such jurisdiction or
(C) to consent to general service of process in any such jurisdiction;
(v) notify each seller of such Registrable Securities, at any
time when a Prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result of
which the Prospectus included in such Registration Statement contains
an untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading, and, at the request of any
such seller, the Company will promptly prepare (and, when completed,
give notice to each seller of Registrable Securities) a supplement or
amendment to such Prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such Prospectus will not
contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading; provided
that upon such notification by the Company, each seller of such
Registrable Securities will not offer or sell such Registrable
Securities until the Company has notified such seller that it has
prepared a supplement or amendment to such Prospectus and delivered
copies of such supplement or amendment to such Seller provided further
that the Company may defer the preparation of such supplement or
amendment if Company furnishes to Holders of Registrable Securities
<PAGE>
requesting registration a certificate signed by the President of
Company stating that in the good faith judgment of the Board of
Directors it would not be in the reasonable interests of Company and
its shareholders for such supplement or amendment to be prepared and it
is essential to defer the preparation of such supplement or amendment,
such deferral being not more than 30 calendar days;
(vi) cause all such Registrable Securities to be listed, prior
to the date of the first sale of such Registrable Securities pursuant
to such registration, on the New York Stock Exchange and each other
securities exchange on which similar securities issued by the Company
are then listed;
(vii) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such
Registration Statement;
(viii) enter into all such customary agreements (including
underwriting agreements in customary form) and take all such other
actions as the Holders of a majority of the Registrable Securities
being sold or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities;
(ix) make available for inspection on a confidential basis by
any seller, any underwriter participating in any disposition pursuant
to such Registration Statement, and any attorney, accountant or other
agent retained by any such seller or underwriter (in each case after
reasonable prior notice), all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
Company's officers, directors, employees and independent accountants to
supply on a confidential basis all information reasonably requested by
any such seller, underwriter, attorney, accountant or agent in
connection with such Registration Statement;
(x) permit any Holder of Registrable Securities which Holder,
in its sole and exclusive judgment, might be deemed to be an
underwriter or a controlling person of the Company within the meaning
of Section 15 of the Securities Act, to participate in the preparation
of such registration or comparable statement and to permit the
insertion therein of material, furnished to the Company in writing,
which in the reasonable judgment of such holder and its counsel should
be included, provided that such material shall be furnished under such
circumstances as shall cause such material to be subject to the
indemnification provisions provided pursuant to Section 9(b) hereof;
(xi) in the event of the issuance of any stop order suspending
the effectiveness of a Registration Statement, or of any order
suspending or preventing the use of any related Prospectus or
suspending the qualification of any Registrable Securities included in
<PAGE>
such Registration Statement for sale in any jurisdiction, the Company
will promptly notify the Holders of Registrable Securities thereof and
use its reasonable efforts promptly to obtain the withdrawal of such
order;
(xii) if requested by the managing underwriter or underwriters
or any Holder of Registrable Securities in connection with any sale
pursuant to a Registration Statement, promptly incorporate in a
Prospectus supplement or post-effective amendment such information
relating to such underwriting as the managing underwriter or
underwriters or such holder reasonably requests to be included therein,
and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after being notified of
the matters incorporated in such Prospectus supplement or
post-effective amendment;
(xiii) cooperate with the holders of Registrable Securities
and the managing underwriter or underwriters, if any, to facilitate the
timely preparation and delivery of certificates (not bearing any
restrictive legends) representing Registrable Securities to be sold
under such registration, and enable such Registrable Securities to be
in such denominations and registered in such names as the managing
underwriter or underwriters, if any, or such holders may request;
(xiv) use its reasonable efforts to cause the Registrable
Securities to be registered with or approved by such other governmental
agencies or authorities within the United States and having
jurisdiction over the Company as may reasonably be necessary to enable
the seller or sellers thereof or the underwriter or underwriters, if
any, to consummate the disposition of such Registrable Securities;
(xv) use its reasonable efforts to obtain:
(A) at the time of effectiveness of each
registration, a "comfort letter" from the Company's
independent certified public accountants covering such matters
of the type customarily covered by "cold comfort letters" as
the Holders of a majority of the Registrable Securities
covered by such registration and the underwriters reasonably
request; and
(B) at the time of any underwritten sale pursuant to
a Registration Statement, a "bring-down comfort letter", dated as of
the date of such sale, from the Company's independent certified public
accountants covering such matters of the type customarily covered by
comfort letters as the Holders of a majority of the Registrable
<PAGE>
Securities covered by such Registration Statement and the underwriters
reasonably request;
(xvi) use its reasonable efforts to obtain, at the
time of effectiveness of each Piggyback Registration and at the time of
any sale pursuant to each registration, an opinion or opinions,
favorable in form and scope to the Holders of a majority of the
Registrable Securities covered by such registration, from counsel to
the Company in customary form; and
(xvii) otherwise comply with all applicable rules and
regulations of the Commission, and make generally available to its
security holders (as contemplated by Section 11(a) under the Securities
Act) an earnings statement satisfying the provisions of Rule 158 under
the Securities Act as soon as practicable, but in any event no later
than 18 months, after the effective date of the Registration Statement.
(b) Notwithstanding Sections 2 and 3 hereof, if Company shall furnish
to Holders of Registrable Securities on or before the date filing would be
required a certificate signed by the President of Company stating that in the
good faith judgment of the Board of Directors of Company it would not be in the
reasonable interests of Buyer and its shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
Registration Statement, Company shall be entitled to postpone filing of the
Registration Statement for a reasonable period of time, but not in excess of 90
calendar days.
7. Cooperation by Prospective Sellers, Etc.
(a) Each prospective seller of Registrable Securities will furnish to
the Company in writing such information as the Company may reasonably require
from such seller, and otherwise reasonably cooperate with the Company in
connection with any Registration Statement with respect to such Registrable
Securities.
(b) The failure of any prospective seller of Registrable Securities to
furnish any information or documents in accordance with any provision contained
in this Agreement shall not affect the obligations of the Company under this
Agreement to any remaining sellers who furnish such information and documents
unless in the reasonable opinion of counsel to the Company or the underwriters,
such failure impairs the viability of the offering or the legality of the
Registration Statement or the underlying offering.
(c) The Holders of Registrable Securities included in any Registration
Statement will not (until further notice) effect sales thereof after receipt of
telegraphic or written notice from the Company to suspend sales to permit the
Company to correct or update such Registration Statement or Prospectus; but the
<PAGE>
obligations of the Company with respect to maintaining any Registration
Statement current and effective shall be extended by a period equal to the
period such suspension is in effect.
8. Registration Expenses.
(a) All costs and expenses incurred or sustained in connection with or
arising out of each registration pursuant to Sections 2 and 3 hereof, including,
without limitation, all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel for the underwriters in connection with the blue sky
qualification of Registrable Securities), printing expenses, messenger,
telephone and delivery expenses, fees and disbursements of counsel for the
Company, reasonable fees and disbursements of one counsel representing the
Holders of Registrable Securities, such counsel to be selected by the Holders of
a majority of the Registrable Securities to be included in such registration,
fees and disbursements of all independent certified public accountants
(including the expenses relating to the preparation and delivery of any special
audit or "cold comfort" letters required by or incident to such registration),
the reasonable fees and expenses of any special experts retained by the Company
of its own initiative or at the request of the managing underwriters in
connection with such registration, and fees and expenses of all (if any) other
Persons retained by the Company (all such costs and expenses being herein
called, collectively, the "Registration Expenses"), will be borne and paid by
the Company; provided, however, that, in the case of Demand Registrations,
unless the Company is engaged in any activity that is not a permissible activity
under applicable laws or regulatory requirements for a Person in which the
Investor holds the ownership interest the Investor then holds in the Company,
the Company will only bear Registration Expenses for the first two Demand
Registrations requested by the Investor and thereafter the Holders of
Registrable Securities included in any Demand Registration will bear all
Registration Expenses thereof in accordance with Section 8(c) hereof; provided,
that Investor may assigns its rights to have the Registration Expenses for one
of its Demand Registrations paid by the Company to a transferee to whom Investor
transfers Registrable Securities and, if Investor so elects, only the
Registration Expenses for the first Demand Registration by Investor and the
first Demand Registration by such transferee shall be borne and paid by Company.
The Company will, in any case, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit, and the fees and
expenses incurred in connection with the listing of the securities to be
registered on each securities exchange on which similar securities of the
Company are then listed. The Holders of Registrable Securities will, in any
case, pay any discount or commission payable to the underwriters, with respect
to the shares being sold by such Holders.
<PAGE>
(b) The Company will not bear the cost of nor pay for any stock
transfer taxes imposed in respect of the transfer of any Registrable Securities
to any purchaser thereof by any Holder of Registrable Securities in connection
with any registration of Registrable Securities pursuant to this Agreement.
(c) To the extent that Registration Expenses incident to any
registration are, under the terms of this Agreement, not required to be paid by
the Company, each Holder of Registrable Securities included in the applicable
registration will pay all Registration Expenses which are solely attributable to
the registration of such Holder's Registrable Securities so included in such
registration, and all other Registration Expenses not so attributable to one
Holder will be borne and paid by all sellers of securities included in such
registration in proportion to the number of securities so included by each such
seller.
9. Indemnification.
(a) Indemnification by the Company. The Company will indemnify each
Holder requesting or joining in a registration and each underwriter of the
securities so registered, the officers, directors and partners of each such
Person and each Person who controls any thereof (within the meaning of the
Securities Act) and their respective successors and assigns against any and all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of any
material fact contained in any Prospectus, offering circular or other document
incident to any registration, qualification or compliance (or in any related
Registration Statement, notification or the like) or any omission (or alleged
omission) to state therein any material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to any action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, underwriter, officer, director,
partner and controlling person for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such claim, loss, damage or
liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company in an instrument duly executed
by such Holder, underwriter, officer, director, partner or controlling person
and stated to be specifically for use in such Prospectus, offering circular or
other document.
(b) Indemnification by Each Holder. Each Holder requesting or joining
in a registration will indemnify each underwriter of the securities so
registered, the Company and its officers and directors and each Person, if any,
who controls any thereof (within the meaning of the Securities Act) and their
<PAGE>
respective successors in title and assigns against any and all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of any material fact
contained in any Prospectus, offering circular or other document incident to any
registration, qualification or compliance (or in any related Registration
Statement, notification or the like) or any omission (or alleged omission) to
state therein any material fact required to be stated therein or necessary to
make the statement therein not misleading, and such Holder will reimburse each
underwriter, the Company and each other Person indemnified pursuant to this
paragraph (b) for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that this paragraph (b) shall apply only
if (and only to the extent that) such statement or omission was made in reliance
upon written information furnished to such underwriter or the Company in an
instrument duly executed by such Holder and stated to be specifically for use in
such Prospectus, offering circular or other document (or related Registration
Statement, notification or the like) or any amendment or supplement thereto;
provided further, that each Holder's liability hereunder with respect to any
particular registration shall be limited to an amount equal to the net proceeds
received by such Holder from the Registrable Securities sold by such Holder in
such registration; and provided, further, that no such Holder shall be required
to indemnify any Person for damages caused by any Person continuing to use a
prospectus (prior to its amendment or supplementation) more than three days
after the Company has received a notice from such Holder of any such untrue
statement or omission contained in such prospectus.
(c) Indemnification Proceedings. Each party entitled to indemnification
pursuant to this Section 9 (the "Indemnified Party") shall give notice to the
party required to provide indemnification pursuant to this Section 9 (the
"Indemnifying Party") promptly after such Indemnified Party acquires actual
knowledge of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party (at its expense) to assume the defense of any claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
reasonably acceptable to the Indemnified Party, and the Indemnified Party may
participate in such defense at such party's expense; and provided, further, that
the failure by any Indemnified Party to give notice as provided in this
paragraph (c) shall not relieve the Indemnifying Party of its obligations under
this Section 9 except to the extent that the failure results in a failure of
actual notice to the Indemnifying Party and such Indemnifying Party is damaged
solely as a result of the failure to give notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. The reimbursement required by this
<PAGE>
Section 9 shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses incurred.
10. Contribution in Lieu of Indemnification. If the indemnification
provided for in Section 9 hereof is unavailable to a party that would have been
an Indemnified Party under any such section in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each party that would have been an Indemnifying Party thereunder shall, in lieu
of indemnifying such Indemnified Party, contribute to the amount paid or payable
by such Indemnified Party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand and such
Indemnified Party on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof). The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Indemnifying Party or such Indemnified Party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and each Holder of
Registrable Securities agree that it would not be just and equitable if
contribution pursuant to this Section 10 were determined by pro-rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 10. The amount paid
or payable by an Indemnified Party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section 10
shall include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim. Notwithstanding any provision of this Section 10 to the contrary, (a)
no Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation and (b) each Holder's
liability hereunder with respect to any particular registration shall be limited
to an amount equal to the net proceeds received by such Holder from the
Registrable Securities sold by such Holder in such registration.
11. Rule 144 Requirements. The Company will use its reasonable efforts
in good faith to make publicly available and available to the Holders of
Registrable Securities, pursuant to Rule 144 of the Commission under the
Securities Act, such information as shall be necessary to enable the Holders of
Registrable Securities to make sales of Registrable Securities pursuant to that
Rule. The Company will furnish to any Holder of Registrable Securities, upon
request made by such Holder, a written statement signed by the Company,
addressed to such Holder, describing briefly the action the Company has taken or
proposes to take to comply with the current public information requirements of
Rule 144. The Company will, at the request of any Holder of Registrable
<PAGE>
Securities, upon receipt from such Holder of a certificate certifying (i) that
such Holder has held such Registrable Securities for a period of not less than
three (3) consecutive years, (ii) that such Holder has not been an affiliate (as
defined in Rule 144) of the Company for more than the ninety (90) preceding
days, and (iii) as to such other matters as may be appropriate in accordance
with such Rule, remove from the stock certificates representing such Registrable
Securities that portion of any restrictive legend which relates to the
registration provisions of the Securities Act.
12. Participation in Underwritten Registrations. No Person may
participate in any underwritten registration pursuant to this Agreement unless
such Person (a) agrees to sell such Person's securities on the basis provided in
any underwriting arrangements approved by the Persons entitled, under the
provisions hereof, to approve such arrangements, and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required by the terms of such underwriting
arrangements. Any Holder of Registrable Securities to be included in any
underwritten registration shall be entitled at any time to withdraw such
Registrable Securities from such registration prior to its effective date in the
event that such Holder shall disapprove of any of the terms of the related
underwriting agreement.
13. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not previously entered
into any agreement with respect to its Common Stock granting any registration
rights to any Person, and will not on or after the date of this Agreement enter
into any agreement with respect to its securities which grants demand
registration rights to anyone or which is inconsistent with the rights granted
to the Holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless such amendment, modification, supplement, waiver or consent is
approved in writing by the Company and the Holders of at least a majority of the
Registrable Securities.
(c) Registrable Securities Held by the Company. Whenever the consent or
approval of Holders of Registrable Securities is required pursuant to this
Agreement, Registrable Securities held by the Company shall not be counted in
determining whether such consent or approval was duly and properly given by such
Holders.
(d) Term. The agreements of the Company contained in this Agreement
shall continue in full force and effect so long as any Holder holds any
Registrable Securities.
<PAGE>
(e) Remedies. In the event of a breach by the Company of its
obligations under this Agreement, each Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of any of the provisions of this Agreement
and hereby agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
(f) Notices. Any notice provided for in this Agreement will be in
writing and will be deemed properly delivered if either personally delivered or
sent by a nationally recognized overnight courier to the recipient at the
address specified below:
(i) if to a Holder, at such Holder's address on the
stock transfer books of the Company;
with copies to:
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attention: Peter J. Manning, Executive
Vice President
and
Gary A. Spiess, General Counsel
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Norman J. Shachoy, Esq.
and
(ii) if to the Company, at:
Mercury Finance Company
100 Field Drive, Suite 340
Lake Forest, Illinois 60045
Attention: John Brincat, Chairman
and
Mark Dapier, General Counsel
Copy to:
McDermott, Will & Emery
<PAGE>
227 West Monroe
Chicago, Illinois 60606
Attention: Bernard Kramer, Esq.
and
Grant A. Bagan, Esq.
and thereafter at such other address, notice of which is given in accordance
with the provisions of this Section 13(f). Any such notice shall be effective
(A) if delivered personally, when received, and (B) if sent by overnight
courier, when receipted for.
(g) Successors and Assigns. This Agreement and the rights and
obligations of any Holder hereunder may be assigned to, and shall inure to the
benefit of, any Person to whom such Holder transfers any or all of its
Registrable Securities, provided that the transferee agrees in writing to be
bound by all of the terms and conditions of this Agreement. The Company may not
assign any of its rights or obligations under this Agreement.
(h) Counterparts. This Agreement may be executed in two or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect their meaning, construction or effect.
(j) Governing Law. The validity, performance, construction and effect
of this Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware, without giving effect to principles
of conflicts of law.
(k) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) Representations and Warranties of the Company. The Company
represents and warrants to each Holder as follows: the execution, delivery and
performance of this Agreement by the Company have been duly authorized by all
requisite corporate action and will not violate any provision of law, any order
of any court or other agency of government, the character or by-laws of the
Company, or any provision of any indenture, agreement or other instrument to
which it or any of its properties or assets is bound, or conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge or encumbrance of any nature
<PAGE>
whatsoever upon any of the properties or assets of the Company. This Agreement
has been duly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms.
(m) Entire Agreement. This Agreement and the Merger Agreement are
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein, with respect to the registration rights granted by the
Company with respect to the Registrable Securities. This Agreement and the
Merger Agreement supersede all prior agreements and understandings between the
parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
MERCURY FINANCE COMPANY
By:__________________________________________________
Title:
[INVESTOR]
By:__________________________________________________
Title:
<PAGE>
Exhibit B
Tax Disaffiliation Agreement
The parties to this Agreement, dated as of January __, 1997, are
Mercury Finance Company, a Delaware corporation (the "Buyer"), and Bank of
Boston Corporation, a Massachusetts corporation (the "Seller").
The Buyer and the Seller have entered into an Agreement and Plan of
Merger dated as of the date hereof (the "Merger Agreement"), pursuant to which
Acquisition Subsidiary will be merged with and into the Company. The parties
desire to enter into this Tax Disaffiliation Agreement (this "Agreement")
pursuant to the Merger Agreement in order to address certain matters relating to
the Tax liabilities of the Acquired Companies.
1. Defined Terms.
Capitalized terms used in this Agreement and not otherwise defined have
the respective meanings given those terms in the Merger Agreement. Capitalized
terms defined both in this Agreement and the Merger Agreement have the
respective meanings given those terms in this Agreement.
"Acquired Companies" means the Company and all of its Subsidiaries, and
"Acquired Company" means any of the Acquired Companies.
"Affiliated Group" means an affiliated group as defined in Section 1504
of the Code or any analogous combined, consolidated, or unitary group defined
under state, local, or foreign income Tax law.
"Code" means the Internal Revenue Code of 1986, as amended. All
citations to the Code or to the Treasury Regulations promulgated thereunder
shall include any amendments or any substitute or successor provisions thereto.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, profit, windfall profit, environmental
(including Code Section 59A), customs, duties, real property, personal property,
capital stock, intangibles, social security, employment, unemployment,
disability, payroll, license, employee, or other tax, withholding tax, or levy,
of any kind whatsoever, including any interest, penalties, or additions to tax
in respect of the foregoing.
"Tax Return" means any return, declaration, report, claim for refund,
information return, or other document (including any related or supporting
estimates, elections, schedules, statements, or information) filed or required
to be filed in connection with the determination, assessment, or collection of
any Tax or the administration of any laws, regulations, or administrative
requirements relating to any Tax.
<PAGE>
2. Tax Indemnity.
(a) Seller's Tax Indemnity. In lieu of any other
remedy for breach of the representations and warranties set
forth in Section 3.10 of the Merger Agreement (other than
those set forth in Section 3.10(c) and (e) thereof), the
Seller shall reimburse and indemnify Buyer and the Acquired
Companies for, and hold Buyer and the Acquired Companies
harmless from and against any Taxes paid or to be paid by (or
on behalf of) any Acquired Company relating to periods through
the Effective Time, including without limitation (A) any Tax
liability for periods through the Effective Time, and (B) any
Tax liability incurred or to be incurred by Buyer or by any
Acquired Company under Treas. Reg. ss. 1.1502-6 (or any
corresponding provision of state, local, or foreign law) for
any Tax period of any Affiliated Group including any Acquired
Company ending prior to or including the Effective Time.
(b) Buyer's Tax Indemnity. Buyer and the Acquired
Companies shall reimburse and indemnify Seller for, and hold
Seller harmless from and against, any Taxes paid or to be paid
by (or on behalf of) any Acquired Company relating to periods
after the Effective Time.
(c) Measurement.
(i) Income Taxes. As to Taxes based upon or
measured with reference to income, the amount of the parties' indemnification
obligation hereunder for any Tax for the Tax period including the Effective Time
shall be determined on the basis of a closing of the books as of the Effective
Time; provided, that the taxable income and Taxes attributable to an Acquired
Company for periods through the Effective Time shall include all items of
taxable income or loss required to be included during such period by reason of
the transactions contemplated by the Merger Agreement (specifically including
all Taxes arising out of or relating to the inclusion of the Acquired Companies
in Seller's Affiliated Group through the Effective Time and the Acquired
Companies' separation from the Seller's Affiliated Group contemplated by
the Merger Agreement).
(ii) Non-Income Taxes. As to any Tax not based\
upon or measured with reference to income, for Tax periods that include
(but do not end on) the Effective Time, the amount of Seller's indemnification
obligation for that Tax period hereunder shall equal (i) the full amount
thereof for the entire Tax period multiplied by a fraction the numerator of
which is the number of days in the Tax period ending on the Effective Time and
the denominator of which is the number of days in the entire Tax period;
provided, that the parties' indemnification obligations shall be adjusted
appropriately to reflect the actual proportionate period of property
ownership during the applicable Tax period for any such non-income Taxes imposed
with respect to the ownership of specific items of property held by an Acquired
Company during any Tax period including the Effective Time.
3. Filing of Tax Returns.
(a) Tax Returns To Be Filed by Seller. The Seller
shall (i) properly prepare (or cause to be prepared) and file
(or cause to be filed) on a timely basis all Tax Returns of
<PAGE>
each Acquired Company for all Tax periods ending on or before
the Effective Time or by reason of the Acquisition Merger that
are due after the Effective Time (taking into account any
extensions in effect at the Effective Time), and (ii) pay (or
cause to be paid) all Taxes shown to be due on such Tax
Returns.
(b) Tax Returns To Be Filed by Buyer. Buyer shall (i)
properly prepare (or cause to be prepared) and file (or cause
to be filed) on a timely basis all Tax Returns of each
Acquired Company for all Tax periods due after the Effective
Time (taking into account any extensions) other than those Tax
Returns referred to in subsection (a) above, and (ii) pay (or
cause to be paid) all Taxes shown to be due on such Tax
Returns (subject to the Seller's indemnity set forth in
Section 2). All Tax Returns to be prepared and filed under
this Section for any period ending before or including the
Effective Time shall be prepared on a basis consistent with
the applicable Acquired Company's past practice to the extent
such past practice is consistent with all applicable Tax laws,
rules, and regulations.
4. Calculation and Payment.
(a) Notice and Payment. Any party seeking payments
under this Agreement at any time and from time to time shall
give the other party or parties written notice of its claim,
which notice shall include all information and documentation
reasonably necessary to support the claim and a calculation,
reasonably satisfactory to such other party or parties, of the
amount of the requested payment. The other party or parties
shall make the applicable payment within thirty (30) days of
his or its receipt of such notice, or, in the case of a
dispute, within thirty (30) days of the determination of the
proper amount of the payment under subsection (b) below.
Written notice of a claim must be given to the party requested
to make the payment prior to the expiration of the applicable
Tax statute of limitations with respect to the period to which
the claim relates. Failure to give any party required to make
payments hereunder timely notice thereof, or delay in
providing such notice, shall excuse such party's obligations
to the extent that, but for such failure, such party could
have avoided all or any portion of such obligation.
(b) Disputes. In the event of a dispute arising with
respect to payments or requested payments under this
Agreement, the party requested to provide a payment shall
notify in writing the party presenting the claim as to the
amount of the claim that is disputed. If the parties cannot
agree on the calculation of the payment, such disagreement
shall be referred for resolution to such nationally recognized
independent certified public accounting firm as is mutually
agreed upon by the Seller and the Buyer (a "Tax Referee"). If
the parties cannot agree on such a Tax Referee, the Tax
Referee shall be picked by two nationally recognized
independent certified public accounting firms, one picked by
the Buyer and one picked by the Seller; provided, however,
that the Tax Referee so picked shall not at that time be the
regular auditor of the Buyer or the Seller, or any affiliate
of any of them. The decision of the Tax Referee shall be final
and binding on the parties. The fees of the Tax Referee shall
<PAGE>
be shared equally by the Seller on the one hand and the Buyer
on the other.
(c) Integration with Merger Agreement. The
provisions of this Agreement shall take precedence over the
provisions of the Merger Agreement to the extent such
provisions are inconsistent herewith or duplicative hereof.
5. Cooperation on Tax Matters; Conduct of Proceedings.
(a) Tax Proceedings. Buyer shall notify Seller in
writing promptly upon learning of any governmental inquiry,
examination, or proceeding (a "Tax Proceeding") that could
result in a determination with respect to Taxes due or payable
by Buyer or any Acquired Company for which Seller is liable or
against which Seller may be required to reimburse or indemnify
Buyer or any Acquired Company pursuant to this Agreement.
Seller shall exercise at its sole expense (and in such manner
as it may determine) complete control over the handling,
disposition, and settlement of any such Tax Proceeding insofar
as it relates to matters for which Seller is so liable or
against which Seller may so be required to reimburse or
indemnify Buyer or any Acquired Company (a "Covered Matter");
provided, that Buyer may participate at its sole cost and
expense in the handling, disposition and settlement thereof;
and provided, further, that Seller shall not enter into any
compromise or agreement with respect to any Covered Matters
without the consent of the Buyer (which shall not be
unreasonably withheld, conditioned, or delayed) if such
compromise or agreement, taken as a whole, would have a direct
adverse effect on Buyer or any Acquired Company (after giving
effect to Seller's indemnification obligations hereunder).
Buyer and the Acquired Companies shall cooperate with the
Seller, as the Seller may reasonably request (including
without limitation providing the Seller with such powers of
attorney as may be reasonably necessary or appropriate) during
the course of any such Tax Proceeding; and the parties shall
cooperate fully with each other and their respective counsel
in any Tax Proceeding relating to Tax periods for which both
could be ultimately liable, taking into account their
obligations hereunder (including without limitation providing
any necessary powers of attorney).
(b) Tax Returns, Etc. Buyer and the Seller shall
cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the calculation of any
Taxes and with the preparation and filing of Tax Returns for
periods through the Effective Time pursuant to this Agreement,
and in connection with any Tax Proceeding with respect to
Taxes for any period through the Effective Time affecting or
relating to any Acquired Company. Such cooperation shall
include the retention and (upon the other party's written
request) the provision of records and information that are
reasonably relevant to such preparation and filing and to any
Tax Proceeding relating thereto and providing additional
information and explanation of any material so provided.
<PAGE>
6. Refunds and Timing Adjustments.
(a) Refunds. Any refunds or credits of federal,
state, local, or foreign Taxes of an Acquired Company received
by Buyer, Seller, or any Acquired Company attributable to
losses, credits or similar allowances arising in or
attributable to periods ending on or prior to the Effective
Time or to decreases in Tax liability in such periods shall be
for the account of the Seller and all other refunds or credits
of any Acquired Company shall be for the account of the Buyer
(or the Acquired Company), it being understood that any
refunds or credits so attributable to Tax periods including
the Effective Time shall be divided between the parties in a
manner consistent with the principles of Section 2(c). Any
party or any Acquired Company receiving such a refund or
credit that is for the account of the other party hereunder
shall promptly pay to the other party an amount equal to the
amount of such refund or credit after the receipt thereof. No
Acquired Company shall carry back any net operating loss or
credit incurred or realized following the Effective Time to
Tax periods of the Acquired Company ending at or prior to the
Effective Time (or to any other period in which the Acquired
Company was a member of an Affiliated Group with the Seller),
and each Acquired Company shall elect to relinquish the
carryback period in respect of any such net operating losses
or credits if necessary or appropriate to give effect to the
foregoing.
(b) Timing Adjustments. If the Tax liability of any
Acquired Company for a period through and including the
Effective Time is increased (a "Pre-Closing Increase") because
of the correction of the timing of an item of income,
deduction, or credit, which, when corrected, produces a Tax
benefit available to Buyer or an Acquired Company after the
Effective Time, Buyer shall pay to Seller from time to time
upon its (or any Acquired Company's) receipt or application of
all or any portion of such Tax benefit a cumulative aggregate
amount equal to the lesser of (i) the amount of such Tax
benefit or portion thereof or (ii) the amount of the
Pre-Closing Increase. If the Tax liability of any Acquired
Company for a period after the Effective Time is increased (a
"Post-Closing Increase") because of the correction of the
timing of an item of income, deduction, or credit, which, when
corrected, produces a Tax benefit available to the Seller or
an Acquired Company for a period on or before the Effective
Time, the Seller shall pay to Buyer (or, if applicable, any
amount payable by the Buyer to the Seller under subsection (a)
above shall be reduced by) an amount equal to the lesser of
(i) the amount of such Tax benefit or portion thereof or (ii)
the amount of the Post-Closing Increase.
7. Miscellaneous.
(a) This Agreement (together with the Merger
Agreement) contains the entire understanding of the parties
relating to the subject matter hereof, supersedes all prior
agreements and understandings relating thereto, and shall not
be amended except by a written instrument hereafter signed by
all of the parties hereto. The language used in this Agreement
will be deemed to be the language chosen by the parties to
express their mutual intent, and no rule of strict
construction will be applied against any party. The headings
<PAGE>
of sections and subsections are for reference only and shall
not limit or control the meaning thereof. Any notices,
requests, payments, instructions, or other documents to be
given hereunder shall be given in the manner provided by
Section 10.02 of the Merger Agreement. This Agreement shall be
governed by and construed and enforced in accordance with the
internal laws (and not the choice-of-law rules) of the State
of Delaware. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
(b) The representations, warranties, covenants, and
agreements of the parties set forth in this Agreement shall
survive the Effective Time until the expiration of the
applicable statute of limitations for Tax assessments
(including any extensions thereof).
(c) This Agreement shall not create any rights
in any person other than the parties to this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as an instrument under seal as of the day and year first written
above.
MERCURY FINANCE COMPANY
By:
Name:
Title:
BANK OF BOSTON CORPORATION
By:
Name:
Title:
