<PAGE>
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BETWEEN
CITIGROUP INC.
AND
ASSOCIATES FIRST CAPITAL CORPORATION
DATED AS OF SEPTEMBER 5, 2000
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TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
SECTION 1.1 The Merger......................................................1
SECTION 1.2 Closing.........................................................2
SECTION 1.3 Effective Time..................................................2
SECTION 1.4 Effects of the Merger...........................................2
SECTION 1.5 Certificate of Incorporation and By-laws of the Surviving
Corporation.....................................................2
SECTION 1.6 Directors and Officers..........................................2
SECTION 1.7 Agreement to Cooperate to Revise Transaction....................2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock.........................................3
SECTION 2.2 Exchange of Certificates........................................4
SECTION 2.3 Certain Adjustments.............................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company...................8
SECTION 3.2 Representations and Warranties of Parent.......................25
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business............................................33
SECTION 4.2 No Solicitation by the Company.................................38
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4 and the Proxy Statement;
Stockholders Meeting...........................................41
SECTION 5.2 Letters of the Company's Accountants...........................42
SECTION 5.3 Letters of Parent's Accountants...............................42
SECTION 5.4 Access to Information; Confidentiality.........................43
SECTION 5.5 Best Efforts...................................................43
SECTION 5.6 Employee Stock Options, Incentive and Benefit Plans............44
SECTION 5.7 Indemnification, Exculpation and Insurance.....................46
SECTION 5.8 Fees and Expenses..............................................47
SECTION 5.9 Public Announcements...........................................48
SECTION 5.10 Affiliates....................................................48
SECTION 5.11 Stock Exchange Listing........................................49
SECTION 5.12 Stockholder Litigation........................................49
SECTION 5.13 Tax Treatment.................................................49
SECTION 5.14 Pooling of Interests..........................................49
SECTION 5.15 Standstill Agreements; Confidentiality Agreements.............49
SECTION 5.16 Conveyance Taxes..............................................49
SECTION 5.17 Payment of Dividends. .........................................50
SECTION 5.18 Section 16 Matters............................................50
SECTION 5.19 Employee Benefit Review......................................50
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger.....51
SECTION 6.2 Conditions to Obligations of Parent............................52
SECTION 6.3 Conditions to Obligations of the Company.......................53
SECTION 6.4 Frustration of Closing Conditions..............................53
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination....................................................53
SECTION 7.2 Effect of Termination..........................................54
SECTION 7.3 Amendment......................................................55
SECTION 7.4 Extension; Waiver..............................................55
SECTION 7.5 Procedure for Termination......................................55
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties..................55
SECTION 8.2 Notices........................................................55
SECTION 8.3 Definitions....................................................56
SECTION 8.4 Interpretation.................................................57
SECTION 8.5 Counterparts...................................................58
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries.................58
SECTION 8.7 Governing Law..................................................58
SECTION 8.8 Assignment.....................................................58
SECTION 8.9 Consent to Jurisdiction........................................58
SECTION 8.10 Headings......................................................59
SECTION 8.11 Severability..................................................59
AGREEMENT AND PLAN OF MERGER dated as of September 5, 2000, by
and between CITIGROUP INC., a Delaware corporation ("Parent"), and
ASSOCIATES FIRST CAPITAL CORPORATION, a Delaware corporation (the
"Company").
WHEREAS, the respective Boards of Directors of Parent and the
Company have each approved the merger of the Company with and into Parent
(the "Merger"), upon the terms and subject to the conditions set forth in
this Agreement, whereby each issued and outstanding share of Class A common
stock, par value $.01 per share, of the Company ("Company Common Stock"),
other than shares owned by the Company and Parent (with certain exceptions,
as set forth in Section 2.1(a)), will be converted into the right to
receive the Merger Consideration (as defined in Section 2.1(b));
WHEREAS, the respective Boards of Directors of Parent and the
Company have each determined that the Merger and the other transactions
contemplated hereby are consistent with, and in furtherance of, their
respective business strategies and goals and are in the best interests of
each corporation and their respective stockholders;
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also
to prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that
the Merger will qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and
that this Agreement be, and is hereby, adopted as a plan of reorganization
for purposes of Section 368 of the Code; and
WHEREAS, for financial accounting purposes, it is intended that
the Merger will be accounted for as a pooling of interests transaction
under United States generally accepted accounting principles ("GAAP").
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the
parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law ("DGCL"), the Company shall be merged with and into
Parent at the Effective Time (as defined in Section 1.3). Following the
Effective Time, Parent shall be the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and
obligations of the Company in accordance with the DGCL.
SECTION 1.2 Closing. Subject to the satisfaction or waiver of
all the conditions to closing contained in Article VI hereof, the closing
of the Merger (the "Closing") will take place at 10:00 a.m. on a date to be
specified by the parties (the "Closing Date"), which shall be no later than
the second day after satisfaction or waiver of the conditions set forth in
Article VI (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions), unless another time or date is agreed to by the parties
hereto. The Closing will be held at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, Four Times Square, New York, New York 10036 or at such
other location as is agreed to by the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this
Agreement, as soon as practicable following the Closing, the parties shall
cause the Merger to be consummated by filing a certificate of merger (the
"Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or recordings
required under the DGCL to effectuate the Merger. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware, or at such subsequent date or
time as Parent and the Company shall agree and specify in the Certificate
of Merger (the time the Merger becomes effective being hereinafter referred
to as the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the
effects set forth in the DGCL.
SECTION 1.5 Certificate of Incorporation and By-laws of the
Surviving Corporation. The Restated Certificate of Incorporation of Parent
shall be the certificate of incorporation of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable
law. The by-laws of Parent, as in effect immediately prior to the Effective
Time, shall be the by-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
SECTION 1.6 Directors and Officers. The directors and officers
of Parent shall, from and after the Effective Time, become the directors
and officers, respectively, of the Surviving Corporation until their
successors shall have been duly elected, appointed or qualified or until
their earlier death, resignation or removal in accordance with the
certificate of incorporation and the by-laws of the Surviving Corporation.
SECTION 1.7 Agreement to Cooperate to Revise Transaction. Upon
the reasonable request of either party, each of Parent and the Company
shall cooperate in efforts to effect a change in the method of effecting
the Merger contemplated by this Agreement, including to provide for a
different form of merger; provided, however, that no such change shall (i)
alter or change the amount or kind of consideration to be received by
holders of Company Common Stock, (ii) adversely affect the proposed
accounting treatment for the Merger or the tax treatment to Parent or
holders of Company Common Stock as a result of receiving the Merger
Consideration, or (iii) materially delay the consummation of the
transactions contemplated hereby.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holder of
any shares of Company Common Stock:
(a) Cancellation of Treasury Stock. Each share of Company
Common Stock that is owned directly by the Company or Parent shall
automatically be cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor; provided, however,
that any shares of Company Common Stock (i) held by the Company or Parent
in connection with any market-making or proprietary trading activity or for
the account of another person, (ii) as to which the Company or Parent is or
may be required to act as a fiduciary or in a similar capacity or (iii) the
cancellation of which would violate any legal duties or obligations of the
Company or Parent, shall not be cancelled but, instead, shall be treated as
set forth in Section 2.1(b).
(b) Conversion of Company Common Stock. Subject to Section
2.2(e), at the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each issued and outstanding share
of Company Common Stock (other than shares to be cancelled in accordance
with Section 2.1(a)), together with the rights attached thereto to purchase
the Company's Series A Junior Participating Preferred Stock issued pursuant
to the Rights Agreement between the Company and First Chicago Trust Company
of New York as Rights Agent, dated as of April 13, 1998 (the "Rights
Agreement"), shall be converted into the right to receive .7334 (the
"Exchange Ratio") of a validly issued, fully paid and nonassessable shares
of common stock, par value $.01 per share ("Parent Common Stock"), of
Parent. The consideration to be issued to holders of Company Common Stock
is referred to herein as the "Merger Consideration." As of the Effective
Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such
shares of Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration and any cash
in lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance
with Section 2.2(e) and any dividends or distributions to which such holder
is entitled pursuant to Section 2.2(c), in each case without interest.
SECTION 2.2 Exchange of Certificates. (a) Exchange Agent. As of
the Effective Time, Parent shall enter into an agreement with one of its
bank or trust company subsidiaries to act as exchange agent for the Merger
(the "Exchange Agent"), which shall provide that Parent shall deposit with
the Exchange Agent as of the Effective Time, for the benefit of the holders
of shares of Company Common Stock, for exchange in accordance with
this Article II, through the Exchange Agent, certificates representing the
shares of Parent Common Stock (such shares of Parent Common Stock, together
with any dividends or distributions with respect thereto with a record date
after the Effective Time, any Excess Shares (as defined in Section 2.2(e))
and any cash (including cash proceeds from the sale of the Excess Shares)
payable in lieu of any fractional shares of Parent Common Stock being
hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.1 in exchange for outstanding shares of Company Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Exchange Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the
"Certificates") whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 2.1 and any cash in lieu of
fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance
with Section 2.2(e) and any dividends or distributions to which such holder
is entitled pursuant to Section 2.2(c), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates (or
affidavits of loss in lieu of Certificates) to the Exchange Agent and shall
be in such form and have such other provisions as the Company and Parent
may reasonably specify) and (ii) instructions for use in surrendering the
Certificates in exchange for the Merger Consideration and any cash in lieu
of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance
with Section 2.2(e) and any dividends or distributions to which such holder
is entitled pursuant to Section 2.2(c). Upon surrender of a Certificate (or
affidavits of loss in lieu of Certificates) for cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required thereby, the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock
which such holder has the right to receive pursuant to the provisions of
this Article II, certain dividends or other distributions in accordance
with Section 2.2(c) and cash in lieu of any fractional share of Parent
Common Stock in accordance with Section 2.2(e), and the Certificate so
surrendered shall forthwith be cancelled. In the event of a surrender of a
Certificate representing shares of Company Common Stock which are not
registered in the transfer records of the Company under the name of the
person surrendering such Certificate, a certificate representing the proper
number of shares of Parent Common Stock will be issued to a person other
than the person in whose name the Certificate so surrendered is registered
if such Certificate shall be properly endorsed or otherwise be in proper
form for transfer and the person requesting such issuance shall pay any
transfer or other taxes required by reason of the issuance of shares of
Parent Common Stock to a person other than the registered holder of such
Certificate or establish to the satisfaction of Parent that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender
the Merger Consideration which the holder thereof has the right to receive
in respect of such Certificate pursuant to the provisions of this Article
II, certain dividends or other distributions in accordance with Section
2.2(c) and cash in lieu of any fractional share of Parent
Common Stock in accordance with Section 2.2(e). No interest shall be paid
or will accrue on any cash payable to holders of Certificates pursuant to
the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date at or after the Effective Time shall be paid to the holder of
any unsurrendered Certificate with respect to the shares of Parent Common
Stock issuable hereunder in respect thereof, and, no cash payment in lieu
of fractional shares shall be paid to any such holder pursuant to Section
2.2(e), and all such dividends, other distributions and cash in lieu of
fractional shares of Parent Common Stock shall be paid by Parent to the
Exchange Agent and shall be included in the Exchange Fund, in each case
until the surrender of such Certificate in accordance with this Article II,
subject to Section 2.2(f). Subject to the effect of applicable escheat or
similar laws, following surrender of any such Certificate there shall be
paid to the holder of the certificate representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) at the time
of such surrender, the amount of dividends or other distributions with a
record date at or after the Effective Time theretofore paid with respect to
such whole shares of Parent Common Stock and the amount of any cash payable
in lieu of a fractional share of Parent Common Stock to which such holder
is entitled pursuant to Section 2.2(e) and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date at
or after the Effective Time and with a payment date subsequent to such
surrender payable with respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Article II (including any
cash paid pursuant to this Article II) shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the shares of
Company Common Stock theretofore represented by such Certificates, subject,
however, to the Surviving Corporation's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective Time
which may have been declared or made by the Company on such shares of
Company Common Stock which remain unpaid at the Effective Time, and there
shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be cancelled and exchanged as
provided in this Article II, except as otherwise provided by law.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution of Parent shall
relate to such fractional share interests and such fractional share
interests will not entitle the owner thereof to vote or to any rights
of a stockholder of Parent.
(ii) As promptly as practicable following the Effective
Time, the Exchange Agent shall determine the excess of (A) the number
of whole shares of Parent Common Stock delivered to the Exchange
Agent by Parent pursuant to Section 2.2(a) over (B) the aggregate
number of whole shares of Parent Common Stock to be distributed to
former holders of Company Common Stock pursuant to Section 2.2(b)
(such excess being herein called the "Excess Shares"). Following the
Effective Time, the Exchange Agent shall, on behalf of the former
stockholders of the Company, sell the Excess Shares at
then-prevailing prices on the New York Stock Exchange, Inc. ("NYSE"),
all in the manner provided in Section 2.2(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of the
NYSE and shall be executed in round lots to the extent practicable.
The Exchange Agent shall use reasonable efforts to complete the sale
of the Excess Shares as promptly following the Effective Time as, in
the Exchange Agent's sole judgment, is practicable consistent with
obtaining the best execution of such sales in light of prevailing
market conditions. Until the net proceeds of such sale or sales have
been distributed to the holders of Certificates formerly representing
Company Common Stock, the Exchange Agent shall hold such proceeds in
trust for such holders (the "Common Shares Trust"). All commissions,
transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation of the Exchange Agent incurred in
connection with such sale of the Excess Shares shall be paid by the
Surviving Corporation from the proceeds of such sales. The Exchange
Agent shall determine the portion of the Common Shares Trust to which
each former holder of Company Common Stock is entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the
Common Shares Trust by a fraction, the numerator of which is the
amount of the fractional share interest to which such former holder
of Company Common Stock is entitled (after taking into account all
shares of Company Common Stock held of record at the Effective Time
by such holder) and the denominator of which is the aggregate amount
of fractional share interests to which all former holders of Company
Common Stock are entitled.
(iv) Notwithstanding the provisions of Section 2.2(e)(ii)
and (iii), Parent may elect at its option, exercised prior to the
Effective Time, in lieu of the issuance and sale of Excess Shares and
the making of the payments herein above contemplated, to pay each
former holder of Company Common Stock an amount in cash equal to the
product obtained by multiplying (A) the fractional share interest to
which such former holder (after taking into account all shares of
Company Common Stock held of record at the Effective Time by such
holder) would otherwise be entitled by (B) the closing price of the
Parent Common Stock as reported on the NYSE Composite Transaction
Tape (as reported in The Wall Street Journal (National Edition), or,
if not reported therein, any other authoritative source) on the
Closing Date, and, in such case, all references herein to the cash
proceeds of the sale of the Excess Shares and similar references
shall be deemed to mean and refer to the payments calculated as set
forth in this Section 2.2(e)(iv).
(v) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Certificates
formerly representing Company Common Stock with respect to any
fractional share interests, the Exchange Agent shall make available
such amounts to such holders of Certificates formerly representing
Company Common Stock subject to and in accordance with the terms of
Sections 2.2(b) and 2.2(c).
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of the Certificates for six
months after the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any holders of the Certificates who have not
theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation for payment of their claim for Merger Consideration,
any dividends or distributions with respect to Parent Common Stock and any
cash in lieu of fractional shares of Parent Common Stock.
(g) No Liability. None of the Company, the Surviving
Corporation or the Exchange Agent shall be liable to any person in respect
of any shares of Parent Common Stock, any dividends or distributions with
respect thereto, any cash in lieu of fractional shares of Parent Common
Stock or any cash from the Exchange Fund, in each case delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificate shall not have been surrendered immediately
prior to such date on which any Merger Consideration, any dividends or
distributions payable to the holder of such Certificate or any cash payable
to the holder of such Certificate pursuant to this Article II would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 3.1(d)), any such Merger Consideration, dividends or
distributions in respect of such Certificate or such cash shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Parent, on a
daily basis. Any interest and other income resulting from such investments
shall be paid to Parent.
(i) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent shall issue
in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration and, if applicable, any unpaid dividends and distributions on
shares of Parent Common Stock deliverable in respect thereof and any cash
in lieu of fractional shares of Parent Common Stock, in each case due to
such person pursuant to this Agreement.
SECTION 2.3 Certain Adjustments. If after the date hereof and
on or prior to the Effective Time the outstanding shares of Parent Common
Stock or Company Common Stock shall be changed into a different number of
shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or any dividend payable in stock or
other securities shall be declared thereon with a record date within such
period, or any similar event shall occur (any such action, an "Adjustment
Event"), the Exchange Ratio shall be adjusted accordingly to provide to the
holders of Company Common Stock the same economic effect as contemplated by
this Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or dividend or similar event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company.
Except (i) as disclosed in the Company Filed SEC Documents (as defined in
Section 3.1(g)), (ii) with respect to matters to which Parent shall have
given its consent pursuant to Section 4.1(a), or (iii) as set forth on the
Disclosure Schedule delivered by the Company to Parent prior to the
execution of this Agreement (the "Company Disclosure Schedule") and making
reference to the particular subsection of this Agreement to which exception
is being taken (regardless of whether such subsection refers to the Company
Disclosure Schedule), the Company represents and warrants to Parent as
follows (it being understood that any matter set forth in the Company
Disclosure Schedule with reference to a particular subsection of this
Agreement will be deemed to be set forth with reference to any other
subsection of this Agreement so long as the relevance of such matter to any
such other subsection is reasonably apparent):
(a) Organization, Standing and Corporate Power.
(i) Each of the Company and its significant subsidiaries
(as defined in Rule 1-02 of Regulation S-X, promulgated pursuant to
the Securities Act of 1933, as amended (the "Securities Act"), by the
Securities and Exchange Commission (the "SEC")) ("significant
subsidiaries") is a corporation or other legal entity duly organized,
validly existing and in good standing (with respect to jurisdictions
which recognize such concept) under the laws of the jurisdiction in
which it is organized and has the requisite corporate or other power,
as the case may be, and authority to carry on its business as now
being conducted, except, as to subsidiaries, for those jurisdictions
where the failure to be in good standing individually or in the
aggregate would not have a material adverse effect (as defined in
Section 8.3) on the Company. Each of the Company and its subsidiaries
(as defined in Section 8.3) is duly qualified or licensed to do
business and is in good standing (with respect to jurisdictions which
recognize such concept) in each jurisdiction in which the nature of
its business or the ownership, leasing or operation of its properties
makes such qualification or licensing necessary, except for those
jurisdictions where the failure to be so qualified or licensed or to
be in good standing individually or in the aggregate would not have a
material adverse effect on the Company. Section 3.1(a) of the Company
Disclosure Schedule includes a complete list of each of the
subsidiaries through which the Company conducts (A) its insurance
operations (the "Company Insurance Subsidiaries"), and (B) its
finance activities (including commercial finance activities and
consumer finance activities, which consumer finance activities
include credit card operations, banking, home equity operations and
consumer financial services) (together the "Company Finance
Subsidiaries").
(ii) The Company has delivered or provided to Parent
prior to the execution of this Agreement complete and correct copies
of its certificate of incorporation and by-laws, as amended to date.
(iii) In all material respects, the minute books of the
Company contain accurate records of all meetings and accurately
reflect all other actions taken by the stockholders, the Board of
Directors and all committees of the Board of Directors of the Company
since January 1, 1998.
(b) Subsidiaries. (i) Section 3.1(b) of the Company Disclosure
Schedule includes all the subsidiaries of the Company which as of the date
of this Agreement are significant subsidiaries. All the outstanding shares
of capital stock of, or other equity interests in, each such significant
subsidiary (i) have been validly issued and are fully paid and
nonassessable; (ii) are owned directly or indirectly by the Company, free
and clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens"); and
(iii) are free of any other restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
ownership interests) that would prevent the operation by the Surviving
Corporation of such significant subsidiary's business as currently
conducted.
(c) Capital Structure. The authorized capital stock of the
Company consists of 1,150,000,000 shares of Company Common Stock,
144,118,820 shares of Class B Common Stock, $.01 par value ("Company Class
B Common Stock") and 50,000,000 shares of preferred stock, par value $.01
per share, of the Company ("Company Authorized Preferred Stock"), of which
734,500 shares have been designated as Company Series A Junior
Participating Preferred Stock ("Company Preferred Stock"). At the close of
business on August 31, 2000: (i) 728,916,299 shares of Company Common Stock
were issued and outstanding; (ii) 1,042,648 shares of Company Common Stock
were held by the Company in its treasury (such shares, "Company Class A
Common Treasury Stock") and no shares of Company Common Stock were held by
subsidiaries of the Company; (iii) no shares of Company Class B Common
Stock were issued and outstanding; (iv) no shares of Company Class B Common
Stock were held by the Company in its treasury (such shares, "Company Class
B Common Treasury Stock") and no shares of Company Class B Common Stock
were held by subsidiaries of the Company; (v) no shares of Company
Preferred Stock were issued and outstanding and 734,500 shares of Company A
Preferred Stock were reserved for issuance pursuant to the Rights
Agreement; (vi) no shares of Company Preferred Stock were held by the
Company in its treasury or were held by any subsidiary of the Company;
(vii) 100,000,000 shares of Company Common Stock were reserved for issuance
pursuant to the Company's Incentive Compensation Plan (the "Company Stock
Plan"), of which 25,231,589 shares are subject to outstanding employee and
non-employee director stock options ("Company Stock Options"), restricted
Company Common Stock or other rights to purchase or receive Company Common
Stock granted under the Company Stock Plan (collectively with Company Stock
Options, "Company Awards"); and (viii) other than as set forth above, no
other shares of Company Authorized Preferred Stock have been designated or
issued. All outstanding shares of capital stock of the Company are, and all
shares thereof which may be issued will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except as set forth in this Section 3.1(c) and except for changes
since August 31, 2000 resulting from the issuance of shares of Company
Common Stock pursuant to Company Awards and other rights referred to above
in this Section 3.1(c), (x) there are not issued, reserved for issuance or
outstanding (A) any shares of capital stock or voting securities or other
ownership interests of the Company, (B) any securities of the Company or
any Company subsidiary convertible into or exchangeable or exercisable for
shares of capital stock or voting securities or other ownership interests
of the Company, or (C) any warrants, calls, options or, except for
commitments entered into in connection with the $515,500,000 aggregate
principal amount Redeemable Hybrid Income Overnight Shares due October 16,
2002 ("RHINOs"), other rights to acquire from the Company or any Company
subsidiary, or any obligation of the Company or any Company subsidiary to
issue, any capital stock, voting securities or other ownership interests
in, or securities convertible into or exchangeable or exercisable for,
capital stock or voting securities or other ownership interests of the
Company, and (y) there are no outstanding obligations of the Company or any
Company subsidiary to repurchase, redeem or otherwise acquire any such
securities or, except for commitments entered into in connection with the
RHINOs, to issue, deliver or sell, or cause to be issued, delivered or
sold, any such securities. There are no outstanding (A) securities of the
Company or any Company subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or voting securities or other
ownership interests in any Company subsidiary, (B) warrants, calls, options
or other rights to acquire from the Company or any Company subsidiary, or
any obligation of the Company or any Company subsidiary to issue, any
capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable or exercisable for, any capital
stock, voting securities or other ownership interests in, any Company
subsidiary or (C) obligations of the Company or any Company subsidiary to
repurchase, redeem or otherwise acquire any such outstanding securities of
Company subsidiaries or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. To the Company's knowledge, neither
the Company nor any Company subsidiary is a party to any agreement
restricting the transfer of, relating to the voting of, requiring
registration of, or granting any preemptive or, except as provided by the
terms of Company Stock Options, antidilutive rights with respect to, any
securities of the type referred to in the two preceding sentences.
(d) Authority; Noncontravention. The Company has all requisite
corporate power and authority to enter into this Agreement and, subject, in
the case of the Merger, to the Company Stockholder Approval (as defined in
Section 3.1(l)) to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on
the part of the Company, subject, in the case of the Merger, to the Company
Stockholder Approval. This Agreement has been duly executed and delivered
by the Company and, assuming the due authorization, execution and delivery
by Parent, constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of any obligation or loss of a benefit under, or result in the creation of
any Lien upon any of the properties or assets of the Company or any of its
subsidiaries under, (i) the certificate of incorporation or by- laws of the
Company, (ii) the certificate of incorporation or by-laws or the comparable
organizational documents of any of its subsidiaries, (iii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise, license or similar
authorization applicable to the Company or any of its subsidiaries or their
respective properties or assets or (iv) subject to the governmental filings
and other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
the Company or any of its subsidiaries or their respective properties or
assets, other than, in the case of clauses (ii), (iii) and (iv), any such
conflicts, violations, defaults, rights, losses or Liens that individually
or in the aggregate would not (x) have a material adverse effect on the
Company or (y) reasonably be expected to impair or delay the ability of the
Company to perform its obligations under this Agreement. To the knowledge
of the Company, no consent, approval, order or authorization of, action by
or in respect of, or registration, declaration or filing with, any federal,
state, local or foreign government, any court, administrative, regulatory
or other governmental agency, commission or authority or any non-
governmental self-regulatory agency, commission or authority (a
"Governmental Entity") is required by or with respect to the Company or any
of its subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the
transactions contemplated by this Agreement, except for (1) the filing of a
pre- merger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); (2) the filing with the SEC of (A) a proxy statement relating to the
Company Stockholders Meeting (as defined in Section 5.1(b)) (such proxy
statement, as amended or supplemented from time to time, the "Proxy
Statement"), and (B) such reports under Section 13(a), 13(d), 15(d) or
16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as may be required in connection with this Agreement and the
transactions contemplated by this Agreement; (3) the filing of the
Certificate of Merger with the Secretary of State of Delaware and such
filings with Governmental Entities to satisfy the applicable requirements
of the laws of states in which the Company and its subsidiaries are
qualified or licensed to do business or state securities or "blue sky"
laws; (4) such filings with and consents and approvals of the Commissioners
of Insurance or similar regulatory authorities having jurisdiction over the
insurance business; (5) filings in respect of, and approvals and
authorizations of, any Governmental Entity having jurisdiction over the
consumer lending, banking, insurance or other financial services
businesses; and (6) such consents, approvals, orders or authorizations the
failure of which to be made or obtained individually or in the aggregate
would not (x) have a material adverse effect on the Company or (y)
reasonably be expected to materially impair or delay the ability of the
Company to perform its obligations under this Agreement.
(e) Company Documents; Undisclosed Liabilities.
(i) Since January 1, 1997, the Company and its
subsidiaries have filed all required reports, schedules, forms,
statements and other documents (including exhibits and all other
information incorporated therein) with the SEC ("Company SEC
Documents"). As of their respective dates, the Company SEC Documents
complied in all material respects with the requirements of the
Securities Act, or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to
such Company SEC Documents, and no Company SEC Document when filed
(as amended and restated and as supplemented by subsequently filed
Company SEC Documents) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The financial statements of the Company and its
subsidiaries included in Company SEC Documents complied as to form,
as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material
respects the consolidated financial position of the Company and its
consolidated subsidiaries, or the appropriate subsidiary of the
Company and such subsidiary's consolidated subsidiaries, as the case
may be, as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
Except (A) as reflected in such financial statements or in the notes
thereto or (B) for liabilities incurred in connection with this
Agreement or the transactions contemplated hereby, neither the
Company nor any of its subsidiaries has any liabilities or
obligations of any nature which, individually or in the aggregate,
would have a material adverse effect on the Company. Section 3.1(e)
of the Company Disclosure Schedule identifies each subsidiary of the
Company that is required to file Company SEC Documents with the SEC.
(ii) The Company has made available to Parent true and
complete copies of the annual and quarterly statements of each of the
Company Insurance Subsidiaries as filed with the applicable insurance
regulatory authorities for the years ended December 31, 1999 and the
quarterly period ended March 31, 2000 (collectively, the "Company SAP
Statements"). Except as would not have a material adverse effect on
the Company, the Company SAP Statements were prepared in conformity
with statutory accounting practices prescribed or permitted by the
applicable insurance regulatory authorities consistently applied
("SAP") for the periods covered thereby and (as may have been amended
and restated or supplemented by subsequently filed Company SAP
statements) present fairly the statutory financial position of such
Company Insurance Subsidiaries as at the respective dates thereof and
the results of operations of such subsidiaries for the respective
periods then ended. Except as would not have a material adverse
effect on the Company, the Company SAP Statements complied with all
applicable Insurance Laws (as defined in Section 3.1(h)) when filed,
and, to the knowledge of the Company, no deficiency has been asserted
with respect to any Company SAP Statements by the applicable
insurance regulatory body or any other governmental agency or body.
The annual statutory balance sheets and income statements included in
the Company SAP Statements have been audited, and the Company has
made available to Parent true and complete copies of all audit
opinions related thereto. The Company has made available to Parent
true and complete copies of all examination reports of insurance
departments and any insurance regulatory agencies since January 1,
1999 relating to the Company Insurance Subsidiaries.
(f) Information Supplied. None of the information supplied or
to be supplied by the Company specifically for inclusion or incorporation
by reference in (i) the registration statement on Form S-4 to be filed with
the SEC by Parent in connection with the issuance of Parent Common Stock in
the Merger (the "Form S-4") will, at the time the Form S-4 becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii)
the Proxy Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation or warranty is made
by the Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent specifically for inclusion
or incorporation by reference in the Proxy Statement.
(g) Absence of Certain Changes or Events. Except for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby and except as permitted by Section 4.1(a), or as
disclosed in any Company SEC Document filed and publicly available prior to
the date hereof (as amended to the date hereof, "Company Filed SEC
Documents") since January 1, 2000, the Company and its subsidiaries have
conducted their business only in the ordinary course, and there has not
been (i) any material adverse change in the Company, including, but not
limited to, any material adverse change arising from or relating to
fraudulent or unauthorized activity, (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital stock, other than
regular quarterly cash dividends on the Company Common Stock and dividends
payable on the Company Preferred Stock in accordance with their terms,
(iii) any split, combination or reclassification of any of the Company's
capital stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of
the Company's capital stock, except for issuances of Company Common Stock
upon the exercise of Company Stock Options, in each case awarded prior to
the date hereof in accordance with their present terms, (iv) prior to the
date hereof (A) any granting by the Company or any of its subsidiaries to
any current or former director, executive officer or other key employee of
the Company or its subsidiaries of any increase in compensation, bonus or
other benefits, except for increases in the ordinary course of business,
(B) any granting by the Company or any of its subsidiaries to any such
current or former director, executive officer or key employee of any
increase in severance or termination pay, or (C) any entry by the Company
or any of its subsidiaries into, or any amendment of, any employment,
deferred compensation, consulting, severance, termination or
indemnification agreement with any such current or former director,
executive officer or key employee, (v) except insofar as may have been
disclosed in Company Filed SEC Documents or required by a change in GAAP or
SAP, any material change in accounting methods (or underlying assumptions),
principles or practices by the Company affecting its assets, liabilities or
business, including without limitation, any reserving, renewal or residual
method, practice or policy, (vi) any tax election by the Company or its
subsidiaries or any settlement or compromise of any income tax liability by
the Company or its subsidiaries, except as would not be required to be
disclosed in the Company SEC Documents, (vii) any material change in
actuarial, pricing, or investment policies, (viii) any material insurance
transaction other than in the ordinary course of business consistent with
past practice or (ix) any agreement or commitment (contingent or otherwise)
to do any of the foregoing.
(h) Compliance with Applicable Laws; Litigation.
(i) The Company, its subsidiaries and employees hold all
permits, licenses, variances, exemptions, orders, registrations and
approvals of all Governmental Entities which are required for the
operation of the businesses of the Company and its subsidiaries (the
"Company Permits"), except where the failure to have any such Company
Permits individually or in the aggregate would not have a material
adverse effect on the Company. The Company and its subsidiaries are
in compliance in all respects with the terms of the Company Permits
and all applicable statutes, laws, ordinances, rules and regulations,
except where the failure so to comply individually or in the
aggregate would not have a material adverse effect on the Company.
Except as disclosed in the Company Filed SEC Documents, no action,
demand, requirement or investigation by any Governmental Entity and
no suit, action, proceeding or arbitration by any person or
Governmental Entity, in each case with respect to the Company or any
of its subsidiaries or any of their respective properties is pending
or, to the knowledge of the Company, threatened, other than, in each
case, those the outcome of which individually or in the aggregate
would not (i) have a material adverse effect on the Company or (ii)
reasonably be expected to impair the ability of the Company to
perform its obligations under this Agreement or prevent or materially
delay the consummation of any of the transactions contemplated by
this Agreement.
(ii) The business and operations of the Company Insurance
Subsidiaries have been conducted in compliance in all respects with
all applicable statutes, laws and regulations regulating the business
of insurance and all applicable orders and directives of insurance
regulatory authorities and market conduct recommendations resulting
from market conduct examinations of insurance regulatory authorities
(collectively, "Insurance Laws"), except where the failure so to
comply individually or in the aggregate would not have a material
adverse effect on the Company. Notwithstanding the generality of the
foregoing, except where the failure to do so would not, individually
or in the aggregate, have a material adverse effect on the Company,
each Company Insurance Subsidiary and, to the knowledge of the
Company, its agents have marketed, sold and issued insurance products
in compliance, in all respects, with Insurance Laws applicable to the
business of such Company Insurance Subsidiary and in the respective
jurisdictions in which such products have been sold, including,
without limitation, in compliance with (i) all applicable
prohibitions against "redlining" or withdrawal of business lines,
(ii) all applicable requirements relating to the disclosure of the
nature of insurance products as policies of insurance and (iii) all
applicable requirements relating to insurance product projections and
illustrations. In addition, (i) there is no pending or, to the
knowledge of the Company, threatened charge by any insurance
regulatory authority that any of the Company Insurance Subsidiaries
has violated, nor any pending or, to the knowledge of the Company,
threatened investigation by any insurance regulatory authority with
respect to possible violations of, any applicable Insurance Laws
where such violations would, individually or in the aggregate, have a
material adverse effect on the Company; and (ii) the Company
Insurance Subsidiaries have filed and will file all notices and
reports required to be filed with any insurance regulatory authority,
except for such notices and reports as to which the failure to file
would have a material adverse effect on the Company.
(iii) Except as otherwise applicable to similarly
situated companies generally, neither the Company nor any of its
subsidiaries is subject to any outstanding order, injunction or
decree or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or, except as would not have a
material adverse effect on the Company, is subject to any order or
directive by, or is a recipient of any supervisory letter from or has
adopted any resolutions at the request of any Governmental Entity
that restricts in any respect the conduct of its business or, except
as would not have a material adverse effect on the Company, that in
any manner relates to its capital adequacy, its policies, its
management or its business (each, a "Company Regulatory Agreement"),
nor has the Company or any of its subsidiaries or affiliates (as
defined in Section 8.3) (A) been advised since January 1, 2000 by any
Governmental Entity that it is considering issuing or requesting any
such Company Regulatory Agreement or (B) have knowledge of any
pending or threatened regulatory investigation.
(iv) Each of the Company's insured depository institution
subsidiaries is "well-capitalized" (as that term is defined at 12
C.F.R. 225.2(r)(2)(i)) and "well managed" (as that term is defined at
12 C.F.R. 225.81(c)), and each institution's examination rating under
the Community Reinvestment Act of 1977 is satisfactory or
outstanding.
(v) The business and operations of the Company and the
Company Finance Subsidiaries have been conducted in compliance in all
material respects with all applicable statutes and regulations
regulating the business of consumer lending, including state usury
laws, the Truth in Lending Act, the Real Estate Settlement Procedures
Act, the Consumer Credit Protection Act, the Equal Credit Opportunity
Act, the Fair Credit Reporting Act, the Homeowners Ownership and
Equity Protection Act, the Fair Debt Collections Act and other
federal, state, local and foreign laws regulating lending ("Finance
Laws"), and have complied in all material respects with all
applicable collection practices in seeking payment under any loan or
credit extension of such subsidiaries. In addition, there is no
pending or, to the knowledge of the Company, threatened charge by any
Governmental Entity that any of the Company Finance Subsidiaries has
violated, nor any pending or, to the knowledge of the Company,
threatened investigation by any Governmental Entity with respect to
possible violations of, any applicable Finance Laws where such
violations would, individually or in the aggregate, have a material
adverse effect on the Company.
(vi) Except for filings with the SEC, which are the
subject of Section 3.1(e)(i) and filings relating to insurance
matters, which are the subject of Section 3.1(e)(ii), the Company and
each of its subsidiaries have timely filed all regulatory reports,
schedules, forms, registrations and other documents, together with
any amendments required to be made with respect thereto, that they
were required to file since January 1, 2000 with (A) any Governmental
Entity, and have timely paid all taxes, fees and assessments due and
payable in connection therewith, except where the failure to make
such payments and filings individually or in the aggregate would not
have a material adverse effect on the Company. There is no material
unresolved violation or exception by any of such Governmental
Entities with respect to any report or statement relating to any
examinations of the Company or any of its subsidiaries.
(i) Absence of Changes in Benefit Plans. Section 3.1(i) of the
Company Disclosure Schedule contains a true and complete list of (i) all
severance and employment agreements of the Company with directors or
executive officers or key employees, other than severance and employment
agreements the remaining cash obligations under which do not exceed $2
million in the aggregate, (ii) all severance programs, policies and
practices of each of the Company and each of its subsidiaries, and (iii)
all plans, agreements or arrangements of the Company and each of its
subsidiaries relating to its current or former employees, officers or
directors which contain change in control provisions (all such agreements,
programs, policies, practices, plans and arrangements being hereinafter
referred to as "Company Benefit Arrangements"). For purposes of this
Agreement, "Company Benefit Plan" shall mean each collective bargaining
agreement, employment agreement, consulting agreement, severance agreement
or any material bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding
providing benefits to any current or former employee, officer or director
of the Company or any of its wholly owned subsidiaries, including but not
limited to any Company Benefit Arrangements. Since January 1, 2000, there
has not been any material change in any actuarial or other assumptions used
to calculate funding obligations with respect to any Company pension plans
or post-retirement benefit plans, or any change in the manner in which
contributions to any Company pension plans or post-retirement benefit plans
are made or in the basis on which such contributions are determined which,
individually or in the aggregate, would result in a material increase of
the Company's or its subsidiaries' liabilities thereunder.
(j) ERISA Compliance.
(i) With respect to Company Benefit Plans, no event has
occurred and there exists no condition or set of circumstances, in
connection with which the Company or any of its subsidiaries could be
subject to any liability that individually or in the aggregate would
have a material adverse effect on the Company under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the
Code or any other applicable law.
(ii) Except as any of the following either individually
or in the aggregate would not have a material adverse effect on the
Company, (x) neither the Company nor any trade or business, whether
or not incorporated (an "ERISA Affiliate"), which together with the
Company would be deemed to be a "single employer" within the meaning
of Section 4001(b) of ERISA, has incurred any unsatisfied liability
under Title IV of ERISA and no condition exists that could reasonably
be expected to present a risk to the Company or any ERISA Affiliate
of the Company of incurring any such liability (other than liability
for premiums to the Pension Benefit Guaranty Corporation arising in
the ordinary course), and (y) no Company Benefit Plan has incurred an
"accumulated funding deficiency" (within the meaning of Section 302
of ERISA or Section 412 of the Code) whether or not waived.
(iii) Section 3.1(j)(iii) of the Company Disclosure
Schedule contains a true and complete list of each Company Benefit
Plan that is subject to Title IV of ERISA and indicates each such
plan that is a "multiemployer plan" within the meaning of Section 3
(37) of ERISA.
(iv) Subject to Section 5.19, each Company Benefit Plan
which is a welfare benefit plan as defined in Section 3(1) of ERISA
(including any such plan covering former employees of the Company or
any subsidiary of the Company) may be amended or terminated by the
Surviving Corporation on or at any time after the Closing Date.
(v) As of the date of this Agreement, neither the Company
nor any of its subsidiaries is a party to, or obligated under, any
collective bargaining or other labor union contract or arrangement
applicable to persons employed by the Company or any of its
subsidiaries and no collective bargaining agreement or other labor
union contract or arrangement is being negotiated by the Company or
any of its subsidiaries. As of the date of this Agreement, there is
no labor dispute, strike or work stoppage against the Company or any
of its subsidiaries pending or, to the knowledge of the Company,
threatened which may interfere with the respective business
activities of the Company or any of its subsidiaries, except where
such dispute, strike or work stoppage individually or in the
aggregate would not have a material adverse effect on the Company. As
of the date of this Agreement, to the knowledge of the Company, none
of the Company, any of its subsidiaries or any of their respective
representatives or employees has committed any unfair labor practice
or other labor law violation in connection with the operation of the
respective businesses of the Company or any of its subsidiaries, and
there is no charge or complaint against the Company or any of its
subsidiaries before the National Labor Relations Board or any
comparable Governmental Entity pending or threatened in writing,
except for any occurrence that individually or in the aggregate would
not have a material adverse effect on the Company.
(vi) The Company has delivered to Parent (A) a list
showing (1) the number of shares of restricted common stock
outstanding under the Incentive Compensation Plan (the "ICP") the
vesting of which is accelerated by, and (2) the number of shares
subject to, and the exercise price of, each Company Stock Option the
exercisability of which is accelerated as a result of, the entering
into of this Agreement, the consummation of the transactions
contemplated by this Agreement or any filing by the Company with the
SEC in respect thereof, and (B) a good faith estimate of the amounts
that may become payable under the Long Term Performance Plan (the
"LTPP"), the Shareholder Interest Bonus Plan (the "SIB") and the
employment agreements entered into by the Company which are scheduled
pursuant to Section 3.1(i)(i) of the Company Disclosure Schedule (the
"Employment Agreements") by virtue of entering into of this
Agreement, the consummation of the transactions contemplated by this
Agreement or any filing by the Company with the SEC in respect
thereof. Neither the entering into of this Agreement, the
consummation of the transactions contemplated by this Agreement or
any filing by the Company with the SEC in respect thereof will,
either alone or in combination with another event undertaken by the
Company or any of its subsidiaries prior to the date hereof, (A)
entitle any current or former employee or officer of the Company or
any ERISA Affiliate to severance pay, unemployment compensation or
any other payment, except as expressly provided in this Agreement,
(B) accelerate the time of payment, vesting, or lapse of restrictions
of or increase the amount of compensation due, or result in a lapse
of restrictions any such employee or officer or (C) constitute a
"change in control" under any Company Benefit Plan except, in each
case, pursuant to the LTPP, the SIB, the Excess Benefit Plan, the
Supplemental Retirement Income Plan, the Supplemental Executive
Welfare Plan and the Employment Agreements, previously disclosed to
Parent.
(k) Taxes.
(i) Except as would not have a material adverse effect on
the Company, (A) each of the Company and its subsidiaries has filed
all tax returns and reports required to be filed by it and (B) all
such tax returns and reports are complete and correct in all
respects, or requests for extensions to file such returns or reports
have been timely filed, granted and have not expired. The Company and
each of its subsidiaries has paid (or the Company has paid on its
behalf) all taxes (as defined herein) due and payable, except as
would not have a material adverse effect on the Company, and the most
recent financial statements contained in Company Filed SEC Documents
reflect an adequate reserve in accordance with GAAP for all taxes
payable by the Company and its subsidiaries for all taxable periods
and portions thereof accrued through the date of such financial
statements.
(ii) No material deficiencies for any taxes have been
proposed, asserted or assessed against the Company or any of its
subsidiaries that are not adequately reserved for. The federal income
tax returns of the Company and each of its subsidiaries for tax years
through 1986 have closed by virtue of the applicable statute of
limitations.
(iii) Neither the Company nor any of its subsidiaries has
taken any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
(iv) As used in this Agreement, "taxes" shall include all
(x) federal, state, local or foreign income, property, sales, excise
and other taxes or similar governmental charges, including any
interest, penalties or additions with respect thereto, (y) liability
for the payment of any amounts of the type described in (x) as a
result of being a member of an affiliated, consolidated, combined or
unitary group, and (z) liability for the payment of any amounts as a
result of being party to any tax sharing agreement or as a result of
any express or implied obligation to indemnify any other person with
respect to the payment of any amounts of the type described in clause
(x) or (y).
(l) Voting Requirements. The affirmative vote at the Company
Stockholders Meeting (the "Company Stockholder Approval") of a majority of
the number of outstanding shares of Company Common Stock to approve and
adopt this Agreement is the only vote of the holders of any class or series
of the Company's capital stock necessary to approve and adopt this
Agreement and the transactions contemplated hereby, including the Merger.
(m) State Takeover Statutes. To the knowledge of the Company,
no state takeover statute is applicable to the Merger or the other
transactions contemplated hereby.
(n) Accounting Matters. The Company has disclosed to its
independent public accountants all actions taken by it or its subsidiaries
that would impact the accounting of the business combination to be effected
by the Merger as a pooling of interests. As of the date hereof, the
Company, based on advice from its independent public accountants, believes
that the Merger will qualify for "pooling of interests" accounting.
(o) Brokers. Except for Goldman, Sachs & Co., no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of the Company.
(p) Ownership of Parent Capital Stock. As of the date hereof,
neither the Company nor, to its knowledge without independent
investigation, any of its affiliates who are not directors or executive
officers of the Company, (i) beneficially owns (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, or (ii) is party to any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in each case, shares of capital stock of
Parent.
(q) Intellectual Property. Except as would not have a material
adverse effect on the Company, the Company and its subsidiaries own or have
a valid license to use all trademarks, service marks, trade names, Internet
domain names, copyrights, computer programs, software (whether in source
code or object code form and documentation related thereto), databases,
inventions, know-how and trade secrets (including any registrations or
applications for registration of any of the foregoing) (collectively, the
"Company Intellectual Property") necessary to carry on its business
substantially as currently conducted and except as would not have a
material adverse effect on the Company, the consummation of the Merger and
the other transactions contemplated hereby will not result in the loss or
impairment of any such rights. Neither the Company nor any such subsidiary
has received any written notice of infringement of or conflict with, and,
to the Company's knowledge, there are no infringements of or conflicts
with, the rights of others with respect to the use of any Company
Intellectual Property that, individually or in the aggregate, in either
such case, would have a material adverse effect on the Company. Except as
would not have a material adverse effect on the Company, the Company is not
a party to or otherwise bound by any settlement agreement, court or
administrative judgment or similar obligation that limits or restricts, or
that upon the consummation of the Merger would limit or restrict, the
Company's ownership or rights to use the Company Intellectual Property.
(r) Certain Contracts. Except as set forth in the Company Filed
SEC Documents or as permitted pursuant to Section 4.1(a), neither the
Company nor any of its subsidiaries is a party to or bound by (i) any
agreement relating to the incurring of indebtedness (including sale and
leaseback and capitalized lease transactions and other similar financing
transactions) providing for payment or repayment in excess of $250 million
individually or $1 billion in the aggregate, other than such agreements
relating to indebtedness incurred in the ordinary course of business, (ii)
any "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC), or (iii) any non-competition agreement or any
other agreement or obligation which purports to limit in any material
respect the manner in which, or the localities in which, all or any
substantial portion of the business of the Company and its subsidiaries,
taken as a whole, is or would be conducted (the agreements, contracts and
obligations specified in clauses (ii) and (iii) above, collectively the
"Company Material Contracts").
(s) Environmental Liability. Except as set forth in the Company
Filed SEC Documents and except as would not have a material adverse effect
on the Company, there are no legal, administrative, arbitral or other
proceedings, claims, actions, causes of action, private environmental
investigations or rededication activities or governmental investigations of
any nature (collectively, "Environmental Claims") or any conditions or
circumstances that could form the basis of any Environmental Claim seeking
to impose on the Company or any of its subsidiaries, or that reasonably
could be expected to result in the imposition on the Company or any of its
subsidiaries of, any liability or obligation arising under applicable
common law standards relating to pollution or protection of the
environment, human health or safety, or under any local, state or federal
environmental statute, regulation, ordinance, decree, judgment or order
relating to pollution or protection of the environment, human health or
safety including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
(collectively, the "Environmental Laws"), pending or, to the knowledge of
the Company, threatened, against the Company or any of its subsidiaries as
a result of the transactions contemplated by this Agreement.
(t) Opinion of Financial Advisor. The Company has received the
opinion of Goldman, Sachs & Co., dated the date hereof, to the effect that,
as of such date, the Exchange Ratio is fair from a financial point of view
to the stockholders of the Company.
(u) Insurance Matters.
(i) To the extent required under Insurance Laws and
except as would not have a material adverse effect on the Company,
all policies, binders, slips, certificates, annuity contracts and
participation agreements and other agreements of insurance (including
all applications, supplements, endorsements, riders and ancillary
agreements in connection therewith), whether individual or group,
that are issued by the Company Insurance Subsidiaries (the "Company
Insurance Contracts") and any and all marketing materials, are on
forms approved by applicable insurance regulatory authorities or
which have been filed and not objected to by such authorities within
the period provided for objection, and such forms comply in all
respects with the Insurance Laws applicable thereto and, as to
premium rates established by the Company or any Company Insurance
Subsidiary which are required to be filed with or approved, the
premiums charged conform thereto in all respects, and such premiums
comply in all material respects with the Insurance Laws applicable
thereto.
(ii) All reinsurance and coinsurance treaties or
agreements, including retrocessional agreements, to which any Company
Insurance Subsidiary is a party or under which any Company Insurance
Subsidiary has any existing rights, obligations or liabilities are in
full force and effect, except for such treaties or agreements the
failure to be in full force and effect of which would not,
individually or in the aggregate, have a material adverse effect on
the Company. Neither any Company Insurance Subsidiary, nor, to the
knowledge of the Company, any other party to a reinsurance or
coinsurance treaty or agreement to which any Company Insurance
Subsidiary is a party, is in default in any material respect as to
any provision thereof, and no such agreement contains any provision
providing that the other party thereto may terminate such agreement,
or reduce any reinsurance or retrocessional coverage of any Company
Insurance Subsidiary thereunder, by reason of the transactions
contemplated by this Agreement. Neither the Company nor any Company
Insurance Subsidiary has received any notice to the effect that any
other party to any such reinsurance and coinsurance treaty or
agreement that is otherwise terminable prior to the expiration
thereof, will be terminated by such party as a result of the
transactions contemplated by this Agreement. Neither the Company nor
any Company Insurance Subsidiary has received any notice to the
effect that the financial condition of any other party to any such
agreement is impaired with the result that a default thereunder or
other failure to comply with the terms thereof may reasonably be
anticipated, whether or not such default or non-compliance may be
cured by the operation of any offset clause in such agreement. Each
Company Insurer Subsidiary was entitled to take credit in its most
recent Company SAP Statement for that portion of its ceded
liabilities under each such reinsurance or coinsurance treaty as to
which credit was taken in such Company SAP Statement. No insurer or
reinsurer or group of affiliated insurers or reinsurers accounted for
the direction to the Company Insurance Subsidiaries or the ceding by
any Company Insurance Subsidiaries of insurance or reinsurance
business in an aggregate amount equal to two percent or more of the
consolidated gross premium income of the Company Insurance
Subsidiaries for the year ended December 31, 1999.
(iii) Prior to the date hereof, the Company has delivered
or made available to Parent a true and complete copy of any actuarial
reports prepared by actuaries, independent or otherwise, with respect
to any Company Insurance Subsidiary since December 31, 1997, and all
attachments, addenda, supplements and modifications thereto (the
"Company Actuarial Analyses"). The information and data furnished by
the Company or any Company Insurance Subsidiary to its independent
actuaries in connection with the preparation of the Company Actuarial
Analyses were complete and accurate in all material respects.
Furthermore, to the knowledge of the Company, each Company Actuarial
Analysis was based upon an accurate inventory of policies in force
for the Company Insurance Subsidiaries, as the case may be, at the
relevant time of preparation, was prepared using appropriate modeling
procedures accurately applied and in conformity with generally
accepted actuarial standards consistently applied, and the
projections contained therein were properly prepared in accordance
with the assumptions stated therein.
(iv) Each material contract between a Company Insurance
Subsidiary and a producer of business therefor ("Producer
Agreements") is valid, binding and in full force and effect in
accordance with its terms, and, to the knowledge of the Company, none
of the parties thereto is in default with respect to any such
Producer Agreement, other than for such failures to be valid, binding
and in full force and effect or such defaults which would not,
individually or in the aggregate, have a material adverse effect on
the Company. To the knowledge of the Company, no party to any
Producer Agreement has given notice to any Company Insurance
Subsidiary that it intends to terminate or cancel any Producer
Agreement as a result of the transactions contemplated by this
Agreement. Since January 1, 1998, to the knowledge of the Company, at
the time any Company Insurance Subsidiary paid commissions to any
producer in connection with the sale of insurance or annuity
contracts, each such producer was duly licensed if required under
applicable Insurance Law in the particular jurisdiction in which such
producer sold such insurance or annuity contracts for the Company
Insurance Subsidiary, other than in immaterial respects.
(v) Liabilities and Reserves.
(i) All reserves and other liabilities established or
reflected on the Company SAP Statements of each Company Insurance
Subsidiary for insurance policy benefits, losses, claims and similar
purposes were, as of the respective dates of such Company SAP
Statements, were determined in all material respects in accordance
with generally accepted actuarial standards and principles
consistently applied, were fairly stated in all material respects in
accordance with SAP and are based on actuarial assumptions that are
in accordance with those called for by the provisions of the related
insurance, annuity, reinsurance, coinsurance and other applicable
agreements of the relevant Company Insurance Subsidiary. The admitted
assets and risk based capital of each Company Insurance Subsidiary as
determined under applicable Insurance Laws are in an amount at least
equal to the minimum amounts required by applicable Insurance Laws.
(ii) Except for regular periodic assessments in the
ordinary course of business or assessments based on developments
which are publicly known within the insurance industry, to the
knowledge of the Company, no claim or assessment is pending or
threatened against any Company Insurance Subsidiary by any state
insurance guaranty association in connection with such association's
fund relating to insolvent insurers which if determined adversely,
would, individually or in the aggregate, have a material adverse
effect on the Company.
(w) Ineligible Persons. To the knowledge of those individuals
identified on Schedule 3.1(d), without independent investigation, neither
the Company or any of its controlled affiliates, nor any "affiliated
person" (as defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act")) of the Company or any of its controlled
affiliates, is ineligible pursuant to Section 9(a) or 9(b) of the
Investment Company Act to act as an investment advisor (or in any other
capacity contemplated by the Investment Company Act) to a registered
investment company. To the knowledge of those individuals identified on
Schedule 3.1(d), without independent investigation, neither the Company or
any of its controlled affiliates nor, to the knowledge of the Company, any
"person associated with an investment adviser" (as defined in the
Investment Advisers Act) of the Company or any of its controlled
affiliates, is ineligible pursuant to Section 203 of the Investment
Advisers Act to act as an investment advisor or as an associated person to
a registered investment adviser. To the knowledge of those individuals
identified on Schedule 3.1(d), without independent investigation, neither
the Company or any of its controlled affiliates, nor any "associated person
of a broker or dealer" (as defined in the Exchange Act) of the Company or
any of its controlled affiliates, is ineligible pursuant to Section 15(b)
of the Exchange Act to act as a broker-dealer or as an associated person to
a registered broker-dealer.
(x) Rights Agreement. As of the date of this Agreement, the
Company or the Board of Directors of the Company, as the case may be, has
(i) taken all necessary actions so that the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will
not result in a "Distribution Date" (as defined in the Rights Agreement)
and (ii) amended the Rights Agreement to render it inapplicable to this
Agreement and the transactions contemplated hereby.
(y) Derivative Transactions.
(i) All Derivative Transactions (as defined below)
entered into by the Company or any of its subsidiaries were entered
into in all material respects in accordance with applicable rules,
regulations and policies of any regulatory authority, and in
accordance with the investment, securities, commodities, risk
management and other policies, practices and procedures employed by
the Company and its subsidiaries, and were entered into with
counterparties believed at the time to be financially responsible and
able to understand (either alone or in consultation with their
advisers) and to bear the risks of such Derivative Transactions. The
Company and each of its subsidiaries have duly performed in all
material respects all of their obligations under the Derivative
Transactions to the extent that such obligations to perform have
accrued, and, to the Company's knowledge, there are no material
breaches, violations or defaults or allegations or assertions of such
by any party thereunder.
(ii) For purposes of this Section 3.1(y), "Derivative
Transactions" means any swap transaction, option, warrant, forward
purchase or sale transaction, futures transaction, cap transaction,
floor transaction or collar transaction relating to one or more
currencies, commodities, bonds, equity securities, loans, interest
rates, catastrophe events, weather-related events, credit-related
events or conditions or any indexes, or any other similar transaction
(including any option with respect to any of these transactions) or
combination of any of these transactions, including collateralized
mortgage obligations or other similar instruments or any debt or
equity instruments evidencing or embedding any such types of
transactions, and any related credit support, collateral or other
similar arrangements related to such transactions.
SECTION 3.2 Representations and Warranties of Parent. Except
(i) as disclosed in the Parent Filed SEC Documents (as defined in Section
3.2(g)), (ii) with respect to matters to which the Company shall have given
its consent pursuant to Section 4.1(b) or (iii) as set forth on the
Disclosure Schedule delivered by Parent to the Company prior to the
execution of this Agreement (the "Parent Disclosure Schedule") and making
reference to the particular subsection of this Agreement to which exception
is being taken (regardless of whether such subsection refers to the Parent
Disclosure Schedule), Parent represents and warrants to the Company as
follows (it being understood that any matter set forth in the Parent
Disclosure Schedule with reference to a particular subsection of this
Agreement will be deemed to be set forth with reference to any other
subsection of this Agreement so long as the relevance of such matter to any
such other subsection is reasonably apparent):
(a) Organization, Standing and Corporate Power.
(i) Each of Parent and its significant subsidiaries is a
corporation or other legal entity duly organized, validly existing
and in good standing (with respect to jurisdictions which recognize
such concept) under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case
may be, and authority to carry on its business as now being
conducted, except, as to subsidiaries, for those jurisdictions where
the failure to be duly organized, validly existing and in good
standing, individually or in the aggregate, would not have a material
adverse effect on Parent. Each of Parent and its subsidiaries is duly
qualified or licensed to do business and is in good standing (with
respect to jurisdictions which recognize such concept) in each
jurisdiction in which the nature of its business or the ownership,
leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions where the failure
to be so qualified or licensed or to be in good standing,
individually or in the aggregate, would not have a material adverse
effect on Parent.
(ii) Parent has delivered or provided to the Company
prior to the execution of this Agreement complete and correct copies
of its certificate of incorporation and by-laws, as amended to date.
(b) Subsidiaries. Exhibit 21 to Parent's Annual Report on Form
10-K for the fiscal year ended December 31, 1999 includes all the
significant subsidiaries of Parent as of the date of this Agreement. All
the outstanding shares of capital stock of, or other equity interests in,
each such significant subsidiary (i) have been validly issued and are fully
paid and nonassessable; (ii) are owned directly or indirectly by Parent,
free and clear of all Liens; and (iii) are free of any other restriction
(including any restriction on the right to vote, sell or otherwise dispose
of such capital stock or other ownership interests) that would prevent the
operation by the Surviving Corporation of such significant subsidiary's
business as currently conducted.
(c) Capital Structure. The authorized capital stock of Parent
consists of 10,000,000,000 shares of Parent Common Stock and 30,000,000
shares of preferred stock, par value $1.00 per share, of Parent ("Parent
Authorized Preferred Stock"), of which 1,600,000 shares have been
designated as 6.365% Cumulative Preferred Stock, Series F ("Parent Series F
Preferred Stock"), 800,000 shares have been designated as 6.213% Cumulative
Preferred Stock, Series G ("Parent Series G Preferred Stock"), 800,000
shares have been designated as 6.231% Cumulative Preferred Stock, Series H
("Parent Series H Preferred Stock"), 500,000 shares have been designated as
8.40% Cumulative Preferred Stock, Series K ("Parent Series K Preferred
Stock"), 690,000 shares have been designated as 9.50% Cumulative Preferred
Stock, Series L ("Parent Series L Preferred Stock"), 800,000 shares have
been designated as 5.864% Cumulative Preferred Stock, Series M ("Parent
Series M Preferred Stock"), 700,000 shares have been designated as
Adjustable Rate Cumulative Preferred Stock, Series Q ("Parent Series Q
Preferred Stock"), 400,000 shares have been designated as Adjustable Rate
Cumulative Preferred Stock, Series R ("Parent Series R Preferred Stock"),
500,000 shares have been designated as 7 3/4% Cumulative Preferred Stock,
Series U ("Parent Series U Preferred Stock"), 250,000 shares have been
designated as Fixed/Adjustable Rate Cumulative Preferred Stock, Series V
("Parent Series V Preferred Stock"), 5,000 shares have been designated as
Cumulative Adjustable Rate Preferred Stock, Series Y ("Parent Series Y
Preferred Stock") and 987 shares have been designated as 5.321% Cumulative
Preferred Stock, Series YY ("Parent Series YY Preferred Stock"). At the
close of business on August 7, 2000 and adjusted to give effect to the
four-for-three Parent Common Stock split paid on August 25, 2000: (i)
4,557,983,532 shares of Parent Common Stock were issued and outstanding;
(ii) 258,530,410 shares of Parent Common Stock were held by Parent in its
treasury (iii) 59,582,808 shares of Parent Common Stock were held by
subsidiaries of Parent; (iv) 1,600,000 shares of Parent Series F Preferred
Stock were issued and outstanding (evidenced by 8,000,000 depositary
shares, each of which represents a 1/5 interest in a share of Parent Series
F Preferred Stock); (v) 800,000 shares of Parent Series G Preferred Stock
were issued and outstanding (evidenced by 4,000,000 depositary shares, each
of which represents a 1/5 interest in a share of Parent Series G Preferred
Stock); (vi) 800,000 shares of Parent Series H Preferred Stock were issued
and outstanding (evidenced by 4,000,000 depositary shares, each of which
represents a 1/5 interest in a share of Parent Series H Preferred Stock);
(vii) 500,000 shares of Parent Series K Preferred Stock were issued and
outstanding (evidenced by 10,000,000 depositary shares, each of which
represents a 1/20 interest in a share of Parent Series K Preferred Stock);
(viii) no shares of Parent Series L Preferred Stock were issued and
outstanding; (ix) 800,000 shares of Parent Series M Preferred Stock were
issued and outstanding (evidenced by 4,000,000 depositary shares, each of
which represents a 1/5 interest in a share of Parent Series M Preferred
Stock); (x) 700,000 shares of Parent Series Q Preferred Stock were issued
and outstanding (evidenced by 7,000,000 depositary shares, each of which
represents a 1/10 interest in a share of Parent Series Q Preferred Stock);
(xi) 400,000 shares of Parent Series R Preferred Stock were issued and
outstanding (evidenced by 4,000,000 depositary shares, each of which
represents a 1/10 interest in a share of Parent Series R Preferred Stock);
(xii) 500,000 shares of Parent Series U Preferred Stock were issued and
outstanding (evidenced by 5,000,000 depositary shares, each of which
represents a 1/10 interest in a share of Parent Series U Preferred Stock);
(xiii) 250,000 shares of Parent Series V Preferred Stock were issued and
outstanding (evidenced by 2,500,000 depositary shares, each of which
represents a 1/10 interest in a share of Parent Series V Preferred Stock);
(xiv) 5,000 shares of Parent Series Y Preferred Stock were issued and
outstanding; (xv) 987 shares of Parent Series YY Preferred Stock were
issued and outstanding; (xvi) approximately 867 million shares of Parent
Common Stock were reserved for issuance pursuant to the stock-based plans
identified in Section 3.4(c) of the Parent Disclosure Schedule (such plans,
collectively, the "Parent Stock Plans"), of which approximately 393.5
million shares are subject to outstanding employee stock options or other
rights to purchase or receive Parent Common Stock granted under the Parent
Stock Plans (collectively, "Parent Employee Stock Options"); (xvii)
1,116,701 shares of Parent Common Stock are reserved for issuance pursuant
to convertible securities; and (xviii) other than as set forth above, no
other shares of Parent Authorized Preferred Stock have been designated or
issued. All outstanding shares of capital stock of Parent are, and all
shares thereof which may be issued pursuant to this Agreement or otherwise
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as set forth in
this Section 3.2(c) and except for changes since August 7, 2000 resulting
from the issuance of shares of Parent Common Stock pursuant to the Parent
Stock Plans, Parent Employee Stock Options or Parent Convertible Securities
and other rights referred to in this Section 3.2(c), as of the date hereof,
(x) there are not issued, reserved for issuance or outstanding (A) any
shares of capital stock or other voting securities of Parent, (B) any
securities of Parent or any Parent subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or voting
securities of Parent, (C) any warrants, calls, options or other rights to
acquire from Parent or any Parent subsidiary, and any obligation of Parent
or any Parent subsidiary to issue, any capital stock, voting securities or
securities convertible into or exchangeable or exercisable for capital
stock or voting securities of Parent or other ownership interests of
Parent, and (y) there are no outstanding obligations of Parent or any
Parent subsidiary to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered
or sold, any such securities. As of the date hereof, there are no
outstanding (A) securities of Parent or any Parent subsidiary convertible
into or exchangeable or exercisable for shares of capital stock or other
voting securities or other ownership interests in any Parent subsidiary,
(B) warrants, calls, options or other rights to acquire from Parent or any
Parent subsidiary, and any obligation of Parent or any Parent subsidiary to
issue, any capital stock, voting securities or other ownership interests
in, or any securities convertible into or exchangeable or exercisable for
any capital stock, voting securities or ownership interests in, any Parent
subsidiary or (C) obligations of Parent or any Parent subsidiary to
repurchase, redeem or otherwise acquire any such outstanding securities of
Parent subsidiaries or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. To Parent's knowledge, neither
Parent nor any Parent subsidiary is a party to any agreement restricting
the transfer of, relating to the voting of, requiring registration of, or
granting any preemptive or, except as provided by the terms of Parent Stock
Plans, Parent Employee Stock Options and Parent Convertible Securities,
antidilutive rights with respect to, any securities of the type referred to
in the two preceding sentences.
(d) Authority; Noncontravention. Parent has all requisite
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Parent and the consummation by Parent of
the transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action on the part of Parent. This Agreement has
been duly executed and delivered by Parent and, assuming the due
authorization, execution and delivery by the Company, constitutes the
legal, valid and binding obligation of Parent, enforceable against Parent
in accordance with its terms. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
benefit under, or result in the creation of any Lien upon any of the
properties or assets of Parent or any of its subsidiaries under, (i) the
certificate of incorporation or by-laws of Parent, (ii) the certificate of
incorporation or by-laws of the comparable organizational documents of any
of its significant subsidiaries, (iii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license or similar authorization applicable to
Parent or any of its subsidiaries or their respective properties or assets
or (iv) subject to the governmental filings and other matters referred to
in the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or any of its
subsidiaries or their respective properties or assets, other than, in the
case of clauses (ii), (iii) and (iv), any such conflicts, violations,
defaults, rights, losses or Liens that individually or in the aggregate
would not (x) have a material adverse effect on Parent or (y) reasonably be
expected to impair or delay the ability of Parent to perform its
obligations under this Agreement. To the knowledge of Parent, no consent,
approval, order or authorization of, action by, or in respect of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Parent or any of its subsidiaries in
connection with the execution and delivery of this Agreement by Parent or
the consummation by Parent of the transactions contemplated by this
Agreement, except for (1) the filing of a pre-merger notification and
report form by Parent under the HSR Act; (2) the filing with the SEC of (A)
the Form S-4 and (B) such reports under Section 13(a), 13(d), 15(d) or
16(a) of the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this Agreement; (3) the
filing of the Certificate of Merger with the Secretary of State of Delaware
and such filings with Governmental Entities to satisfy the applicable
requirements of the laws of states in which Parent and its subsidiaries are
qualified or licensed to do business or state securities or "blue sky"
laws; (4) such filings with and consents and approvals of the Commissioners
of Insurance or similar regulatory authorities having jurisdiction over the
insurance business, (5) such filings with and approvals of the NYSE and the
Pacific Stock Exchange (the "PSE") to permit the shares of Parent Common
Stock to be issued in the Merger and under the Company Stock Plan to be
listed on the NYSE and PSE; (6) filings in respect of, and approvals and
authorizations of, any Governmental Entity having jurisdiction over the
consumer lending, banking, insurance or other financial services
businesses; and (7) such consents, approvals, orders or authorizations the
failure of which to be made or obtained, individually or in the aggregate,
would not (x) have a material adverse effect on Parent or (y) reasonably be
expected to materially impair or delay the ability of Parent to perform its
obligations under this Agreement.
(e) SEC Documents; Undisclosed Liabilities. Since January 1,
1997, Parent has filed all required reports, schedules, forms, statements
and other documents (including exhibits and all other information
incorporated therein) with the SEC (the "Parent SEC Documents"). As of
their respective dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Parent SEC Documents, and none of the Parent
SEC Documents when filed (as amended and restated and as supplemented by
subsequently filed Parent SEC Documents) contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Parent included in the Parent SEC Documents complied as to
form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and
fairly present in all material respects the consolidated financial position
of Parent and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except (i) as reflected in such financial
statements or in the notes thereto or (ii) for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby,
neither Parent nor any of its subsidiaries has any liabilities or
obligations of any nature which, individually or in the aggregate, would
have a material adverse effect on Parent.
(f) Information Supplied. None of the information supplied or
to be supplied by Parent specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii)
the Proxy Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Form S-4 will comply as to form in all material respects
with the requirements of the Securities Act and the rules and regulations
thereunder, except that no representation or warranty is made by Parent
with respect to statements made or incorporated by reference therein based
on information supplied by the Company specifically for inclusion or
incorporation by reference in the Form S-4.
(g) Absence of Certain Changes or Events. Except for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby or as disclosed in any Parent SEC Document filed and
publicly available prior to the date hereof (as amended to the date hereof,
the "Parent Filed SEC Documents"), and except as permitted by Section
4.1(b), since January 1, 2000, Parent and its subsidiaries have conducted
their business only in the ordinary course, and there has not been (i) any
material adverse change in Parent, including, but not limited to, any
material adverse change arising from or relating to fraudulent or
unauthorized activity, (ii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property)
with respect to any of Parent's capital stock, other than regular quarterly
cash dividends on the Parent Common Stock and dividends payable on Parent's
preferred stock in accordance with their terms, (iii) as of the date
hereof, any split, combination or reclassification of any of Parent's
capital stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of
Parent's capital stock, except for issuances of Parent Common Stock upon
exercise of Parent Employee Stock Options, upon conversion of Parent
Convertible Securities or in accordance with the terms of the Parent Stock
Plans, (iv) as of the date hereof, except insofar as may have been
disclosed in Parent Filed SEC Documents or required by a change in GAAP,
any change in accounting methods, principles or practices by Parent
materially affecting its assets, liabilities or business or (v) as of the
date hereof, any tax election by Parent or its subsidiaries or any
settlement or compromise of any income tax liability by Parent or its
subsidiaries except as would not be required to be disclosed in the Parent
SEC Documents.
(h) Compliance with Applicable Laws; Litigation.
(i) Parent, its subsidiaries and employees hold all
permits, licenses, variances, exemptions, orders, registrations and
approvals of all Governmental Entities which are required for the
operation of the businesses of Parent and its subsidiaries (the
"Parent Permits"), except where the failure to have any such Parent
Permits individually or in the aggregate would not have a material
adverse effect on Parent. Parent and its subsidiaries are in
compliance in all respects with the terms of the Parent Permits and
all applicable statutes, laws, ordinances, rules and regulations,
except where the failure so to comply individually or in the
aggregate would not have a material adverse effect on Parent. As of
the date of this Agreement, except as disclosed in Parent Filed SEC
Documents, no action, demand, requirement or investigation by any
Governmental Entity and no suit, action, proceeding or arbitration by
any person or Governmental Entity, in each case with respect to
Parent or any of its subsidiaries or any of their respective
properties, is pending or, to the knowledge of Parent, threatened,
other than, in each case, those the outcome of which, individually or
in the aggregate, would not (i) have a material adverse effect on
Parent or (ii) reasonably be expected to impair the ability of Parent
to perform its obligations under this Agreement or prevent or
materially delay the consummation of any of the transactions
contemplated by this Agreement.
(ii) Except as otherwise applicable to similarly situated
companies generally, neither Parent nor any of its subsidiaries is
subject to any outstanding order, injunction or decree or is a party
to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or, except as would not have a material adverse
effect on Parent, is subject to any order or directive by, or is a
recipient of any supervisory letter from or has adopted any
resolutions at the request of any Governmental Entity that restricts
in any material respect the conduct of its business or, except as
would not have a material adverse effect on Parent, that in any
manner relates to its capital adequacy, its policies, its management
or its business (each, a "Parent Regulatory Agreement"), nor has
Parent or any of its subsidiaries or affiliates (A) been advised
since January 1, 2000 by any Governmental Entity that it is
considering issuing or requesting any such Parent Regulatory
Agreement or (B) have knowledge of any pending or threatened
regulatory investigation.
(i) Absence of Changes in Benefit Plans. For purposes of this
Agreement, "Parent Benefit Plan" shall mean each collective bargaining
agreement, employment agreement, consulting agreement, severance agreement
or any material bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding
providing benefits to any current or former employee, officer or director
of Parent or any of its wholly owned subsidiaries. Since January 1, 2000,
there has not been any material change in any actuarial or other
assumptions used to calculate funding obligations with respect to any
Parent pension plans or post-retirement benefit plans, or any change in the
manner in which contributions to any Parent pension plans or post-
retirement benefit plans are made or in the basis on which such
contributions are determined which, individually or in the aggregate, would
result in a material increase of Parent's or its subsidiaries' liabilities
thereunder.
(j) ERISA Compliance.
(i) With respect to Parent Benefit Plans, no event has
occurred and there exists no condition or set of circumstances, in
connection with which Parent or any of its subsidiaries could be
subject to any liability that individually or in the aggregate would
have a material adverse effect on Parent under ERISA, the Code or any
other applicable law.
(ii) Except as any of the following either individually
or in the aggregate would not have a material adverse effect on
Parent, (x) neither Parent nor any trade or business, whether or not
incorporated (an "ERISA Affiliate"), which together with Parent would
be deemed to be a "single employer" within the meaning of Section
4001(b) of ERISA, has incurred any unsatisfied liability under Title
IV of ERISA in connection with any Parent Benefit Plan and no
condition exists that could reasonably be expected to present a risk
to Parent or any ERISA Affiliate of Parent of incurring any such
liability (other than liability for premiums to the Pension Benefit
Guaranty Corporation arising in the ordinary course), and (y) no
Parent Benefit Plan has incurred an "accumulated funding deficiency"
(within the meaning of Section 302 of ERISA or Section 412 of the
Code) whether or not waived.
(iii) Section 3.2(j)(iii) of the Parent Disclosure
Schedule contains a true and complete list of each Parent Benefit
Plan that is subject to Title IV of ERISA and indicates each such
plan that is a "multiemployer plan" within the meaning of Section
3(37) of ERISA.
(k) Taxes. (i) Except as would not have a material adverse
effect on Parent, (A) each of Parent and its subsidiaries has filed all tax
returns and reports required to be filed by it and (B) all such tax returns
and reports are complete and correct in all respects, or requests for
extensions to file such returns or reports have been timely filed, granted
and have not expired. Parent and each of its subsidiaries has paid (or
Parent has paid on its behalf) all taxes due and payable, except as would
not have a material adverse effect on Parent, and the most recent financial
statements contained in the Parent Filed SEC Documents reflect an adequate
reserve in accordance with GAAP for all taxes payable by Parent and its
subsidiaries for all taxable periods and portions thereof accrued through
the date of such financial statements.
(ii) No material deficiencies for any taxes have been
proposed, asserted or assessed against Parent or any of its
subsidiaries that are not adequately reserved for. The federal income
tax returns of Parent and each of its subsidiaries for tax years
identified in Section 3.2(k)(ii) of the Parent Disclosure Schedule
have closed by virtue of the applicable statute of limitations.
(iii) Neither Parent nor any of its subsidiaries has
taken any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
(l) Accounting Matters. Parent has disclosed to its independent
public accountants all actions taken by it or its subsidiaries that would
impact the accounting of the business combination to be effected by the
Merger as a pooling of interests. As of the date hereof, Parent, based on
advice from its independent public accountants, believes that the Merger
will qualify for "pooling of interest" accounting.
(m) Brokers. Except for Salomon Smith Barney Inc., no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Parent.
(n) Ownership of Company Capital Stock. Except for shares owned
by Parent Benefit Plans or shares held or managed for the account of
another person or as to which Parent is required to act as a fiduciary or
in a similar capacity or as otherwise disclosed in the Parent SEC
Documents, as of the date hereof, neither Parent nor, to its knowledge
without independent investigation, any of its affiliates who are not
directors or executive officers of Parent, (i) beneficially owns (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, or
(ii) is party to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, in each case, shares
of capital stock of the Company, other, in each case, than the shares of
the Company's capital stock held directly or indirectly, in trust accounts,
managed accounts or the like or held for the account of another person.
(o) Voting Requirements. Assuming the accuracy of the Company's
representation and warranty contained in Section 3.1(c), no vote of the
holders of Parent Common Stock or Parent's preferred stock is necessary to
authorize the issuance of Parent Common Stock pursuant to the Merger or
otherwise in connection with the transactions contemplated by this
Agreement, including the stock exchange listings contemplated by Section
5.11.
(p) Environmental Liability. Except as set forth in the Parent
Filed SEC Documents and except as would not have a material adverse effect
on Parent, there are no legal, administrative, arbitral or other
proceedings, claims, actions, causes of action, private environmental
investigations or rededication activities or governmental investigations of
any nature seeking to impose on Parent or any of its subsidiaries, or that
reasonably could be expected to result in the imposition on Parent or any
of its subsidiaries of, any liability or obligation arising under
applicable Environmental Laws, pending or, to the knowledge of Parent,
threatened, against Parent or any of its subsidiaries.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business. (a) Conduct of Business by the
Company. Except as set forth in Section 4.1(a) of the Company Disclosure
Schedule, except as otherwise expressly contemplated by this Agreement or
except as consented to by Parent in writing, such consent not to be
unreasonably withheld or delayed, during the period from the date of this
Agreement to the Effective Time, the Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the ordinary
course consistent with past practice and in compliance in all material
respects with all applicable laws and regulations and, to the extent
consistent therewith, use all reasonable efforts to preserve intact their
current business organizations, use all reasonable efforts to keep
available the services of their current officers and other key employees
and preserve their relationships with those persons having business
dealings with them to the end that their goodwill and ongoing businesses
shall be unimpaired at the Effective Time. Without limiting the generality
of the foregoing, senior officers of Parent and the Company shall meet on a
regular basis to review the financial and operational affairs of the
Company and its subsidiaries. Such review shall be conducted in accordance
with applicable law and shall not cover current or future pricing of
specific products, marketing or strategic plans, specific breakdowns of
sales by customers, or plans to introduce new competitive products and
shall in no event be deemed to constitute control of the Company by Parent.
Without limiting the generality of the foregoing (but subject to the above
exceptions), during the period from the date of this Agreement to the
Effective Time, the Company shall not, and shall not permit any of its
subsidiaries to:
(i) other than dividends and distributions by a direct or
indirect wholly owned subsidiary of the Company to its parent, or by
a subsidiary that is partially owned by the Company or any of its
subsidiaries, provided that the Company or any such subsidiary
receives or is to receive its proportionate share thereof, (x)
declare, set aside or pay any dividends on, make any other
distributions in respect of, or enter into any agreement with respect
to the voting of, any of its capital stock (except for regular
quarterly cash dividends on the Company Common Stock), (y) split,
combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of its capital stock, except upon the
exercise of Company Stock Options that are, in each case, outstanding
as of the date hereof in accordance with their present terms, or (z)
purchase, redeem or otherwise acquire any shares of capital stock of
the Company or any of its subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares
or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber
or subject to any Lien any shares of its capital stock, any other
voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities (other than the issuance of Company Common
Stock upon the exercise of Company Stock Options that are, in each
case, outstanding as of the date hereof in accordance with their
present terms);
(iii) amend its certificate of incorporation, by-laws or
other comparable organizational documents;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any person, other
than acquisitions in the ordinary course of finance receivables in an
aggregate principal amount not to exceed $2.5 billion and other than
acquisitions (not of the type contemplated above) in the ordinary
course with a value not to exceed $25 million; provided any such
acquisitions shall be for cash consideration;
(v) sell, lease, license, mortgage or otherwise encumber
or subject to any Lien or otherwise dispose of any of its properties
or assets that is material in relation to the Company and its
subsidiaries taken as a whole (including securitizations), other than
in the ordinary course of business so long as Parent's prior written
approval, which shall not be unreasonably withheld or delayed, is
obtained;
(vi) except for borrowings under existing credit
facilities or lines of credit or refinancing of indebtedness
outstanding on the date hereof, incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse,
or otherwise become responsible for the obligations of any person, or
make any loans, advances or capital contributions to, or investments
in, any person other than its wholly owned subsidiaries, except in
the ordinary course of business consistent with past practice or
except as attributable to the execution of this Agreement and the
transactions contemplated hereby;
(vii) other than changes which are not known to the Chief
Financial Officer of the Company and are not significant and are in
the ordinary course of business consistent with past practices,
change its accounting methods (or underlying assumptions), principles
or practices affecting its assets, liabilities or business, including
without limitation, any reserving, renewal or residual method,
practice or policy, in each case, in effect at December 31, 1999,
except as required by changes in GAAP or SAP, or change any of its
methods of reporting income and deductions for federal income tax
purposes from those employed in the preparation of the federal income
tax returns of the Company for the taxable year ending December 31,
1999, except as required by changes in law or regulation;
(viii) change in any material respects its investment or
risk management or other similar policies of the Company or any of
its subsidiaries (other than the Company Insurance Subsidiaries, the
conduct of which is addressed in subsection (ix) below);
(ix) change in any material respects its actuarial,
reserving, investment or risk management or other similar policies of
the Company Insurance Subsidiaries;
(x) create, renew or amend any agreement or contract or
other binding obligation of the Company or its subsidiaries
containing (A) any restriction on the ability of the Company or its
subsidiaries to conduct its business as it is presently being
conducted or (B) any restriction on the Company or its subsidiaries
engaging in any type or activity or business;
(xi) (A) grant to any current or former director,
executive officer or other key employee of the Company or its
subsidiaries any increase in compensation, bonus or other benefits,
except for increases in the ordinary course of business (including,
without limitation, for new hires in the ordinary course of
business), (B) grant to any such current or former director,
executive officer or other key employee of the Company any increase
in severance or termination pay, (C) enter into, or amend, any
employment, deferred compensation, consulting, severance, termination
or indemnification agreement with any such current or former
director, executive officer or key employee, (D) grant to any
employees of the Company or its subsidiaries any award under the LTPP
and/or the SIB with a performance period that commences on or after
January 1, 2001;
(xii) except pursuant to agreements or arrangements in
effect on the date hereof and previously provided to Parent, pay,
loan or advance any amount to, or sell, transfer or lease any
properties or assets (real, personal or mixed, tangible or
intangible) to, or enter into any agreement or arrangement with, any
of its officers or directors or any affiliate or the immediate family
members or associates of any of its officers or directors other than
compensation in the ordinary course of business consistent with past
practice;
(xiii) make any material tax elections (unless required
by applicable law or made in the ordinary course of business
consistent with past practices);
(xiv) agree or consent to any material agreements or
material modifications of existing agreements with any Governmental
Entity in respect of the operations of its business, except (i) as
required by law to renew Permits or agreements in the ordinary course
consistent with past practice, or (ii) to effect the consummation of
the transactions contemplated hereby;
(xv) pay, discharge, settle, compromise or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), including taking any action to
settle or compromise any litigation, in each case, material to the
Company and its subsidiaries taken as a whole, other than the
payment, discharge, settlement, compromise or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company Filed SEC
Documents filed prior to the date hereof, or incurred since June 30,
2000 in the ordinary course of business consistent with past
practice; or
(xvi) authorize, or commit or agree to take, any of the
foregoing actions;
provided that the limitations set forth in this Section 4.1(a) (other than
clause (iii)) shall not apply to any transaction between the Company and
any wholly owned subsidiary or between any wholly owned subsidiaries of the
Company. Prior to the Closing, the Company shall terminate any and all
repurchase programs and plans conducted by the Company for Company Common
Stock.
(b) Conduct of Business by Parent. Except as set forth in
Section 4.1(b) of the Parent Disclosure Schedule, except as otherwise
expressly contemplated by this Section 4.1(b) or otherwise expressly
contemplated by this Agreement or except as consented to by the Company in
writing, such consent not to be unreasonably withheld or delayed, during
the period from the date of this Agreement to the Effective Time, Parent
shall, and shall cause its subsidiaries to carry on their respective
businesses in compliance in all material respects with all applicable laws
and regulations and use all reasonable efforts to preserve intact their
current business organizations, use reasonable efforts to keep available
the services of their current officers and other key employees and preserve
their relationships with those persons having business dealings with them
to the end that their goodwill and ongoing businesses shall be unimpaired
at the Effective Time. Without limiting the generality of the foregoing
(but subject to the above exceptions), during the period from the date of
this Agreement to the Effective Time, Parent shall not, and shall not
permit any of its subsidiaries to:
(i) other than pursuant to Adjustment Events and other
than dividends and distributions by a direct or indirect wholly owned
subsidiary of Parent to its parent, or by a subsidiary that is
partially owned by Parent or any of its subsidiaries, provided that
Parent or any such subsidiary receives or is to receive its
proportionate share thereof, (x) declare, set aside or pay any
dividends on or make any other distributions in respect of any of its
capital stock (except (A) for regular quarterly cash dividends (which
may be increased by Parent in amounts generally consistent with past
practice) on the Parent Common Stock and (B) for regular quarterly
cash dividends on the Parent Authorized Preferred Stock) or (y) other
than pursuant to an Adjustment Event, split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of, or in substitution for,
shares of its capital stock, except in connection with the exercise
of shares subject to employee and non-employee director stock
options;
(ii) except as contemplated hereby, amend its certificate
of incorporation (other than in connection with the issuance of a new
class or series of Parent Authorized Preferred Stock); provided,
however, that this Section 4.1(b)(ii) shall not apply to Parent's
subsidiaries;
(iii) enter into any agreement to acquire all or
substantially all of the capital stock or assets of any other person
or business unless such transaction would not reasonably be expected
to materially delay or impede the consummation of the Merger; or
(iv) authorize, or commit or agree to take, any of the
foregoing actions;
provided that the limitations set forth in this Section 4.1(b) shall not
apply to any transaction between Parent and any wholly owned subsidiary or
between any wholly owned subsidiaries of Parent.
(c) Other Actions. Except as required by law, the Company and
Parent shall not, and shall not permit any of their respective subsidiaries
to, voluntarily take any action that would, or that could reasonably be
expected to, result in (i) any of the representations and warranties of
such party set forth in this Agreement that are qualified as to materiality
becoming untrue at the Effective Time, (ii) any of such representations and
warranties that are not so qualified becoming untrue in any material
respect at the Effective Time, or (iii) any of the conditions to the Merger
set forth in Article VI not being satisfied.
(d) Advice of Changes. Except to the extent prohibited by
applicable law or regulation, the Company and Parent shall promptly advise
the other party orally and in writing to the extent it has knowledge of (i)
any representation or warranty made by it contained in this Agreement that
is qualified as to materiality becoming untrue or inaccurate in any respect
or any such representation or warranty that is not so qualified becoming
untrue or inaccurate in any material respect, (ii) the failure by it to
comply in any material respect with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it
under this Agreement and (iii) any change or event having, or which,
insofar as can reasonably be foreseen, could reasonably be expected to have
a material adverse effect on such party or on the truth of their respective
representations and warranties or the ability of the conditions set forth
in Article VI to be satisfied; provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements of
the parties (or remedies with respect thereto) or the conditions to the
obligations of the parties under this Agreement.
SECTION 4.2 No Solicitation by the Company. (a) The Company
shall not, nor shall it permit any of its subsidiaries to, nor shall it
authorize or permit any of its or any of its subsidiaries' directors,
officers or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly through another person, (i)
solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes a Company
Takeover Proposal (as defined below) or (ii) participate in any discussions
or negotiations regarding any Company Takeover Proposal; provided, however,
that the Company and its Board of Directors, in response to any bona fide
Company Takeover Proposal which was not solicited by it and which did not
otherwise result from a breach of this Section 4.2(a), and subject to
providing prior written notice of its decision to take such action to
Parent as contemplated herein and in compliance with this Section 4.2(a)
and Section 4.2(c), shall be permitted to:
(A) effect a Change in the Company Recommendation (as defined
below), or
(B) furnish information with respect to the Company and its
subsidiaries to any person making a Company Takeover
Proposal pursuant to a customary confidentiality
agreement (as determined by the Company based upon the
advice of its outside counsel) and participate in
discussions or negotiations regarding such Company
Takeover Proposal,
if and only to the extent that (i) the Company's Stockholders Meeting shall
not have occurred, (ii) the Board of Directors of the Company determines in
good faith, after consultation with outside counsel, that it is necessary
to do so in order to act in a manner consistent with its fiduciary duties
to the Company's stockholders under applicable law and (iii) (x) in the
case of clause (A) only, the Company's Board of Directors concludes in good
faith that such Company Takeover Proposal constitutes a Company Superior
Proposal, provided that at least three business days prior to making such
conclusion, the Company's Board of Directors provides Parent written notice
advising Parent that the Company's Board of Directors is prepared to
conclude that such Company Takeover Proposal constitutes a Superior
Proposal and during such three business day period the Company and its
advisors shall have negotiated in good faith with Parent to make
adjustments in the terms and conditions of this Agreement such that such
Company Takeover Proposal would no longer constitute a Company Superior
Proposal and (y) in the case of clause (B) only, the Company's Board of
Directors concludes in good faith that such Company Takeover Proposal is
reasonably likely to result in a Company Superior Proposal. The Company,
its subsidiaries and their representatives immediately shall cease and
cause to be terminated any existing activities, discussions or negotiations
with any parties with respect to any Company Takeover Proposal.
For purposes of this Agreement, "Company Takeover Proposal"
means any inquiry, proposal or offer from any person relating to any direct
or indirect acquisition or purchase of a business that constitutes 30% or
more of the net revenues, net income or assets of the Company and its
subsidiaries, taken as a whole, or 30% or more of any class of equity
securities of the Company, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 30% or more of
any class of any equity securities of the Company, or any merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company (or any Company
subsidiary whose business constitutes 30% or more of the net revenues, net
income or assets of the Company and its subsidiaries, taken as a whole),
other than the transactions contemplated by this Agreement. For purposes of
this Agreement, a "Company Superior Proposal" means any proposal made by a
third party (I) to acquire, directly or indirectly, including pursuant to a
tender offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of the Company's capital stock then
outstanding or all or substantially all the assets of the Company and (II)
which is otherwise on terms which the Board of Directors of the Company
determines in its good faith judgment (after consultation with (i) either
Goldman, Sachs & Co. or another nationally recognized investment banking
firm and (ii) outside counsel), taking into account, among other things,
all legal, financial, regulatory and other aspects of the proposal and the
person making the proposal, that the proposal, (i) if consummated would
result in a transaction that is more favorable to the Company's
stockholders from a financial point of view than the Merger and (ii) is
reasonably capable of being completed, including to the extent required,
financing which is then committed or which, in the good faith judgment of
the Board of Directors of the Company, is reasonably capable of being
obtained by such third party.
(b) Except as expressly permitted by this Section 4.2, neither
the Board of Directors of the Company nor any committee thereof shall (i)
withdraw, modify or qualify, or propose publicly to withdraw, modify or
qualify, in a manner adverse to Parent, the approval of the Agreement, the
Merger and the other transaction contemplated hereby or the Company
Recommendation (as defined in Section 5.1(b)) or take any action or make
any statement in connection with the Company Stockholders Meeting
inconsistent with such approval or Company Recommendation (collectively, a
"Change in the Company Recommendation"), (ii) approve or recommend, or
propose publicly to approve or recommend, any Company Takeover Proposal, or
(iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, a
"Company Acquisition Agreement") related to any Company Takeover Proposal.
For purposes of this Agreement, a Change in the Company Recommendation
shall include any approval or recommendation (or public proposal to approve
or recommend), by the Company Board of a Company Takeover Proposal, or any
failure by the Company Board to recommend against a Company Takeover
Proposal. Notwithstanding the foregoing, the Board of Directors of the
Company, to the extent that it determines in good faith, after consultation
with outside counsel, that in light of a Company Superior Proposal it is
necessary to do so in order to act in a manner consistent with its
fiduciary duties to the Company's stockholders under applicable law, may
terminate this Agreement solely in order to concurrently enter into a
Company Acquisition Agreement with respect to any Company Superior
Proposal, but only at a time that is after the third business day following
Parent's receipt of written notice advising Parent that the Board of
Directors of the Company is prepared to accept a Company Superior Proposal,
specifying the material terms and conditions of such Company Superior
Proposal and identifying the person making such Company Superior Proposal,
all of which information will be kept confidential by Parent in accordance
with the terms of the Confidentiality Agreement.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.2, the Company shall immediately
advise Parent orally and in writing of any request for information or of
any Company Takeover Proposal, the material terms and conditions of such
request or Company Takeover Proposal and the identity of the person making
such request or Company Takeover Proposal. The Company will keep Parent
reasonably informed of the status and details (including amendments or
proposed amendments) of any such request or Company Takeover Proposal,
including without limitation informing Parent upon delivery of information
in response to any such request for information.
(d) Nothing contained in this Section 4.2 shall prohibit the
Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from
making any disclosure (and such disclosure shall not be deemed to be a
Change in the Company Recommendation unless it is an explicit Change in the
Company Recommendation) if, in the good faith judgment of the Board of
Directors of the Company, after consultation with outside counsel, failure
so to disclose would be inconsistent with its obligations under applicable
law; provided, however, any such disclosure relating to a Company Takeover
Proposal shall be deemed to be a Change in the Company Recommendation
unless the Board of Directors of the Company reaffirms the Company
Recommendation in such disclosure.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4 and the Proxy
Statement; Stockholders Meeting. (a) As soon as practicable following the
date of this Agreement, the Company and Parent shall prepare and file with
the SEC the Proxy Statement and Parent shall prepare and file with the SEC
the Form S-4, in which the Proxy Statement will be included as a
prospectus. Each of the Company and Parent shall use best efforts to have
the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. The Company will use all best efforts to
cause the Proxy Statement to be mailed to the holders of Company Common
Stock as promptly as practicable after the Form S-4 is declared effective
under the Securities Act. Parent shall also take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified or to file a general consent to service of process) required to
be taken under any applicable state or foreign securities laws in
connection with the issuance of the Parent Common Stock in the Merger and
the Company shall furnish all information concerning the Company and the
holders of Company Common Stock as may be reasonably requested in
connection with any such action. No filing of, or amendment or supplement
to, the Form S-4 or the Proxy Statement will be made by Parent or the
Company without providing the other with the opportunity to review and
comment thereon. Parent will advise the Company, promptly after it receives
notice thereof, of the time when the Form S-4 has become effective or any
supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement or the Form S-4 or
comments thereon and responses thereto or requests by the SEC for
additional information. If at any time prior to the Effective Time any
information relating to the Company or Parent, or any of their respective
affiliates, officers or directors, should be discovered by the Company or
Parent which should be set forth in an amendment or supplement to any of
the Form S-4 or the Proxy Statement, so that any of such documents would
not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other party hereto and
an appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law,
disseminated to the stockholders of the Company.
(b) The Company shall, as promptly as practicable after the
Form S-4 is declared effective under the Securities Act, duly call, give
notice of, convene and hold a meeting of its stockholders (the "Company
Stockholders Meeting") in accordance with the DGCL for the purpose of
obtaining the Company Stockholder Approval and, subject to Section 4.2, the
Board of Directors of the Company shall recommend to the Company's
stockholders the approval and adoption of this Agreement, the Merger and
the other transactions contemplated hereby (the "Company Recommendation").
Without limiting the generality of the foregoing, the Company agrees that
its obligations pursuant to the first sentence of this Section 5.1(b) shall
not be affected by the commencement, public proposal, public disclosure or
communication to the Company of any Company Takeover Proposal.
Notwithstanding any Change in the Company Recommendation, this Agreement
and the Merger shall be submitted to the stockholders of the Company at the
Company's Stockholders Meeting for the purpose of approving the Agreement
and the Merger and nothing contained herein shall be deemed to relieve the
Company of such obligation.
SECTION 5.2 Letters of the Company's Accountants. (a) The
Company shall use all commercially reasonable efforts to cause to be
delivered to Parent two letters from the Company's independent accountants,
one dated a date within two business days before the date on which the Form
S-4 shall become effective and one dated a date within two business days
before the Closing Date, each addressed to Parent, in form and substance
reasonably satisfactory to Parent and customary in scope and substance for
comfort letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
(b) The Company shall use all commercially reasonable efforts
to cause to be delivered to Parent and Parent's independent accountants two
letters (the "Company Pooling Letters") from the Company's independent
accountants addressed to the Company, one dated as of the date the Form S-4
is declared effective and one dated as of the Closing Date, in each case
stating that accounting for the Merger as a pooling of interests under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations is appropriate if the Merger is closed and consummated as
contemplated by this Agr ement.
SECTION 5.3 Letters of Parent's Accountants. (a) Parent shall
use all commercially reasonable efforts to cause to be delivered to the
Company two letters from Parent's independent accountants, one dated a date
within two business days before the date on which the Form S-4 shall become
effective and one dated a date within two business days before the Closing
Date, each addressed to the Company, in form and substance reasonably
satisfactory to the Company and customary in scope and substance for
comfort letters delivered by independent public accountants in connection
with registration statements similar to the Form S- 4.
(b) Parent shall use all commercially reasonable efforts to
cause to be delivered to the Company and the Company's independent
accountants two letters (the "Parent Pooling Letters") from Parent's
independent accountants addressed to Parent, one dated as of the date the
Form S-4 is declared effective and one dated as of the Closing Date, in
each case stating that accounting for the Merger as a pooling of interests
under Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations is appropriate if the Merger is closed and
consummated as contemplated by this Agreement.
SECTION 5.4 Access to Information; Confidentiality. Subject to
the Confidentiality Agreement, dated August 31, 2000, between Parent and
the Company (the "Confidentiality Agreement"), and subject to the
restrictions contained in confidentiality agreements to which such party is
subject (which such party will use its reasonable best efforts to have
waived) and applicable law, each of the Company and Parent shall, and shall
cause each of its respective subsidiaries to, afford to the other party and
to the officers, employees, accountants, counsel, financial advisors and
other representatives of such other party, reasonable access during normal
business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records
and, during such period, each of the Company and Parent shall, and shall
cause each of their respective subsidiaries to, furnish promptly to the
other party (a) a copy of each report, schedule, registration statement and
other document filed by it during such period pursuant to the requirements
of federal or state securities laws and (b) all other information
concerning its business, properties and personnel as such other party may
reasonably request. In addition, the Company will deliver, or cause to be
delivered, to Parent the internal or external reports reasonably required
by Parent promptly after such reports are made available to the Company's
personnel. No review pursuant to this Section 5.4 shall affect any
representation or warranty given by either party hereto to the other party.
Each of the Company and Parent will hold, and will cause its respective
officers, employees, accountants, counsel, financial advisors and other
representatives and affiliates to hold, any nonpublic information in
accordance with the terms of the Confidentiality Agreement.
SECTION 5.5 Best Efforts. (a) Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use
best efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the
other transactions contemplated by this Agreement, including (i) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings and the taking of all steps as may be necessary
to obtain an approval or waiver from, or to avoid an action or proceeding
by, any Governmental Entity, (ii) the obtaining of all necessary consents,
approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions
contemplated by this Agreement, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental
Entity vacated or reversed, and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement.
Nothing set forth in this Section 5.5(a) will limit or affect actions
permitted to be taken pursuant to Section 4.2.
(b) In connection with and without limiting the foregoing, the
Company and Parent shall (i) take all action necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes
applicable to this Agreement or the Merger or any of the other transactions
contemplated hereby or thereby and (ii) if any state takeover statute or
similar statute or regulation becomes applicable to this Agreement or the
Merger or any other transaction contemplated hereby or thereby, take all
action necessary to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the
other transactions contemplated by this Agreement.
(c) Each of the Company and Parent shall cooperate with each
other in obtaining opinions of Simpson Thacher & Bartlett, counsel to the
Company, and Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Parent,
dated as of the Effective Time, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Code. In connection therewith, each of Parent and the Company shall deliver
to Simpson Thacher & Bartlett and Skadden, Arps, Slate, Meagher & Flom LLP
customary representation letters substantially in the form set forth in
Schedule 5.5(c) (the representation letters referred to in this sentence
are collectively referred to as the "Tax Certificates").
(d) The Company shall use its best efforts to assist Parent and
certain of its subsidiaries that are subject to the reporting requirements
of the Exchange Act (the "Reporting Subs") in the preparation and filing,
on the earliest practicable date after the date of this Agreement, of
Current Reports on Form 8-K for each of Parent and the Reporting Subs
containing the information required by Item 512(a)(1)(ii) of Regulation S-K
of the SEC, including the historical financial statements of the Company
required by Rule 3-05 of Regulation S-X of the SEC and the pro forma
financial information with respect to the business combination contemplated
by this Agreement required by Article 11 of Regulation S-X of the SEC, and
the Company shall take all other action necessary to allow Parent and the
Reporting Subs to issue and sell securities on a continuous or delayed
basis in one or more public offerings registered under the Securities Act.
SECTION 5.6 Employee Stock Options, Incentive and Benefit
Plans. (a) As of the Effective Time, (i) each outstanding Company Stock
Option shall be converted into an option (an "Adjusted Option") to purchase
the number of shares of Parent Common Stock (rounded to the nearest whole
number of shares of Parent Common Stock) equal to the number of shares of
Company Common Stock subject to such Company Stock Option immediately prior
to the Effective Time multiplied by the Exchange Ratio, at an exercise
price per share (rounded to the nearest whole cent) equal to the exercise
price for each such share of Company Common Stock subject to such option
divided by the Exchange Ratio, and all references in each such option to
the Company shall be deemed to refer to Parent, where appropriate;
provided, however, that the adjustments provided in this clause (i) with
respect to any options which are "incentive stock options" (as defined in
Section 422 of the Code) or which are described in Section 423 of the Code,
shall be effected in a manner consistent with the requirements of Section
424(a) of the Code, and (ii) Parent shall assume the obligations of the
Company under the Company Stock Plan. The other terms of each such option,
and the plans under which they were issued, shall continue to apply in
accordance with their terms.
(b) As of the Effective Time, (i) each outstanding Company
Award other than Company Stock Options (including restricted stock, stock
appreciation rights, deferred stock, phantom stock, stock equivalents and
stock units) (each a "Company Award") under the Company Stock Plan shall be
converted into the same instrument of Parent, in each case with such
adjustments (and no other adjustments) to the terms of such Company Awards
as are necessary to preserve the value inherent in such Company Awards with
no detrimental or beneficial effects on the holder thereof and (ii) Parent
shall assume the obligations of the Company under the Company Awards. The
other terms of each such Company Award, and the plans or agreements under
which they were issued, shall continue to apply in accordance with their
terms.
(c) The Company and Parent agree that the Company Stock Plan
and Parent Stock Plans shall be amended, to the extent necessary, to
reflect the transactions contemplated by this Agreement, including, but not
limited to the conversion of shares of Company Common Stock held or to be
awarded or paid pursuant to such benefit plans, programs or arrangements
into shares of Parent Common Stock on a basis consistent with the
transactions contemplated by this Agreement.
(d) Parent shall (i) reserve for issuance the number of shares
of Parent Common Stock that will become subject to the benefit plans,
programs and arrangements referred to in this Section 5.6 and (ii) issue or
cause to be issued the appropriate number of shares of Parent Common Stock
pursuant to applicable plans, programs and arrangements, upon the exercise
or maturation of rights existing thereunder on the Effective Time or
thereafter granted or awarded. No later than the Effective Time, Parent
shall prepare and file with the SEC a registration statement on Form S-8
(or other appropriate form) registering a number of shares of Parent Common
Stock necessary to fulfill Parent's obligations under this Section 5.6.
Such registration statement shall be kept effective (and the current status
of the prospectus required thereby shall be maintained) for at least as
long as Adjusted Options or Company Awards remain outstanding.
(e) As soon as practicable after the Effective Time, Parent
shall deliver to the holders of Company Stock Options and Company Awards
appropriate notices setting forth such holders' rights pursuant to the
Company Stock Plan and the agreements evidencing the grants of such Company
Stock Options and Company Awards and that such Company Stock Options and
Company Awards and the related agreements shall be assumed by Parent and
shall continue in effect on the same terms and conditions (subject to the
adjustments required by this Section 5.6 after giving effect to the
Merger).
(f) Following the Effective Time, the Surviving Corporation
shall comply with the Company's obligations under Company Benefit Plans and
similar arrangements existing on the date hereof and disclosed to Parent;
provided, however, that the foregoing shall not prevent the Surviving
Corporation from amending or terminating any Company Benefit Plan or
similar arrangement in accordance with its terms.
SECTION 5.7 Indemnification, Exculpation and Insurance. (a)
Parent agrees that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective
Time now existing in favor of the current or former directors or officers
of the Company and its subsidiaries as provided in their respective
certificates of incorporation or by-laws (or comparable organizational
documents) and any indemnification agreements or arrangements of the
Company shall survive the Merger and shall continue in full force and
effect in accordance with their terms. The Surviving Corporation shall pay
any expenses of any indemnified person under this Section 5.7 in advance of
the final disposition of any action, proceeding or claim relating to any
such act or omission to the fullest extent permitted under the DGCL upon
receipt from the applicable indemnified person to whom advances are to be
advanced of any undertaking to repay such advances required under the DGCL.
The Surviving Corporation shall cooperate in the defense of any such
matter. In addition, from and after the Effective Time, directors or
officers of the Company who become directors or officers of the Surviving
Corporation or its affiliates will be entitled to the same indemnity rights
and protections as are afforded to other directors and officers of the
Surviving Corporation.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person
and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such
case, proper provision will be made so that the successors and assigns of
the Surviving Corporation will assume the obligations thereof set forth in
this Section 5.7.
(c) The provisions of this Section 5.7 (i) are intended to be
for the benefit of, and will be enforceable by, each indemnified party, his
or her heirs and his or her representatives and (ii) are in addition to,
and not in substitution for, any other rights to indemnification or
contribution that any such person may have by contract or otherwise.
(d) For six years after the Effective Time, the Surviving
Corporation shall maintain in effect the Company's current directors' and
officers' liability insurance covering acts or omissions occurring prior to
the Effective Time with respect to those persons who are currently covered
by the Company's directors' and officers' liability insurance policy on
terms with respect to such coverage and amount no less favorable to the
Company's directors and officers currently covered by such insurance than
those of such policy in effect on the date hereof; provided that the
Surviving Corporation may substitute therefor policies of Parent or its
subsidiaries containing terms with respect to coverage and amount no less
favorable to such directors or officers; provided, further, that in no
event shall the Surviving Corporation be required to pay aggregate premiums
for insurance under this Section 5.7(d) in excess of 200% of the aggregate
premiums paid by the Company in 2000 on an annualized basis for such
purpose.
SECTION 5.8 Fees and Expenses. (a) Except as provided in this
Section 5.8, all fees and expenses incurred in connection with the Merger,
this Agreement, and the transactions contemplated by this Agreement shall
be paid by the party incurring such fees or expenses, whether or not the
Merger is consummated.
(b) (i) In the event that this Agreement is terminated by
Parent pursuant to Section 7.1(c), then, promptly, but in no event later
than two business days after such termination, the Company shall pay Parent
a fee equal to $400 million by wire transfer of same day funds.
(ii) In the event that (A) a Pre-Termination Takeover
Proposal Event (as defined below) shall occur after the date of this
Agreement and thereafter this Agreement is terminated by either
Parent or the Company pursuant to Section 7.1(b)(i) or 7.1(b)(ii) and
(B) prior to the date that is 18 months after the date of such
termination the Company enters into a Company Acquisition Agreement,
then the Company shall promptly, but in no event later than two
business days after the date such Company Acquisition Agreement is
entered into, pay Parent a fee equal to $400 million by wire transfer
of same day funds.
(iii) In the event that this Agreement is terminated by
the Company pursuant to Section 7.1(d), then concurrently with such
termination, the Company shall pay to Parent a fee equal to $400
million by wire transfer of same day funds.
(iv) In the event that (A) a Pre-Termination Takeover
Proposal Event shall occur after the date of this Agreement, (B) the
Company Board of Directors has effected a Change in the Company
Recommendation, and (C) this Agreement is terminated by either Parent
or Company for any reason provided for under Section 7.1, then,
promptly, but in no event later than two business days after such
termination, the Company shall pay Parent a fee equal to $400 million
by wire transfer of same day funds.
(v) In no event shall the Company be required to pay more
than $400 million pursuant to this Section 5.8.
(vi) For purposes of this Section 5.8(b), a
"Pre-Termination Takeover Proposal Event" shall be deemed to occur if
a Company Takeover Proposal shall have been made known to the Company
or any of its subsidiaries or has been made directly to its
stockholders generally or any person shall have publicly announced an
intention (whether or not conditional) to make a Company Takeover
Proposal. The Company acknowledges that the agreements contained in
this Section 5.8(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements,
Parent would not enter into this Agreement; accordingly, if the
Company fails promptly to pay the amount due pursuant to this Section
5.8(b), and, in order to obtain such payment, Parent commences a suit
which results in a judgment against the Company for the fee set forth
in this Section 5.8(b), the Company shall pay to Parent its costs and
expenses (including attorneys' fees and expenses) in connection with
such suit, together with interest on the amount of the fee at the
rate on six-month U.S. Treasury obligations plus 300 basis points in
effect on the date such payment was required to be made.
SECTION 5.9 Public Announcements. Parent and the Company will
consult with each other before issuing, and provide each other the
opportunity to review, comment upon and concur with and use reasonable
efforts to agree on, any press release or other public statements and any
internal communications with respect to the transactions contemplated by
this Agreement, including the Merger, and shall not issue any such press
release or make any such public statement prior to such consultation,
except as either party may determine is required by applicable law, court
process or by obligations pursuant to any listing agreement with any
national securities exchange. The parties agree that the initial press
release to be issued with respect to the transactions contemplated by this
Agreement shall be in the form heretofore agreed to by the parties.
SECTION 5.10 Affiliates. (a) To the extent practicable,
concurrently with the execution of this Agreement (or to the extent not
practicable, as soon as practicable and in any event within 10 business
days after the date hereof), the Company shall deliver to Parent a written
agreement substantially in the form attached as Exhibit 5.10(a) hereto of
all of the persons who are "affiliates" of the Company for purposes of Rule
145 under the Securities Act or for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations; all
of such affiliates, who are affiliates as of the date of this Agreement,
are identified in Section 5.10 of the Company Disclosure Schedule. Section
5.10 of the Company Disclosure Schedule shall be updated by the Company as
necessary to reflect changes from the date hereof and the Company shall use
best efforts to cause each person added to such schedule after the date
hereof to deliver a similar agreement. Parent shall cause all persons who
are affiliates of Parent for purposes of qualifying the Merger for pooling
of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations to comply with
the fourth paragraph of Exhibit 5.10(a) hereto.
(b) The Surviving Corporation shall publish combined sales and
net income figures as contemplated by and in accordance with the terms of
SEC Accounting Series Release No. 135 no later than 30 days after the end
of the first fiscal quarter ending after the Closing in which there was at
least 30 days of post-Merger combined operations. This Section 5.10(b) is
intended to be for the benefit of affiliates of the Company.
SECTION 5.11 Stock Exchange Listing. Parent shall use best
efforts to cause the Parent Common Stock issuable (i) under Article II or
(ii) upon exercise of the Adjusted Options pursuant to Section 5.6 to be
approved for issuance on the NYSE and the PSE, in each case subject to
official notice of issuance, as promptly as practicable after the date
hereof, and in any event prior to the Closing Date.
SECTION 5.12 Stockholder Litigation. Each of the Company and
Parent shall give the other the reasonable opportunity to participate in
the defense of any stockholder litigation against the Company or Parent, as
applicable, and its directors relating to the transactions contemplated by
this Agreement.
SECTION 5.13 Tax Treatment. Each of Parent and the Company
shall use best efforts to cause the Merger to qualify as a reorganization
under the provisions of Section 368 of the Code and to obtain the opinions
of counsel referred to in Sections 6.2(c) and 6.3(c).
SECTION 5.14 Pooling of Interests. Each of the Company and
Parent shall use best efforts to cause the transactions contemplated by
this Agreement, including the Merger, to be accounted for as a pooling of
interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations, and such accounting treatment to be
accepted by the SEC, and each of the Company and Parent agrees that, except
as required by applicable law or regulation, it shall take no action that
would cause such accounting treatment not to be obtained.
SECTION 5.15 Standstill Agreements; Confidentiality Agreements.
During the period from the date of this Agreement through the Effective
Time, the Company shall not terminate, amend, modify or waive any provision
of any confidentiality or standstill agreement to which it or any of its
respective subsidiaries is a party. During such period, the Company shall
enforce, to the fullest extent permitted under applicable law, the
provisions of any such agreement, including by obtaining injunctions to
prevent any breaches of such agreements and to enforce specifically the
terms and provisions thereof in any court of the United States of America
or of any state having jurisdiction.
SECTION 5.16 Conveyance Taxes. Parent and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and
stamp taxes, any transfer, recording, registration and other fees or any
similar taxes which become payable in connection with the transactions
contemplated by this Agreement that are required or permitted to be filed
on or before the Effective Time. Parent shall pay, and the Company shall
pay on behalf of their respective stockholders, without deduction or
withholding from any amount payable to the holders of Company Common Stock,
any such taxes or fees imposed by any Governmental Entity which become
payable in connection with the transactions contemplated by this Agreement
for which such stockholders are primarily liable.
SECTION 5.17 Payment of Dividends. From the date hereof until
the Effective Time, Parent and the Company will coordinate with each other
regarding the declaration of dividends in respect of the shares of Parent
Common Stock and the shares of the Company Common Stock and the record
dates and payment dates relating thereto (it being the intention of the
parties that such record dates and payment dates be as consistent as
practicable with past practice), it being the intention of the parties that
holders of shares of Company Common Stock will not receive two dividends,
or fail to receive one dividend, for any single calendar quarter with
respect to their shares of Company Common Stock and the shares of Parent
Common Stock any holder of shares of Company Common Stock receives in
exchange therefor in connection with the Merger.
SECTION 5.18 Section 16 Matters. Prior to the Effective Time,
Parent and Company shall take all such steps as may be required to cause
any dispositions of Company Common Stock (including derivative securities
with respect to Company Common Stock) or acquisitions of Parent Common
Stock (including derivative securities with respect to Parent Common Stock)
resulting from the transactions contemplated by Article I or Article II of
this Agreement by each individual who is subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to the
Company, to be exempt under Rule 16b-3 promulgated under the Exchange Act,
such steps to be taken in accordance with the No-Action Letter dated
January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher & Flom
LLP.
SECTION 5.19 Employee Benefit Review. Commencing promptly
following the date hereof, Parent's and the Company's human resource
managers shall conduct a review of the Company Benefit Plans and other
Company compensation arrangements in order to coordinate the benefits to be
provided after the Closing to persons who are employees of the Company or
its subsidiaries immediately prior to the Closing ("Affected Employees")
and to ensure an orderly transition and the appropriate retention of
employees. Specifically this review shall include the following:
(a) With respect to any Company Benefit Plan that is a retiree
medical or other retiree welfare plan, to the extent the costs of providing
benefits thereunder are adequately accrued, the Surviving Corporation shall
not amend or terminate such plan following the Effective Time in any manner
which results in the benefits available thereunder to fail to be
substantially similar to those provided on the date hereof or the increase
in costs, other than any co-payment and cost-sharing increases (which may
be continued in the same proportion to Company provided portions of cost)
to any former Company employee (and his or her eligible dependents) who is
receiving such benefits thereunder as of the Effective Date, or any
Affected Employee (and his or her eligible dependents) who would be
eligible for such benefits if he or she retired on the Effective Date (or
who, as of the Effective Date, is within three years of being able to
retire and receive benefits thereunder).
(b) Prior service credit will be granted for eligibility,
vesting and participation in, and eligibility to retire under, the
Surviving Corporation's benefit programs.
(c) Pre-existing condition exclusions will be waived for
Affected Employees to the extent possible. Appropriate consideration for
past deductibles, or out-of-pocket expenses toward the medical or dental
programs will be evaluated for operational feasibility and strived for
whenever possible.
(d) A reasonable period of time will be allowed for the
Affected Employees to utilize accrued, paid time off, within reasonable
limits and allowing for the effective operation of the business.
(e) The Company will determine and announce in the ordinary
course (prior to the Effective Date), but will not pay, the fiscal year
2000 bonus amounts for senior executives (approximately 205 individuals),
and the Surviving Corporation shall pay to such senior executives the bonus
amounts so announced on or as soon as reasonably practicable after March 1,
2001.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver by each of Parent and the Company on
or prior to the Closing Date of the following conditions:
(a) Stockholder Approval. The Company Stockholder Approval
shall have been obtained.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(c) Governmental and Regulatory Approvals. Other than the
filing provided for under Section 1.3 and filings pursuant to the HSR Act
(which are addressed in Section 6.1(b)), all consents, approvals and
actions of, filings with and notices to any Governmental Entity required of
the Company, Parent or any of their subsidiaries to consummate the Merger
and the other transactions contemplated hereby, the failure of which to be
obtained or made is reasonably expected to have a material adverse effect
on Parent and its subsidiaries and prospective subsidiaries, taken as a
whole, shall have been obtained or made.
(d) No Injunctions or Restraints. No judgment, order, decree,
statute, law, ordinance, rule or regulation, entered, enacted, promulgated,
enforced or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect (i) preventing the consummation of the
Merger, or (ii) which otherwise is reasonably likely to have a material
adverse effect on the Company or Parent, as applicable; provided, however,
that each of the parties shall have used its best efforts to prevent the
entry of any such Restraints and to appeal as promptly as possible any such
Restraints that may be entered.
(e) Form S-4. The Form S-4 shall have become effective under
the Securities Act and no stop order or proceedings seeking a stop order
shall have been entered or be pending by the SEC.
(f) Stock Exchange Listings. The shares of Parent Common Stock
issuable to the Company's stockholders (i) as contemplated by Article II or
(ii) upon exercise of the Adjusted Options pursuant to Section 5.6 shall
have been approved for listing on the NYSE and the PSE, subject to official
notice of issuance.
(g) Pooling Letters. Parent and the Company shall have received
the Parent Pooling Letters and the Company Pooling Letters and they shall
not have been withdrawn or modified in any material respect.
SECTION 6.2 Conditions to Obligations of Parent. The obligation
of Parent to effect the Merger is further subject to satisfaction or waiver
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth herein (i) that are qualified as to
materiality shall be true and correct both when made and at and as of the
Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), and
(ii) that are not qualified as to materiality shall be true and correct
both when made and at and as of the Closing Date, as if made at and as of
such time (except to the extent expressly made as of an earlier date, in
which case as of such date) in all material respects.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to
be performed by it at or prior to the Closing Date under this Agreement.
(c) Tax Opinion. Parent shall have received from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to Parent, an opinion dated as of such
date, to the effect that the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and Parent and the
Company will each be a party to such reorganization within the meaning of
Section 368(b) of the Code. In rendering such opinion, counsel for Parent
may require delivery of and rely on the Tax Certificates.
(d) Regulatory Condition. No condition or requirement has been
imposed by one or more Governmental Entities in connection with any
required approval by them of the Merger relating to the transactions
contemplated hereunder which, either alone or together with all such other
conditions or requirements requires the Company or its subsidiaries to be
operated in a manner which is materially different from industry standards
in effect on the date hereof and which materially adversely affects the
business, financial condition, results of operations or prospects of the
Company and its subsidiaries, taken as a whole, or their businesses, other
than their commercial finance businesses, taken as a whole.
SECTION 6.3 Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent set forth herein (i) that are qualified as to
materiality shall be true and correct both when made and at and as of the
Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), and
(ii) that are not qualified as to materiality shall be true and correct
both when made and at and as of the Closing Date, as if made at and as of
such time (except to the extent expressly made as of an earlier date, in
which case as of such date) in all material respects.
(b) Performance of Obligations of Parent. Parent shall have
performed in all material respects all obligations required to be performed
by it at or prior to the Closing Date under this Agreement.
(c) Tax Opinions. The Company shall have received from Simpson
Thacher & Bartlett, counsel to the Company, an opinion as of such date, to
the effect that the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and Parent and the Company will each
be a party to such reorganization within the meaning of Section 368(b) of
the Code. In rendering such opinion, counsel for the Company may require
delivery of and rely on the Tax Certificates.
SECTION 6.4 Frustration of Closing Conditions. Neither Parent
nor the Company may rely on the failure of any condition set forth in
Section 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such
failure was caused by such party's failure to use best efforts to
consummate the Merger and the other transactions contemplated by this
Agreement, as required by and subject to Section 5.5.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time, and whether before or after the
Company Stockholder Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by
April 1, 2001, provided, however, that the right to terminate this
Agreement pursuant to this Section 7.1(b)(i) shall not be available
to any party whose failure to perform any of its obligations under
this Agreement results in the failure of the Merger to be consummated
by such time; provided, however, that this Agreement may be extended
not more than 30 days by either party by written notice to the other
party if the Merger shall not have been consummated solely as a
result of the condition set forth in Section 6.1(c) failing to have
been satisfied and the extending party reasonably believes that the
relevant approvals will be obtained during such extension period;
(ii) if the Company Stockholder Approval shall not have
been obtained at the Company Stockholders Meeting duly convened
therefor or at any adjournment or postponement thereof; or
(iii) if any Restraint having any of the effects set
forth in Section 6.1(d) shall be in effect and shall have become
final and nonappealable; provided, that the party seeking to
terminate this Agreement pursuant to this Section 7.1(b)(iii) shall
have used best efforts to prevent the entry of and to remove such
Restraint;
(c) by Parent, if the Company shall have failed to make the
Company Recommendation in the Proxy Statement or effected a Change in the
Company Recommendation (or resolved to take any such action), whether or
not permitted by the terms hereof, or shall have breached its obligations
under this Agreement by reason of a failure to call or convene the Company
Stockholders Meeting in accordance with Section 5.1(b); or
(d) by the Company in accordance with Section 4.2(b); provided
that, in order for the termination of this Agreement pursuant to this
paragraph (d) to be deemed effective, the Company shall have complied with
all provisions of Section 4.2, including the notice provisions therein, and
with applicable requirements, including the payment of the fee referred to
in paragraph (b)(iii) of Section 5.8.
The party desiring to terminate this Agreement pursuant to
clause (b), (c) or (d) of this Section 7.1 shall give written notice of
such termination to the other party in accordance with Section 8.2,
specifying the provision hereof pursuant to which such termination is
effected.
SECTION 7.2 Effect of Termination. In the event of termination
of this Agreement by either the Company or Parent as provided in Section
7.1, this Agreement shall forthwith become void and have no effect, without
any liability or obligation on the part of Parent or the Company, other
than the provisions of Section 3.1(o), Section 3.2(m), the last sentence of
Section 5.4, Section 5.8, this Section 7.2 and Article VIII, which
provisions survive such termination, provided, however, that nothing herein
(including the payment of any amounts pursuant to Section 5.8 hereof) shall
relieve any party from any liability for any willful and material breach by
a party of any of its representations, warranties, covenants or agreements
set forth in this Agreement.
SECTION 7.3 Amendment. This Agreement may be amended by the
parties at any time before or after the Company Stockholder Approval;
provided, however, that after such approval, there shall not be made any
amendment that by law requires further approval by the stockholders of the
Company without the further approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of
all of the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the
Effective Time, a party may (a) extend the time for the performance of any
of the obligations or other acts of the other party, (b) waive any
inaccuracies in the representations and warranties of the other party
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 7.3, waive compliance by
the other party with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed
on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights.
SECTION 7.5 Procedure for Termination. A termination of this
Agreement pursuant to Section 7.1 shall, in order to be effective, require,
in the case of Parent or the Company, action by its Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective
Time.
SECTION 8.2 Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally, telecopied (which is confirmed) or
sent by overnight courier (providing proof of delivery) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent, to
Citigroup Inc.
Corporate Law Department
425 Park Avenue, Second Floor
New York, New York 10043
Telecopy No.:(212) 793-4401
Attention: Assistant General Counsel, M&A Unit
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Telecopy No.: (212) 735-2000
Attention: Kenneth J. Bialkin and Eric J. Friedman
(b) if to the Company, to
250 East Carpenter Freeway
Irving, Texas 75062
Telecopy No.: (972) 652-5798
Attention: General Counsel
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Telecopy No.: (212) 455-2502
Attention: David J. Sorkin and Alan D. Schnitzer
SECTION 8.3 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person, where
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a person,
whether through the ownership of voting securities, by contract, as trustee
or executor, or otherwise; provided, however, that (x) any investment
account advised or managed by such person or one of its subsidiaries or
affiliates on behalf of third parties, or (y) any partnership, limited
liability company, or other similar investment vehicle or entity engaged in
the business of making investments of which such person acts as the general
partner, managing member, manager, investment advisor, principal
underwriter or the equivalent shall not be deemed an affiliate of such
person;
(b) "material adverse change" or "material adverse effect"
means, when used in connection with the Company or Parent, any change,
effect, event, occurrence or state of facts that is, or would reasonably be
expected to be, materially adverse to the business, financial condition or
results of operations of such party and its subsidiaries taken as a whole,
other than any change, effect, event or occurrence constituting or relating
to (i) the economy or financial markets of the United States or any other
region, (ii) this Agreement or the transactions contemplated hereby or the
announcement thereof and (iii) the financial services industry in general
and, in the case of the Company, not specifically relating to the Company
or its subsidiaries, and in the case of Parent, not specifically relating
to Parent or its subsidiaries.
The terms "material" and "materially" have correlative meanings;
(c) "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity;
(d) a "subsidiary" of any person means another person, an
amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a majority
of its Board of Directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of which) is owned
directly or indirectly by such first person; provided, however, that (x)
any investment account advised or managed by such person or one of its
subsidiaries or affiliates on behalf of third parties, or (y) any
partnership, limited liability company, or other similar investment vehicle
or entity engaged in the business of making investments of which such
person acts as the general partner, managing member, manager, investment
advisor, principal underwriter or the equivalent shall not be deemed a
subsidiary of such person; and
(e) "knowledge" of any person which is not an individual means
the actual knowledge of such person's executive officers.
SECTION 8.4 Interpretation. When a reference is made in this
Agreement to an Article, Section or Exhibit, such reference shall be to an
Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation". The words "hereof",
"herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All terms defined in this Agreement
shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including
(in the case of agreements or instruments) by waiver or consent and (in the
case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.
SECTION 8.5 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries.
This Agreement (including the documents and instruments referred to herein)
and the Confidentiality Agreement (a) constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter of this Agreement
and (b) except for the provisions of Article II, Sections 5.6, 5.7 and
5.10(b), are not intended to confer upon any person other than the parties
any rights or remedies.
SECTION 8.7 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable
principles of conflict of laws thereof.
SECTION 8.8 Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties
hereto without the prior written consent of the other parties. Any
assignment in violation of the preceding sentence shall be void. Subject to
the preceding two sentences, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
SECTION 8.9 Consent to Jurisdiction. Each of the parties hereto
(a) consents to submit itself to the personal jurisdiction of any federal
court located in the State of Delaware or any Delaware state court in the
event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (b) agrees that it will not attempt to deny
or defeat such personal jurisdiction by motion or other request for leave
from any such court, and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal court sitting in the State of
Delaware or a Delaware state court.
SECTION 8.10 Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
SECTION 8.11 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, Parent and the Company have caused this
Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
CITIGROUP INC.
By /s/ Sanford I. Weill
----------------------------------------
Name: Sanford I. Weill
Title: Chairman and Chief Executive
Officer
ASSOCIATES FIRST CAPITAL CORPORATION
By /s/ Keith W. Hughes
-----------------------------------------
Name: Keith W. Hughes
Title: Chairman and Chief Executive
Officer
EXHIBIT 5.10(A)
Citigroup Inc.
Corporate Law Department
425 Park Avenue, Second Floor
New York, New York 10043
Attention: Assistant General Counsel, M&A Unit
Ladies and Gentlemen:
The undersigned, a holder of shares of Class A Common Stock,
par value $.01 per share ("Company Common Stock"), of Associates First
Capital Corporation, a Delaware corporation (the "Company"), is entitled to
receive in connection with the merger (the "Merger") of the Company with
and into Citigroup Inc., a Delaware corporation ("Parent"), shares of
common stock, par value $.01 per share ("Parent Common Stock"), of Parent.
The undersigned acknowledges that the undersigned may be deemed an
"affiliate" of the Company within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), by the Securities and Exchange Commission (the "SEC") and may be
deemed an "affiliate" of the Company for purposes of qualifying the Merger
for pooling of interests accounting treatment under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations,
although nothing contained herein should be construed as an admission of
either such fact.
If, in fact, the undersigned were such an affiliate under the
Securities Act, the undersigned's ability to sell, assign or transfer the
shares of Parent Common Stock received by the undersigned in the Merger may
be restricted unless such transaction is registered under the Securities
Act or an exemption from such registration is available. The undersigned
understands that such exemptions are limited and, to the extent the
undersigned felt or feels necessary, the undersigned has obtained or will
obtain advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the
sale of such securities of Rules 144 and 145(d) promulgated under the
Securities Act. The undersigned understands that Parent is under no
obligation to register Parent Common Stock for sale, transfer or other
disposition by the undersigned or take any action (other than as provided
in the penultimate paragraph of this letter) to make compliance with an
exemption from registration available to the undersigned.
The undersigned hereby represents to and covenants with Parent
that the undersigned will not sell, assign, transfer or otherwise dispose
any of the Parent Common Stock received (including through a cashless
exercise of stock options) by the undersigned in the Merger except (i)
pursuant to an effective registration statement under the Securities Act,
(ii) in conformity with the volume and other limitations of Rule 145 or
(iii) in a transaction which, in the opinion of the general counsel of
Parent, Simpson Thacher & Bartlett, or other counsel reasonably
satisfactory to Parent or as described in a "no-action" or interpretive
letter from the Staff of the SEC specifically issued with respect to a
transaction to be engaged in by the undersigned, is not required to be
registered under the Securities Act.
The undersigned hereby further represents to and covenants with
Parent that from the date that is 30 days prior to the Effective Time (as
defined in the Agreement and Plan of Merger, dated as of September 5, 2000,
among the Company and Parent), the undersigned will not sell, transfer or
otherwise dispose of any shares of Company Common Stock held by the
undersigned and that the undersigned will not sell, transfer or otherwise
dispose of any shares of Parent Common Stock received by the undersigned in
the Merger or other shares of Parent Common Stock held by the undersigned
until after such time as results covering at least 30 days of post-Merger
combined operations of the Company and Parent have been published by
Parent, in the form of a quarterly earnings report, an effective
registration statement filed with the SEC, a report to the SEC on Form
10-K, 10-Q or 8-K, or any other public filing or announcement which
includes such combined results of operations.
In the event of a sale or other disposition by the undersigned
of Parent Common Stock pursuant to Rule 145, the undersigned will supply
Parent with evidence of compliance with such Rule, in the form of a letter
in the form of Annex I hereto and, to the extent required by the second
preceding paragraph, the opinion of counsel or no-action letter referred to
in such paragraph. The undersigned understands that Parent may instruct its
transfer agent to withhold the transfer of any shares of Parent Common
Stock disposed of by the undersigned, but that (provided such transfer is
not prohibited by any other provision of this letter agreement) upon
receipt of such evidence of compliance, Parent shall cause the transfer
agent to effectuate the transfer of the Parent Common Stock sold as
indicated in such letter. Notwithstanding the foregoing, Parent shall
revoke the stop transfer instructions with respect to any shares of Parent
Common Stock held by the undersigned or a transferee of the undersigned as
to which the legend referred to below has been removed.
The undersigned acknowledges and agrees that the legend set
forth below will be placed on certificates representing any Parent Common
Stock received by the undersigned in connection with the Merger or held by
a transferee thereof, which legend will be removed by delivery of
substitute certificates (A) upon the transfer by the undersigned of Parent
Common Stock in a sale made in conformity within the provisions of Rule
145(d) or pursuant to an effective registration statement under the
Securities Act or (B) upon receipt of an opinion in form and substance
reasonably satisfactory to Parent from independent counsel (which may be
Simpson Thacher & Bartlett) reasonably satisfactory to Parent to the effect
that such legends are no longer required for purposes of the Securities
Act.
There will be placed on the certificates for Parent Common
Stock issued to the undersigned, or, except as otherwise provided herein,
any substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued
pursuant to a business combination which is being accounted for as a
pooling of interests, in a transaction to which Rule 145 promulgated
under the Securities Act of 1933, as amended, applies.
The shares have not been acquired by the holder with a view to, or
for resale in connection with, any distribution thereof within the
meaning of the Securities Act of 1933, as amended. The shares may not
be sold, pledged or otherwise disposed of (i) until such time as
Parent shall have published financial results covering at least 30
days of combined operations after the Effective Time and (ii) except
pursuant to a registration statement under, or in accordance with an
exemption from the registration requirements of, the Securities Act
of 1933."
For so long as and to the extent necessary to permit the
undersigned to sell the Parent Common Shares pursuant to Rule 145 and, to
the extent applicable, Rule 144 under the Securities Act, Parent shall take
all such actions as reasonably available to file, on a timely basis, all
reports and data required to be filed with the Securities and Exchange
Commission by it pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), furnish to the undersigned upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale
under Rule 145 and otherwise take all such actions as reasonably available
to permit such sales pursuant to Rule 145 and Rule 144. Parent has filed,
on a timely basis, all reports required to be filed with the Securities and
Exchange Commission under Section 13 of the Exchange Act during the
preceding 12 months.
The undersigned acknowledges that (i) the undersigned has
carefully read this letter and understands the requirements hereof and the
limitations imposed upon the distribution, sale, transfer or other
disposition of shares of Company Common Stock and Parent Common Stock and
(ii) the receipt by Parent of this letter is an inducement to Parent's
obligations to consummate the Merger.
Very truly yours,
[NAME]
Dated: __________, _____
ANNEX I
[DATE]
[NAME]
On ________, the undersigned sold ___ shares of common stock
(the "Parent Common Stock") of Citigroup Inc. ("Parent") which were
received by the undersigned in connection with the merger of a subsidiary
of Parent with and into Associates First Capital Corporation.
Based upon the most recent report or statement filed by Parent
with the Securities and Exchange Commission, the shares of Parent Common
Stock sold by the undersigned were within the prescribed limitations set
forth in paragraph (e) of Rule 144 promulgated under the Securities Act of
1933, as amended (the "Securities Act").
The undersigned hereby represents that the shares of Parent
Common Stock were sold in "brokers' transactions" within the meaning of
Section 4(4) of the Securities Act or in transactions directly with a
"market maker" as that term is defined in Section 3(a)(38) of the
Securities Exchange Act of 1934, as amended. The undersigned further
represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Parent Common Stock, and that the
undersigned has not made any payment in connection with the offer or sale
of the Parent Common Stock to any person other than to the broker who
executed the order in respect of such sale.
Very truly yours,
