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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
AUTOFINANCE GROUP, INC.
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(Name of Issuer)
Common Shares, no stated par value
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(Title of Class of Securities)
052 774 106
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(CUSIP Number)
Thomas C. Stevens, 1100 National City Bank Building
Cleveland, Ohio 44114 (216) 566-5500
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
March 20, 1995
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
Check the following box if a fee is being paid with the statement [X]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7).
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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SCHEDULE 13D
<TABLE>
<S> <C>
CUSIP NO. 052 774 106 PAGE 2 OF PAGES
----- -----
===================================================================================================================================
| 1 | NAME OF REPORTING PERSON |
| | S.S. OR I.R.S. IDENTIFICATION OF ABOVE PERSON |
| | |
| | KEYCORP 34-6542451 |
|-----|---------------------------------------------------------------------------------------------------------------------------|
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ]|
| | (b)[ ]|
| | |
|-----|---------------------------------------------------------------------------------------------------------------------------|
| 3 | SEC USE ONLY |
| | |
|-----|---------------------------------------------------------------------------------------------------------------------------|
| 4 | SOURCE OF FUNDS |
| | BK, WC |
|-----|---------------------------------------------------------------------------------------------------------------------------|
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(E) [ ]|
| | |
|-----|---------------------------------------------------------------------------------------------------------------------------|
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION |
| | OHIO |
|---------------------------------------------------------------------------------------------------------------------------------|
| | 7 | SOLE VOTING POWER |
| | | -0- 1 |
| NUMBER OF |-------------------------------------------------------------------------------------------------------|
| SHARES | 8 | SHARED VOTING POWER |
| BENEFICIALLY | | -0- 1 |
| OWNED BY |-------------------------------------------------------------------------------------------------------|
| EACH | 9 | SOLE DISPOSITIVE POWER |
| REPORTING | | -0- 1 |
| PERSON |-------------------------------------------------------------------------------------------------------|
| WITH | 10 | SHARED DISPOSITIVE POWER |
| | | -0- 1 |
|---------------------------------------------------------------------------------------------------------------------------------|
|11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
| | -0- 1 |
|-----|---------------------------------------------------------------------------------------------------------------------------|
|12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X]|
| | |
|-----|---------------------------------------------------------------------------------------------------------------------------|
|13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
| | 0.0 1 |
|-----|---------------------------------------------------------------------------------------------------------------------------|
|14 | TYPE OF REPORTING PERSON* |
| | HC; CO |
======|============================================================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
</TABLE>
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1. This Schedule 13D relates to the Common Stock, no
stated par value ("AFG Common Stock"), of AutoFinance Group, Inc. ("AFG") that
may be purchased by KeyCorp ("KeyCorp") upon exercise of an option (the "AFG
Option") granted by AFG to KeyCorp. The AFG Option is exercisable only upon
the occurrence of certain Purchase Events (as described in Item 6 of this
Schedule 13D), none of which has occurred as of the date of this Schedule 13D,
and may be exercised only with regulatory approval (if, as a result of the
exercise, KeyCorp would own more than 5% of the AFG Common Stock then
outstanding). Unless and until the AFG Option becomes exercisable, KeyCorp
disclaims beneficial ownership of these shares.
Item 1. Security and Issuer.
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The title of the class of equity securities to which
this Schedule 13D relates is the Common Stock, no stated par value ("AFG Common
Stock"), of AutoFinance Group, Inc., a California corporation ("AFG"). The
address of the principal executive offices of AFG is 601 Oakmont Lane,
Westmont, Illinois 60559. AFG is an automotive finance company engaged
primarily in the indirect financing (the purchase of contracts from dealers) of
automotive purchases by individuals with non-prime credit.
Item 2. Identity and Background.
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This Schedule 13D is filed on behalf of KeyCorp
("KeyCorp"). KeyCorp is an Ohio corporation with its principal executive
offices at 127 Public Square, Cleveland, Ohio 44114. KeyCorp is registered as
a bank holding company with the Federal Reserve Board under the Federal Bank
Holding Company Act of 1956, as amended ("BHCA") and a savings and loan holding
company as defined in the Federal Home Owner's Loan Act ("HOLA") and is
principally engaged in the business of managing and controlling banks and
activities closely related to banking.
Filed as Appendix I to this Schedule 13D is a list of
the executive officers and directors of KeyCorp, containing the following
information with respect to each of them: (a) name, (b) business address, and
(c) present principal occupation or employment, and the name and, if different
than such person's business address, the address of any corporation or other
organization in which such employment is conducted. Each person listed in
Appendix I is a United States citizen.
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During the past five years, neither KeyCorp nor, to
the best of KeyCorp's knowledge, any person named in Appendix I (a) has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (b) has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree, or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to such
laws.
Item 3. Source and Amount of Funds or Other Consideration.
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This Schedule 13D relates to the AFG Common Stock
that may be purchased by KeyCorp upon exercise of an option (the "AFG Option")
granted by AFG to KeyCorp pursuant to a Stock Option Agreement, dated as of
March 20, 1995 (the "Option Agreement"), between AFG and KeyCorp.
(Descriptions of the provisions of the Option Agreement appearing throughout
this Schedule 13D are qualified in their entirety by reference to the Option
Agreement, which is included as an Exhibit to this Schedule 13D and is
incorporated herein by reference).
The number of shares of AFG Common Stock that may be
purchased upon exercise of the AFG Option is equal to 19.9% of the AFG Common
Stock outstanding as of March 20, 1995 (without giving effect to any shares of
AFG Common Stock subject to or issued pursuant to the AFG Option). This number
is 3,718,194 shares, based on 18,684,392 shares of AFG Common Stock outstanding
as of March 16, 1995, as represented by AFG to KeyCorp. The purchase price per
share is equal to $16.50; provided, however, that in the event AFG, without the
prior written consent of KeyCorp or in violation of the Merger Agreement (as
defined below in Item 4), issues (other than pursuant to options or warrants
outstanding as of March 20, 1995), or agrees to issue any shares of AFG Common
Stock at a price less than $16.50 per share, such purchase price shall be equal
to the lesser price. (The number of shares and the purchase price are subject
to adjustment as described in Items 5 and 6). The aggregate purchase price for
all of the shares of AFG Common Stock that may be purchased upon exercise of
the AFG Option is approximately $61,350,201.
If and when the AFG Option is exercised, KeyCorp's
source of funds to pay the purchase price will be either working capital or
funds borrowed from one or more banks in the ordinary course of business; the
identity of any such bank or banks has not yet been determined.
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Item 4. Purpose of Transaction.
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The AFG Option was granted concurrently with the
execution of an Agreement of Merger, dated as of March 20, 1995 (the "Merger
Agreement"), among KeyCorp, KeyCorp Finance Inc., an Ohio corporation and a
wholly-owned subsidiary of KeyCorp ("KeySub"), and AFG, providing for the
merger (the "Merger") of AFG with and into KeySub, which will be the surviving
corporation in the Merger (sometimes referred to herein as the "Surviving
Corporation"). (Descriptions of the provisions of the Merger Agreement
appearing throughout this Schedule 13D are qualified in their entirety by
reference to the Merger Agreement, which is included as an Exhibit to this
Schedule 13D and is incorporated herein by reference).
AFG granted the AFG Option in order to induce KeyCorp
to enter into the Merger Agreement. One effect of the AFG Option is to
increase the likelihood that the Merger will be completed by making it more
difficult and more expensive for another party to obtain control of or acquire
AFG.
The Merger is intended to combine the assets and
operations of AFG and KeyCorp (subject to the Distribution as defined below in
Section 4) and will be accounted for as a purchase.
Under the Merger Agreement, AFG and KeyCorp are
prohibited from intentionally taking any action that would disqualify the
Merger as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), for federal income tax
purposes. The Merger Agreement prohibits AFG from purchasing or redeeming any
shares of AFG Common Stock. In the Merger Agreement, AFG has agreed to cause
its affiliates (as that term is used in Rule 145 under the Securities Act of
1933, as amended) to enter into an agreement providing, among other things,
that the shares of KeyCorp Common Stock acquired by the affiliate in the Merger
may not be transferred for a minimum period of one year after the merger
becomes effective (the "Effective Time").
In the Merger Agreement, AFG has agreed to distribute
(the "Distribution") to AFG's shareholders, immediately prior to the Merger
becoming effective, 95.01% of the outstanding shares of common stock, par value
$.10 per share ("Patlex Common Stock"), of Patlex Corporation, a Pennsylvania
corporation and a wholly-owned subsidiary of AFG ("Patlex"), pursuant to a
Distribution Agreement, dated as of March 20, 1995, among AFG, Patlex and
KeyCorp (the "Patlex Spinoff Agreement"). The balance of the outstanding
shares of Patlex Common Stock will be retained by AFG and not distributed in
the Distribution so
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that, immediately following the Distribution and the payment of cash in lieu of
fractional shares, the AFG shareholders will be the record and beneficial
owners of 95.01% of the outstanding shares of Patlex Common Stock and the
Surviving Corporation will be the record and beneficial owner of 4.99% of the
outstanding shares of Patlex Common Stock. (Descriptions of the provisions of
the Patlex Spinoff Agreement appearing throughout this Schedule 13D are
qualified in their entirety by reference to the Patlex Spinoff Agreement, which
is included as an Exhibit to this Schedule 13D and is incorporated herein by
reference).
Pursuant to the terms of the Merger Agreement,
certain shareholders of AFG (the "Shareholders"), including two directors of
AFG, holding as of March 16, 1995, an aggregate of 5,179,154 shares of AFG
Common Stock (equal to 27.7% of the outstanding shares of AFG Common Stock as
of March 16, 1995) each entered into a Voting Agreement and Irrevocable Proxy,
dated as of March 20, 1995 (the "Voting Agreements"), with KeyCorp pursuant to
which each Shareholder has agreed to vote, or cause to be voted the shares of
AFG Common Stock that such Shareholder owns or has the power to vote (i) in
favor of the adoption of the Merger Agreement and the approval of the Merger,
(ii) against the approval of any proposal relating to a competing merger or
business combination involving an acquisition of all or a substantial portion
of the AFG Common Stock, the assets of AFG, or the assets or stock of any
subsidiary of AFG by any person or entity other than KeyCorp or an affiliate
of KeyCorp, and (iii) against any other transaction which is inconsistent with
the obligation of AFG to consummate the Merger in accordance with the Merger
Agreement. (Descriptions of the provisions of the Voting Agreement appearing
throughout this Schedule 13D are qualified in their entirety by reference to
the Voting Agreements, which are included as an Exhibit to this Schedule 13D
and is incorporated herein by reference. A list of the Shareholders executing
a Voting Agreement is included as an Exhibit to this Schedule 13D and is
incorporated herein by reference).
When the Merger becomes effective, the Amended
Articles of Incorporation of KeySub (in the form attached as Exhibit B to the
Merger Agreement) will become the Articles of Incorporation of the Surviving
Corporation, the regulations of KeySub will be the Regulations of the Surviving
Corporation, and the directors of KeySub will be the directors of the Surviving
Corporation.
The Merger Agreement does not permit AFG to declare
and pay any cash dividends on the AFG Common Stock or to enter into any
Securitization Transaction (as defined below in this Item 4), except that the
Merger Agreement permits AFG or an AFG subsidiary to sell or pledge outstanding
loans of, or
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extensions of credit by, AFG or an AFG subsidiary (individually an "AFG Loan",
and collectively the "AFG Loans") in one or more private placement transactions
under the Securities Act of 1933, as amended (a "Securitization Transaction"),
if, and only if, one or more bank affiliates of KeyCorp is unwilling, on or
before April 30, 1995, to enter into definitive loan documentation with AFG.
Pursuant to the Merger, shares of AFG Common Stock
will be converted into the right to receive shares of KeyCorp Common Stock. As
a result, after completion of the Merger, transactions in AFG Common Stock will
no longer be reported on NASDAQ, and the AFG Common Stock will be eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934.
Except as set forth in Items 4, 5, and 6 of, and in
the Appendices and Exhibits to, this Schedule 13D, KeyCorp does not at this
time have any plans or proposals that relate to or would result in (a) the
acquisition by any person of additional securities of AFG, or the disposition
of securities of AFG, (b) an extraordinary corporate transaction, such as a
merger, reorganization or liquidation, involving AFG or any of its
subsidiaries, (c) a sale or transfer of a material amount of the assets of AFG
or any of its subsidiaries, (d) any change in the present Board of Directors or
management of AFG, including any change in the number or terms of AFG's
directors or the filling of any existing vacancies on AFG's Board of Directors,
(e) any material change in the present capitalization or dividend policy of
AFG, (f) any other material change in AFG's business or corporate structure,
(g) changes in AFG's charter, bylaws, or instruments corresponding thereto or
other actions that may impede the acquisition of control of AFG by any person,
(h) causing a class of securities of AFG to be delisted from a national
securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association,
(i) a class of equity securities of AFG becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Securities Act of 1933, or (j)
any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
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The number of shares of AFG Common Stock that may be
purchased upon exercise of the AFG Option is equal to 19.9% of the shares of
AFG Common Stock outstanding as of March 20, 1995 (without giving effect to any
shares of Common Stock subject to or issued pursuant to the AFG Option). This
number, which is subject to adjustment as described in Item 6, is 3,718,194
shares, based on 18,684,392 shares of AFG Common Stock
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outstanding as of March 16, 1995, as represented by AFG to KeyCorp. If
additional shares of AFG Common Stock are issued or otherwise become
outstanding after the date of the Option Agreement (other than pursuant to the
Option Agreement), the number of shares of AFG Common Stock subject to the AFG
Option will be increased so that, after such issuance, it equals 19.9% of the
number of shares of AFG Common Stock then issued and outstanding (without
giving effect to any shares of AFG Common Stock subject to or issued pursuant
to the AFG Option). The AFG Option is exercisable only upon the occurrence of
certain Purchase Events (as described in item 6), none of which has occurred,
and may be exercised only with regulatory approval (if, as a result of the
exercise, KeyCorp would own more than 5% of the AFG Common Stock then
outstanding). Unless and until the AFG Option becomes exercisable, KeyCorp
disclaims beneficial ownership of the AFG Common Stock that may be purchased
upon exercise of the AFG Option.
KeyCorp knows of no other person having the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, the shares of AFG Common Stock that may be purchased upon
exercise of the AFG Option.
To the best of KeyCorp's knowledge, Appendix II sets
forth, for each person listed in Appendix I, the number of shares of AFG Common
Stock as to which there is sole power to vote or to direct the vote, shared
power to vote or to direct the vote, or sole or shared power to dispose or to
direct the disposition.
Item 6. Contracts, Arrangements, Understandings, or Relationships with
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Respect to Securities of the Issuer.
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Set forth below are descriptions of certain
provisions of the Option Agreement, the Merger Agreement, the Patlex Spinoff
Agreement and the Voting Agreements. The descriptions of the Option Agreement,
the Merger Agreement, the Patlex Spinoff Agreement and the Voting Agreements
are qualified in their entirety by reference to the Option Agreement,
the Merger Agreement, the Patlex Spinoff Agreement and the Voting Agreements,
which are included as Exhibits to this Schedule 13D and are incorporated
herein by reference.
Option Agreement
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The Option Agreement provides that KeyCorp may
exercise the AFG Option upon the occurrence of one or more of the following
events after the date of the Option Agreement ("Purchase Events"):
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(a) AFG or any of its subsidiaries, without the
prior written consent of KeyCorp, authorizes, recommends, proposes, or
publicly announces an intention to authorize, recommend, or propose,
or enters into an agreement to effect, (i) a merger, consolidation,
joint venture, or other business combination involving AFG or any of
its subsidiaries with or into any person (other than a merger,
consolidation, joint venture, or other business combination with or
into KeyCorp or any of KeyCorp's subsidiaries, or a merger or
consolidation of any of AFG's subsidiaries with or into AFG or any of
its other subsidiaries), (ii) a sale, lease, or other disposition of
assets or earning power of AFG or any of its subsidiaries, in one or
more transactions, representing 50% or more of the consolidated assets
or earning power of AFG and its subsidiaries to any person (other than
KeyCorp or any of its subsidiaries), or (iii) an issuance, sale, or
other disposition of securities representing 25% or more of the voting
power of AFG or any of its subsidiaries to any person (other than
KeyCorp or any of its subsidiaries) (any of the foregoing being an
"Acquisition Transaction"); except that, (A) if KeyCorp gives its
prior written consent to any such transaction, the transaction as to
which KeyCorp gives such consent will not be an Acquisition
Transaction and (B) the transaction contemplated by the Patlex Spinoff
Agreement will not be a Purchase Event or an Acquisition Transaction;
(b) any person (other than KeyCorp or any of its
subsidiaries) commences, or files a registration statement with
respect to, a tender offer or exchange offer for shares of AFG Common
Stock such that, upon consummation of the offer, that person would
beneficially own 25% or more of the AFG Common Stock then outstanding;
(c) any person (other than KeyCorp or any of its
subsidiaries) acquires beneficial ownership of 25% or more of the AFG
Common Stock then outstanding, or any group (other than a group which
includes KeyCorp or any of its subsidiaries), acquires beneficial
ownership of 25% or more of the AFG Common Stock then outstanding;
(d) the shareholders of AFG do not approve the
Merger Agreement, the AFG shareholders' meeting for the approval of
the Merger Agreement is canceled (and not rescheduled) prior to
termination of the Merger
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Agreement, or AFG's Board of Directors withdraws or modifies in a
manner adverse to KeyCorp the recommendation of AFG's Board of
Directors that AFG's shareholders approve the Merger and adopt the
Merger Agreement, in each case after any person (other than KeyCorp or
any of its subsidiaries) publicly announces a bona fide proposal, or
publicly discloses a bona fide intention to make a bona fide proposal,
to engage in a transaction which would be a Purchase Event under (a),
(b), or (c) above (or AFG has publicly disclosed receipt of such a
proposal).
Generally, the right to exercise the AFG Option
terminates upon the earliest of (a) the effectiveness of the Merger, (b) 12
months after the first occurrence of a Purchase Event, and (c) termination of
the Merger Agreement in accordance with its terms before the occurrence of a
Purchase Event.
In the event of any change in the AFG Common Stock by
reason of a stock dividend, split-up, recapitalization, combination, exchange
of shares, or similar transaction, the number of shares subject to the AFG
Option and the purchase price therefor will be adjusted accordingly.
During the 12-month period following the first
occurrence of a Repurchase Event (as defined below in this paragraph), KeyCorp
will have the right to require AFG to repurchase the AFG Option and all shares
of AFG Common Stock purchased upon exercise of the AFG Option that are
beneficially owned by KeyCorp at the time the repurchase is requested. The
aggregate price will be the sum of (a) the aggregate purchase price paid by
KeyCorp for all shares of AFG Common Stock purchased upon exercise of the AFG
Option that are beneficially owned by KeyCorp at the time the repurchase is
requested, (b) the excess of the Applicable Price (as defined below in this
paragraph) over the purchase price paid by KeyCorp for each share of AFG Common
Stock purchased upon exercise of the AFG Option that is beneficially owned by
KeyCorp at the time the repurchase is requested, multiplied by the number of
such shares, and (c) the excess of the Applicable Price over the option price
per share multiplied by the number of shares with respect to which the AFG
Option has not been exercised. For this purpose, "Repurchase Event" shall mean
(x) the consummation of an "Acquisition Transaction," except that the
percentage referred to in subparagraph (a)(iii) of the definition of
Acquisition Transaction is replaced by 30%, and (y) a Purchase Event under
subparagraph (c) except the percentage referred to therein is replaced with
30%. For this purpose, "Applicable Price" means the highest of (w) the highest
price per share at which a tender offer or exchange offer has been made for AFG
Common Stock after
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March 20, 1995 and before the repurchase is requested, (x) the highest price
per share to be paid by any person (other than KeyCorp or any of its
subsidiaries) for shares of AFG Common Stock, or the highest consideration per
share to be received by the holders of AFG Common Stock, pursuant to an
agreement for a merger or other business combination with AFG that is entered
into after March 20, 1995 and before the repurchase is requested, (y) the
highest closing sales price per share of AFG Common Stock reported on NASDAQ
during the 60 business days before the repurchase is requested, and (z) in the
event of the sale of more than 50% of the assets or earning power of AFG and
its subsidiaries to any person (other than KeyCorp or any of its subsidiaries),
the sum of the price paid for the assets or earning power and the current value
of AFG's remaining assets, divided by the number of shares of AFG Common Stock
outstanding at the time of the sale.
During the six-month period beginning 12 months after
the first occurrence of a Repurchase Event, AFG will have the right to
repurchase from KeyCorp all of the shares of AFG Common Stock purchased upon
exercise of the AFG Option that are beneficially owned by KeyCorp at the time
the repurchase is requested. The aggregate price will be the greater of (i)
110% of the average closing sales price per share of AFG Common Stock reported
on NASDAQ for the 10 business days before the repurchase is requested and (ii)
the sum of (x) the purchase price per share paid by KeyCorp for the shares and
(y) KeyCorp's pre-tax per share carrying cost for the shares, multiplied in
either case by the number of shares being repurchased.
Upon request by KeyCorp within the three-year period
following the first exercise of the AFG Option (or later in the event of a
delay in obtaining certain regulatory approvals), AFG will file up to two
registration statements with the Securities and Exchange Commission to permit
the sale or other disposition of the shares of AFG Common Stock purchased upon
exercise of the AFG Option. AFG will also permit KeyCorp to include the shares
in certain registration statements initiated by AFG.
Until the later of (a) 24 months following the first
exercise of the AFG Option and (b) termination of the AFG Option, AFG will have
a right of first refusal with respect to the sale or other disposition by
KeyCorp of shares of AFG Common Stock purchased upon exercise of the AFG
Option. This right of first refusal will not, however, apply to (x) any
disposition in which the proposed transferee will receive not more than 2% of
the outstanding AFG Common Stock, (y) any registered public offering in which
steps are taken to ensure than no purchaser will acquire more than 2% of the
outstanding AFG Common Stock,
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and (z) any transfer to a wholly-owned subsidiary of KeyCorp that agrees to be
bound by the terms of the Option Agreement.
KeyCorp may not exercise the AFG Option if, at the
time of exercise, it is in material breach of the Merger Agreement and has had
written notice of the breach from AFG for at least 20 days.
Certain rights and obligations of AFG and KeyCorp
under the Option Agreement are subject to receipt of required regulatory
approvals. Among others things, the approval of the Federal Reserve Board is
required for the acquisition by KeyCorp of more than 5% of the outstanding
shares of AFG Common Stock.
Merger Agreement
----------------
The Merger Agreement provides for the Merger of AFG
with and into KeySub, which will be the surviving corporation in the Merger.
Upon completion of the Merger, each outstanding share of AFG Common Stock
(other than AFG Common Stock held in AFG's treasury or owned by KeyCorp for its
own account) will be converted into the right to receive that number of shares
of KeyCorp Common Stock determined by dividing $16.50 by the average (rounded
to the nearest whole cent) of the closing sale price of one share of KeyCorp
Common Stock as reported on the consolidated tape of the New York Stock
Exchange ("NYSE") for the ten consecutive trading days ending on and including
the fifth trading day immediately preceding (but not including) the Closing
Date (as defined in the Merger Agreement), but in no event less than .50 and no
more than .60 shares of KeyCorp Common Stock (subject to adjustment pursuant to
the terms of the Merger Agreement); outstanding shares of AFG Common Stock
owned by KeyCorp for its own account will be canceled; and shares of AFG Common
Stock held in AFG's treasury will be canceled.
Completion of the Merger is subject to certain
conditions, including (a) approval by the shareholders of AFG, (b) approvals by
the Federal Reserve Board and other regulatory authorities and receipt of
material consents, (c) the effectiveness under the Securities Act of 1933 of
the Registration Statements for the shares of KeyCorp Common Stock to be issued
in the Merger and the shares of Patlex Common Stock to be distributed in the
Distribution, (d) receipt by KeyCorp of comfort letters from the independent
certified public accountants of AFG with respect to certain financial
information regarding AFG, (e) receipt by AFG and KeyCorp of opinions of their
respective counsel that the Merger constitutes a tax-free reorganization for
federal income tax purposes and that no gain or loss will be recognized by
KeyCorp, on the one hand, or by AFG or AFG's shareholders on the other hand as
a result of the Merger
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(except in the case of AFG shareholders for cash received in lieu of fractional
shares), (f) the absence of certain material adverse changes in the financial
condition, results of operations, or business of AFG, (g) the Distribution
shall have become effective in accordance with the Patlex Spinoff Agreement,
and (h) other conditions to closing customary in a transaction of this type.
None of the foregoing regulatory approvals have been obtained, and there is no
assurance that they will be obtained or, if they are obtained, as to the time
at which they will be obtained.
In the Merger Agreement, AFG and KeyCorp have made
representations and warranties to each other that are customary in a
transaction of this type. These representations and warranties will not
survive the completion of the Merger.
AFG and KeyCorp have agreed to promptly file all
reports and applications required to be filed with the Securities and Exchange
Commission, the Federal Reserve Board, and other regulatory authorities in
order to obtain the approvals required to carry out the Merger and the other
transactions contemplated by the Merger Agreement.
KeyCorp will, as soon as practicable, prepare and
file with the Securities and Exchange Commission a Registration Statement with
respect to the shares of KeyCorp Common Stock to be issued in the Merger; the
Registration Statement will include a Proxy Statement/Prospectus to be mailed
to the shareholders of AFG in connection with the Merger. AFG will take all
action necessary to convene as promptly as practicable a special meeting of its
shareholders for purposes of considering and taking action upon the Merger
Agreement. AFG will submit the Proxy Statement/ Prospectus to its shareholders
and will use its best efforts to obtain all votes and approvals of its
shareholders necessary for the approval and adoption of the Merger Agreement.
AFG will submit no other matter for approval at the special meeting of
shareholders without KeyCorp's prior approval. Except to the extent legally
required for the discharge by the Board of Directors of AFG of its fiduciary
duties, the Board of Directors of AFG will recommend and use its best efforts
to cause AFG's shareholders to vote in favor of the Merger.
From the time the Merger becomes effective, KeyCorp
will indemnify and advance reasonable costs and expenses and hold harmless each
of the directors and officers of AFG or any of its subsidiaries, as of the
Effective Time, to the full extent that AFG would have been required under
California law or its Articles of Incorporation or By-laws in effect on March
20, 1995 to indemnify such person and, for a period of three years after the
Merger becomes effective, use its reasonable efforts to
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<PAGE> 14
cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by AFG (provided that KeyCorp may
substitute policies of at least the same coverage and amounts containing terms
and conditions which are substantially no less advantageous to such officers
and directors).
AFG has agreed not (a) to solicit any proposals from
any person for the acquisition of a material amount of assets or any equity
securities of, or any business combination with, AFG or any of its subsidiaries
or (b) except as required in the exercise by AFG's Board of Directors of its
fiduciary duties, to engage in any negotiations concerning, or to provide any
information with respect to, such a transaction.
Reference is made to Items 4 and 5 for a description
of other provisions of the Merger Agreement.
Patlex Spinoff Agreement
------------------------
The Patlex Spinoff Agreement provides for the
distribution, immediately prior to the Merger becoming effective (the
"Distribution Date"), of 95.01% of the outstanding shares of Patlex Common
Stock on a proportionate basis to AFG's shareholders on the record date for the
Distribution. The balance of the outstanding shares of Patlex Common Stock
will be retained by AFG and not distributed in the Distribution so that,
immediately following the Distribution and the payment of cash in lieu of
fractional shares, the AFG shareholders will be the record and beneficial
owners of 95.01% of the outstanding shares of Patlex Common Stock and the
Surviving Corporation will be the record and beneficial owner of 4.99% of the
outstanding shares of Patlex Common Stock. In the Patlex Spinoff Agreement,
Patlex has warranted to KeyCorp and the Surviving Corporation that, if cash is
paid in lieu of fractional shares in the Distribution, the cash issued for the
fractional shares will not exceed 1% of the total value of Patlex.
Completion of the Distribution is subject to certain
conditions, including (a) approvals by regulatory authorities, (b) the
effectiveness under the Securities Act of 1933 of the Spinoff Registration
Statement for the shares of Patlex Common Stock to be distributed in the
Distribution, (c) Patlex's Board of Directors being elected by AFG and the
Patlex Certificate of Incorporation and By-laws being in effect, and (d)
receipt by AFG of an opinion of counsel (at least as strong as the most
stringent standard set forth in Treasury Regulation Section 1.6662-4(d)(2))
that the Distribution constitutes a distribution within the meaning of Section
355(a) of the Internal Revenue Code for federal income tax purposes and no gain
or loss
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<PAGE> 15
will be recognized by AFG and the AFG shareholders upon the distribution of the
shares of Patlex Common Stock.
AFG and Patlex will, as soon as practicable, prepare
and file with the Securities and Exchange Commission a Spinoff Registration
Statement with respect to the shares of Patlex Common Stock to be distributed
in the Distribution. In addition, AFG and Patlex will prepare and file a
Spinoff Statement, and will mail the Spinoff Statement to the shareholders of
AFG at the time of mailing of the Proxy Statement/Prospectus relating to the
Merger.
The Patlex Spinoff Agreement provides that Patlex
will, upon the request of KeyCorp or the Surviving Corporation, from the date
beginning on the first anniversary of the Distribution Date and ending on the
fifth anniversary of the Distribution Date, file one registration statement
with the Securities and Exchange Commission if such registration is required in
order for the Surviving Corporation to sell or otherwise dispose of the shares
of Patlex Common Stock retained by AFG. KeyCorp and the Surviving Corporation
have agreed to use their reasonable efforts to cause any sale or other
disposition of the shares of Patlex Common Stock to be effected on a widely
distributed basis so that no purchaser of the shares of Patlex Common Stock
will acquire from the Surviving Corporation more than 2% of the Patlex Common
Stock outstanding at the time of such sale or other disposition.
The Patlex Spinoff Agreement provides that (a) prior
to the Distribution Date, all intercompany receivables, payables, loans, cash
overdrafts, and other accounts in existence prior to the Distribution Date
between AFG and any subsidiary of AFG (other than Patlex or Patlex/Delaware, a
Delaware corporation and a wholly-owned subsidiary of Patlex
("Patlex/Delaware")), will be settled in full by payment of the net balance,
(b) from the Distribution Date and continuing until Patlex and AFG determine it
is no longer necessary, all cash collections and cash disbursements received by
one party for the benefit of the other party will be remitted to the party
entitled to the benefit of such cash collections and cash disbursements, (c)
prior to the Distribution Date, AFG will not make any capital contributions to
Patlex and will not purchase any shares of Patlex Common Stock, and (d) Patlex
will not be required to pay any dividend or make any other distribution from
the date of the Patlex Spinoff Agreement through the Distribution Date on any
shares of Patlex Common Stock.
Patlex has agreed to indemnify KeyCorp, the Surviving
Corporation and AFG and any of its subsidiaries (other than Patlex and
Patlex/Delaware) and their respective past and
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<PAGE> 16
present officers and directors against certain liabilities of Patlex and
Patlex/Delaware and to reimburse AFG and any subsidiary of AFG (other than
Patlex or Patlex/Delaware) for reasonable expenses of defense.
KeyCorp and the Surviving Corporation have agreed to
indemnify Patlex and Patlex/Delaware and their respective past and present
officers and directors against certain liabilities of AFG and any of the AFG
subsidiaries (other than Patlex and Patlex/Delaware) and to reimburse Patlex
and Patlex/Delaware for reasonable expenses of defense.
The Patlex Spinoff Agreement may be terminated and
the Distribution may be abandoned at any time prior to the Distribution Date
only with the prior written consent of KeyCorp. The Patlex Spinoff Agreement
will automatically terminate upon the termination of the Merger Agreement and
no party to the Patlex Spinoff Agreement will have any liability to any other
party, except that the termination will not relieve any party from liability
for any breach under the Patlex Spinoff Agreement.
VOTING AGREEMENT
The Voting Agreements provides that each Shareholder
will vote, or cause to be voted the shares of AFG Common Stock that such
Shareholder owns or has the power to vote (i) in favor of the adoption of the
Merger Agreement and the approval of the Merger, (ii) against the approval of
any proposal relating to a competing merger or business combination involving
an acquisition of all or a substantial portion of the AFG Common Stock, the
assets of AFG, or the assets or stock of any subsidiary of AFG by any person or
entity other than KeyCorp or an affiliate of KeyCorp, and (iii) against any
other transaction which is inconsistent with the obligation of AFG to
consummate the Merger in accordance with the Merger Agreement. Pursuant to the
Voting Agreements, each Shareholder has also appointed Frank Borman (a director
of AFG), or in the event Frank Borman is no longer able to serve, A. E.
Steinhaus (also a director and President and Chief Executive Officer of AFG) as
the proxy of such Shareholder to vote such Shareholder's shares of AFG Common
Stock in accordance with the terms of the Voting Agreements.
The Shareholders executing Voting Agreements consist
of certain shareholders of AFG, including two directors of AFG, holding as of
March 16, 1995, an aggregate of 5,179,154 shares of AFG Common Stock (equal to
27.7% of the outstanding shares of AFG Common Stock as of March 16, 1995).
Each Shareholder executing a Voting Agreement has
also represented to KeyCorp that such Shareholder will not sell
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<PAGE> 17
or otherwise dispose voluntarily of any the shares of AFG Common Stock owned by
such Shareholder and will not take any voluntary action which would have the
effect of removing such Shareholder's power to vote the shares of AFG Common
Stock or would be inconsistent with the terms of the Voting Agreement.
Each Shareholder's obligations under the Voting
Agreement will terminate on a date which is the earlier of (i) the date on
which the Merger Agreement is terminated in accordance with the terms thereof,
(ii) the day after AFG's shareholders approve the Merger by the requisite vote
(but only with respect to shares of AFG Common Stock transferred as a gift to a
charitable organization), and (iii) the date on which the Merger is
consummated.
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<PAGE> 18
Item 7. Materials to Be Filed as Exhibits.
------ ---------------------------------
The following are filed as Appendices or
Exhibits to this Schedule 13D:
Appendix I. Information Relating to Executive
Officers and Directors of KeyCorp
Appendix II. Information Relating to Beneficial
Ownership of AutoFinance Group, Inc.
Common Stock by Executive Officers
and Directors of KeyCorp
Exhibit 1. Stock Option Agreement, dated as of
March 20, 1995, between AutoFinance
Group, Inc. and KeyCorp
Exhibit 2. Agreement of Merger, dated as of
March 20, 1995, among AutoFinance
Group, Inc., KeyCorp, and KeyCorp
Finance Inc.
Exhibit 3. Patlex Spinoff Agreement, dated as
of March 20, 1995, among AutoFinance
Group, Inc., Patlex Corporation, and
KeyCorp
Exhibit 4. Voting Agreement and Irrevocable
Proxy, dated as of March 20, 1995,
among KeyCorp, Frank Borman, A. E.
Steinhaus and each AFG Shareholder
listed on Exhibit 5.
Exhibit 5. List of AFG Shareholders executing
Voting Agreements and Irrevocable
Proxies
Signature
---------
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth in this
statement is true, complete, and correct.
Dated: March 30, 1995 KeyCorp
By: /s/ Steven N. Bulloch
------------------------
Title: Assistant Secretary
-18-
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
--------
Designation Title Page No.
----------- ----- --------
<S> <C>
Appendix I. Information Relating to Executive
Officers and Directors of KeyCorp
Appendix II. Information Relating to Beneficial
Ownership of AutoFinance Group,
Inc. Common Stock by Executive
Officers and Directors of KeyCorp
Exhibit 1. Stock Option Agreement, dated as
March 20, 1995, between AutoFinance
Group, Inc. and KeyCorp
Exhibit 2. Agreement of Merger, dated as of
March 20, 1995, among AutoFinance
Group, Inc., KeyCorp, and KeyCorp
Finance Inc.
Exhibit 3. Patlex Spinoff Agreement, dated
as of March 20, 1995, among
AutoFinance Group, Inc., Patlex
Corporation, and KeyCorp
Exhibit 4. Voting Agreement and Irrevocable
Proxy, dated as of March 20, 1995,
among KeyCorp, Frank Borman,
A. E. Steinhaus and each AFG
Shareholder listed on Exhibit 5.
Exhibit 5. List of AFG Shareholders executing Voting
Agreements and Irrevocable Proxies
</TABLE>
-19-
<PAGE> 20
APPENDIX I
INFORMATION RELATING TO
EXECUTIVE OFFICERS AND DIRECTORS
OF KEYCORP
The following is a list of the executive officers and
directors of KeyCorp ("KeyCorp") as of the date of this Schedule 13D. The
business address for each of executive officers is KeyCorp, 127 Public Square,
Cleveland, Ohio 44114.
<TABLE>
<CAPTION>
Executive Officers:
------------------
<S> <C>
Name Office
---- ------
Victor J. Riley, Jr. Chairman and Chief Executive Officer
Robert W. Gillespie President and Chief Operating Officer
Gary R. Allen Senior Executive Vice President and Chief Banking Officer
Henry L. Meyer III Senior Executive Vice President and Chief Banking Officer
Roger Noall Senior Executive Vice President and Chief Administrative Officer
James W. Wert Senior Executive Vice President and Chief Financial Officer
Carter B. Chase Executive Vice President, General Counsel and Secretary
Lee Irving Executive Vice President, Treasurer and Chief Accounting Officer
Kevin M. Blakely Executive Vice President
Michael A. Butler Executive Vice President
Allen J. Gula, Jr. Executive Vice President
Bruce E. Tofte Executive Vice President
</TABLE>
-20-
<PAGE> 21
<TABLE>
<S> <C>
Martin J. Walker Executive Vice President
Directors:
---------
Name and Occupation Business Address
------------------- ----------------
Victor J. Riley, Jr. 127 Public Square
Chairman and Chief Cleveland, Ohio 44114
Executive Officer
KeyCorp
Robert W. Gillespie 127 Public Square
President and Chief Cleveland, Ohio 44114
Operating Officer
KeyCorp
H. Douglas Barclay Financial Plaza
Partner 221 S. Warren Street
Hiscock & Barclay Syracuse, New York 13221
William G. Bares 29400 Lakeland Boulevard
President and Chief Wickliffe, Ohio 44092
Operating Officer
The Lubrizol Corporation
Albert C. Bersticker 1000 Lakeside Avenue
President and Chief Cleveland, Ohio 44114
Executive Officer
Ferro Corporation
Thomas A. Commes 101 Prospect Avenue, N.W.
President and Chief 12th Floor - Midland Bldg.
Operating Officer Cleveland, Ohio 44115
The Sherwin-Williams
Company
Kenneth M. Curtis One Canal Plaza
President P.O. Box 7320
Curtis, Thaxter, Stevens, Portland, Maine 14112
Broder & Micoleau, LLP, P.A.
John C. Dimmer 1019 Pacific Avenue
President Suite 1408
Firs Management Corporation Tacoma, Washington 98402
Lucie Fjeldstad 26600 S. W. Parkway
President P.O.Box 1000 M/S 63/808
Tektronix, Inc. Wilsonville, Oregon 97070
</TABLE>
-21-
<PAGE> 22
<TABLE>
<S> <C>
Stephen R. Hardis Eaton Center
Vice Chairman, Chief 1111 Superior Avenue
Financial and Cleveland, Ohio 44114
Administrative Officer
Eaton Corporation
Henry S. Hemmingway 50 S. Main Street
President Suite 2220
Town & Country Life Salt Lake City, Utah 84144
Insurance Company
Charles R. Hogan 2708 E. Main Street
Co-Chairman of the P.O. Box 597
Board Puyallup, Washington 98371
Puget Sound Marketing
Co., Inc.
Lawrence A. Leser 312 Walnut Street, 28th Floor
President and Chief Cincinnati, Ohio 45202
Executive Officer
The E.W. Scripps Company
Stephen A. Minter 1400 Hanna Building
Executive Director and Cleveland, Ohio 44115
President
The Cleveland Foundation
M. Thomas Moore 1100 Superior Avenue
Chairman, President and Cleveland, Ohio 44114
Chief Executive Officer
Cleveland-Cliffs Inc.
John C. Morley 6065 Parkland Boulevard
President and Chief Cleveland, Ohio 44124
Executive Officer
Reliance Electric Company
Richard W. Pogue Erieview Tower, Suite 1300
Senior Advisor 1301 East 9th Street
Dix & Eaton Cleveland, Ohio 44114
Robert A. Schumacher 680 Weed Street
Consultant New Canaan, Connecticut 06840
Retired President, Chief (address from May 30 - Nov 1)
Operating Officer; Current
Director and Executive 11706 Turtle Beach Road
Management Consultant North Palm Beach, Florida
Georgia Pacific Corporation 33408
(address from Nov 1 - May 29)
</TABLE>
-22-
<PAGE> 23
<TABLE>
<S> <C>
Ronald B. Stafford 1 Cumberland Avenue
Partner P.O.Box 2947
Stafford, Trombley, Plattsburgh, New York 12901
Purcell, Lahtinen, Owens
& Curtin, P.C.
Dennis W. Sullivan 17325 Euclid Avenue
Executive Vice President Cleveland, Ohio 44112
and Chief Operating
Executive
Parker-Hannifin Corporation
Peter G. Ten Eyck, II 219 Tygert Road
President Voorheesville, New York 12186
Indian Ladder Farms
Nancy B. Veeder Residence Inn
President One Residence Inn Drive
Veeder Realty Inc. Latham, New York 12110
</TABLE>
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<PAGE> 24
APPENDIX II
INFORMATION RELATING TO
BENEFICIAL OWNERSHIP OF AFG COMMON STOCK BY
EXECUTIVE OFFICERS AND DIRECTORS
OF KEYCORP
To the best of KeyCorp's knowledge, for each person
listed in Appendix I, the number of shares of AFG Common Stock as to which
there is sole power to vote or to direct the vote, shared power to vote or to
direct the vote, or sole or shared power to dispose or to direct the
disposition is as follows:
None
-24-
<PAGE> 1
Exhibit 1
STOCK OPTION AGREEMENT, dated as of March 20, 1995 (this "Agreement"),
between KeyCorp, an Ohio corporation ("Grantee"), and AutoFinance Group, Inc., a
California corporation ("Issuer").
WITNESSETH:
WHEREAS, Grantee, KeyCorp Finance Inc., an Ohio corporation and a
wholly-owned subsidiary of Grantee ("KeySub"), and Issuer have entered into an
Agreement of Merger (the "Merger Agreement") which has been executed by the
parties hereto prior to this Agreement; and
WHEREAS, as a condition and inducement to Grantee's willingness to
enter into the Merger Agreement and in consideration thereof, Issuer has agreed
to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
SECTION 1. Grant of Option. (a) Issuer hereby grants to
Grantee an unconditional, irrevocable Option (the "Option") to purchase, subject
to the terms hereof, up to 3,718,194 fully paid and nonassessable shares of
Common Stock, no stated par value ("Common Stock"), of Issuer at a price of
$16.50 per share (the "Option Shares"); provided, however, that
in the event Issuer, without the written consent of Grantee or otherwise in
violation of the provisions of Section 2.2 of the Merger Agreement, hereafter
issues (other than pursuant to options or warrants outstanding on the date of
this Agreement), or agrees to issue any shares of Common Stock at a price less
than $16.50 per share (as adjusted pursuant to subsection 6(a)), such price
shall be equal to such lesser price (such price, as adjusted if applicable, the
"Option Price"); provided further that in no event shall the
number of shares of Common Stock for which this Option is exercisable exceed
19.9% of the Issuer's issued and outstanding shares of Common Stock without
giving effect to any shares of Common Stock subject to or issued pursuant to the
Option. The number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to adjustment as herein
set forth.
(b) In the event that any additional shares of Common Stock are issued
or otherwise become outstanding after the date of this Agreement other than
pursuant to this Agreement, including, without limitation, pursuant to existing
employee
-1-
<PAGE> 2
stock option plans, the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, it equals 19.9% of the number
of shares of Common Stock then issued and outstanding without giving effect to
any shares of Common Stock subject to or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to
authorize Issuer or Grantee to breach any provision of the Merger Agreement.
SECTION 2. Exercise of Option. (a) Following the occurrence of
a Purchase Event (as defined in Section 2(b)), Grantee may exercise the Option,
in whole or in part, at any time and from time to time prior to the expiration
of the right to exercise the Option (as provided in Section 2(c)); except that,
(i) Grantee may not exercise the Option if, at the time of exercise, it is in
material breach of the Merger Agreement and has had written notice of that
breach from Issuer for at least 20 days, (ii) any purchase of Option Shares upon
exercise of the Option shall be subject to compliance with applicable law,
including the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") or other governmental authority or regulatory or administrative
agency or commission, domestic or foreign (each a "Governmental Entity"), and
(iii) to the extent necessary, any applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended, and the rules and regulations thereunder with respect to the
exercise of the Option shall have expired or been terminated.
(b) As used herein, a "Purchase Event" means any of the following
events that occurs after the date of this Agreement:
(i) Issuer or any subsidiary of Issuer, without the prior
written consent of Grantee, shall have authorized, recommended, or
proposed, shall have publicly announced an intention to authorize,
recommend, or propose, or shall have entered into an agreement to
effect, (A) a merger, consolidation, joint venture, or other business
combination involving Issuer or any subsidiary of Issuer with or into
any person (the term "person" for purposes of this Agreement having
the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations thereunder) (other than a merger,
consolidation, joint venture, or other business combination with or
into Grantee or any subsidiary of Grantee, or a merger or
consolidation of any subsidiary of Issuer with or into Issuer or any
other subsidiary of Issuer), (B) a sale, lease, or other disposition
of assets or earning power of Issuer or any of its subsidiaries, in
one or more transactions, representing 50% or more
-2-
<PAGE> 3
of the consolidated assets or earning power of Issuer and its
subsidiaries to any person (other than Grantee or any subsidiary of
Grantee), or (C) an issuance, sale, or other disposition (whether by
means of a merger, consolidation, share exchange, or other
transaction) of securities representing 25% or more of the voting
power of Issuer or any subsidiary of Issuer to any person (other than
Grantee or any subsidiary of Grantee) (any of the foregoing being an
"Acquisition Transaction"; except that, (A) if Grantee
has given its prior written consent to any such transaction, the
transaction as to which Grantee has given its prior written consent
shall not be an "Acquisition Transaction" and (B) that the transaction
contemplated by the Patlex Spinoff Agreement shall not be a Purchase
Event or an Acquisition Transaction);
(ii) any person (other than Grantee or any subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have filed a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"),
and the rules and regulations thereunder with respect to, a tender
offer or exchange offer to acquire shares of Common Stock such that,
upon consummation of the offer, such person would beneficially own 25%
or more of the Common Stock of Issuer then outstanding;
(iii) any person (other than Grantee or any subsidiary of
Grantee), alone or together with such person's Affiliates (the term
"Affiliates" or "Associates" for purposes of this Agreement having the
meaning assigned thereto in Rule 12b-2 under the Exchange Act), shall
have acquired beneficial ownership (the term "beneficial ownership"
for purposes of this Agreement having the meaning assigned thereto in
Section 13(d) of the Exchange Act, and the rules and regulations
thereunder) of 25% or more of the Common Stock then outstanding, or
any group (the term "group" for purposes of this Agreement having the
same meaning as in Section 13(d)(3) of the Exchange Act, and the rules
and regulations thereunder) (other than a group of which Grantee or
any subsidiary of Grantee is a member) shall have been formed that
beneficially owns 25% or more of the Common Stock then outstanding; or
(iv) the holders of Common Stock shall not have approved the
Merger Agreement at the meeting of such shareholders (or any
adjournment or postponement thereof) held for the purpose of voting on
the Merger
-3-
<PAGE> 4
Agreement, such meeting shall not have been held or shall have been
canceled (and not rescheduled) prior to termination of the Merger
Agreement, or Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to Grantee the recommendation of Issuer's
Board of Directors that Issuer's shareholders vote in favor of and
approve the Merger and adopt the Merger Agreement, in each case after
any person (other than Grantee or any subsidiary of Grantee) shall
have publicly announced a bona fide proposal, or publicly disclosed a
bona fide intention to make a bona fide proposal, to engage in a
transaction which would be a Purchase Event under clause (i), (ii) or
(iii) of this Section 2(b) (or the Issuer shall have publicly
disclosed receipt of such a proposal).
(c) Except as provided in the last sentence of this Section 2(c) and
in Section 2(e), the right to exercise the Option shall terminate upon the
earliest to occur of (i) the Effective Time (as such term is defined in the
Merger Agreement), (ii) 12 months after the first occurrence of a Purchase
Event, and (iii) termination of the Merger Agreement in accordance with its
terms prior to the occurrence of a Purchase Event. The rights set forth in
Sections 7 and 9 shall not terminate when the right to exercise the Option
terminates, but shall extend to such time as is provided in Sections 7 or 9,
respectively. Notwithstanding the termination of the right to exercise the
Option, Grantee shall be entitled to purchase those Option Shares with respect
to which it has exercised the Option prior to termination of the right to
exercise the Option.
(d) In the event Grantee wishes to exercise the Option, it shall send
to Issuer a written notice (the date on which the notice is sent being herein
referred to as the "Notice Date") specifying (i) the number of Option Shares
that it intends to purchase pursuant to such exercise and (ii) a place and date
not earlier than five business days nor later than 20 business days from the
Notice Date for the closing of such purchase (the "Closing Date").
Notwithstanding the foregoing, if the closing of such purchase cannot be
consummated by reason of any applicable judgment, decree, order, law, or
regulation, the Closing Date shall be extended and occur not earlier than three
business days nor later than 30 business days after such restriction on
consummation has expired or been terminated. If prior notification to or
approval by the Federal Reserve Board or any other Governmental Entity is
required in connection with such purchase and sale, Grantee and Issuer shall
each, to the extent required, promptly file and expeditiously process the notice
or application for approval (and Issuer and Grantee shall cooperate with each
other in the filing and processing thereof), and the Closing Date shall be
extended and occur not earlier than three business days nor later than 30
business days after the date on
-4-
<PAGE> 5
which (x) any required notification period has expired or been terminated or (y)
such approval has been obtained, as the case may be, and, in either event, any
requisite waiting period has expired.
(e) Notwithstanding Section 2(d), in no event shall any Closing Date
be more than 12 months after the Notice Date, and, if the Closing Date has not
occurred within 12 months after the related Notice Date due to the failure to
obtain any required approval by the Federal Reserve Board or any other
Governmental Entity, the exercise of the Option on the Notice Date shall be
deemed to have been rescinded. Notwithstanding the preceding sentence, in the
event (i) Grantee receives official notice that an approval of the Federal
Reserve Board or any other Governmental Entity required for the purchase and
sale of the Option Shares will not be issued or granted or (ii) a Closing Date
has not occurred within 12 months after the related Notice Date due to the
failure to obtain any such required approval, Grantee shall be entitled to
exercise the Option in connection with the resale of the Option Shares pursuant
to a registration statement as provided in Section 9.
SECTION 3. Payment and Delivery of Certificates. (a) On the
Closing Date, Grantee shall pay to Issuer in immediately available funds, by
wire transfer to a bank account designated by Issuer, an amount equal to the
Option Price multiplied by the number of Option Shares to be purchased on the
Closing Date.
(b) On each Closing Date, simultaneous with the delivery of
immediately available funds as provided in Section 3(a), Issuer shall deliver to
Grantee a certificate or certificates representing the Option Shares being
purchased, and Grantee shall deliver to Issuer a letter in which Grantee agrees
not to sell or otherwise dispose of such Option Shares in violation of
applicable law or the provisions of this Agreement.
(c) Certificates for the Option Shares shall be endorsed with a
restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND PURSUANT TO THE TERMS OF AN AUTOFINANCE GROUP, INC. STOCK
OPTION AGREEMENT DATED AS OF MARCH 20, 1995. A COPY OF SUCH AGREEMENT
WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY
THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the reference in the foregoing legend to
restrictions arising under the Securities Act shall be removed, by delivery of a
substitute certificate or certificates without such reference, if Grantee
delivers to Issuer a copy of a
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<PAGE> 6
letter from the staff of the Securities and Exchange Commission, or an opinion
of counsel in form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for purposes of the
Securities Act.
SECTION 4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
(a) Due Authorization. Issuer has all requisite corporate
power and authority to enter into this Agreement and, subject to Grantee
obtaining the approvals, if any, contemplated by this Agreement or required by
law, to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Issuer. This Agreement has been duly executed
and delivered by Issuer and constitutes a valid and binding obligation of
Issuer, enforceable against Issuer in accordance with its terms.
(b) Authorized Stock. Issuer has heretofore taken, and until
termination of the right to exercise the Option shall hereafter take, all
corporate and other action necessary to authorize and reserve, and to permit it
to issue, all of the Option Shares, including any additional shares of Common
Stock or other securities that may be issued pursuant to Section 6. The Option
Shares, including any such additional shares of Common Stock or other
securities, upon issuance pursuant hereto, shall be duly and validly issued,
fully paid, and nonassessable, and shall be delivered free and clear of all
liens, claims, charges, and encumbrances of any kind, including any preemptive
rights of any shareholder of Issuer.
(c) No Conflicts. Except as disclosed pursuant to the Merger
Agreement, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in a violation of or default under, (i) any provision of the Articles of
Incorporation or By-laws of Issuer or any subsidiary of Issuer or (ii), subject
to Grantee obtaining the approvals, if any, contemplated by this Agreement or
required by law, any loan or credit agreement, note, mortgage, indenture, lease,
or other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule, or regulation
applicable to Issuer or any subsidiary of Issuer or their respective properties
or assets, which conflict, violation, or default would have a material adverse
effect on Issuer.
SECTION 5. Representations and Warranties of Grantee. Grantee
hereby represents and warrants to Issuer that:
(a) Due Authorization. Grantee has all requisite corporate power
and authority to enter into this Agreement and,
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<PAGE> 7
subject to Grantee obtaining the approvals referred to in this Agreement, to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee and
constitutes a valid and binding obligation of Grantee, enforceable against
Grantee in accordance with its terms.
(b) No Conflicts. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in a violation of or default under, (i) any provision
of the Articles of Incorporation or Regulations of Grantee or any subsidiary of
Grantee or (ii) subject to Grantee obtaining the approvals referred to in this
Agreement or required by law, any loan or credit agreement, note, mortgage,
indenture, lease, or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to Grantee or any subsidiary of
Grantee or their respective properties or assets, which conflict, violation, or
default would have a material adverse effect on Grantee.
(c) Purchase Not for Distribution. Any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be taken
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
SECTION 6. Adjustment upon Changes in Capitalization, etc. (a)
In the event of any change in the Common Stock by reason of a stock dividend,
split-up, recapitalization, combination, exchange of shares, or similar
transaction, the type and number of shares or securities subject to the Option,
and the Option Price therefor, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing any such transaction, so
that Grantee shall receive upon exercise of the Option the number and class of
shares, other securities, property, or cash that Grantee would have received in
respect of the Option Shares if the Option had been exercised and the Option
Shares had been issued to Grantee immediately prior to such event or the record
date therefor, as applicable.
(b) In the event that Issuer enters into an agreement (i) to
consolidate with or merge into any person (other than Grantee or any subsidiary
of Grantee), and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) pursuant to which any person (other than
Grantee or any subsidiary of Grantee) shall merge into Issuer, and Issuer shall
be the continuing or surviving corporation, but outstanding
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<PAGE> 8
shares of Common Stock shall be changed into or exchanged for stock, other
securities, property, or cash, or (iii) to sell, lease, or otherwise transfer
assets of Issuer or any of its subsidiaries, in one or more transactions,
representing more than 50% of the consolidated assets or earning power of Issuer
and its subsidiaries to any person (other than Grantee or any subsidiary of
Grantee), then, and in each such case, the agreement governing such transaction
shall make proper provisions so that, upon the consummation of such transaction,
the Grantee may, in its discretion, (x) retain the Option to purchase the Option
Shares or (y) convert the Option into the right to receive, at the election of
Grantee either from the Acquiring Corporation (as defined in Section 6(c)) or
from any person that controls the Acquiring Corporation, the number and class of
shares, other securities, property, or cash that Grantee would have received in
respect of the Option Shares if the Option had been exercised and the Option
Shares had been issued to Grantee immediately prior to the consummation of such
transaction, the distribution of the proceeds thereof to Issuer's shareholders,
or the record date therefor, as applicable.
(c) For purposes of this Agreement, "Acquiring Corporation" means (i)
the continuing or surviving corporation in a merger or consolidation involving
Issuer in which Issuer is not the continuing or surviving corporation, (ii)
Issuer in a merger in which Issuer is the continuing or surviving corporation,
and (iii) the transferee of more than 50% of the consolidated assets or earning
power of Issuer and its subsidiaries. The provisions of Sections 6, 7, 8, 9, 10,
and 11 shall apply with appropriate adjustments to any securities for which the
Option becomes exercisable pursuant to this Section 6.
SECTION 7. Repurchase of Option at Request of Grantee. (a) At
the request of Grantee at any time during the period beginning upon the first
occurrence of a Repurchase Event (as defined in Section 7(d)) and ending 12
months thereafter, Issuer shall repurchase from Grantee the Option (unless the
Option shall have expired or been terminated) and all shares of Common Stock
purchased by Grantee upon exercise of the Option that are beneficially owned by
Grantee at the Request Date (as defined in this Section 7(a)). (The date on
which Grantee requests that Issuer repurchase the Option or Option Shares under
this Section 7 is referred to as the "Request Date"). Such repurchase shall be
at an aggregate price (the "Put Consideration") equal to the sum of:
(x) the aggregate Option Price paid by Grantee for all
shares of Common Stock purchased upon exercise of the Option that are
beneficially owned by Grantee on the Request Date;
(y) the excess, if any, of the Applicable Price (as defined
in Section 7(c)) over the Option Price paid by Grantee for each share
of Common Stock
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<PAGE> 9
with respect to which the Option has been exercised that are
beneficially owned by Grantee on the Request Date, multiplied by the
number of such shares; and
(z) the excess, if any, of the Applicable Price over the
Option Price (adjusted pursuant to Section 6), multiplied by the
number of Option Shares with respect to which the Option has not been
exercised; provided that, in the case of Option Shares
with respect to which the Option has been exercised but the Closing
Date has not occurred, the Closing Date shall be suspended and the
Option shall be treated, for purposes of this clause (z), as if it had
not been exercised.
(b) If Grantee exercises its rights under this Section 7, Issuer
shall, within 10 business days after the Request Date, pay the Put Consideration
to Grantee in immediately available funds, by wire transfer to a bank account
designated by Grantee; Grantee shall, against receipt of the payment therefor,
surrender to Issuer the Option and the certificates evidencing the shares of
Common Stock purchased upon exercise of the Option that are beneficially owned
by Grantee on the Request Date; and Grantee shall warrant that it has sole
ownership of such shares, free and clear of all liens, claims, charges, and
encumbrances of any kind. Notwithstanding the foregoing, if Issuer is prohibited
from paying all or any portion of the Put Consideration by reason of any
applicable judgment, decree, order, law, or regulation, Issuer shall immediately
pay that portion of the Put Consideration that it is not prohibited from paying,
shall from time to time thereafter immediately pay such further portion of the
Put Consideration that it is not then prohibited from paying, and, in all cases,
shall pay the balance of the Put Consideration within 10 business days after
such prohibition has expired or been terminated. Upon receipt of a partial
payment of the Put Consideration, Grantee shall surrender a portion of the
Option and/or Option Shares, as selected by Grantee, corresponding (as closely
as practicable) to the portion of the Put Consideration received by Grantee.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share at which a tender offer or exchange
offer has been made for shares of Common Stock after the date of this Agreement
and on or prior to the Request Date, (ii) the highest price per share to be paid
by any person (other than Grantee or one of its subsidiaries) for shares of
Common Stock or the highest consideration per share to be received by holders of
Common Stock, in each case pursuant to an agreement for a merger, consolidation,
joint venture, or other business combination with Issuer entered into after the
date hereof and on or prior to the Request Date, (iii) the highest closing sales
price per share of Common Stock reported on the National Market System of the
National Association of Securities
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<PAGE> 10
Dealers Automated Quotation System ("NASDAQ") (or, if transactions in Common
Stock are not reported on NASDAQ, the highest bid price quoted on the principal
trading market on which the Common Stock is traded as reported by a recognized
source) during the 60 business days preceding the Request Date, and (iv) in the
event of the sale by Issuer or its subsidiaries, in one or more transactions, of
assets or earning power aggregating more than 50% of the consolidated assets or
earning power of Issuer and its subsidiaries to any person (other than the
Grantee or any subsidiary of Grantee), the sum of the price paid for such assets
or earning power and the current value of the remaining assets of Issuer and its
subsidiaries divided by the number of shares of Common Stock outstanding at the
time of the sale. The value of any consideration other than cash that is
offered, paid, or received pursuant to clauses (i), (ii), or (iv) of this
Section 7(c), and the value of the remaining assets of Issuer and its
subsidiaries referred to in clause (iv), shall be determined in good faith by an
independent nationally recognized investment banking firm mutually acceptable to
Grantee and Issuer, which determination shall be conclusive for all purposes of
this Agreement.
(d) As used herein, a "Repurchase Event" means (i) the consummation of
an Acquisition Transaction, provided, that, the percentage for purposes of
Section 2(b)(i)(B) shall be 50% and the percentages for purposes of Section
2(b)(i)(C) shall be 30%, or (ii) any person (other than the Grantee or any
subsidiary of Grantee), alone or together with such person's Affiliates and
Associates shall have acquired beneficial ownership of 30% or more of the Common
Stock then outstanding, or any group (other than a group of which Grantee or any
subsidiary of Grantee is a member) shall have been formed that beneficially owns
30% or more of the Common Stock then outstanding.
SECTION 8. Repurchase of Option at Request of Issuer. (a)
Except to the extent that Grantee shall have previously exercised its rights
under Section 7, at the request of Issuer during the six-month period commencing
12 months following the first occurrence of a Repurchase Event, Issuer may
repurchase from Grantee, and Grantee shall sell to Issuer, all (but not less
than all) of the shares of Common Stock purchased by Grantee upon exercise of
the Option that are beneficially owned by Grantee on the Call Date (as defined
in this Section 8(a)) at a price (the "Call Consideration") equal to the greater
of (x) 110% of the Current Market Price (as defined in Section 8(c)) and (y) the
sum of (A) the Option Price paid by Grantee for such shares plus (B) Grantee's
pretax per share carrying cost (as defined in Section 8(c)), multiplied in
either case by the number of shares being repurchased. (The date on which Issuer
requests that Grantee sell the Option Shares under this Section 8 is referred to
as the "Call Date"). Notwithstanding the foregoing, Grantee may, within 30 days
following Issuer's notice of its intention to purchase shares pursuant to this
Section 8, deliver an Offeror's
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<PAGE> 11
Notice pursuant to Section 10, in which case the provisions of Section 10 and
not those of this Section 8 shall control. Notwithstanding any contrary
provision of this Section 8, Issuer's rights under this Section 8 shall be
suspended (with any such rights being extended accordingly) during any period in
which the exercise of such rights would subject Grantee to liability pursuant to
Section 16(b) of the Exchange Act.
(b) If Issuer exercises its rights under this Section 8 and Grantee
does not deliver an Offeror's Notice or sell shares of Common Stock to a third
party pursuant to the Offeror's Notice, Issuer shall, within 10 business days
after the thirtieth day following Issuer's notice of its intention to purchase
shares pursuant to this Section 8 or, if applicable, within 10 business days
after abandonment of the transaction covered by the Offeror's Notice, pay the
Call Consideration in immediately available funds, by wire transfer to a bank
account designated by Grantee; Grantee shall surrender to Issuer the
certificates evidencing the shares of Common Stock purchased upon exercise of
the Option that are beneficially owned by Grantee on the Call Date; and Grantee
shall warrant that it has sole ownership of such shares, free and clear of all
liens, claims, charges, and encumbrances of any kind.
(c) As used herein, (i) "Current Market Price" means the average
closing sales price per share of Common Stock reported on NASDAQ (or if the
Common Stock is not reported on NASDAQ, the highest bid price quoted on the
principal trading market on which such shares are traded as reported by a
recognized source) for the 10 business days preceding the Call Date, and (ii)
"Grantee's pretax per share carrying cost" shall be the amount equal to the
interest on the aggregate Option Price paid for the shares of Common Stock being
repurchased pursuant to this Section 8 from the date of purchase to the date of
repurchase at the rate of interest announced by Issuer as its prime or base
lending or reference rate during such period, less any dividends received on the
shares being repurchased, divided by the number of shares being repurchased.
SECTION 9. Registration Rights. If requested by Grantee at any
time and from time to time within (a) the period beginning upon the first
exercise of the Option and ending three years thereafter or (b) the period
beginning upon the occurrence of either of the events set forth in clauses (i)
and (ii) of Section 2(e), or the receipt by Grantee of official notice that an
approval of the Federal Reserve Board or any other Governmental Entity required
for a repurchase pursuant to Section 7(c) will not be issued or granted, and
ending 60 business days thereafter (but solely as to shares of Common Stock with
respect to which the required approval was not received), Issuer shall as
expeditiously as possible prepare and file up to two registration statements
under the Securities Act if such registration is necessary in order to permit
the sale or other
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<PAGE> 12
disposition of any or all shares of Common Stock or other securities that have
been purchased by or are issuable to Grantee upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by
Grantee, including, if applicable, a "shelf" registration statement under Rule
415 under the Securities Act or any successor provision, and Issuer shall use
its best efforts to qualify such shares or other securities under any applicable
state securities laws. Grantee shall use reasonable efforts to cause, and to
cause any underwriters of any sale or other disposition to use reasonable
efforts to cause, any sale or other disposition pursuant to such registration
statement to be effected on a widely distributed basis so that no purchaser or
transferee shall purchase or acquire from the Grantee and/or the underwriters
more than 2% of the Common Stock outstanding upon consummation of the sale or
disposition. Issuer shall use reasonable efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of other
parties that are required therefor, and to keep such registration statement
effective for such period (not in excess of 90 days, in the case of a filing on
a form other than Form S-3, or 180 days in the case of a filing on Form S-3 from
the day such registration statement first becomes effective) as may be
reasonably necessary to effect such sale or other disposition. In the event that
Grantee requests Issuer to file a registration statement following the failure
to obtain an approval required for an exercise of the Option as described in
Section 2(e), the closing of the sale or other disposition of Common Stock or
other securities pursuant to such registration statement shall occur
substantially simultaneously with the exercise of the Option. The obligations of
Issuer hereunder to file a registration statement and to maintain its
effectiveness may be suspended for one or more periods of time not exceeding 60
days in the aggregate during any consecutive 12-month period if the Board of
Directors of Issuer determines that the filing of such registration statement or
the maintenance of its effectiveness would require disclosure of nonpublic
information that would materially and adversely affect Issuer. Any registration
statement prepared and filed under this Section 9, and any sale covered thereby,
shall be at Issuer's expense, except for underwriting discounts or commissions,
brokers' fees, and the fees and disbursements of Grantee's counsel related
thereto. Grantee shall provide all information reasonably requested by Issuer
for inclusion in any registration statement to be filed hereunder. If, during
the time periods referred to in the first sentence of this Section 9, Issuer
effects a registration under the Securities Act of any Common Stock for its own
account or for the account of any shareholder of Issuer (other than a
registration on Form S-4, Form S-8, or any successor form), Issuer shall afford
Grantee the right to participate in such registration, and such participation
shall not affect the obligation of Issuer to effect two registration statements
for Grantee under this Section 9; provided that, if the managing
underwriters of such offering advise Issuer in
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<PAGE> 13
writing that, in their opinion, the number of shares of Common Stock requested
to be included in such registration exceeds the number that can be sold in such
offering, Issuer shall include the shares requested to be included in the
offering by Grantee pro rata with the shares intended to be included in the
offering by Issuer. In connection with any registration pursuant to this Section
9, Issuer and Grantee shall provide each other and any underwriter of the
offering with customary representations, warranties, covenants, indemnification,
and contribution in connection with such registration.
SECTION 10. First Refusal. At any time after the first
occurrence of a Purchase Event and prior to the later of (a) the expiration of
24 months following the first purchase of shares of Common Stock upon exercise
of the Option and (b) the termination of the right to exercise the Option
pursuant to Section 2(c), if Grantee desires to sell, assign, transfer, or
otherwise dispose of all or any of the shares of Common Stock or other
securities purchased by it upon exercise of the Option, Grantee shall give
Issuer written notice of the proposed transaction (an "Offeror's Notice"),
identifying the proposed transferee, accompanied by a copy of a binding offer to
purchase such shares or other securities signed by such transferee and setting
forth the terms of the proposed transaction. An Offeror's Notice shall be deemed
an offer by Grantee to Issuer, which may be accepted within 10 business days
after receipt of such Offeror's Notice by Issuer, to sell such shares or other
securities to Issuer on the same terms and conditions and at the same price as
those set forth in the Offeror's Notice for the proposed transaction. The
purchase of any such shares or other securities by Issuer shall be settled
within 10 business days of the date of the acceptance of the offer by Issuer,
and the purchase price shall be paid to Grantee in immediately available funds.
In the event of the failure or refusal of Issuer to purchase all the shares or
other securities covered by an Offeror's Notice, Grantee may thereafter sell
all, but not less than all, of such shares to the proposed transferee at no less
than the price specified and on terms no more favorable than those set forth in
the Offeror's Notice. The requirements of this Section 10 shall not apply to
(x) any disposition as a result of which the proposed transferee will purchase
or acquire in such transaction not more than 2% of the outstanding Common Stock,
(y) any sale by means of a public offering registered under the Securities Act
in which steps are taken to reasonably ensure that no purchaser will purchase or
acquire more than 2% of the outstanding Common Stock, or (z) any transfer to a
wholly owned subsidiary of Grantee that agrees in writing to be bound by the
terms hereof.
SECTION 11. Listing. If shares of Common Stock or any other
securities to be acquired upon exercise of the Option are then quoted on NASDAQ
or any stock exchange, Issuer, at the request of Grantee, will, if necessary,
promptly take all action as is necessary to continue the listing of such shares
or other
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<PAGE> 14
securities on NASDAQ or the applicable stock exchange, as the case may be.
SECTION 12. Division of Option. This Agreement (and the Option
granted hereby) are exchangeable, without expense, at the option of Grantee,
upon presentation and surrender of this Agreement at the principal office of
Issuer, for other Agreements providing for options of different denominations
entitling the Holder thereof to purchase in the aggregate the same number of
shares of Common Stock purchasable hereunder. The terms "Agreement" and "Option"
as used herein include any other Agreements and related Options for which this
Agreement and the Option granted hereby may be exchanged. Upon receipt by Issuer
of evidence reasonably satisfactory to it of the loss, theft, destruction, or
mutilation of this Agreement, and (in the case of loss, theft, or destruction)
of reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Agreement, Issuer will execute and deliver a
new Agreement of like tenor and date. Any such new Agreement, when executed and
delivered, shall constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed, or mutilated
shall at any time be enforceable by anyone.
SECTION 13. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9,
each of the parties hereto shall bear and pay all expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants, and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may
be waived at any time by the party that is entitled to the benefits of such
provision, but such waiver shall only be effective if in writing and signed by
the party entitled to the benefits of such provision. This Agreement may not be
modified, amended, altered, or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary;
Severability. Except as otherwise set forth in the Merger Agreement, this
Agreement, the Merger Agreement, and the other documents and instruments
referred to therein and herein (a) constitute the entire agreement and
understanding, and supersede all prior agreements and understandings, both
written and oral, between the parties with respect to their subject matter and
(b) are not intended to confer upon any person other than the parties hereto any
right or remedies. If any term, provision, covenant, or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void, or unenforceable, the
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<PAGE> 15
other terms, provisions, covenants, and restrictions of this Agreement shall
remain in full force and effect and shall not be affected, impaired, or
invalidated. If for any reason such court or regulatory agency determines that
the Option does not permit Grantee to acquire, or does not require Issuer to
repurchase, the full number of shares of Common Stock as provided in Sections 2
and 7 (as adjusted pursuant to Section 6), it is the express intention of Issuer
to allow Grantee to acquire, or to require Issuer to repurchase, such lesser
number of shares as may be permissible without any amendment or modification
hereof.
(d) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of California without regard
to any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation), or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address as shall be specified by like notice):
If to Issuer, to:
AutoFinance Group, Inc.
601 Oakmont Lane
Westmont, Illinois 60559-5549
Telecopy: (708) 655-2376
Attention: Blair T. Nance
With copies to:
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, Pennsylvania 19903-6693
Telecopy: (215) 563-5299
Attention: Stephen M. Goodman, Esq.
If to Grantee, to:
KeyCorp
127 Public Square
Cleveland, Ohio 44114
Telecopy: (216) 689-7827
Attention: Mr. Roger Noall
Senior Executive Vice President
and Chief Administrative Officer
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<PAGE> 16
With copies to:
KeyCorp
127 Public Square
Cleveland, Ohio 44114
Telecopy: (216) 689-4121
Attention: Daniel R. Stolzer, Esq.
Senior Vice President
and Senior Managing Counsel
(g) Counterparts. This Agreement and any amendments hereto may
be executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that both parties need not sign the same counterparts.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party; provided, however, Grantee may assign
its rights and interests herein and under the Option from and after the
occurrence of a Purchase Event without the prior consent of Issuer. Subject to
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns. Notwithstanding the foregoing, until the Federal Reserve Board approves
an application or notice filing by Grantee to acquire the Common Stock subject
to the Option, Grantee may not assign its rights under the Option except in (i)
a widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board.
(i) Further Assurances. In the event of any exercise of the
Option by Grantee, Issuer and Grantee shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(j) Specific Performance. This Agreement may be enforced by
either party through specific performance, injunctive relief, and other
equitable relief. Both parties hereby waive any requirement for the securing or
posting of any bond in connection with the obtaining of any such equitable
relief and agree that this provision is without prejudice to any other rights
that the parties hereto may have for any failure to perform this Agreement.
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<PAGE> 17
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
KEYCORP
By: /s/ Andrew R. Tyson
---------------------------
Title: Senior Vice President
AUTOFINANCE GROUP, INC.
By: /s/ A. E. Steinhaus
---------------------------
Title: President and Chief
Executive Officer
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<PAGE> 1
Exhibit 2
AGREEMENT OF MERGER
DATED AS OF MARCH 20, 1995
BY AND AMONG
KEYCORP
KEYCORP FINANCE INC.
AND
AUTOFINANCE GROUP, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
PAGE
----
<S> <C>
RECITALS: 1
ARTICLE I
THE MERGER 2
SECTION 1.1 Structure of the Merger. . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Conversion of Shares . . . . . . . . . . . . . . . . . . . 3
SECTION 1.3 Termination Rights . . . . . . . . . . . . . . . . . . . . 5
SECTION 1.4 Exchange of Certificates . . . . . . . . . . . . . . . . . 5
SECTION 1.5 Dissenters' Rights . . . . . . . . . . . . . . . . . . . . 8
SECTION 1.6 Distribution of Patlex Common Stock . . . . . . . . . . . . 8
SECTION 1.7 Closing of AFG's Transfer Books . . . . . . . . . . . . . . 9
SECTION 1.8 Employee and Director Stock Options . . . . . . . . . . . . 9
SECTION 1.9 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 1.10 Effective Time. . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE II
CONDUCT OF AFG AND KEYCORP PENDING THE MERGER 12
SECTION 2.1 Conduct of AFG's Business Prior to the Effective Time. . . 12
SECTION 2.2 Forbearance by AFG. . . . . . . . . . . . . . . . . . . . 12
SECTION 2.3 Forbearance by KeyCorp . . . . . . . . . . . . . . . . . . 17
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AFG 17
SECTION 3.1 Recitals True . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.2 Capital Stock . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.5 Authorization . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.6 No Breach; Consent Obtained . . . . . . . . . . . . . . . 21
SECTION 3.7 Reports . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.8 Financial Statements; Undisclosed Liabilities . . . . . . 23
SECTION 3.9 Absence of Certain Changes or Events . . . . . . . . . . . 24
SECTION 3.10 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . 24
SECTION 3.11 Absence of Claims . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.12 Absence of Regulatory Actions . . . . . . . . . . . . . . 25
SECTION 3.13 Agreements . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.14 Labor Matters . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.15 Employee Benefit Plans . . . . . . . . . . . . . . . . . 27
SECTION 3.16 Properties and Other Assets . . . . . . . . . . . . . . . 30
SECTION 3.17 Knowledge As to Conditions . . . . . . . . . . . . . . . 31
SECTION 3.18 Compliance with Laws . . . . . . . . . . . . . . . . . . 31
SECTION 3.19 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.20 Registration Statement . . . . . . . . . . . . . . . . . 31
SECTION 3.21 [Intentionally Deleted] . . . . . . . . . . . . . . . . . 32
SECTION 3.22 No Material Adverse Change . . . . . . . . . . . . . . . 32
SECTION 3.23 Anti-takeover Provisions Inapplicable . . . . . . . . . . 32
SECTION 3.24 Material Interests of Certain Persons . . . . . . . . . . 33
SECTION 3.25 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.26 Voting and Affiliates Agreements . . . . . . . . . . . . 33
</TABLE>
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SECTION 3.27 GECC Agreement . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.28 Loan Servicing Activity . . . . . . . . . . . . . . . . . 34
SECTION 3.29 Compliance with Lending Regulations . . . . . . . . . . . 34
SECTION 3.30 Inquiries . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.31 Representations . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.32 Advances . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.33 Securitization Transactions . . . . . . . . . . . . . . . 36
SECTION 3.34 Accuracy of Information . . . . . . . . . . . . . . . . . 38
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF KEYCORP AND KEYSUB 38
SECTION 4.1 Recitals True . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.2 Capital Stock of KeyCorp . . . . . . . . . . . . . . . . . 38
SECTION 4.3 Organization and Authority . . . . . . . . . . . . . . . . 39
SECTION 4.4 Authorization . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.5 No Breaches; Consent Obtained . . . . . . . . . . . . . . 40
SECTION 4.6 Certain Statements, Reports and Documents . . . . . . . . . 41
SECTION 4.7 No Material Adverse Change . . . . . . . . . . . . . . . . 41
SECTION 4.8 Compliance with Applicable Law . . . . . . . . . . . . . . 41
SECTION 4.9 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.10 KeyCorp Common Stock . . . . . . . . . . . . . . . . . . 42
SECTION 4.11 Knowledge As to Conditions . . . . . . . . . . . . . . . 42
SECTION 4.12 Registration Statement . . . . . . . . . . . . . . . . . 42
ARTICLE V
COVENANTS 43
SECTION 5.1 Acquisition Proposals . . . . . . . . . . . . . . . . . . 43
SECTION 5.2 Employment and Benefit Matters. . . . . . . . . . . . . . 44
SECTION 5.3 Investigation and Confidentiality. . . . . . . . . . . . . 44
SECTION 5.4 Certain Filings, Consents and Arrangements. . . . . . . . 45
SECTION 5.5 State Anti-takeover Statutes. . . . . . . . . . . . . . . 45
SECTION 5.6 Indemnification. . . . . . . . . . . . . . . . . . . . . . 46
SECTION 5.7 Additional Agreements. . . . . . . . . . . . . . . . . . . 47
SECTION 5.8 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.9 Proxy; Registration Statement. . . . . . . . . . . . . . . 48
SECTION 5.10 Shareholders' Meeting. . . . . . . . . . . . . . . . . . 48
SECTION 5.11 Additional Affiliate Agreements. . . . . . . . . . . . . 49
SECTION 5.12 Tax-Free Reorganization Treatment. . . . . . . . . . . . . 49
SECTION 5.13 Documents and Information to be Furnished by AFG . . . . 50
SECTION 5.14 Notification of Certain Matters . . . . . . . . . . . . . 50
SECTION 5.15 Tax Representations of AFG . . . . . . . . . . . . . . . 51
SECTION 5.16 Tax Representations of KeyCorp and KeySub. . . . . . . . 51
SECTION 5.17 Voting Agreements . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.18 Merger Consideration. . . . . . . . . . . . . . . . . . . 51
SECTION 5.19 NYSE Listing. . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.20 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.21 Termination of Invemed . . . . . . . . . . . . . . . . . 51
ARTICLE VI
CONDITIONS TO CONSUMMATION 52
SECTION 6.1 Conditions to All Parties' Obligations. . . . . . . . . . 52
</TABLE>
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SECTION 6.2 Conditions to Obligations of KeyCorp and KeySub. . . . . 53
SECTION 6.3 Conditions to the Obligations of AFG. . . . . . . . . . 57
ARTICLE VII
TERMINATION 58
SECTION 7.1 Termination. . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.2 Effect of Termination. . . . . . . . . . . . . . . . . . 58
SECTION 7.3 Termination Fee . . . . . . . . . . . . . . . . . . . . 59
ARTICLE VIII
ENVIRONMENTAL MATTERS 60
SECTION 8.1 Environmental Representations and Warranties of AFG . . 60
SECTION 8.2 Environmental Occurrence Notification and Response . . . 62
ARTICLE IX
OTHER MATTERS 62
SECTION 9.1 Certain Definitions; Interpretation. . . . . . . . . . . 62
SECTION 9.2 Knowledge . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.3 Survival. . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.4 Waiver and Amendment. . . . . . . . . . . . . . . . . . 63
SECTION 9.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.7 Expenses. . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.8 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.9 Entire Agreement; Etc . . . . . . . . . . . . . . . . . 65
SECTION 9.10 Assignment. . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
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<S> <C> <C>
Exhibits A Form of Option Agreement
B Amended Articles of Incorporation of KeySub
C CGCL Dissenters' Rights Statute
D Form of Patlex Distribution Agreement
E Loan Commitment Letter
F-1 List of Parties to Voting Agreements
F-2 Form of Voting Agreement
G Form of Affiliate's Letter
H Tax Representation Letter for 5% AFG Shareholders
I Form of Escrow Agreement
Schedules 3.2(b) Capital Stock
3.2(c) Voting Arrangement
3.2(d) Beneficial Owners of More than 5% of AFG Common Stock
3.3 Jurisdictions where AFG Qualified to do Business
3.4 Subsidiaries
3.6 No Violations
3.8 Financial Statements; Undisclosed Liabilities
3.9 Absence of Certain Changes or Events
3.10 Taxes and Tax Returns
3.11 Absence of Claims
3.12 Absence of Regulatory Actions
3.13 Agreements
3.15 Employee Benefit Matters
3.16 Properties and Other Assets
3.18 Compliance with Laws
3.24 Material Interests of Certain Persons
3.25 Insurance
3.28 Servicing Agreements
3.29 Compliance with Lending Regulations
3.30 Inquiries
3.31 Representations
3.32 Advances
3.33 Securitization Transactions
</TABLE>
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<PAGE> 6
INDEX OF DEFINED TERMS
<TABLE>
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Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
AFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AFG Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
AFG Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
AFG Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
AFG Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
AFG Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
AFG Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
AFG Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
AFG Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
AFG Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
AFG Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
AFG Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
AFG Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
AFG Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Average Stock Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
BHCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
CGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Corporate Spinoff Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Environmental Action Item . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Environmental Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ERISA Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
HOLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Invemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
KeyCorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
KeyCorp Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
KeyCorp Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
KeyCorp Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
KeyCorp Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
KeyCorp Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
KeyCorp Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
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KeyCorp Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
KeySub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
KeySub Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Maximum Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Merger Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . 31
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
OGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Patlex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Patlex Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Patlex Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Patlex Spinoff Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Proxy Statement/Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Quantum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Registration Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Regulated Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Regulators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Repurchase Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Securitization Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Securitization Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Securitization Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Securitization Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Securitization Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Securitization Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Servicing Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Spinoff Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . 32
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Voting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Warrant Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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AGREEMENT OF MERGER, dated as of the 20th day of March, 1995 (the
"Agreement"), by and among KeyCorp, an Ohio corporation ("KeyCorp"), KeyCorp
Finance Inc., an Ohio corporation ("KeySub"), and AutoFinance Group, Inc., a
California corporation ("AFG" or the "Company").
RECITALS:
A. KeyCorp. KeyCorp has been duly incorporated and is a corporation,
duly organized, validly existing, and in good standing under the laws of the
State of Ohio, with its principal executive offices located in Cleveland, Ohio.
KeyCorp is a registered bank holding company under the Federal Bank Holding
Company Act of 1956, as amended ("BHCA"), and a savings and loan holding company
as defined in the Federal Home Owners' Loan Act ("HOLA").
B. KeySub. KeySub has been duly incorporated, and is a corporation,
duly organized, validly existing, and in good standing under the laws of the
State of Ohio, with its principal executive offices located in Cleveland, Ohio.
C. AFG. AFG has been duly incorporated and is a corporation, duly
organized, validly existing, and in good standing under the laws of the State of
California, with its principal executive offices located in Westmont, Illinois.
AFG is an automotive finance company engaged primarily in the indirect financing
(the purchase of contracts from dealers) of automotive purchases by individuals
with non-prime credit.
D. The Option Agreement. As a condition to the execution and delivery
of this Agreement, and as a condition to and inducement of the willingness of
KeyCorp and KeySub to enter into this Agreement, KeyCorp and AFG are entering
into a Stock Option Agreement in the form set forth in Exhibit A attached hereto
(the "Option Agreement"), pursuant to which AFG is granting to KeyCorp an option
to purchase Common Stock of AFG up to an amount equal to 19.9% of the
outstanding shares of AFG Common Stock.
E. Intention of the Parties. It is the intention of the parties to
this Agreement that the Merger (as defined below) for federal income tax
purposes shall qualify as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
F. Board and KeySub Shareholder Approvals. The Board of Directors of
AFG has adopted resolutions approving this Agreement and the Option Agreement
and the consummation of the transactions contemplated hereby and thereby and
authorizing the execution and delivery of this Agreement and the Option
Agreement. In addition, each of the Board of Directors (or the Executive
Committee thereof) of KeyCorp and the Board of Directors of KeySub have adopted
resolutions approving this Agreement and the consummation of the transactions
contemplated hereby and authorizing the execution and delivery of this Agreement
and, in the case of KeyCorp, the Option Agreement, and
<PAGE> 9
KeyCorp, as the sole shareholder of KeySub, has adopted resolutions approving
this Agreement and approving the consummation of the transactions contemplated
hereby.
G. Spin-off. As provided in the Patlex Spinoff Agreement (as defined
in Section 1.6), AFG will distribute (the "Distribution") to AFG's shareholders
immediately prior to the Effective Time 95.01% of the outstanding shares of
common stock, par value $.10 per share ("Patlex Common Stock"), of Patlex
Corporation, a Pennsylvania corporation and a wholly-owned subsidiary of AFG
("Patlex"). The balance of the outstanding shares of Patlex Common Stock shall
be retained by AFG and not distributed in the Distribution so that, immediately
following the Distribution and the payment of cash in lieu of fractional shares,
the Surviving Corporation shall be the record and beneficial owner of 4.99% of
the outstanding shares of Patlex Common Stock.
NOW, THEREFORE, in consideration of their mutual promises and
obligations hereunder, the parties hereto adopt and make this Agreement and
prescribe the terms and conditions hereof and the manner and basis of carrying
it into effect, which shall be as follows:
ARTICLE I
THE MERGER
SECTION 1.1 Structure of the Merger. Subject to the terms and
conditions hereof, at the Effective Time (as defined in Section 1.10), AFG will
merge (the "Merger") with and into KeySub, pursuant to and in accordance with
Section 1701.78 of the Ohio General Corporation Law ("OGCL") and Section 1108 of
the California General Corporation Law ("CGCL"). KeySub will be the surviving
corporation (sometimes referred to herein as the "Surviving Corporation") and
shall continue to be incorporated under the laws of the State of Ohio. The
Merger shall have the effects specified in the OGCL and the CGCL. At the
Effective Time, the articles of incorporation of the Surviving Corporation shall
be the Amended Articles of Incorporation of KeySub in the form of Exhibit B
attached hereto, and the regulations of the Surviving Corporation shall be the
Regulations of KeySub, in each case until amended in accordance with their
respective provisions and applicable law. The directors and officers of KeySub
immediately prior to the Effective Time will be the directors and officers,
respectively, of the Surviving Corporation, from and after the Effective Time,
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation, or removal in accordance with the terms
of the Surviving Corporation's Amended Articles of Incorporation and Regulations
and the OGCL.
SECTION 1.2 Conversion of Shares. Subject to Section 1.2(b), at the
Effective Time:
2
<PAGE> 10
(a) Each then-outstanding share of AFG Common Stock,
no stated par value (the "AFG Common Stock") (other than shares of AFG
Common Stock (i) held in the treasury of AFG or (ii) owned by KeyCorp
for its own account), will, by virtue of the Merger, automatically be
canceled, retired, and converted into the right to receive the
following (the "Merger Consideration"), subject to Section 1.2(b): that
number of Common Shares, with a par value of $1 each, of KeyCorp (the
"KeyCorp Common Stock") determined by dividing $16.50 by the Average
Stock Price (as defined below), but in no event less than .50 and no
more than .60 shares of KeyCorp Common Stock per share of AFG Common
Stock regardless of the Average Stock Price.
For purposes of this Section 1.2(a), "Average Stock
Price" means the average (rounded to the nearest whole cent) of the
closing sale price of one share of KeyCorp Common Stock as reported on
the consolidated tape of the New York Stock Exchange ("NYSE") for the
ten (10) consecutive trading days ending on and including the fifth
(5th) trading day immediately preceding (but not including) the Closing
Date (as defined in Section 1.9). The number of shares of KeyCorp
Common Stock to be received for each share of AFG Common Stock as
determined pursuant to this Section 1.2(a) shall be referred to herein
as the "Exchange Ratio." The Exchange Ratio shall be subject to
adjustment as provided in Section 6.2(b)(vi).
(b) No certificates or scrip representing fractional
shares of KeyCorp Common Stock shall be issued upon the surrender for
exchange of a certificate or certificates for shares of AFG Common
Stock. No dividends or distributions of KeyCorp shall be payable on or
with respect to any fractional share and any such fractional share
interest will not entitle the owner thereof to vote or to any rights of
shareholders of KeyCorp. In lieu of any such fractional shares, holders
of shares of AFG Common Stock otherwise entitled to fractional shares
of KeyCorp Common Stock shall be entitled, upon surrender of a
certificate or certificates for shares of AFG Common Stock in
accordance with Section 1.4, to receive promptly after the Effective
Time from the Exchange Agent (as defined in Section 1.4(a)) a cash
payment (without interest) in an amount equal to the fraction of such
share of KeyCorp Common Stock to which such holder would otherwise be
entitled multiplied by the closing sale price of KeyCorp Common Stock
as reported on the NYSE on the trading day immediately preceding the
Effective Time.
(c) Pursuant to the Rights Agreement, dated August 25,
1989, by and between KeyCorp and Society National Bank, as rights
agent, as amended (the "KeyCorp Rights Plan"), each share of KeyCorp
Common Stock issued in the Merger shall be accompanied by a right (a
"KeyCorp Right") under the KeyCorp Rights Plan. For purposes of this
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Agreement, all references to a share of KeyCorp Common Stock shall be
deemed to include the accompanying KeyCorp Right.
(d) Each then-outstanding share of AFG Common Stock
owned by KeyCorp for its own account will, by virtue of the Merger,
automatically be canceled and retired and all rights in respect thereof
will cease to exist.
(e) Each share of AFG Common Stock issued and held in
AFG's treasury will, by virtue of the Merger, automatically be canceled
and retired and all rights in respect thereof will cease to exist. Such
shares will not be treated as outstanding for purposes of this
Agreement.
(f) Each then outstanding share of KeySub shall
continue to be an issued and outstanding common share, without par
value, of the Surviving Corporation and shall thereafter constitute all
the issued and outstanding shares of the Surviving Corporation, and all
such shares shall be owned by KeyCorp.
(g) Each then-outstanding share of KeyCorp Common
Stock shall continue to be an issued and outstanding Common Share, with
a par value of $1 each, of KeyCorp, and any shares of KeyCorp Common
Stock held in KeyCorp's treasury immediately prior to the Effective
Time shall continue to be held in the treasury of KeyCorp at the
Effective Time.
(h) If between the date of this Agreement and the
Effective Time, the KeyCorp 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 if a
stock dividend thereon shall be declared with a record date within said
period, the number of shares of KeyCorp Common Stock deliverable
pursuant to this Agreement shall be adjusted accordingly.
(i) Notwithstanding anything to the contrary herein,
the parties hereto may, by written agreement, modify the structure of
the Merger in order to achieve the intention of the parties as to the
federal income tax treatment described in Recital E, and the parties
shall promptly enter into an amendment to this Agreement pursuant to
Section 9.4 of this Agreement necessary or desirable to accomplish any
such modification, whether such amendment is after submission to or
approval by the shareholders of AFG.
SECTION 1.3 Termination Rights. Keycorp and AFG shall
each have the right, by written notice to the other party, to elect to abandon
the Merger and terminate this Agreement by action of its respective Board of
Directors (or, in the case of KeyCorp, of the Executive Committee of its Board
of Directors) at any time during the three trading day period commencing with
the fifth trading day immediately preceding (but not including) the Closing Date
if the Average Stock Price of a share of KeyCorp
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Common Stock shall be less than $23.20 (adjusted as indicated in Section
1.2(h)); provided, however, in the event that KeyCorp receives
from AFG and rejects an Accelerated Closing Election (as defined in Section
1.9), then KeyCorp shall forfeit the foregoing right to abandon the Merger and
to terminate this Agreement if, but only if, the average (rounded to the nearest
whole cent) of the closing sale price of one share of KeyCorp Common Stock as
reported on the consolidated tape of the NYSE for the ten (10) consecutive
trading days beginning on the trading day following KeyCorp's rejection of the
Accelerated Closing Election shall be equal to or greater than $23.20 (adjusted
as indicated in Section 1.2(h)).
SECTION 1.4 Exchange of Certificates.
(a) Exchange Agent. Society National Bank or
such other national bank or trust company that is designated by KeyCorp
prior to the Effective Time shall act as agent of the AFG shareholders
for purposes of, among other things, effecting distributions to AFG
shareholders under this Agreement, distributing transmittal letters and
distributing certificates for shares of KeyCorp Common Stock and cash
in lieu of fractional shares of KeyCorp Common Stock to AFG
shareholders (the "Exchange Agent").
(b) Termination of Agreement after Deposit of
Shares of AFG Common Stock with Exchange Agent; Voting and
Dividend Rights Prior to Effective Time. In the event of the
termination of this Agreement after holders of shares of AFG Common
Stock have deposited same with the Exchange Agent, KeyCorp and AFG
shall promptly instruct the Exchange Agent to return all shares of AFG
Common Stock to the persons who deposited them. AFG shareholders shall
continue to have the right to vote and to receive all dividends
received on shares of AFG Common Stock deposited by them with the
Exchange Agent until the Effective Time.
(c) Distribution of KeyCorp Common Stock and
Cash. KeyCorp shall deposit with the Exchange Agent the Merger
Consideration including the certificates representing shares of KeyCorp
Common Stock and cash in lieu of fractional shares of KeyCorp Common
Stock to be distributed to holders of AFG Common Stock who have
theretofore surrendered their certificates for shares of AFG Common
Stock to the Exchange Agent. As of the Effective Time and upon
surrender of such certificates representing shares of AFG Common Stock
to KeyCorp, the holder shall be entitled to receive in exchange
therefor the certificates representing shares of KeyCorp Common Stock
and cash in lieu of fractional shares of certificates representing
KeyCorp Common Stock. Unless and until any certificates representing
shares of AFG Common Stock shall be so surrendered, no dividend payable
to holders of record of KeyCorp Common Stock as of any time subsequent
to the Effective Time shall be paid to the holder of such
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outstanding certificate, and the holder's other rights as a shareholder
shall be suspended, but upon surrender of such outstanding certificate
as aforesaid there shall be paid to the record holder of the
certificates for KeyCorp Common Stock issued in conversion therefor the
dividends (without interest) that have theretofore become payable with
respect to the shares of KeyCorp Common Stock represented by such
certificates and the holder's other rights as a shareholder shall
thereafter be restored. With respect to holders of certificates of
shares of AFG Common Stock entitled to receive cash in lieu of
fractional shares of certificates representing shares of KeyCorp Common
Stock, no interest shall be paid for the time prior to the surrender of
such certificates.
(d) Lost Certificates. In the event any
certificate or certificates shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming
such certificate or certificates to be lost, stolen or destroyed and,
if required by KeyCorp, the posting by such person of a bond in such
amount as KeyCorp may direct as indemnity against any claim that may be
made against it with respect to such certificate or certificates, the
Exchange Agent will issue in exchange for such lost, stolen or
destroyed certificate or certificates the appropriate Merger
Consideration, and any unpaid dividends and distributions on the
KeyCorp Common Stock deliverable in respect of each share of AFG Common
Stock represented by such certificate or certificates as determined
pursuant to this Agreement, in each case, without any interest thereon.
(e) Rights of Exchange Agent; Disposition of
Undisbursed Merger Consideration. The Exchange Agent shall not be
entitled to vote or to exercise any rights of ownership with respect to
the shares of KeyCorp Common Stock held by it from time to time
hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such shares for the
account of the persons entitled thereto. Within 180 days following the
Effective Time, the Exchange Agent shall deliver to KeyCorp any shares
of KeyCorp Common Stock and funds which KeyCorp has made available to
the Exchange Agent and which have not been disbursed to holders of
certificates representing shares of AFG Common Stock, and thereafter
such holders shall be entitled to look to KeyCorp (subject to abandoned
property, escheat, or other similar laws) with respect to the shares of
KeyCorp Common Stock and cash in lieu of fractional shares of KeyCorp
Common Stock deliverable or payable upon due surrender of their
certificates representing shares of AFG Common Stock.
(f) Transfer. If delivery of all or part of
the Merger Consideration is to be made to a person other than the
person in whose name a surrendered share of AFG Common Stock is
registered, it shall be a condition to such
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delivery or exchange that the certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and
that the person requesting such delivery or exchange shall have paid
any transfer and other taxes required by reason of such delivery or
exchange in a name other than that of the registered holder of the
certificate so surrendered or shall have established to the reasonable
satisfaction of KeyCorp that such tax either has been paid or is not
payable. Neither KeyCorp nor the Exchange Agent shall pay, or be liable
to pay, any stock transfer taxes incurred by any shareholder in
connection with the Merger.
(g) Right to Merger Consideration. Until
surrendered and exchanged in accordance with this Section 1.4, each
certificate representing shares of AFG Common Stock shall, from and
after the Effective Time, represent solely the right to receive the
Merger Consideration, together with any dividends or other
distributions as provided in Section 1.4(c), and shall have no other
rights. From and after the Effective Time, KeyCorp shall be entitled to
treat, for all corporate purposes, certificates that have not yet been
surrendered for exchange as evidencing the ownership of the aggregate
Merger Consideration into which the shares of AFG Common Stock
represented by such certificates shall have been converted,
notwithstanding any failure to surrender such certificates. Neither AFG
nor KeyCorp shall be liable to any holder of shares of AFG Common Stock
for any Merger Consideration (or dividends or distributions with
respect thereto) delivered to a public official pursuant to any
applicable abandoned property, escheat, or similar law.
SECTION 1.5 Dissenters' Rights. Notwithstanding any
provision of this Agreement to the contrary, any shares of AFG Common Stock
outstanding immediately prior to the Effective Time held by a holder who has
demanded and perfected dissenters' rights, if any, for those shares in
accordance with the CGCL and, as of the Effective Time, has not withdrawn or
lost such dissenters' rights shall not be converted into or represent a right to
receive the Merger Consideration, but the holder of such shares shall only be
entitled to such rights, if any, as are granted by the CGCL. The CGCL
Dissenters' Rights Statute is attached hereto as Exhibit C. If a holder of
shares of AFG Common Stock who demands and perfects dissenters' rights for those
shares under the CGCL shall effectively withdraw or lose (through failure to
perfect or otherwise) dissenters' rights, or if dissenters' rights are not
available to holders of AFG Common Stock by reason of Section 1300(b)(1) of the
CGCL or otherwise, then, as of the Effective Time or the occurrence of such
event, whichever last occurs, those shares shall be converted into and
represent only the right to receive the Merger Consideration as provided in
Section 1.4, together with any dividends or other distributions as provided in
Section 1.4(c), without interest, upon the surrender of the certificates
representing those shares.
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AFG shall forthwith give KeyCorp notice of any written demands for dissenters'
rights of any holder of shares of AFG Common Stock, attempted withdrawals of
such demands, and any other instruments or notices served pursuant to the CGCL
received by AFG relating to dissenters' rights. AFG shall not, except with the
prior written consent of KeyCorp, voluntarily make any payment with respect to
any demands for dissenters' rights of any holder of shares of AFG Common Stock,
offer to settle or settle any such demands, or approve any withdrawal of any
such demands. In the event that prior to the Effective Time, any such dissenting
shareholder ceases to be a dissenting shareholder, such shareholder shall be
entitled to receive the Merger Consideration pursuant to Section 1.4 hereof.
SECTION 1.6 Distribution of Patlex Common Stock.
Immediately prior to the Effective Time, and upon the further terms and
conditions of the Distribution Agreement, by and among AFG, Patlex and KeyCorp
and dated the date hereof, in the form of Exhibit D attached hereto (the "Patlex
Spinoff Agreement"), AFG shall distribute 95.01% of the outstanding shares of
Patlex Common Stock on a proportionate basis to the holders of record of shares
of AFG Common Stock on the record date established for the Distribution,
regardless of whether the holders thereafter perfect dissenters' rights with
respect to their AFG Common Stock in the Merger under Chapter 13 of the CGCL.
The balance of the outstanding shares of Patlex Common Stock shall be retained
by AFG and not distributed in the Distribution so that, immediately following
the Distribution and the payment of cash in lieu of fractional shares, the
holders of record of AFG Common Stock on such record date shall be the record
and beneficial owners of 95.01% of the outstanding shares of Patlex Common
Stock, and the Surviving Corporation shall be the record and beneficial owner of
4.99% of the outstanding shares of Patlex Common Stock.
SECTION 1.7 Closing of AFG's Transfer Books. At the
close of business on the business day immediately preceding the date of the
Effective Time, the stock transfer books of AFG will be closed and no transfer
of shares of AFG Common Stock will thereafter be made. If, after the Effective
Time, any certificates representing shares of AFG Common Stock are presented to
the Surviving Corporation, they will be canceled, retired, and exchanged as
provided in Section 1.4.
SECTION 1.8 Employee and Director Stock Options.
(a) At the Effective Time, the AFG Option Plans (as
defined in Section 3.2 hereof) shall be assumed by KeyCorp and each
employee or director stock option to purchase shares of AFG Common
Stock granted by AFG pursuant to the AFG Option Plans which is
outstanding and unexercised immediately prior to the Effective Time,
whether or not exercisable, shall be assumed by KeyCorp and converted
into an option to purchase shares of KeyCorp Common Stock for such
number of shares of KeyCorp Common Stock and at such exercise price as
is determined as provided below and
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otherwise having the same duration and other terms as the original
option, except that: (i) KeyCorp and its Executive Equity Compensation
Committee shall be substituted for AFG and its Compensation Committee
administering such AFG Option Plans, and (ii) from and after the
Effective Time, each such option granted by AFG may be exercised only
for KeyCorp Common Stock notwithstanding any contrary provision of the
AFG Option Plans or stock option agreements executed in connection
therewith. The number of shares of KeyCorp Common Stock subject to, and
the applicable per share exercise price of, each assumed and converted
option shall be determined as follows:
(A) The number of shares of KeyCorp Common
Stock shall be equal to the product of (i) the number
of shares of AFG Common Stock subject to the option
and (ii) the Exchange Ratio, rounded down to the
nearest whole share; and
(B) The exercise price per share of KeyCorp
Common Stock under the new option shall be equal to
(i) the exercise price per share of AFG Common Stock
under the option divided by (ii) the Exchange Ratio,
rounded up to the nearest cent.
In addition, after the Effective Time, the holder of each such assumed
and converted stock option shall be entitled to receive upon exercise
of such stock option the number of shares of Patlex Common Stock as
provided by Section 3.5(a) of the Distribution Agreement. At or after
the Effective Time, KeyCorp may, to the extent permitted by applicable
laws and the terms of the AFG Option Plans, cause the AFG Option Plans
to be otherwise modified, terminated, or merged with new or existing
KeyCorp plans; provided, however, that KeyCorp will not cancel any AFG
option previously granted under the AFG Option Plans.
(b) At the Effective Time, the Non-Plan Option (as
defined in Section 3.2(a)) and each employee or director stock option
to purchase shares of AFG Common Stock granted pursuant to the Patlex
Option Plan (as defined in Section 3.2(a)) and assumed by AFG which is
outstanding and unexercised immediately prior to the Effective Time,
whether or not exercisable, shall be converted into the right to
receive cash in an amount equal to the product of (i) the number of
shares of AFG Common Stock subject to such stock option and (ii) the
amount by which $16.50 exceeds the exercise price per share of such
option. In addition, at the Effective Time, the holder of each such
stock option shall be entitled to receive upon conversion of such stock
option the number of shares of Patlex Common Stock as provided by
Section 3.5(b) of the Distribution Agreement.
SECTION 1.9 Closing. Unless the parties otherwise
agree in writing, the closing (the "Closing") of the
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Merger shall take place at the offices of Thompson, Hine and Flory in Cleveland,
Ohio at 10:00 a.m., local time, as promptly as practicable after the date on
which the conditions specified in Sections 6.1, 6.2, and 6.3 hereof are
satisfied; provided, however, if the conditions specified in
Sections 6.1, 6.2, and 6.3 hereof are satisfied on or prior to September 30,
1995, the Closing shall be on such date as KeyCorp shall select, but in no event
later than October 2, 1995 (the "Closing Date"). Notwithstanding the foregoing:
(a) Within five (5) business days following the date
of the later to occur of (i) the approval of this Agreement and the
transactions contemplated hereby by the requisite vote of the
shareholders of AFG in accordance with Section 6.1(a) hereof or
(ii) the receipt, in accordance with Section 6.1(b) hereof, by
KeyCorp and AFG of all regulatory approvals required for the
consummation of the transactions contemplated by this Agreement and
the expiration of all applicable waiting periods (the
"Shareholder/Regulatory Approval Date"), AFG may provide KeyCorp with
written notice of its election (the "Accelerated Closing Election") to
consummate the transactions contemplated by this Agreement and cause
the Merger to become effective as soon as practicable and in any event
within ten (10) business days of the date of the Accelerated Closing
Election. In the event that AFG proposes that the Closing shall occur
on or prior to August 24, 1995, the Accelerated Closing Election shall
also contain the agreement of Patlex to pay all taxes, interest,
penalties and expenses incurred by AFG, the Surviving Corporation or
KeyCorp as a result of the Distribution occurring prior to
August 24, 1995. In the event that KeyCorp selects a Closing Date on
or prior to August 24, 1995, and AFG has not theretofore proposed that
the Closing shall occur on or prior to August 24, 1995, KeyCorp shall
pay all taxes, interest, penalties and expenses incurred by AFG, the
Surviving Corporation or KeyCorp as a result of the Distribution
occurring prior to August 24, 1995.
(b) Within five (5) business days of its receipt of
the Accelerated Closing Election, KeyCorp shall provide AFG with
written notice of either (i) KeyCorp's agreement to consummate the
transactions contemplated by this Agreement and cause the Merger to
become effective in accordance with the schedule set forth in the
Accelerated Closing Election or in accordance with such other schedule
reasonably satisfactory to KeyCorp, provided, however, that such other
schedule shall not result in the Closing occurring in excess of twenty
(20) business days after the Closing Date proposed by AFG in the
Accelerated Closing Election, or (ii) KeyCorp's rejection of AFG's
Accelerated Closing Election, in which case KeyCorp shall determine the
Closing Date in accordance with the first sentence of this Section 1.9.
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The obligations of AFG, KeySub, and KeyCorp in any event shall be subject to
satisfaction, unless duly waived, of the applicable conditions set forth in this
Agreement.
SECTION 1.10 Effective Time. The Merger shall become
effective at the time and date which is the later of the time at which (a) a
certificate of merger meeting the requirements of Section 1701.81 of the OGCL
shall be executed in accordance with all appropriate legal requirements and
shall be filed with the Secretary of State of the State of Ohio as required
thereby (or such later time as specified therein) and (b) an officer's
certificate and a copy of the Merger Agreement meeting the requirements of
Section 1103 of the CGCL shall be executed in accordance with all appropriate
legal requirements and shall be filed with the Secretary of State of the State
of California as required thereby (or such later time as specified therein) (the
"Effective Time").
ARTICLE II
CONDUCT OF AFG AND KEYCORP PENDING THE MERGER
SECTION 2.1 Conduct of AFG's Business Prior to the
Effective Time. Except as expressly provided in this Agreement and in the Patlex
Spinoff Agreement, during the period from the date of this Agreement to the
Effective Time, AFG shall, and shall cause its subsidiaries to, (a) conduct its
and their respective business in, and not take any action except in, the usual,
regular and ordinary course consistent with past practice, (b) use its and their
respective reasonable efforts to maintain and preserve intact its and their
respective business organization, employees and business relationships and
retain the services of its and their respective officers and key employees, (c)
maintain and keep its and their respective properties in as good repair and
condition as at present, (d) keep in full force and effect insurance and bonds
comparable in amount and scope of coverage to that now maintained by it and each
of its subsidiaries, (e) perform all obligations required to be performed by it
and each of its subsidiaries under all contracts, leases, and documents relating
to or affecting its and their respective assets, properties, and business, (f)
comply with and perform in all material respects all obligations and duties
imposed upon it and each of its subsidiaries by all federal, state, municipal,
and local laws and rules, regulations, and orders by federal, state, municipal,
or local governmental agencies, and (g) take no action which would adversely
affect or delay the ability of AFG, KeyCorp or KeySub to obtain any necessary
approvals, consents or waivers of any governmental authority required for the
transactions contemplated hereby or to perform its covenants and agreements on a
timely basis under this Agreement.
SECTION 2.2 Forbearance by AFG. During the period from
the date of this Agreement to the Effective Time, except as otherwise permitted
or required by this Agreement or
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contemplated by the Patlex Spinoff Agreement, AFG shall not, and shall not
permit any of its subsidiaries to, without the prior written consent of KeyCorp:
(a) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other individual,
corporation or other entity, or make or purchase any single loan,
advance or other extension of credit, in excess of $100,000 (even if
made in the ordinary course of business), or enter into any
Securitization Transaction (as defined in Section 3.33) or similar
transaction, except that (i) AFG and the AFG Subsidiaries shall be
permitted to enter into Securitization Transactions in the ordinary
course of their business consistent with past practices if, and only
if, one or more bank affiliates of KeyCorp is unwilling, on or before
April 30, 1995, to enter into the definitive loan documentation
contemplated by the commitment letter attached hereto as Exhibit E in
accordance with the provisions of such commitment letter and, to the
extent not specified by the commitment letter, containing covenants and
conditions substantially similar to those in the GECC Agreement (as
defined in Section 3.27), AFG hereby agreeing that it will enter into
definitive loan documentation contemplated by the commitment letter in
accordance with the provisions of such commitment letter and, to the
extent not specified by the commitment letter, containing covenants and
conditions substantially similar to those in the GECC Agreement,
(ii) AFG may repurchase the remaining loan portfolio of the 1992-A
Securitization, provided, however, that the repurchase is made in the
ordinary course of business consistent with past practices and the
aggregate repurchase price does not exceed $2,250,000, (iii) if the
Closing does not occur prior to October 1, 1995, AFG may repurchase the
remaining loan portfolio of the 1992-B Securitization, provided,
however, that the repurchase is made in the ordinary course of business
consistent with past practices and the aggregate repurchase price does
not exceed $2,250,000, and (iv) AFG may purchase other loan portfolios,
provided, however, that the loan portfolios meet AFG's evaluation
processes for bulk purchases, on a basis consistent with past
practices, and KeyCorp consents in writing to the purchase (KeyCorp
agrees that it shall respond in a timely manner to any request by AFG
for such a consent and that it shall not unreasonably withhold its
consent);
(b) (i) diminish or reduce in any respect its credit
standards applicable to the making or purchasing of AFG Loans (as
defined in Section 3.29), (ii) increase in any manner the effective
ratio between the amount of any AFG Loan made or purchased and the
wholesale value or other measure of the value of the motor vehicle or
other collateral securing any such AFG Loan as compared to the
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loan to value ratios currently utilized by AFG, or (iii) make any
material reduction in interest rates, manner of determining interest,
amount of fees or manner of determining fees or any other aspect of the
pricing of AFG Loans or of any servicing, consulting, or other service
provided by AFG, any AFG Subsidiary or any other affiliate of AFG from
those in effect on the date of this Agreement without, in each case,
the prior written consent of KeyCorp (KeyCorp agrees that it shall
respond in a timely manner to any request by AFG for such a consent and
that it shall not unreasonably withhold its consent);
(c) adjust, split, combine, or reclassify any capital
stock or other securities; enter into any arrangement, contract, or
commitment with respect to the issuance, purchase or voting of shares
of its capital stock, or any securities or obligations convertible into
or exchangeable for any shares of its capital stock or any other equity
or long-term debt securities, or directly or indirectly redeem,
purchase, or otherwise acquire, or hypothecate, pledge, or otherwise
encumber, any shares of its capital stock or other securities; grant
any stock appreciation rights or grant any right to acquire any shares
of its capital stock, or any securities convertible into or
exchangeable for shares of such capital stock or any other equity or
long-term debt securities, or issue any additional shares of its
capital stock, except any shares of AFG Common Stock issued pursuant to
the exercise of options or warrants outstanding prior to the date of
this Agreement, or any securities convertible into or exchangeable for
any shares of its capital stock or any other equity or long-term debt
securities; make, declare, or pay any dividend or make any other
distribution on, (whether in cash, stock or property or any combination
thereof) any shares of its capital stock, except for dividends paid by
any of the wholly-owned AFG Subsidiaries (as defined in Section 3.4)
other than Patlex to AFG or any of its wholly-owned subsidiaries;
(d) other than in the ordinary course of business
consistent with past practice, sell, assign, transfer, lease, mortgage,
exchange, encumber or otherwise dispose of any of its material
properties or assets, including AFG Loans and rights to the servicing
of AFG Loans, to any individual, corporation or other entity, other
than a wholly-owned AFG Subsidiary other than Patlex, or cancel,
release or assign any indebtedness of any such person or any claims
held by any such person, except in the ordinary course of business
consistent with past practice or pursuant to contracts or agreements in
force on the date of this Agreement; provided, however,
that neither AFG nor any AFG Subsidiary will enter into any
Securitization Transaction not expressly permitted under
Section 2.2(a);
(e) other than in the ordinary course of business
consistent with past practice, make any material investment
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either by purchase of stock or securities, contributions to capital,
property transfers, bulk purchases, or purchase of any property or
assets of any other individual, corporation, bank, business, trust,
partnership, association, limited liability company, or other entity
other than a wholly-owned AFG Subsidiary other than Patlex;
(f) other than in the ordinary course of business
consistent with past practice, enter into or terminate any material
lease or contract, including, without limitation, any loans or loan
commitments to officers, directors, or 5% or more shareholders (or any
person or business entity controlled by or affiliated with any such
officers, directors, or shareholders), or make any change in any of its
material leases or contracts, other than renewals of contracts and
leases without material adverse changes of terms; provided,
however, that the Company obtains the consent of KeyCorp as to
the terms of any such renewals of contracts or leases;
(g) other than increases in the ordinary course of
business in accordance with past practice, increase in any manner the
compensation or fringe benefits of any of its present or former
directors, executive officers, or other employees or pay any pension or
retirement allowance not required by any existing plan or agreement to
any such directors, executive officers or other employees, or grant any
severance or termination pay or, except as required by applicable law
or regulation, become a party to, amend, renew, modify, or commit
itself to any pension, retirement, profit sharing, severance,
termination, welfare benefit, employment, deferred compensation,
non-competition, bonus, stock option, parachute, consulting, or other
employee benefit agreements, trusts, plans, funds, or other
arrangements with or for the benefit or welfare of any present or
former director, executive officer or other employee (other than with
respect to new employees in the ordinary course of business);
provided, however, that (i) AFG may pay a bonus to its
executive and managerial employees for its fiscal year ending June 30,
1995 in accordance with its past practice for such bonuses and may base
such bonus on the net amount of pro forma earnings that AFG would have
achieved if a Securitization Transaction had occurred in such period,
minus the earnings which were actually achieved on the assets which
would otherwise have been sold to a Securitization Trustee, as
calculated on the basis of a formula used by CS First Boston
Corporation for calculating earnings in Securitization Transactions, a
copy of which shall have been provided to and approved for this purpose
by KeyCorp, but AFG shall pay no bonuses or incentive compensation for
any period after June 30, 1995 and (ii) AFG may grant to A. E.
Steinhaus a stock option to purchase 30,000 shares of AFG Common Stock
and may grant to Blair T. Nance a stock option to purchase 20,000
shares of AFG Common Stock;
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(h) other than in the ordinary course of business and
consistent with past practice, make any payment or contribution with
respect to any ERISA Plan (as defined in Section 3.15), or any other
arrangement, program, or plan listed in Schedule 3.15 except as
required by the terms of such ERISA Plan, or other arrangement,
program, or plan, create or amend any ERISA Plan or other arrangement,
program or plan listed in Schedule 3.15 except to the extent that such
amendment is required to maintain qualification under the Code or
comply with ERISA (as defined in Section 3.15), provided, however, that
no such amendment shall increase the rate of benefit accruals for
non-highly compensated employees beyond the current rate of such
benefit accruals nor increase the number of non-highly compensated
employees covered under any such plans unless such increases are the
sole method by which such plan may achieve or maintain qualification or
compliance and, in such event, only with the prior written consent of
KeyCorp, which shall not be unreasonably withheld;
(i) settle any claim, action or proceeding involving
any liability of AFG or the AFG Subsidiaries for material money damages
or restrictions upon the operations of AFG or any of its subsidiaries;
(j) modify in any material respect the manner in which
it and its subsidiaries have heretofore conducted and accounted for
their business;
(k) amend its articles of incorporation or by-laws or
any other organizational documents;
(l) make any capital expenditures other than (i) in
the ordinary course of business or as necessary to maintain existing
assets in good repair, in either case, not to exceed $50,000 for any
single item, group of related items or project or (ii) as contemplated
by a capital budget submitted to and approved by KeyCorp (KeyCorp
agrees that it shall respond in a timely manner to any request by AFG
for approval of the capital budget and that it shall not unreasonably
withhold its approval);
(m) merge into, consolidate with, affiliate with, or
be purchased or acquired by, any other individual, corporation, or
other entity, or permit any other individual, corporation, or other
entity, to be merged, consolidated or affiliated with it or be
purchased or acquired by it, or acquire all or any substantial portion
of the assets of any other individual, corporation, or other entity
(other than the repurchase of the remaining loan portfolio of the
1992-A Securitization or the 1992-B Securitization, and the purchase of
other loan portfolios, in all cases only as expressly permitted under
Section 2.2(a)) or sell all or any portion of its assets;
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(n) purchase or otherwise acquire from a third party
assets constituting any other line of business, or any other material
properties or assets;
(o) fail to notify KeyCorp promptly of its receipt of
any letter, notice, or other communication, whether written or oral,
from any governmental entity advising AFG or any AFG Subsidiary that it
is contemplating issuing, requiring, or requesting any agreement,
memorandum of understanding, or similar undertaking, or order,
directive, or supervisory letter; or
(p) agree to, or make any commitment to, take any of
the actions prohibited by this Section 2.2.
SECTION 2.3 Forbearance by KeyCorp. During the period
from the date of this Agreement to the Effective Time, KeyCorp shall not,
without the prior written consent of AFG, take any action that would adversely
affect or delay the ability of AFG, KeyCorp or KeySub to obtain any necessary
approvals, consents or waivers of any governmental authority required for the
transactions contemplated hereby or to perform its covenants and agreements on a
timely basis under this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AFG
AFG represents and warrants to KeyCorp and KeySub,
that:
SECTION 3.1 Recitals True. The facts set forth in the
Recitals of this Agreement with respect to AFG and each AFG Subsidiary are true
and correct.
SECTION 3.2 Capital Stock.
(a) AFG Common Stock. As of the date hereof,
AFG has 50,000,000 authorized shares of AFG Common Stock, of which
18,684,392 shares were issued and outstanding as of March 16, 1995,
exclusive of treasury shares, and 5,000,000 authorized shares of
preferred stock, no stated par value, none of which has been issued or
reserved for issuance or is outstanding. There is no other class of
capital stock of AFG authorized. As of March 16, 1995, 564,375 shares
of AFG Common Stock were reserved for issuance upon the exercise of
outstanding stock options pursuant to the AFG 1991 Stock Option Plan,
67,600 shares of AFG Common Stock were reserved for issuance upon the
exercise of outstanding stock options pursuant to the AFG 1989 Stock
Option Plan (together with the AFG 1991 Stock Option Plan, the "AFG
Option Plans"), 319,900 shares of AFG Common Stock were reserved for
issuance upon the exercise of outstanding stock options pursuant to the
Patlex Stock Option Plan assumed by AFG (the "Patlex Option Plan"),
25,000 shares were reserved for
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issuance upon the exercise of a stock option granted outside the AFG
Option Plans and the Patlex Option Plan (the "Non-Plan Option"), and
123,760 shares were reserved for issuance under all warrants granted by
AFG or any AFG Subsidiary (the "Warrants"). All outstanding shares of
capital stock of the Company are duly authorized, validly issued and
outstanding, fully paid and non-assessable, and subject to no
preemptive rights.
(b) Rights to Acquire AFG Common Stock. Except
as set forth in Schedule 3.2(b), there are no subscriptions, options,
warrants, scrip, rights, calls, convertible securities, or any other
similar agreements, arrangements, or commitments of any character
relating to the issued or unissued capital stock or other securities of
AFG obligating, or which may obligate, AFG to issue, deliver, or sell,
or cause to be issued, delivered, or sold, additional shares of its
capital stock or obligating or which may obligate, AFG to grant,
extend, or enter into any such subscription, option, warrant, scrip,
right, call, convertible security, or other similar agreement,
arrangement, or commitment, except (i) as provided in the Option
Agreement, (ii) options covering an aggregate of 976,875 shares of AFG
Common Stock granted to directors, officers and employees pursuant to
the AFG Option Plans or the Patlex Option Plan or otherwise as of March
16, 1995, and (iii) the Warrants exercisable for 123,760 shares of AFG
Common Stock as of March 16, 1995. The names of all optionees and
holders of the Warrants, the date of each option granted and of each
Warrant, the number of shares subject to each such option and each
Warrant, the price at which each such option and each Warrant may be
exercised under the AFG Option Plans or the Patlex Option Plan or
pursuant to any other AFG Employee Plans (as defined in Section 3.15)
and under any warrant agreement (collectively, the "Warrant
Agreements"), and which options are "incentive stock options" within
the meaning of Section 422 of the Code, are set forth in Schedule
3.2(b). Copies of the AFG Option Plans, the Patlex Option Plan, the
form of each Warrant, and each Warrant Agreement have heretofore been
delivered by AFG to KeyCorp.
(c) Voting Arrangements. Except as set forth
in Schedule 3.2(c) and except for the Voting Agreements (as defined in
Section 3.26), there are no voting trusts or other similar agreements,
arrangements, or commitments to which AFG is a party or of which it has
knowledge with respect to the voting of capital stock of AFG. The total
number of shares of AFG Common Stock outstanding immediately prior to
the Effective Time shall not exceed 19,785,027 shares, including as
outstanding for purposes of this sentence all shares of AFG Common
Stock which would become outstanding upon (i) exercise of the Warrants,
and (ii) exercise of all then unexercised director and employee
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stock options, but excluding any shares issued upon KeyCorp's exercise
of its option under the Option Agreement.
(d) Five Percent or More Shareholders.
Schedule 3.2(d) identifies each person or group of persons that has
filed a Schedule 13D or Schedule 13G with the Securities and Exchange
Commission (the "SEC") and AFG indicating that such person or persons
is, or is otherwise known to AFG to be, the beneficial owner (in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") of more than 5% of the outstanding shares
of AFG Common Stock as of the date hereof.
SECTION 3.3 Authority. Each of AFG and the AFG
Subsidiaries has the requisite corporate power and authority to own or lease its
or their properties and assets and to carry on its or their business as it is
now being conducted or is reasonably expected to be conducted, and is a
corporation in each case duly organized, validly existing and in good standing
under the laws of the state of its incorporation. Each of AFG and each AFG
Subsidiary is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the ownership or leasing of property
or the nature of the business conducted by it makes such qualification necessary
to carry on its business as it is now being conducted including, without
limitation, each of the 28 jurisdictions in which AFG's representatives conduct
business with automobile dealers on behalf of AFG (all such jurisdictions are
listed on Schedule 3.3), and to own, lease, or operate all of its or their
material properties and assets. AFG and each AFG Subsidiary have all federal,
state, local, and foreign governmental licenses, franchises, permits, and other
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as it is now being conducted. AFG has previously made
available to KeyCorp true and complete copies of the Articles of Incorporation
and By-laws of AFG and each AFG Subsidiary as in effect on the date of this
Agreement.
SECTION 3.4 Subsidiaries. Schedule 3.4 sets forth a
complete and correct list, including jurisdiction of incorporation and
headquarters locations, of all of AFG's subsidiaries (individually an "AFG
Subsidiary" and collectively the "AFG Subsidiaries"), including AFG Receivables
Corporation, a California corporation ("AFG Receivables"), and Patlex. Except
for the matters set forth in Schedule 3.4 (each of which, in the reasonable
opinion of AFG, will be resolved prior to the Effective Time as described in
such Schedule 3.4), all the issued and outstanding shares of capital stock of
each of the AFG Subsidiaries are owned by AFG, directly or indirectly, and are
validly issued and outstanding, fully paid, and nonassessable, have not been
issued in violation of any preemptive rights, and are owned free and clear of
all liens, claims, charges, options, encumbrances, restrictions on transfer, or
agreements with respect thereto. There are no subscriptions, options, warrants,
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scrip, rights, calls, convertible securities, or any other similar agreements,
arrangements, or commitments of any character relating to the issued or unissued
capital stock or other securities of any AFG Subsidiary obligating, or which may
obligate, any AFG Subsidiary to issue, deliver, or sell, or cause to be issued,
delivered, or sold, additional shares of its capital stock or obligating or
which may obligate any AFG Subsidiary to grant, extend, or enter into any such
subscription, option, warrant, scrip, right, call, convertible security, or
other similar agreement, arrangement, or commitment. Except as set forth in
Schedule 3.4, neither AFG nor any AFG Subsidiary is a general partner in any
partnership or owns beneficially any equity securities (which includes limited
partnership interests and convertible securities) or any similar interests of
any corporation, bank, business, trust, partnership, association, limited
liability company, or similar organization.
SECTION 3.5 Authorization.
(a) Corporate Authority. AFG has the requisite
corporate power and authority to execute and deliver this Agreement and
the Option Agreement subject to the receipt of required shareholder
approval of this Agreement, and to carry out its obligations hereunder
and thereunder. Subject only to the requisite shareholder vote as to
this Agreement, the execution, delivery, and performance of this
Agreement and the Option Agreement by AFG and the consummation of the
transactions contemplated hereby and thereby have been duly authorized
and approved by the Board of Directors of AFG, and no other corporate
action is necessary to authorize this Agreement or the Option Agreement
or to consummate the transactions so contemplated. The Board of
Directors has received the opinion of CS First Boston Corporation, as
financial advisor to AFG, with respect to the Merger. This Agreement
and the Option Agreement are each valid and binding agreements of AFG
enforceable against it in accordance with their respective terms,
subject as to enforcement to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws affecting the
enforcement of creditor's rights generally and except that the
availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before
which any proceedings may be brought.
(b) Vote Required to Approve Merger. The only
shareholder vote required for approval of this Agreement and
consummation of the Merger and the other transactions contemplated
hereby shall be the approval by the affirmative vote of a majority of
the outstanding shares of the AFG Common Stock entitled to vote.
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SECTION 3.6 No Breach; Consent Obtained.
(a) No Breach or Violations. The execution,
delivery and performance of this Agreement by AFG does not, the
execution, delivery and performance of the Option Agreement by AFG does
not, and the consummation of the Merger and the additional transactions
contemplated hereby and thereby will not, constitute (i) except for the
matters set forth in Schedule 3.6 (each of which, in the reasonable
opinion of AFG, will be resolved prior to the Effective Time as
described in such Schedule 3.6), a breach or violation of, or a default
under (or an event which, with notice or lapse of time or both, would
constitute a default under), or result in the termination of, or
accelerate the performance required by, or result in the creation of
any lien, security interest, charge, or other encumbrance upon any of
the properties or assets of AFG or any of the AFG Subsidiaries under
any law, rule or regulation, any applicable provision of or any
judgment, decree, order, governmental permit or license, or any note,
bond, mortgage, deed of trust, license, lease, agreement, indenture or
other instrument or obligation of AFG or any AFG Subsidiary or to which
AFG or any AFG Subsidiary (or any of their respective properties) is
subject, including, without limitation, any agreement listed on
Schedule 3.13, or (ii) a breach or violation of, or a default under,
the certificate or articles of incorporation or by-laws of AFG or any
AFG Subsidiary.
(b) Consents Obtained. Except for the matters
set forth in Schedule 3.6 (each of which, in the reasonable opinion of
AFG, will be obtained as described in such Schedule 3.6), the
execution, delivery and performance of, and the consummation of the
transactions contemplated by this Agreement and the Option Agreement
will not require any approval, consent, authorization, waiver, permit
of or from, or filing with or notification to, any person, public body,
rating agency or authority other than (i) the required approvals,
consents and waivers of governmental authorities referred to in Section
6.1, (ii) the approval of the shareholders of AFG referred to in
Section 3.5(b), (iii) such approvals, consents or waivers as are
required under the federal and state securities or "Blue Sky" laws in
connection with the transactions contemplated by this Agreement or the
Option Agreement, (iv) the filing of a certificate of merger with the
Secretary of State of the State of Ohio and an officer's certificate
and copy of this Agreement filed with the Secretary of State of the
State of California pursuant to the OGCL and the CGCL, respectively and
(v) any other approvals, consents or waivers, the absence of which,
individually or in the aggregate, would not result in a Material
Adverse Effect on AFG or the Surviving Corporation or enable any person
to enjoin the Merger.
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SECTION 3.7 Reports. AFG has delivered or will deliver
to KeyCorp its Annual Reports on Form 10-K for the fiscal years ended June 30,
1993 and 1994, and all other documents, as amended prior to the date of this
Agreement, filed or to be filed subsequent to June 30, 1993 under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act in the form filed with the
Securities and Exchange Commission (the "SEC") (collectively, the "AFG
Reports"). No such reports or other documents other than those delivered to
KeyCorp have been required to be filed with the SEC on or prior to the date
hereof. As of their respective dates, no AFG Report contained or will contain
any untrue statement of a material fact or omitted or will omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made or will
be made, not misleading.
SECTION 3.8 Financial Statements; Undisclosed
Liabilities.
(a) Fair Presentation. AFG has provided to
KeyCorp copies of its unaudited consolidating balance sheets as of
June 30, 1994 and December 31, 1994 and its unaudited consolidating
statements of income for the one year and six month periods,
respectively, ending on such dates. Each of such consolidating balance
sheets and each of the consolidated balance sheets included in or
incorporated by reference into the AFG Reports (including any related
notes and schedules thereto) fairly presents and will fairly present
the consolidated or consolidating financial position, as the case may
be, of AFG as of its date and each of such consolidating statements of
income and each of the consolidated statements of income, changes in
stockholders' equity and cash flows or equivalent statements in or
incorporated by reference into the AFG Reports (including any related
notes and schedules thereto) fairly presents and will fairly present
the consolidated and consolidating results of operations or the
consolidated changes in cash flows, as the case may be, of AFG for the
periods set forth therein, in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved, except as may be noted therein subject to normal and
recurring year-end audit adjustments in the case of unaudited
statements.
(b) No Undisclosed Liabilities. Except as set
forth in Schedule 3.8, there exist no obligations or liabilities,
whether absolute, accrued, contingent or otherwise (including, without
limitation on the foregoing, liabilities under any of the agreements
pursuant to which AFG has sold or disposed of any business, including
without limitation any product liability, environmental or other
liability relating to the medical products businesses sold by AFG (then
named "Vitalmetrics, Inc.") in 1986 and 1989, as guarantor under any
guarantees, and liabilities for taxes), which are material in amount
(individually or in the
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aggregate) that are required to be disclosed, reflected, or reserved
for under generally accepted accounting principles, but are not so
disclosed, reflected or reserved for in the AFG Reports.
(c) Adequacy of Allowances for Credit Losses;
Other Reserves. The "allowance for credit losses" shown on the
audited consolidated balance sheet as of June 30, 1994 and the
allowance for credit losses shown on the consolidated balance sheets as
of December 31, 1994, were, and all such allowances for future periods
after the date of this Agreement will be, adequate in all material
respects to provide for possible losses on loans of AFG and all AFG
Subsidiaries outstanding as of the dates thereof under generally
accepted accounting principles. Except as disclosed in Schedule 3.8,
since June 30, 1994, AFG has not incurred any unusual or extraordinary
credit losses. For purposes of determining adequacy, AFG represents and
warrants that it applies uniform standards to all currently outstanding
loans of, or current extensions of credit by, AFG or any AFG
Subsidiary. AFG has established all additional reserves, as set forth
on the AFG Reports necessary to reflect any obligations or liabilities
of AFG or any AFG Subsidiary, whether absolute, accrued, contingent or
otherwise (including, without limitation on the foregoing, liabilities
for taxes, for violations of laws or regulations, for discontinued
operations, if any, for severance, or for other matters), and all such
additional reserves are adequate in all respects to cover and pay for
the full amount of the matters for which such reserves were
established, and there are no material amounts of any such obligations
or liabilities in excess of such reserves for the matters involved.
SECTION 3.9 Absence of Certain Changes or Events.
Except as disclosed in Schedule 3.9 or in any of the AFG Reports, from and after
June 30, 1994 to the date of this Agreement no event has occurred that would
constitute, were such event to have taken place after the date hereof and on or
before the Closing Date, a breach or violation of any of the provisions set
forth in Section 2.2.
SECTION 3.10 Taxes and Tax Returns. All federal,
state, local, and foreign tax returns and tax reports required to be filed by or
on behalf of AFG or any AFG Subsidiary on or before the date of this Agreement
have been timely filed or requests for extensions have been timely filed and any
such extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all material respects. All taxes shown on
the returns and reports referred to in the previous sentence have been paid in
full or adequate provision has been made for any such taxes, including interest
and penalties, on its balance sheet (in accordance with generally accepted
accounting principles). Schedule 3.10 sets forth, as of the date of this
Agreement, the following information with
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respect to AFG and each AFG Subsidiary: (a) the most recent tax year through
which the Internal Revenue Service (the "IRS") has completed its examination of
such corporation, (b) whether there is an examination pending by the IRS with
respect to such corporation and, if so, the tax years involved, (c) whether such
corporation has executed or filed with the IRS any agreement which is still in
effect extending the period for assessment and collection of any federal tax
and, if so, the tax years covered by such agreement and the expiration date of
such extension, and (d) whether there are any existing disputes with any
governmental entity as to federal, state, or local taxes. There are no liens for
foreign, federal, state, or local taxes upon the assets of AFG or any AFG
Subsidiary, except for statutory liens for taxes and assessments not yet
delinquent or the validity of which is being contested in good faith by
appropriate proceedings. Except as set forth in Schedule 3.10, neither AFG nor
any AFG Subsidiary is a party to any action or proceeding by any governmental
authority for assessment and collection of taxes, and no claim for assessment
and collection of taxes has been asserted against any of them. AFG and the AFG
Subsidiaries have complied in all material respects with all information
reporting requirements, including the TIN (taxpayer identification number),
reporting and backup and other withholding requirements of the foreign, federal,
state, local, and other tax laws.
SECTION 3.11 Absence of Claims. Except as described in
Schedule 3.11, (a) no claim, litigation, proceeding or controversy before any
court or governmental agency is pending against, and there is no pending claim,
action, proceeding, arbitration, or known investigation affecting, nor any
judgment, injunction, decree, consent or order imposed on, AFG or any AFG
Subsidiary, or any officer or director of AFG, or the assets or business of AFG
or any AFG Subsidiary, (b) to the best of its knowledge, no such litigation,
proceeding, arbitration, investigation, claim or action has been threatened or
is contemplated, and (c) there are no uncured violations, or violations with
respect to which refunds or restitutions may be required, cited in any
compliance report to AFG or any AFG Subsidiary as a result of the examination by
any governmental authority or otherwise known to AFG or any AFG Subsidiary.
Without limitation on the foregoing, except as described in Schedule 3.11, there
are no actions, suits, or proceedings pending or, to the best knowledge of AFG,
threatened against AFG or any AFG Subsidiary by any shareholder of AFG (or any
former shareholder of AFG) or involving claims under state law involving
fiduciary obligations of directors and/or officers or involving claims under the
Securities Act of 1933, as amended (the "Securities Act"), or under any
applicable law restricting the issuance of loans to directors or officers of AFG
or any AFG Subsidiary.
SECTION 3.12 Absence of Regulatory Actions. Except as
described in Schedule 3.12, neither AFG nor any AFG Subsidiary (or any of their
respective officers, directors or controlling persons) is a party to any cease
and desist order,
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written agreement or memorandum of understanding with, or a party to any
commitment letter or similar undertaking to, or is subject to any order or
directive by, or is a recipient of any supervisory letter from, or has adopted
any board resolutions at the request of, federal or state, securities, consumer
lending, insurance or other governmental authorities (the "Regulators") nor has
any of them been advised by any Regulator that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, directive, written agreement, memorandum of understanding,
supervisory letter, commitment letter, board resolutions or similar undertaking.
SECTION 3.13 Agreements. Except for the Option
Agreement and except as set forth in Schedule 3.13, neither AFG nor any AFG
Subsidiary is a party to, or bound or affected by, or has received benefits
under any material contract (as defined in Item 601(b)(10) of Regulation S-K of
the SEC). Without limitation on the foregoing, except as set forth in Schedule
3.13, as of the date of this Agreement, neither AFG nor any AFG Subsidiary is a
party to any oral or written:
(a) agreement, indenture, or other instrument not
specifically disclosed in the AFG Reports relating to the borrowing of
money by AFG or the guarantee by AFG of any such obligation (other than
trade payables and instruments relating to transactions entered into in
the ordinary course of business);
(b) agreement relating to the repurchase of
securities;
(c) sale and leaseback or similar agreement including,
but not limited to, arrangements and contracts for the purchase and
sale of AFG Loans that are material to the business of AFG;
(d) consulting agreements or arrangements not
terminable on 30 days or less notice involving the payment of more than
$50,000 per annum;
(e) agreement with any executive officer or other key
employee of it or any of its subsidiaries the benefits of which are
contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving it or any of its subsidiaries of
the nature contemplated by this Agreement or the Option Agreement and
which provides for any payment in excess of $25,000;
(f) agreement with respect to any executive officer of
it or any of its subsidiaries providing any term of employment or
compensation guarantee extending for a period longer than one year and
for the payment of more than $100,000 per annum;
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(g) agreement or plan, including any stock option
plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement or the Option
Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement or the Option Agreement; or
(h) license agreements (as licensor or licensee) or
royalty agreements providing for future payments in excess of $25,000
and which by its or their terms is not terminable without penalty by
AFG upon notice of 30 days or less, or any other type of patent
exploitation or enforcement business.
The agreements and other documents referred to in this
Section 3.13 are referred to individually as an "AFG Contract" and collectively
as the "AFG Contracts." True and complete copies of each AFG Contract have
heretofore been made available to KeyCorp. Except as described in Schedule 3.13,
(i) each of the AFG Contracts is valid and subsisting and in full force and
effect, (ii) AFG and each AFG Subsidiary has in all material respects performed
all obligations required to be performed by them to date under such AFG
Contracts, and (iii) to the best knowledge of AFG, (A) no other party to any of
the AFG Contracts is in default under any such AFG Contract, and (B) no event or
condition exists which constitutes or, after notice or lapse of time or both,
would constitute, a material default on the part of AFG or any AFG Subsidiary
under any such AFG Contracts.
SECTION 3.14 Labor Matters. Neither AFG nor any AFG
Subsidiary is a party to, or is bound by, any collective bargaining agreement,
contract, or other agreement or understanding with a labor union or labor
organization, nor is AFG or any AFG Subsidiary the subject of any proceeding
asserting that AFG or any such AFG Subsidiary has committed an unfair labor
practice or seeking to compel AFG or any such AFG Subsidiary to bargain with any
labor organization as to wages and conditions of employment, nor is there any
strike or other labor dispute involving AFG or any AFG Subsidiary pending or, to
the knowledge of AFG, threatened.
SECTION 3.15 Employee Benefit Plans.
(a) Schedule 3.15 contains a list of all employment
agreements, severance agreements or arrangements, parachute agreements,
employee or director bonus, deferred compensation, pension, retirement,
profit sharing, stock option, stock purchase, employee stock ownership,
stock appreciation rights, savings, loan, consulting, collective
bargaining, group insurance, fringe benefit, and other employee
benefit, incentive, and welfare plans, policies,
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contracts and arrangements, formal or informal, written or oral, and
all trust agreements related thereto, now in effect and relating to any
present or former directors, officers, or employees of AFG or any AFG
Subsidiary, whether or not described in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (the
"Employee Plans").
(b) All of the Employee Plans have been maintained,
operated, and administered in substantial compliance with their terms,
and AFG, each AFG Subsidiary, and all of the Employee Plans currently
comply, and have at all relevant times complied, in all material
respects with applicable provisions of ERISA, the Code, securities
laws, and other applicable laws.
(c) With respect to each Employee Plan which is a
pension plan (as defined in Section 3(2) of ERISA) (a "Pension Plan"),
each such Pension Plan (and any trust relating thereto) intended to be
a qualified plan under Section 401(a) of the Code either has been
determined by the IRS to be so qualified or is the subject of a pending
application for such determination that was timely filed.
(d) Neither AFG nor any AFG Subsidiary nor any member
of a "controlled group", as defined in Section 4971(e)(2)(B) of the
Code, of which AFG or any AFG Subsidiary is a member has any liability
on account of any accumulated funding deficiency (as defined in Section
412 of the Code), whether or not waived, or on account of any failure
to make contributions to or pay benefits under any such Pension Plan,
nor is AFG aware of any claim pending or threatened to be brought by
any party regarding such matters.
(e) No "prohibited transaction" (as defined in Section
406 of ERISA or Section 4975 of the Code) with respect to any "employee
benefit plan" (as defined under Section 3(3) of ERISA, each such plan
an "ERISA Plan") has occurred which is likely to result in any material
penalties or taxes under Section 502(i) of ERISA or Section 4975 of the
Code and, except as disclosed in Schedule 3.15, no reportable event
under Section 4043 of ERISA (other than any such event with respect to
which the 30-day notice requirement has been waived by regulation) has
occurred with respect to any ERISA Plan. No liability under Title IV of
ERISA has been incurred by AFG or any AFG Subsidiary, or any trade or
business, whether or not incorporated (an "ERISA Affiliate"), that
together with AFG or any AFG Subsidiary would be deemed a "single
employer" within the meaning of Section 4001 of ERISA since the
effective date of ERISA that has not been satisfied in full, and no
condition exists that presents a material risk to AFG or any AFG
Subsidiary or an ERISA Affiliate of incurring a liability under such
Title with respect to ERISA Plans, other than liability for
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premiums due under the Pension Benefit Guaranty Corporation ("PBGC").
(f) No ERISA Plan has been terminated, nor has the
PBGC instituted proceedings to terminate any ERISA Plan or to appoint a
trustee or administrator of an ERISA Plan, and no circumstances exist
that constitute grounds under Section 4042 of ERISA entitling the PBGC
to institute any such proceedings.
(g) All reporting and disclosure requirements of ERISA
and the Code have been complied with in all material respects with
respect to each of the ERISA Plans and each other Employee Plan.
(h) The fair market value of the assets of each
Pension Plan exceeds the present value of the "benefit liabilities" (as
defined in Section 4001(a)(16) of ERISA) under such Pension Plan as of
the end of the most recent plan year with respect to the respective
Pension Plan ending prior to the date hereof, calculated on the basis
of the actuarial assumptions used in the most recent actuarial
valuation for such Pension Plan as of the date hereof.
(i) Neither AFG, any AFG Subsidiary nor any ERISA
Affiliate has contributed to any "multiemployer plan," as defined in
Section 3(37) of ERISA, on or after September 26, 1980. Except as set
forth in Schedule 3.15, AFG and the AFG Subsidiaries do not have any
obligations for retiree health and life benefits under any benefit
plan, contract or arrangement that cannot be amended or terminated
without incurring any liability thereunder.
(j) With respect to each Employee Plan, AFG has
delivered to KeyCorp a true and correct copy of (i) the most recent
annual report on Form 5500, if any, filed with the IRS, (ii) such
Employee Plan, (iii) each trust agreement and insurance contract
relating to such Employee Plan, (iv) the most recent summary plan
description for such Employee Plan, (v) the most recent actuarial
report or valuation if such Employee Plan is subject to Title IV of
ERISA, and (vi) the most recent determination letter issued by the IRS
if such Employee Plan is intended to be qualified under Section 401(a)
of the Code.
SECTION 3.16 Properties and Other Assets.
(a) Real Property. Schedule 3.16 sets forth a
complete and correct list of all real property owned, leased, or
operated by AFG or any AFG Subsidiary and copies of each such mortgage,
lease or other agreement have heretofore been provided to KeyCorp.
Except as set forth on Schedule 3.16, neither AFG nor any AFG
Subsidiary owns any real property. Except as set forth in
Schedule 3.16, all properties listed in Schedule 3.16 as being owned,
leased,
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or operated by them in each case are free and clear of any liens,
claims, charges, options, encumbrances, or similar restrictions except
liens for current taxes and assessments not yet due and payable and
utility and other easements that do not interfere with the use of the
property for the business being conducted thereon.
(b) Intellectual Property. Schedule 3.16 also
contains a complete list or description of all registered trademarks,
trade names and patents owned, applied for or used or otherwise held by
AFG or any AFG Subsidiary for use in its or their respective business.
AFG or an AFG Subsidiary owns or possesses all rights to its respective
corporate name and to all registered trademarks, trade names, patents,
patent applications, trade secrets, processing and billing systems,
loss exposure programs, contract acquisitions standards programs, other
computer programs, and all other proprietary software, data bases,
systems, and other information used by AFG or any such AFG Subsidiary
directly in its respective business. Neither the operation of any such
business nor any of the loans and services provided by AFG or any AFG
Subsidiary infringe upon any proprietary rights of any third party.
Neither AFG nor any AFG Subsidiary has received, or is aware of any
basis for, any notice or claim alleging that it has infringed on any
other party's intellectual property rights in the conduct of its
business nor challenging the validity in any respect of its ownership
or use of any such intellectual property. None of the intellectual
property which, individually or in the aggregate, is material to the
business of AFG or any AFG Subsidiary, the value of which to AFG or any
AFG Subsidiary is contingent upon maintenance of the confidentiality
thereof, has been disclosed by AFG or any AFG Subsidiary to any person
other than its own respective employees, representatives and agents,
except pursuant to written presently effective, and fully enforceable
employment or non-disclosure agreements.
SECTION 3.17 Knowledge As to Conditions. AFG knows of
no reason why the approvals, consents and waivers of governmental authorities
referred to in Section 6.1(b) should not be obtained without the imposition of
any condition of the type referred to in the proviso thereto or why the
accountants' letter referred to in Section 6.2(a) cannot be obtained.
SECTION 3.18 Compliance with Laws. Except as set forth
in Schedule 3.18, (a) AFG and each AFG Subsidiary has complied in all material
respects with all laws, regulations, and orders (including, without limitation,
zoning ordinances, building codes, and environmental, civil rights, and
occupational health and safety laws and regulations) and governing instruments
applicable to any of them and to the conduct of its or their respective business
and (b) neither AFG nor any AFG Subsidiary is in default under, and no event has
occurred which, with the lapse of time or action by a third party, could result
in a default
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under, the terms of any judgment, order, writ, decree, permit, or license of any
agency or any government or court, whether federal, state, municipal, or local
and whether at law or in equity.
SECTION 3.19 Fees. Other than financial advisory
services performed for AFG by Invemed Associates, Inc. ("Invemed") and CS First
Boston Corporation, neither AFG nor any AFG Subsidiary, nor any of their
respective officers, directors, employees or agents has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions, or finder's fees, and no broker or finder has acted directly
or indirectly for AFG or any AFG Subsidiary, in connection with this Agreement
or the transactions contemplated hereby. The fees and expenses payable by AFG
and any AFG Subsidiary to CS First Boston Corporation shall be as set forth in
the engagement letter, dated March 2, 1995, from CS First Boston Corporation to
Mr. Frank Borman, Chairman of the Board of AFG (with confirmation by CS First
Boston Corporation that the consolidated liabilities of AFG reflected in its
financial statements are not treated as part of the "Aggregate Consideration"
paid or payable, or otherwise distributable to, AFG's shareholders). The fees
and expenses payable to Invemed are payable out of the fees and expenses payable
to CS First Boston Corporation.
SECTION 3.20 Registration Statement. The information
to be supplied by AFG for inclusion in (a) the Registration Statement on Form
S-4 to be filed with the SEC by KeyCorp for the purpose of, among other things,
registering the KeyCorp Common Stock to be issued to the shareholders of AFG in
the Merger (the "Merger Registration Statement"), (b) the proxy statement to be
filed with the SEC by AFG under the Exchange Act and distributed in connection
with the AFG Meeting (as defined in Section 5.10) to vote upon this Agreement
(as amended or supplemented from time to time, the "Proxy Statement," and
together with the prospectus included in the Registration Statements (as defined
below), as amended or supplemented from time to time, the "Proxy
Statement/Prospectus"), or (c) the Registration Statement on Form S-1, Form 10
or other applicable form to be filed with the SEC by Patlex for the purpose of
registering the Patlex Common Stock to be distributed to holders of AFG Common
Stock in connection with the Distribution (the "Spinoff Registration Statement";
together with the Merger Registration Statement, the "Registration Statements")
will not, at the time either such Registration Statement becomes effective, and,
in the case of the Proxy Statement/Prospectus, at the time it is mailed and at
the time of the AFG 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. All documents which AFG is responsible for filing
with the SEC and any other Regulator in connection with the Merger will comply
as to form in all material respects with the provisions of applicable law,
except that no
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representation is made by AFG with respect to statements made therein based on
information supplied by KeyCorp for inclusion in the Proxy Statement or the
Spinoff Registration Statement, respectively, or with respect to information
concerning KeyCorp or any of its Subsidiaries incorporated by reference in the
Proxy Statement.
SECTION 3.21 [Intentionally Deleted]
SECTION 3.22 No Material Adverse Change. Since June
30, 1994, there has been no material adverse change in the business, properties,
financial condition, results of operations, or prospects of AFG or any AFG
Subsidiary.
SECTION 3.23 Anti-takeover Provisions Inapplicable.
There is no "supermajority vote," "control share acquisition," "merger
moratorium," or other "anti-takeover" provision of the CGCL, the California
Corporate Securities Law, or the corporation or "Blue Sky" law of any other
jurisdiction applicable to the Merger or the Option Agreement or requiring the
filing of a proxy statement/prospectus or any other document with any Regulator
in connection with the ownership or the change in ownership of AFG Common Stock
(other than "Blue Sky" filings required in connection with the issuance of
KeyCorp Common Stock to holders of AFG Common Stock), and no moratorium on
"significant business transactions" will arise under the CGCL with respect to
the Merger or any of the other transactions contemplated by this Agreement or
the Option Agreement.
SECTION 3.24 Material Interests of Certain Persons.
Except as disclosed in AFG's Proxy Statement for its 1994 Annual Meeting of
Shareholders, and except as set forth in Schedule 3.24, no officer or director
of AFG, or any "associate" (as such term is defined in Rule 12b-2 under the
Exchange Act) of any such officer or director, has any material interest in any
material contract, arrangement, or property (real or personal), tangible or
intangible, used in or pertaining to the business of AFG or any AFG Subsidiary
as of the date of this Agreement.
SECTION 3.25 Insurance. Schedule 3.25 sets forth a
list of all insurance policies and programs maintained by AFG and each AFG
Subsidiary, including the name of the insurer, the risks insured against,
current expiration dates and renewal options, the amount of the coverage, and
any applicable deductibles, retentions, co-pay obligations and other material
provisions.
SECTION 3.26 Voting and Affiliates Agreements.
(a) Voting Agreements. AFG has obtained, or on
or before March 27, 1995 will obtain, from the directors, officers, and
other shareholders of AFG listed on Exhibit F-1 attached hereto a
Voting Agreement and Irrevocable Proxy in the form of Exhibit F-2
attached hereto (individually, a "Voting Agreement" and collectively,
the
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"Voting Agreements") executed by each such shareholder. AFG shall not
contest the validity or enforceability of any of the Voting Agreements
and shall not join in, assist or help to fund (whether through
advancement of expenses or otherwise) any such contest.
(b) Affiliates Agreements. AFG has identified
to KeyCorp in writing all persons who are "Affiliates" of AFG as that
term is used in paragraphs (c) and (d) of Rule 145 under the Securities
Act (the "Affiliates"). AFG has obtained, or prior to the mailing of
the Proxy Statement/Prospectus to AFG's shareholders will obtain, a
written agreement in the form of Exhibit G attached hereto from each
person whom it has heretofore identified as an Affiliate.
SECTION 3.27 GECC Agreement. Except with respect to
the Merger, there is no default or breach by AFG or any AFG Subsidiary of the
Motor Vehicle Installment Contract Loan and Security Agreement, dated March 26,
1993, between AFG and General Electric Capital Corporation, a New York
corporation ("GECC"), as amended to date (the "GECC Agreement"), no event has
occurred which with the passage of time or the giving of notice would constitute
a default or breach of the GECC Agreement, and there is no basis for GECC to
allege any such present or prospective default or breach.
SECTION 3.28 Loan Servicing Activity. AFG has
delivered to KeyCorp true and complete copies of all servicing agreements
("Servicing Agreements") to which AFG or one of the AFG Subsidiaries is a party
as of the date hereof, and all such Servicing Agreements are listed on Schedule
3.28. All of the Servicing Agreements are valid and binding obligations of AFG
or one of the AFG Subsidiaries and are in full force and effect, and are
enforceable in accordance with their terms. Except for the matters set forth in
Schedule 3.28 (each of which, in the reasonable opinion of AFG, will be resolved
as described in Schedule 3.28), there is no default or breach or claim of
default or breach by any party under, or dispute regarding the material terms
of, any such Servicing Agreement, and no event has occurred which with the
passage of time or the giving of notice or both would constitute a default or
breach by any party under any such Servicing Agreement or would permit
termination, modification or acceleration of any such Servicing Agreement. There
is no pending or, to the best knowledge of AFG or any AFG Subsidiary,
threatened, cancellation of any Servicing Agreement, and neither AFG nor any AFG
Subsidiary has received any notice to the effect that any party to any Servicing
Agreement intends to cease doing business with AFG or any AFG Subsidiary. Except
as set forth in Schedule 3.28, no sanctions or penalties have been imposed upon
AFG or any AFG Subsidiary subsequent to June 30, 1992 under any Servicing
Agreement or under any applicable regulation.
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SECTION 3.29 Compliance with Lending Regulations.
(a) Business Compliance. AFG, each of the AFG
Subsidiaries and, with respect to all currently outstanding loans of,
or current extensions of credit by, AFG or any AFG Subsidiary,
including, without limitation, outstanding loans sold or pledged by AFG
or AFG Receivables in a Securitization Transaction (individually an
"AFG Loan", and collectively, the "AFG Loans"), each prior servicer and
originator of any such AFG Loan, has been and is (including without
limitation, with respect to the documentation, underwriting,
origination, purchase, assumption, modification, sale, pooling and
servicing of AFG Loans by AFG, the AFG Subsidiaries and such prior
servicers and originators) in compliance with all regulations, orders,
writs, decrees, injunctions and other requirements of any court or
governmental authorities applicable to it, its properties and assets
and its conduct of its business including, without limitation, (i) the
rules, regulations and requirements of any applicable agency, (ii) any
applicable local, state or federal laws or ordinances, and any
regulations or orders issued thereunder, governing or pertaining to
unlawful discrimination in lending (including without limitation, equal
credit opportunity, retail installment sales, and fair credit
reporting), truth-in-lending, or consumer credit (including without
limitation the Federal Consumer Credit Protection Act, the Federal
Truth-in-Lending Act and Regulation Z thereunder, and the Federal Equal
Credit Opportunity Act and Regulation B thereunder) and (iii) all
applicable usury and interest limitations laws. Without limitation on
the foregoing, AFG, each AFG Subsidiary and each prior servicer and
originator of the AFG Loans has been and is in compliance in all
respects with all servicer and other requirements of the applicable
agencies, investors, or other parties to Servicing Agreements
(including, without limitation, any applicable net worth requirements)
which are applicable to it, and all applicable underwriting standards
of such agencies, investors, or other parties to Servicing Agreements.
(b) Reporting Compliance. AFG and each AFG
Subsidiary, as the case may be, have each timely filed all reports
required to be filed by any governmental agency, rating agency,
investor, insurer, or parties to Servicing Agreements or by any
federal, state or municipal law, regulation or ordinance. None of AFG,
any AFG Subsidiary, nor, with respect to any AFG Loan, any prior
originator or servicer of any such AFG Loan, has done or failed to do,
or has caused to be done or omitted to be done, any act, the effect of
which would operate to invalidate or materially impair (i) any
approvals of any governmental agency, rating agency, insurer or
investor, or other party to any Servicing Agreement, (ii) any vehicle
insurance policy, (iii) any fidelity bond, direct surety bond, or
errors and omissions
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insurance policy required by any agency, insurer or investor, or other
party to any Servicing Agreement or (vi) any surety or guaranty
agreement.
(c) No Claim or Basis for Violation. Except as
set forth in Schedule 3.29, since June 30, 1992, no governmental
agency, rating agency, investor, insurer or other party to any
Servicing Agreement has (i) claimed that AFG or any AFG Subsidiary has
violated or not complied with the applicable underwriting standards and
loan processing criteria with respect to AFG Loans sold by AFG or any
AFG Subsidiary to an investor in any Securitization Transaction or
otherwise or (ii) imposed restrictions on the activities (including
commitment authority) of AFG or any AFG Subsidiary. To the best
knowledge of AFG, there exist no facts or circumstances which would
entitle an investor in any Securitization Transaction to demand
repurchase by AFG or any AFG Subsidiary of any AFG Loan or which would
entitle an insurer to demand indemnification from AFG or any AFG
Subsidiary with respect to any AFG Loan.
SECTION 3.30 Inquiries. Schedule 3.30 contains a true
and correct list of all of the audits, investigations, complaints and inquiries
of AFG or any AFG Subsidiary by any agency or investor commenced since June 30,
1992, the result of which audits or investigations claimed a failure to comply
with applicable regulations and resulted in (a) a repurchase of AFG Loans from
AFG or any AFG Subsidiary, (b) indemnification by AFG or any AFG Subsidiary in
connection with AFG Loans, (c) rescission of an insurance or guaranty contract
or agreement, or (d) payment of a penalty to any agency or any investor. No such
audit or investigation is pending or, to the best knowledge of AFG, threatened.
AFG has made available to KeyCorp copies of all written reports and materials
received by it or any AFG Subsidiary in connection with such audits,
investigations, complaints and inquiries.
SECTION 3.31 Representations. Except as set forth in
Schedule 3.31, there is no material breach or violation of any representation,
warranty, or covenant made by AFG, any AFG Subsidiary or any other person
(including, without limitation, all prior servicers and originators) to any
investor or other person in connection with the origination, purchase, or
servicing of any AFG Loan or the transfer of the ownership of any AFG Loan
and/or the servicing rights thereto to such investor or other person.
SECTION 3.32 Advances. Except as set forth in Schedule
3.32, there are no pooling, participation, servicing or other agreements to
which AFG or any AFG Subsidiary is a party which obligate any of them to make
servicing advances with respect to defaulted or delinquent AFG Loans, including
each "Purchase Agreement," "Pooling and Servicing Agreement," "Placement Agency
Agreement," and "Servicer's Indemnification
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Agreement" to which either AFG or any AFG Subsidiary was a party in any
Securitization Transaction.
SECTION 3.33 Securitization Transactions.
(a) AFG, as the servicer (for purposes of this
Agreement, the "Securitization Servicer") of each outstanding
transaction under which AFG Receivables has sold or pledged AFG Loans
in a securitization sold as a private placement under the Securities
Act (a "Securitization Transaction"), has complied in all material
respects with all agreements and all conditions to be performed or
satisfied by it with respect to all agreements and arrangements
pursuant to which it is bound under such Securitization Transaction
(such agreements and arrangements are collectively referred to as the
"Securitization Instruments"). Schedule 3.33 contains a list of all
such Securitization Transactions.
(b) Neither AFG nor any AFG Subsidiary or other
affiliate of any of them which is the issuer or depositor for purposes
of the "Securities" definition in any Securitization Transaction
(a "Securitization Issuer"), no entity which is a trustee
("Securitization Trustee") for any Securitization Transaction and no
Securitization Servicer has taken any action which would cause any
trust, corporation, partnership or other entity ("Securitization
Entity") to be registered as an investment company pursuant to the
Investment Company Act of 1940, as amended (the "Investment Company
Act"), or which would cause any Securitization Entity to be
"controlled by" an investment company within the meaning of the
Investment Company Act.
(c) Each Securitization Issuer, Securitization Trustee
and Securitization Servicer has performed all of its respective
obligations under the Securitization Instruments and under any other
existing law relating to Securitization Transactions, and has made all
filings required to be made by or under the Exchange Act.
(d) No Securitization Issuer, Securitization Trustee
or Securitization Servicer has taken any action which would adversely
affect the characterization or tax treatment for federal, state or
local income or franchise tax purposes of any Securitization Entity or
any securities issued in a Securitization Transaction, and all required
federal, state and local tax and information returns relating to any
Securitization Transaction have been properly filed.
(e) No private placement memorandum, or any supplement
or amendment thereto, as of the date on which it was issued by a
Securitization Entity in any Securitization Transaction, contained any
untrue statement of a material fact or omitted to state any material
fact required to be
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stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and no
securities were issued or sold by AFG or any AFG Subsidiary in
violation of Section 5 of the Securities Act in any Securitization
Transaction.
(f) Each representation and warranty made by AFG or
AFG Receivables in each "Purchase Agreement," "Pooling and Servicing
Agreement," "Placement Agency Agreement," and "Servicer's
Indemnification Agreement" to which either of them was a party in any
Securitization Transaction was true and correct in all material
respects whenever made or updated by either of them, and AFG and AFG
Receivables have each fully performed and carried out each covenant and
agreement made by either of them in any such agreement.
(g) No rating agency has downgraded, or given AFG or
AFG Receivables any indication that it is considering a downgrading of
any securities issued in any Securitization Transaction, or of its
rating of any Securitization Servicer.
(h) No Securitization Issuer, Securitization Trustee
or Securitization Servicer has taken any action in contemplation of
entering into any Securitization Transaction as of or after the date
hereof, except as expressly permitted by Section 2.2(a).
(i) The information set forth in the monthly servicing
reports for January 1995, which were previously furnished by AFG to
KeyCorp, is accurate in all material respects.
SECTION 3.34 Accuracy of Information. The statements
contained in this Agreement, the Schedules attached hereto, and in any other
written document executed and delivered by or on behalf of AFG pursuant to the
terms of this Agreement are true and correct in all material respects, and such
statements and documents do not omit to state any material fact necessary to
make the statements contained therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF KEYCORP AND KEYSUB
KeyCorp and KeySub represent and warrant to AFG that:
SECTION 4.1 Recitals True. The facts set forth in the
Recitals of this Agreement with respect to KeyCorp and KeySub are true and
correct.
SECTION 4.2 Capital Stock of KeyCorp. As of the date
hereof, KeyCorp has: 900,000,000 authorized Common Shares,
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with a par value of $1 each (the "KeyCorp Common Stock"), of which
242,901,125 shares were issued and outstanding as of February 28, 1995,
(together with the KeyCorp Rights issued pursuant to the KeyCorp Rights Plan),
25,000,000 authorized shares of Preferred Stock, with a par value of $1 each,
none of which is outstanding, and 1,400,000 authorized shares of 10% Cumulative
Preferred Stock, Class A, of which 1,280,000 shares are outstanding as of the
date hereof. As of the date hereof, KeySub has: 500 authorized Common Shares,
without par value (the "KeySub Common Stock"). As of the date hereof, no more
than 20,000,000 shares of KeyCorp Common Stock were reserved for issuance upon
the exercise of outstanding stock options granted by KeyCorp pursuant to its
stock option plans for employees and directors. There are no other classes of
capital stock of KeyCorp or KeySub authorized. All outstanding shares of
capital stock of KeyCorp and KeySub are duly authorized, validly issued and
outstanding, fully paid and non-assessable, and subject to no pre-emptive
rights.
SECTION 4.3 Organization and Authority. Each direct or
indirect subsidiary of KeyCorp that is a significant subsidiary as defined in
Rule 1-02 of Regulation S-X promulgated by the SEC (individually a "KeyCorp
Subsidiary" and collectively, the "KeyCorp Subsidiaries") is a corporation or a
banking institution in each case duly organized, validly existing and in good
standing under the laws of the state of its incorporation or of the United
States. KeyCorp owns all of the outstanding stock of each KeyCorp Subsidiary,
free and clear of all liens, charges, encumbrances, and security interests. Each
of KeyCorp and the KeyCorp Subsidiaries has the power and authority, and is duly
qualified in all jurisdictions (except for such qualifications the absence of
which, individually or in the aggregate, would not have a Material Adverse
Effect (as defined in Section 9.1) where such qualification is required, to
carry on its business as it is now being conducted and to own, lease, or operate
all of its material properties and assets. KeyCorp and each KeyCorp Subsidiary
have all federal, state, local and foreign governmental licenses, franchises,
permits, and other authorizations necessary for it to own or lease its
properties and assets and to carry on its business as it is now conducted, other
than any licenses, franchises, permits and other authorization the failure of
which to have would not, individually or in the aggregate, have a Material
Adverse Effect on KeyCorp. KeyCorp has previously made available to AFG true and
complete copies of the Amended and Restated Articles of Incorporation and the
Regulations of KeyCorp, as in effect on the date of this Agreement.
SECTION 4.4 Authorization. KeyCorp and KeySub have the
requisite corporate power and authority to execute and deliver this Agreement
and the Option Agreement and to carry out their respective obligations hereunder
and thereunder. The execution, delivery, and performance of (a) this Agreement
by KeyCorp and KeySub, (b) the Option Agreement by KeyCorp, and (c) the
Employment and Non-competition Agreements, each dated the
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date hereof, between KeySub and each of A. E. Steinhaus and Blair T. Nance (the
"Employment Agreements") by KeySub and the consummation of the transactions
contemplated hereby and thereby have been duly authorized and approved, as
appropriate in each case, by the Executive Committee of the Board of Directors
of KeyCorp, by the Board of Directors of KeySub and by KeyCorp as the sole
shareholder of KeySub, and no other corporate action is necessary to authorize
this Agreement or to consummate the transactions so contemplated. The Board of
Directors of KeyCorp has received the opinion of Salomon Brothers with respect
to the Merger. This Agreement is a valid and binding agreement of KeyCorp and
KeySub enforceable against KeyCorp and KeySub in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws affecting the enforcement of
creditors rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought.
SECTION 4.5 No Breaches; Consent Obtained.
(a) No Breaches or Violations. The execution,
delivery and performance of this Agreement by KeyCorp and KeySub does
not, and the consummation of the transactions contemplated hereby will
not, constitute (i) assuming the approvals and consents referred to in
Section 6.1 are obtained, a breach or violation of, or a default under
(or an event which, with notice or lapse of time or both, would
constitute a default under), or result in the termination of, or
accelerate the performance required by, or result in a right of
termination or acceleration of, or result in the creation of any lien,
security interest, charge, or other encumbrance upon any of the
properties or assets of KeyCorp or any of the KeyCorp Subsidiaries
under, any law, rule or regulation, any applicable provision of or any
judgment, decree, order, governmental permit or license, or any note,
bond, mortgage, deed of trust, license, lease, agreement, indenture or
other instrument or obligation of KeyCorp or any KeyCorp Subsidiary or
to which KeyCorp or any KeyCorp Subsidiary (or any of their respective
properties) is subject, which breach, violation or default would have a
Material Adverse Effect on KeyCorp and the KeyCorp Subsidiaries, taken
as a whole, or enable any person to enjoin the Merger or (ii) a breach
or violation of the Amended and Restated Articles or Incorporation or
the Regulations of KeyCorp or the charter or by-laws of any KeyCorp
Subsidiary.
(b) Consent Obtained. The execution, delivery
and performance of this Agreement by KeyCorp does not, and the
consummation of the transactions contemplated hereby will not, require
any approval, consent, authorization, waiver, permit of or from, or
filing with or notification to, any person, public body, or authority
other than (i) the
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required approvals, consents and waivers of governmental authorities
referred to in Section 6.1(b), (ii) the approval of the shareholders of
AFG referred to in Section 3.5(b) hereof, (iii) such approvals,
consents or waivers as are required under the federal and state
securities or "Blue Sky" laws in connection with the transactions
contemplated by this Agreement or the Option Agreement, and (iv) the
filing of a Certificate of Merger with the Secretary of State of the
State of Ohio and the filing of an officer's certificate and a copy of
this Agreement with the Secretary of State of the State of California
pursuant to the OGCL and the CGCL, respectively.
SECTION 4.6 Certain Statements, Reports and Documents.
KeyCorp has delivered to AFG its Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, and all other documents, as amended prior to the date
of this Agreement, filed or to be filed subsequent to December 31, 1993 under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act in the form filed with
the SEC (the "KeyCorp Reports"). As of their respective dates, the KeyCorp
Reports did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they were
made, not misleading; and each of the consolidated balance sheets in or
incorporated by reference into the KeyCorp Reports (including any related notes
and schedules thereto) fairly presents and will fairly present the consolidated
financial position of KeyCorp as of its date and each of the consolidated
statements of income and changes in stockholder's equity and cash flow or
equivalent statements in or incorporated by reference into the KeyCorp Reports
(including any related notes and schedules thereto) fairly presents and will
fairly present the consolidated results of operations or consolidated changes in
cash flows, as the case may be, of KeyCorp for the periods set forth therein, in
each case in accordance with generally accepted accounting principles
consistently applied during the period involved, except as may be noted therein,
subject to normal and recurring year-end audit adjustments in the case of
unaudited statements.
SECTION 4.7 No Material Adverse Change. Except as
disclosed in any KeyCorp Report, since December 31, 1993, there has been no
material adverse change in the business, financial condition, results of
operations, or prospects of KeyCorp and the KeyCorp Subsidiaries taken as a
whole.
SECTION 4.8 Compliance with Applicable Law. KeyCorp
and each KeyCorp Subsidiary has complied in all material respects with all laws,
regulations, and orders (including, without limitation, zoning ordinances,
building codes, and environmental, civil rights, and occupational health and
safety laws and regulations and governing instruments) applicable to any of them
and to the conduct of its or their respective business, except where the failure
to so comply, either individually or in
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the aggregate, would not have a Material Adverse Effect on KeyCorp and the
KeyCorp Subsidiaries taken as a whole and (b) neither KeyCorp nor any KeyCorp
Subsidiary is in default under, and no event has occurred which, with the lapse
of time or action by a third party, could result in a default under, the terms
of any judgment, order, writ, decree, permit, or license of any agency or any
government or court, whether federal, state, municipal, or local and whether at
law or in equity, except where such default or such event, either individually
or in the aggregate, would not have a Material Adverse Effect on KeyCorp and the
KeyCorp Subsidiaries taken as a whole.
SECTION 4.9 Fees. Other than financial advisory
services performed for KeyCorp by Salomon Brothers Inc, neither KeyCorp nor any
of the KeyCorp Subsidiaries, nor any of their respective officers, directors,
employees or agents has employed any broker or finder or incurred any liability
for any financial advisory fees, brokerage fees, commissions, or finder's fees,
and no broker or finder has acted directly or indirectly for it or any of its
subsidiaries, in connection with this Agreement or the transactions contemplated
hereby.
SECTION 4.10 KeyCorp Common Stock. The KeyCorp Common
Stock to be issued in the Merger is duly authorized and, when issued to holders
of AFG Common Stock in connection with the Merger, will be validly issued, fully
paid and non-assessable and not subject to preemptive rights, with no personal
liability attaching thereto.
SECTION 4.11 Knowledge As to Conditions. KeyCorp knows
of no reason why the approvals, consents and waivers of governmental authorities
referred to in Section 6.1(b) should not be obtained without the imposition of
any condition of the type referred to in the proviso thereto.
SECTION 4.12 Registration Statement. The information
to be supplied by KeyCorp for inclusion in the Registration Statements will not,
at the time either such Registration Statement becomes effective, and, in the
case of the Proxy Statement/Prospectus, at the time it is mailed and at the time
of the AFG 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. All documents which KeyCorp is responsible for filing with
the SEC and any other Regulator in connection with the Merger will comply as to
form in all material respects with the provisions of applicable law, except that
no representation is made by KeyCorp with respect to statements made therein
based on information supplied by AFG for inclusion in the Proxy Statement or the
Spinoff Registration Statement, respectively, or with respect to information
concerning AFG or any AFG Subsidiary incorporated by reference in the Proxy
Statement.
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ARTICLE V
COVENANTS
SECTION 5.1 Acquisition Proposals. Unless and until
this Agreement shall have been terminated by either party pursuant to Article
VII hereof, AFG agrees that neither it nor any AFG Subsidiary nor any of the
respective officers and directors of AFG or any AFG Subsidiary shall, and AFG
shall direct and cause its and any AFG Subsidiary's employees, agents and
representatives (including, without limitation, any investment banker, attorney,
or accountant retained by it or any of its subsidiaries) not to, (i) initiate,
solicit, or encourage, directly or indirectly, any inquiries or the making of
any proposal or offer, or enter into any agreement or instrument evidencing any
proposal or offer (including, without limitation, any proposal or offer to
shareholders of AFG) with respect to a merger, consolidation or similar
transaction involving, or any purchase of, or right to purchase, all or any
significant portion of the assets or any equity securities of, or any securities
convertible into or otherwise evidencing any equity securities of, AFG or any of
its subsidiaries (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or, (ii) except to the extent legally required for the
discharge by AFG's Board of Directors of its fiduciary duties as advised in
writing by such Board's counsel, engage in any negotiations concerning, or
assist, cooperate or provide any information or data to, or have any discussions
with, any person, corporation, partnership or other entity or group (other than
KeyCorp) relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal. AFG will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. In addition, AFG will take the necessary steps to inform the
appropriate individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section 5.1. AFG will notify KeyCorp
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with AFG, and AFG will provide to KeyCorp
the identity of any person, corporation, partnership, or other entity or group
making such inquiries or proposals.
SECTION 5.2 Employment and Benefit Matters.
(a) Service Credit. In the event that any
employee of AFG or any AFG Subsidiary is transferred to KeyCorp or any
affiliate of KeyCorp or becomes a participant in an employee benefit
plan, program or arrangement maintained by or contributed to by KeyCorp
or any of its affiliates, KeyCorp shall cause such plan, program, or
arrangement to treat the prior service of such employee with AFG or any
AFG Subsidiary as service rendered to KeyCorp or its affiliate, as the
case may be, for purposes of
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eligibility to participate, vesting and eligibility for special
benefits under such plan, program, or arrangement, but not for the
purpose of accrual of benefits or determining the amount of any retiree
medical benefits. Without limitation on the foregoing, KeyCorp shall
not treat any employee of AFG or any AFG Subsidiary as a "new" employee
for purposes of any exclusion under any health or similar plan of
KeyCorp or any of its affiliates for a pre-existing medical condition.
(b) Employment, Severance, and Other
Obligations. Following the Effective Time, KeyCorp shall honor in
accordance with their terms all employment, severance, and other
compensation contracts between AFG or any AFG Subsidiary (other than
Patlex) and any director, officer, or employee of AFG or any AFG
Subsidiary (other than Patlex).
SECTION 5.3 Investigation and Confidentiality. Prior
to the Effective Time, KeyCorp and AFG each will keep the other party promptly
advised of all material developments relevant to its business and to the
consummation of the Merger and may make or cause to be made such investigation,
if any, of the business, properties, operations, and financial and legal
condition of the other party and its respective subsidiaries as KeyCorp or AFG
reasonably deems necessary or advisable to familiarize itself and its advisors
with such business, properties, operations, and condition, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations. KeyCorp and
AFG each agrees to furnish the other party and the other party's advisors with
such financial and operating data and other information with respect to its
business, properties, and employees as KeyCorp and AFG shall from time to time
reasonably request. No investigation by one party shall affect the
representations and warranties of the other party and, subject to Sections 7.2
and 9.3 of this Agreement, each such representation and warranty shall survive
any such investigation. Each party shall maintain the confidentiality of all
confidential information furnished to it by the other party in accordance with
the terms of the Confidentiality Agreements, dated March 3, 1995 between AFG and
KeyCorp, and dated March 7, 1995 between KeyCorp and AFG.
SECTION 5.4 Certain Filings, Consents and
Arrangements. KeyCorp, KeySub and AFG shall (a) as soon as practicable after the
date hereof, make any filings and applications required to be filed in order to
obtain all approvals, consents and waivers of governmental authorities necessary
or appropriate for the consummation of the transactions contemplated hereby or
by the Option Agreement, (b) cooperate with one another (i) in promptly
determining what filings are required to be made or approvals, consents or
waivers are required to be obtained under any other relevant federal, state,
local or foreign law or regulation, and (ii) in promptly making any such
filings, furnishing information required in connection
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therewith and seeking timely to obtain any such approvals, consents, or waivers,
and (c) deliver to the other party copies of the publicly available portions of
all such filings and applications promptly after they are filed. In addition,
AFG and the AFG Subsidiaries will use their best efforts to obtain, to the
extent necessary, from the other party or parties to all AFG Loans, Servicing
Agreements, indentures, leases, contracts, and other agreements to which any of
them is a party, or by which any of their assets may be bound, appropriate
consents and waivers in writing to the transactions contemplated by this
Agreement or the Option Agreement and/or such amendments, assignments, or
modifications of such documents as may be required in order that the Merger
shall not conflict therewith, result in a breach or termination of any provision
thereof, or result in any default thereunder, or result in the creation of any
lien, pledge, claim, security interest, encumbrance, charge, or restriction on
any of the properties or assets of AFG or any AFG Subsidiary pursuant thereto.
SECTION 5.5 State Anti-takeover Statutes. AFG shall
take all reasonable steps (a) to exempt AFG and the Merger Agreement and Option
Agreement and the transactions contemplated hereby and thereby from the
requirements of any state anti-takeover, control share, merger moratorium, or
other similar law by action of its Board of Directors or otherwise, (b) upon the
request of KeyCorp, to assist in any challenge by KeyCorp to the applicability
to the Merger Agreement and Option Agreement and the transactions contemplated
hereby and thereby of any such state anti-takeover law, and (c) promptly notify
KeyCorp upon receipt by AFG of any notice, order, inquiry or other
communication, written or oral, received from any state securities law
administrator or other party with respect to any such matter.
SECTION 5.6 Indemnification.
(a) From and after the Effective Time, KeyCorp agrees
to indemnify and advance reasonable costs and expenses for services
actually performed and invoiced (including reasonable attorneys' fees,
disbursements and expenses) and hold harmless each present director and
officer of AFG or its subsidiaries as of the Effective Time (the
"Indemnified Parties"), against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages,
liabilities, and amounts paid in settlement (collectively, "Costs")
incurred in connection with any claim, action, suit, proceeding, or
investigation, whether civil, criminal, administrative, or
investigative, arising out of or pertaining to matters existing or
occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at, or after the Effective Time, to the full extent
that AFG would have been required under California law or its Articles
of Incorporation or By-laws in effect on the date hereof to indemnify
such person (and KeyCorp shall also advance expenses as incurred to the
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full extent required under applicable law provided the person to whom
expenses are advanced provides an undertaking to repay such advances if
it is ultimately determined that such person is not entitled to
indemnification); provided that any determination required to be made
with respect to whether an officer's or director's conduct complies
with the standards set forth under California law and AFG's Articles of
Incorporation and By-laws or otherwise applicable to AFG shall be made
by independent counsel selected jointly by KeyCorp and the Indemnified
Party.
(b) Any Indemnified Party wishing to claim
indemnification under Section 5.6(a) shall notify KeyCorp within
forty-five days upon learning of any such claim, action, suit,
proceeding, or investigation, but the failure to so notify KeyCorp
shall not relieve KeyCorp of any liability it may have to such
Indemnified Party if such failure does not prejudice the indemnifying
party. In the event of any such claim, action, suit, proceeding, or
investigation (whether arising before or after the Effective Time),
(i) KeyCorp shall have the right to assume the defense thereof and
KeyCorp shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred
by such Indemnified Parties in connection with the defense thereof,
except that if KeyCorp elects not to assume such defense or counsel
for the Indemnified Parties and advises such Indemnified Parties that
there are issues which raise conflicts of interest between KeyCorp and
the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and KeyCorp shall pay the reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received; provided, however,
that KeyCorp shall be obligated pursuant to this paragraph to pay for
only one firm of counsel for all Indemnified Parties in any
jurisdiction unless the use of one counsel for such Indemnified Parties
would present such counsel with a conflict of interest, (ii) the
Indemnified Parties will cooperate in the defense of any such matter,
and (iii) KeyCorp shall not be liable for any settlement effected
without its prior written consent which shall not be unreasonably
withheld; and provided, further, that KeyCorp shall not have any
obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such
determination shall have become final and nonappealable, that the
indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law. If such indemnity is not
available with respect to any Indemnified Party, then KeyCorp and the
Indemnified Party shall contribute to the amount payable in such
proportion as is appropriate to reflect relative faults and benefits.
(c) For a period of three years after the Effective
Time, KeyCorp shall use all reasonable efforts to
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cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by AFG (provided that KeyCorp
may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are substantially no less
advantageous to such directors and officers) with respect to claims
arising from facts or events which occurred before the Effective Time;
provided, however, that in no event shall KeyCorp be obligated to
expend, in order to maintain or provide insurance pursuant to this
Subsection 5.6(c), any amounts per annum in excess of 200% of the
amount of the annual premiums paid as of the date hereof by AFG for
such insurance (the "Maximum Amount"). If the amount of the annual
premiums necessary to maintain or procure such insurance coverage
exceeds the Maximum Amount, KeyCorp shall use all reasonable efforts to
maintain the most advantageous policies of directors' and officers'
insurance obtainable for an annual premium equal to the Maximum Amount.
In the event that KeyCorp acts as its own insurer for all of its
directors and officers with respect to matters typically covered by a
directors' and officers' liability insurance policy, KeyCorp's
obligations under this Subsection 5.6(c) may be satisfied by such self
insurance.
SECTION 5.7 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable
efforts to take promptly, or cause to be taken promptly, all actions and to do
promptly, or cause to be done promptly, all things necessary, proper, or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement as promptly as
practicable, including using efforts to obtain all necessary actions or
non-actions, extensions, waivers, consents, and approvals from all applicable
governmental entities, effecting all necessary registrations, applications and
filings (including, without limitation, filings under any applicable state
securities laws) and obtaining any required contractual consents and regulatory
approvals.
SECTION 5.8 Publicity. The initial press release announcing this
Agreement shall be a joint press release and thereafter AFG and KeyCorp shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and in making
any filings with any governmental entity or with any national securities
exchange with respect thereto.
SECTION 5.9 Proxy; Registration Statement. As soon as practicable
after the date hereof, KeyCorp and AFG shall prepare the Proxy Statement, file
it with the SEC, respond to comments of the staff of the SEC, clear the Proxy
Statement with the staff of the SEC and promptly thereafter mail the Proxy
Statement to all holders of record (as of the applicable record date) of shares
of AFG Common Stock. KeyCorp and AFG shall cooperate with each other in the
preparation of the Proxy
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Statement. KeyCorp shall prepare and file the Merger Registration Statement
with the SEC as soon as is reasonably practicable following receipt of final
comments from the staff of the SEC on the Proxy Statement (or advice that the
staff will not review such filing) and shall use all reasonable efforts to have
the Merger Registration Statement declared effective by the SEC as promptly as
practicable and to maintain the effectiveness of such Merger Registration
Statement. KeyCorp shall also take any action required to be taken under state
"Blue Sky" or securities laws in connection with the issuance of the KeyCorp
Common Stock pursuant to the Merger, and AFG shall furnish KeyCorp all
information concerning AFG and the holders of its capital stock and shall take
any action as KeyCorp may reasonably request in connection with any such
action.
SECTION 5.10 Shareholders' Meeting. AFG shall take all action
necessary, in accordance with applicable law and its Articles of Incorporation
and By-laws, to convene a special meeting of the holders of AFG Common Stock
(the "AFG Meeting") as promptly as practicable for the purpose of considering
and taking action upon this Agreement. The AFG Meeting shall be held on a date
mutually agreed upon by KeyCorp and AFG, but in all events as soon as
reasonably practicable after the Registration Statements are declared
effective. AFG shall submit the Proxy Statement to its shareholders and use its
best efforts to obtain all votes and approvals of its shareholders necessary
for the approval and adoption of this Agreement. AFG shall submit no other
matter for approval at the AFG Meeting without the consent of KeyCorp. AFG will
not distribute any information to its shareholders with respect to the
transactions contemplated hereby without prior notice to, and opportunity to
comment upon such information by, KeyCorp. AFG will, at the AFG Meeting,
present this Agreement for approval and adoption by its shareholders, in
accordance with the applicable requirements of law. Except to the extent
legally required for the discharge by the Board of Directors of AFG of its
fiduciary duties, The Board of Directors of AFG shall recommend, and shall use
its best efforts to cause, the holders of the AFG Common Stock to vote in favor
of and approve the Merger and adopt this Agreement at the AFG Meeting.
SECTION 5.11 Additional Affiliate Agreements. Hereafter and until the
Effective Time, AFG shall identify to KeyCorp each additional person who
thereafter becomes an Affiliate and shall promptly deliver written and executed
agreements in the form of Exhibit G attached hereto to KeyCorp for each such
person.
SECTION 5.12 Tax-Free Reorganization Treatment. Neither AFG nor any
of its affiliates, nor KeyCorp nor any of its affiliates shall take or cause to
be taken any action, whether before or after the Effective Time, which would
disqualify the Merger as a "reorganization" within the meaning of Section
368(a) of the Code. In the event that the Distribution is ultimately determined
to be a taxable distribution (for whatever reason) by the Internal Revenue
Service, any state taxing authority or a
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court, or pursuant to a settlement of a disputed tax deficiency, regardless of
when the Closing occurs, or by KeyCorp if the Closing occurs on or prior to
August 24, 1995 or the closing condition in Section 6.2(j) is not satisfied,
neither AFG, Patlex, KeyCorp, the Surviving Corporation nor any affiliate of any
of them (other than a person who shall have been a recipient of the
Distribution) shall have any liability for the payment of any taxes, interest or
penalties imposed on the recipients of the Distribution arising as a result of
any such determination. If the Closing occurs on or prior to August 24, 1995,
liability for the payment of any taxes, interest or penalties imposed upon AFG,
the Surviving Corporation or KeyCorp as a result of such determination or
settlement ("Corporate Spinoff Taxes") shall be paid in accordance with Section
1.9(a). If the Closing occurs after August 24, 1995 and such determination or
settlement is attributable to any action taken by KeyCorp, KeySub, the Surviving
Corporation or any of their shareholders or affiliates, KeyCorp shall pay (and
shall indemnify Patlex against) the Corporate Spinoff Taxes. If the Closing
occurs after August 24, 1995 and such determination or settlement is
attributable to any action (other than the continuing conduct of its business
activities substantially in the manner conducted prior to the date of this
Agreement) taken by Patlex or any of its shareholders or affiliates, Patlex
shall pay (and shall indemnify AFG, the Surviving Corporation and KeyCorp
against) the Corporate Spinoff Taxes. If the Closing occurs after August 24,
1995 and such determination is not attributable to any action (other than the
continuing conduct of its business activities substantially in the manner
conducted prior to the date of this Agreement) either by Patlex or any of its
shareholders or by KeyCorp, KeySub, the Surviving Corporation or any of their
affiliates, KeyCorp shall pay the first $2,500,000 of the Corporate Spinoff
Taxes and Patlex shall pay the amount, if any, by which the Corporate Spinoff
Taxes exceed $2,500,000.
SECTION 5.13 Documents and Information to be Furnished
by AFG. AFG will furnish to KeyCorp promptly after such documents are available
(a) the monthly financial statements of AFG and the AFG Subsidiaries (in the
same form, and prepared on the basis of the same accounting principles and
procedures used in, the preparation of the monthly financial statements
previously provided by AFG to KeyCorp), (b) all filings or reports filed by AFG
or the AFG Subsidiaries with federal, state, or other governmental agencies
having supervisory or regulatory authority over the activities or securities of
AFG or the AFG Subsidiaries, and (c) true and complete copies of such
information concerning the affairs of AFG or the AFG Subsidiaries as KeyCorp and
its representatives may reasonably request, including, without limitation, all
internal control reports submitted to AFG or the AFG Subsidiaries by independent
accountants in connection with each annual, interim, or special audit of the
books made by such accountants, all management reports prepared by AFG
pertaining to credit quality and the status of AFG Loans and Servicing
Agreements and all reports sent
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to the holders of the Asset Backed Certificates of any class pursuant to all
Securitization Transactions.
SECTION 5.14 Notification of Certain Matters. During
the period from the date of this Agreement to the Effective Time, AFG shall
promptly notify KeyCorp of (a) any material change in the normal course of its
business or the respective business of any AFG Subsidiary, (b) any governmental
complaints, audits, investigations, or hearings (or communications indicating
that the same may be contemplated), or (c) the institution or the threat of
litigation involving AFG or any AFG Subsidiary, other than in the normal course
of its business.
SECTION 5.15 Tax Representations of AFG. AFG shall
make all representations and warranties and obtain such certificates from
certain of its officers and directors, in each case as may reasonably be
requested by counsel for either AFG or KeyCorp, and from certain of its
shareholders, in the form of Exhibit H attached hereto, in order for such
counsel to issue the respective tax opinion referred to in Section 6.1(f)
hereof.
SECTION 5.16 Tax Representations of KeyCorp and
KeySub. KeyCorp and KeySub shall make all representations and warranties and
obtain such certificates from their officers, directors or shareholders
reasonably requested by counsel for either AFG or KeyCorp in order for such
counsel to issue the respective tax opinion referred to in Section 6.1(f)
hereof.
SECTION 5.17 Voting Agreements. AFG shall deliver to
KeyCorp by March 27, 1995 all of the Voting Agreements.
SECTION 5.18 Merger Consideration. At the Effective
Time, KeyCorp shall make arrangements to timely provide the Merger Consideration
to the Exchange Agent to enable the Exchange Agent to deliver the Merger
Consideration in accordance with Article I of this Agreement.
SECTION 5.19 NYSE Listing. KeyCorp and KeySub will use
their best efforts to maintain KeyCorp's listing on the NYSE. Prior to the
Closing and in accordance with applicable rules and regulations, KeyCorp and
KeySub shall file a Subsequent Listing Application with the NYSE to list any
additional shares of KeyCorp Common Stock to be issued to holders of AFG Common
Stock in connection with the Merger.
SECTION 5.20 Best Efforts. Each of KeyCorp, KeySub and
AFG shall use their best efforts to take, or cause to be taken, all actions
necessary, proper or advisable to consummate the Merger and the transactions
contemplated by this Agreement on a prompt basis, including such actions as any
of the parties consider necessary, proper, or advisable in connection therewith,
including, without limitation, using all reasonable best efforts to lift or
rescind any injunction or restraining
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order or other order adversely affecting the abilities of the parties to
consummate the transactions contemplated hereby.
SECTION 5.21 Termination of Invemed Agreement.
Effective as of the Effective Time, AFG shall cause the Agreement to Render
Services, dated March 30, 1993, between AFG and Invemed to be terminated at a
cost to AFG not exceeding a pro rata portion (based on the number of days
elapsed in the quarter) of the fee payable to Invemed for the quarter in which
the termination occurs.
ARTICLE VI
CONDITIONS TO CONSUMMATION
SECTION 6.1 Conditions to All Parties' Obligations.
The respective obligations of KeyCorp, KeySub and AFG to effect the Merger shall
be subject to the satisfaction or waiver prior to the Effective Time of the
following conditions:
(a) The Agreement and the transactions contemplated
hereby shall have been approved by the requisite vote of the
shareholders of AFG; KeyCorp as the sole shareholder of KeySub hereby
approving this Agreement and the Merger in accordance with applicable
law.
(b) All required approvals and authorizations of,
filings and registrations with, consents or waivers of, and
notifications to, all regulatory authorities required for the
consummation of the transactions contemplated hereby shall have been
obtained or made, including, without limitation, all approvals by the
Federal Reserve Board and the approval of the Arizona Superintendent of
Banks, and shall be in full force and effect and all applicable
statutory waiting periods shall have expired; provided, however, that
no approval, consent or waiver in this Section 6.1(b) shall be deemed
to have been received if it shall contain or be subject to any
restriction or condition which, in the judgment of KeyCorp, is
unreasonably burdensome.
(c) No party hereto shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction
which enjoins or prohibits the consummation of the Merger or any other
transaction contemplated by this Agreement.
(d) No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by any
governmental authority which prohibits, restricts or makes illegal the
consummation of the Merger or any other transaction contemplated by
this Agreement.
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(e) The Registration Statements shall have become
effective and no stop order suspending the effectiveness of either
Registration Statement shall have been issued and no proceedings for
that purpose shall have been initiated or threatened by the SEC.
(f) KeyCorp and KeySub shall have received the opinion
of Thompson, Hine and Flory and AFG shall have received the opinion of
Morgan, Lewis & Bockius, each dated as of the Closing Date,
substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinions which are
consistent with the state of facts existing at the Effective Time, the
Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and
that, accordingly: (i) in the case of the opinion of Thompson, Hine and
Flory, no gain, or loss will be recognized by KeyCorp or KeySub as a
result of the Merger; and (ii) in the case of the opinion of Morgan,
Lewis & Bockius, (A) no gain, income or loss will be recognized by AFG
as a result of the Merger; and (B) no gain or loss will be recognized
by the holders of AFG who exchange their shares of AFG Common Stock for
shares of KeyCorp Common Stock pursuant to the Merger (except with
respect to cash received in lieu of a fractional share interest in
KeyCorp Common Stock). In rendering such opinions, Morgan, Lewis &
Bockius and Thompson, Hine and Flory may require and rely upon
representations contained in certificates of officers of KeyCorp,
KeySub, AFG and others.
(g) No litigation or proceeding shall be pending
against KeyCorp or AFG or any of their respective subsidiaries brought
by any governmental agency seeking to prevent consummation of the
transactions contemplated hereby.
(h) The Distribution shall have become effective in
accordance with the Patlex Spinoff Agreement.
(i) The shares of KeyCorp Common Stock issuable to
AFG's shareholders pursuant to this Agreement shall have been
authorized for listing on the NYSE, upon official notice of issuance.
SECTION 6.2 Conditions to Obligations of KeyCorp and
KeySub. The obligations of KeyCorp and KeySub to effect the Merger shall be
subject to the satisfaction or waiver prior to the Effective Time of the
following additional conditions:
(a) KeyCorp and its directors and officers who sign
the Merger Registration Statement shall have received from AFG's
independent certified public accountants comfort letters, dated (i) the
date of the mailing of the Proxy Statement/Prospectus to AFG's
shareholders and (ii) shortly prior to the Effective Time, with respect
to certain
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financial information regarding AFG. KeyCorp shall identify the
procedures to be followed and the form of the comfort letter, which
procedures and form shall be reasonable under the circumstances.
(b)(i) Each of the representations and warranties of
AFG contained in this Agreement and the Option Agreement shall have
been true, in all material respects, on and as of the date of this
Agreement and on and as of the Shareholder/Regulatory Approval Date;
provided, however, that no adverse effect on the
consolidated net income of AFG for any period beginning on or after the
date hereof arising solely as a result of compliance by AFG with its
covenant set forth in this Agreement to the effect that neither AFG nor
any AFG Subsidiary shall enter into any Securitization Transaction
after the date hereof, shall be deemed to make any representation
concerning AFG not true in any material respect for purposes of this
Section 6.2(b) or otherwise in this Agreement;
(ii) There shall not have occurred at any time after
the date of this Agreement and before the Closing Date any substantial
disruption of the ability of AFG and the AFG Subsidiaries (other than
Patlex), taken as a whole, to conduct any significant portion of their
business in the ordinary course and in accordance with their past
practices that has a duration of two weeks or more and results in a
material adverse change to the business, property, financial condition,
results of operations, or prospects of AFG and the AFG Subsidiaries,
taken as a whole (without regard to how or by whom or what such
disruption is caused);
(iii) the average of the ratios of (A) delinquent AFG
Loans (those that are more than 30 days overdue), to (B) the
outstanding principal balance of AFG Loans, as of the end of each of
the last three months for which such data is available prior to the
Closing Date shall not exceed 2.25%;
(iv) the average of the ratios of (A) net charge-offs
for AFG Loans during the month, to (B) the outstanding principal
balance of AFG Loans as of the end of the month, for each of the last
three months for which such data is available prior to the Closing Date
shall not exceed 8.5%;
(v) the total volume of AFG Loans made or purchased by
AFG or any AFG Subsidiary (excluding bulk purchases from financial
institutions) during the last three-month period for which such data is
available prior to the Closing Date shall not be less than $40,000,000;
(vi) no claims, litigation, or proceedings shall be
pending or, to the best of AFG's knowledge, threatened against AFG or
any of the AFG Subsidiaries that are not disclosed in Schedule 3.11,
and there shall exist no
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liabilities of AFG or any AFG Subsidiary, whether absolute, accrued,
contingent or otherwise, of a type required to be disclosed, reflected,
or reserved for under generally accepted accounting principles that are
incurred prior to the Effective Time but were not disclosed in Schedule
3.8 or in any of the AFG Reports filed by AFG prior to the date of this
Agreement (other than liabilities, normal in nature and amount,
incurred by AFG or any AFG Subsidiary in the ordinary course of
business since December 31, 1994), that in the reasonable judgment of
KeyCorp are, in the aggregate, likely to result in expenses or
liabilities (including in any case attorneys' fees and other costs of
litigation) in excess of $20,000,000, on a before-tax basis.
Notwithstanding any other provision of this Agreement, KeyCorp shall
have the right to terminate this Agreement or refuse to consummate the
Closing due to the nonfulfillment of this subsection (vi), only if
KeyCorp provides AFG with written notice (the "KeyCorp Notice") before
5:00 p.m. (Cleveland time) on the date ten business days prior to the
scheduled date of the Closing. The KeyCorp Notice shall specifically
state the following: that it is pursuant to this subsection (vi), each
of the claims, litigation, expenses or liabilities and the amount of
the expense or liability that KeyCorp has determined in its reasonable
judgment are likely to result, in each case and on an aggregate basis,
therefrom and the basis for KeyCorp's reasonable judgment. If AFG
receives the KeyCorp Notice, AFG shall have the right (the "AFG Right")
to have this subsection (vi) not be a closing condition if AFG provides
KeyCorp with written notice of its exercise of the AFG Right (the "AFG
Notice") during the period beginning on the first business day after
receipt by AFG of the KeyCorp Notice and ending at 5:00 p.m. (Cleveland
time) on the fourth business day after receipt by AFG of the KeyCorp
Notice, pursuant to which AFG agrees that a portion of the Merger
Consideration shall be withheld and deposited with an escrow agent for
disbursement in accordance with the Escrow Agreement attached hereto as
Exhibit I. In case of any such escrow, (A) the number of shares of
KeyCorp Common Stock to be deposited with the escrow agent shall be
sufficient, in the reasonable judgment of KeyCorp, to cover the excess
of the amount of such expenses or liabilities over $20,000,000 and
(B) the Exchange Ratio shall be reduced so as to correspond to the
number of shares of KeyCorp Common Stock otherwise to be issued under
the Agreement less the number of shares of KeyCorp Common Stock
deposited with the escrow agent;
(vii) no default by AFG or any AFG Subsidiary of the
GECC Agreement, or event which with the passage of time or the giving
of notice would constitute a default, shall have occurred;
(viii) AFG shall have performed, in all material
respects, each of its covenants required to be performed by it at or
prior to the Closing Date; and
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(ix) KeyCorp shall have received certificates signed
by the Chief Executive Officer and the Chief Financial Officer of AFG
(A) on the Shareholder/Regulatory Approval Date to the effect of
Section 6.2(b)(i), and (B) on the Closing Date to the effects set forth
in Section 6.2(b)(ii) through 6.2(b)(viii) above.
(c) KeyCorp shall have received all state securities
laws and "Blue Sky" permits and other authorizations necessary to
consummate the transactions contemplated thereby.
(d) AFG and each AFG Subsidiary shall have obtained
any and all consents or waivers from other parties to loan agreements,
Securitization Transactions (including, without limitation, any
consents or approvals of rating agencies or other entities or parties
as to AFG or any affiliate of AFG required by any documentation
relating to any Securitization Transaction) or other contracts required
for the consummation of the Merger, and AFG and each AFG Subsidiary
shall have obtained any and all permits, authorizations, consents,
waivers, and approvals required for the lawful consummation of the
Merger.
(e) Each person who may be deemed by KeyCorp to be an
Affiliate of AFG shall have delivered, prior to the mailing of the
Proxy Statement/Prospectus to AFG's shareholders, an Affiliate
Agreement substantially in the form of Exhibit G attached hereto, and
all such Affiliate Agreements shall be in full force and effect on the
Closing Date.
(f) The Employment Agreements as defined in
Section 4.4, shall be in full force and effect, each of A. E.
Steinhaus and Blair T. Nance shall be capable of performing their
duties thereunder, and neither of them shall have died, become
disabled or in any other manner been the subject of any termination of
employment pursuant to any provision of their respective Employment
Agreements.
(g) All Warrants granted by AFG or any AFG Subsidiary
shall have been exercised prior to the Effective Time.
(h) Neither AFG, any AFG Subsidiary, nor any affiliate
of either of them shall have entered into any Securitization
Transaction except as expressly permitted under Section 2.2(a).
(i) GECC shall have given its consent, as required
under the GECC Agreement, to this Agreement and the Merger without
making its consent conditional upon any payment to it.
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(j) In the event that the Closing Date is after August
24, 1995, KeyCorp shall have received an opinion (at least as strong as
the most stringent standard set forth in Treasury Regulation Section
1.6662-4(d)(2)) of Morgan, Lewis & Bockius, dated as of the date of the
Distribution, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the time of the
Distribution and a reasonable assessment of existing authorities, the
Distribution will be treated for federal income tax purposes as a
tax-free spinoff within the meaning of Section 355 of the Code and
that, accordingly, no gain, income or loss will be recognized by AFG as
a result of the Distribution.
(k) The letter agreement, dated November 28, 1990,
between AFG and Quantum Fund N.V. ("Quantum"), providing for the right
of Quantum to designate up to two members of the AFG Board of Directors
shall have been terminated effective as of the Closing Date.
SECTION 6.3 Conditions to the Obligations of AFG. The
obligation of AFG to effect the Merger shall be subject to the satisfaction or
waiver prior to the Effective Time of the following additional conditions:
(a) Each of the representations, warranties and
covenants of KeyCorp and KeySub contained in this Agreement and the
Option Agreement shall, in all material respects, be true on the
Closing Date as if made on such date (or on the date when made in the
case of any representation or warranty which specifically relates to an
earlier date); KeyCorp and KeySub each shall have performed, in all
material respects, each of its covenants and agreements contained in
this Agreement required to be performed by it at or prior to the
Closing Date; and AFG shall have received certificates signed by a duly
authorized officer of KeyCorp and of KeySub, respectively, dated the
Closing Date, to the foregoing effect.
(b) The Board of Directors of AFG shall have received
a letter, in form and substance satisfactory to AFG, dated the date on
which the Proxy Statement/Prospectus is first mailed to holders of AFG
Common Stock, pursuant to which CS First Boston Corporation shall
express its opinion that the consideration to be received by AFG's
shareholders, other than KeyCorp, in the Merger and the Distribution,
taken as a whole, is fair to such shareholders from a financial point
of view.
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ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be
terminated, and the Merger abandoned, prior to the Effective Time, either before
or after its approval by the shareholders of AFG in accordance with Section 5.10
or:
(a) by the mutual written consent of KeyCorp and AFG,
if the Board of Directors (or, in the case of KeyCorp, the Executive
Committee of the Board of Directors) of each so determines;
(b) by KeyCorp or AFG, if its Board of Directors (or,
in the case of KeyCorp, the Executive Committee of the Board of
Directors) so determines, in the event of a material breach by the
other party hereto of any (i) representation or warranty contained
herein (or, in the case of AFG, in the Option Agreement), if the
nonbreaching party in good faith determines that it might not have
entered into this Agreement, or that the Merger Consideration might
have been different, if the nonbreaching party had known of the breach
prior to execution of this Agreement, or (ii) covenant or agreement
contained herein (or, in the case of AFG, in the Option Agreement)
which is not cured or not curable within 60 days after written notice
of such breach is given to the party committing such breach by the
other party;
(c) by KeyCorp or AFG by written notice to the other
party if either (i) any approval, consent or waiver of a governmental
authority required to permit the consummation of the transactions
contemplated hereby shall have been denied or (ii) any governmental
authority of competent jurisdiction shall have issued a final,
unappealable order enjoining or otherwise prohibiting the consummation
of the transactions contemplated by this Agreement;
(d) by KeyCorp or AFG, if its Board of Directors (or,
in the case of KeyCorp, the Executive Committee of the Board of
Directors) so determines, in the event that the Merger is not
consummated by December 31, 1995 unless the failure to so consummate by
such time is due to the breach of any representation, warranty or
covenant contained in this Agreement by the party seeking to terminate;
(e) by the Board of Directors of AFG if any of the
conditions specified in Section 6.3 hereof have not been met by KeyCorp
or waived by AFG at such time as such condition is no longer capable of
being satisfied;
(f) by the Board of Directors (or the Executive
Committee thereof) of KeyCorp if any of the conditions specified in
Section 6.2 hereof have not been met by AFG or
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waived by KeyCorp at such time as such condition is no longer capable
of being satisfied; or
(g) by the Board of Directors (or the Executive
Committee thereof) of KeyCorp simultaneously with or at any time after
the occurrence of a "Repurchase Event" (as defined in the Option
Agreement).
SECTION 7.2 Effect of Termination. In the event of
the termination of this Agreement by either KeyCorp or AFG, as provided in
Section 7.1, this Agreement (except this Section, the confidentiality
obligations of Section 5.3, Sections 7.3, and 9.7) shall thereafter become
void, and there shall be no liability on the part of any party hereto or their
respective officers or directors; provided, however, that in the event of a
breach of any representation, warranty, covenant, or agreement set forth in
this Agreement, liability for such breach shall survive the termination of this
Agreement and, if the terminating party is not also in material breach of this
Agreement, then, notwithstanding Section 9.7 hereof, the breaching party shall
pay, within 20 days of such termination, all out-of-pocket costs and
expenses, including without limitation, reasonable legal, accounting and
investment banking fees and expenses, incurred by the nonbreaching party in
connection with their entering into this Agreement and their carrying out of
any and all acts contemplated hereunder.
SECTION 7.3 Termination Fee. If this Agreement is
terminated for any reason within one year after a "Purchase Event" occurs under
the Option Agreement (other than the termination of this Agreement by AFG for a
material breach by KeyCorp of any representation, warranty, covenant, or
agreement set forth in this Agreement and such material breach continued for
30 days after written notice to KeyCorp), AFG will, within 10 days following
written demand made by KeyCorp, pay to KeyCorp, in immediately available funds,
$1,500,000. The rights of KeyCorp under this Section 7.3 are in addition to and
independent of its rights under any other provision of this Agreement and under
the Option Agreement and shall survive any termination of this Agreement;
provided, however, that any payment required under this Section 7.3 shall be
reduced by the amount of any payment required to be made under Section 7.2.
ARTICLE VIII
ENVIRONMENTAL MATTERS
SECTION 8.1 Environmental Representations and
Warranties of AFG.
(a) "Properties" as used in this Article VIII shall
include all real property presently owned, operated or leased by AFG
and each AFG Subsidiary, including those that are, or should have been,
listed in Schedule 3.16 as provided in Section 3.16 of this Agreement.
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(b) AFG and each AFG Subsidiary has obtained any and
all material permits, licenses and other authorizations which are
required with respect to the operation of their respective businesses
and all Properties under any Environmental Laws (as hereinafter
defined) (such permits, licenses and authorizations being hereinafter
referred to as "Environmental Permits") including all federal, state
and local laws relating to pollution or protection of the environment
such as the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), laws relating to emissions, discharges,
releases or threatened releases of hazardous, toxic or other
pollutants, contaminants, chemicals, electro-magnetic field radiation,
or materials regulated by Environmental Laws ("Regulated Material")
including, but not limited to, ambient air, surface water, ground
water, land surface or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage
disposal, transport or handling of Regulated Material (which laws,
together with all regulations, rules, codes, plans, decrees, judgments,
injunctions, notice and demand letters issued, entered, promulgated or
approved thereunder with respect to AFG or any AFG Subsidiary being
herein referred to as "Environmental Laws"). AFG and each AFG
Subsidiary is in compliance with all terms and conditions of all
Environmental Permits required under the Environmental Laws, and are
also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, orders,
agreements, schedules and timetables contained in the Environmental
Laws, except where the failure to be in such compliance would not have
a Material Adverse Effect on AFG and the AFG Subsidiaries taken as a
whole. AFG will request from each owner and previous owner of any
Properties or any business currently leased by AFG or any AFG
Subsidiary who owns or has owned the Property within the five years
preceding the date of this Agreement copies of all notices alleging
noncompliance with any Environmental Law. To the extent that AFG has
not to date received responses from any such owner or previous owner,
it will continue to seek such information.
(c) There is no civil, criminal or administrative
action, demand, claim, investigation or proceeding pending or, to the
best knowledge of AFG, threatened against AFG or any AFG Subsidiary
with regard to any Properties including, without limitation, any
notices or demand letters or requests for information from any federal
or state environmental agency, under or relating in any way to the
Environmental Laws.
(d) With regard to any of the Properties, there are no
past, present or to the best knowledge of AFG, anticipated future
events, conditions, circumstances, or plans which may interfere with or
prevent compliance or continued compliance with the Environmental Laws
in any
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material respect, or which may give rise to any material common law or
other legal liability, or which otherwise may form the basis of any
material claim, action, demand, proceeding, notice of violation or
investigation, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
or the emission, discharge, release or threatened release into the
environment, of any Regulated Material. Without in any way limiting the
foregoing, to the best knowledge of AFG, no release, emission or
discharge into the environment of any Regulated Material which would
give rise to material liability under any Environmental Laws has
occurred, is currently occurring at any Properties and, to the best
knowledge of AFG, there is no spill, deposit, or discharge of any such
Regulated Material at, on, into, under or having originated from any of
the Properties. To the best knowledge of AFG, none of the Properties
includes any equipment, machinery, device, or other apparatus that
contains polychlorinated biphenyls that is now or ever has been
leaking; any asbestos that is or reasonably may be anticipated to
become in a condition which reasonably may threaten the health and/or
safety of a person exposed to the asbestos; any type of underground
storage tank; and
(e) AFG has delivered or will deliver to KeyCorp true,
complete and correct copies of results of any nonprivileged reports,
studies, audits, assessments, analyses, tests or monitoring known to,
in the possession of, or initiated by AFG, any AFG Subsidiary or each
owner and previous owner of any of the Properties pertaining to the
existence of Hazardous Substances and other environmental concerns
relating to any of the Properties, or concerning compliance with or
liability under the Environmental Laws.
SECTION 8.2 Environmental Occurrence Notification and
Response. In the event that AFG either receives notice from any governmental
entity, or any owner or other tenant of any of the Properties, or it or any of
its managers or management personnel responsible for environmental matters has
actual knowledge at any time after the date of this Agreement and prior to the
Closing Date that any representation of AFG set forth in Section 8.1 may not be
fully accurate (an "Environmental Action Item"), AFG shall provide KeyCorp with
notice setting forth the details thereof as soon as is reasonably practicable,
but in no event later than the earlier of three (3) days after becoming aware of
such Environmental Action Item or at the Closing Date, and shall cooperate in
all reasonable respects with KeyCorp in investigating and remediating, if
necessary, at AFG's expense, any such situation.
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ARTICLE IX
OTHER MATTERS
SECTION 9.1 Certain Definitions; Interpretation. As
used in this Agreement, the following terms shall have the meanings indicated:
"Material Adverse Effect," shall mean, when used with
respect to any person, a material adverse effect on the consolidated
business, operations, results of operations or financial condition of
such person, other than any such effect attributable to or resulting
directly or indirectly from changes in the general level of interest
rates or general economic conditions.
"person" includes an individual, corporation,
partnership, association, trust or unincorporated organization or
government or any agency or political subdivision thereof.
When a reference is made in this Agreement to Sections
or Exhibits, such reference shall be to a Section of, or Exhibit to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for ease of reference only and shall not affect
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation." Any singular term in this Agreement
shall be deemed to include the plural, and any plural term the singular.
SECTION 9.2 Knowledge. As used in this Agreement the
phrase "to the best of AFG's knowledge" or any similar phrase shall mean the
knowledge of A. E. Steinhaus, President and Chief Executive Officer, and Blair
T. Nance, Chief Financial Officer, or any one or both of them, based upon actual
knowledge or constructive knowledge that should have been known based upon
reasonable investigation by them, consistent with their positions and
responsibilities, of AFG and each AFG Subsidiary and its and their respective
business, assets, liabilities, operations and prospects.
SECTION 9.3 Survival. Only those agreements and
covenants of the parties that are expressly made applicable in whole or in part
after the Effective Time shall survive the Effective Time. All other
representations, warranties, agreements and covenants shall be deemed to be
conditions of the Agreement and shall not survive the Effective Time. If the
Agreement shall be terminated, the agreements of the parties in Sections 5.3
(but only to the extent of the confidentiality obligations set forth in such
Section), 7.2, 7.3 and 9.7 shall survive such termination.
SECTION 9.4 Waiver and Amendment. (a) Prior to the
Effective Time, by written notice to any other party hereto,
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any party hereto may (i) extend the time for the performance of any of the
obligations or other actions of such other party under this Agreement;
(ii) waive any inaccuracies in the representations or warranties of such other
party contained in this Agreement or in any document delivered pursuant to this
Agreement; (iii) waive compliance with any of the conditions or covenants to be
performed by such other party contained in this Agreement; or (iv) waive
performance of any of the obligations of such other party under this Agreement.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
either party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any of the representations, warranties, covenants,
conditions or agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
(b) This Agreement may be amended or supplemented by
the parties hereto, by action taken by or on behalf of their respective Boards
of Directors or, for KeyCorp, the Executive Committee at any time before or
after approval and adoption of this Agreement by the shareholders of AFG;
provided, however, that any such amendment or supplement to this Agreement made
subsequent to the approval and adoption of this Agreement by the shareholders of
AFG shall not (i) alter the amount of change the form of the Merger
Consideration, or (ii) alter or change any of the terms of this Agreement if
such alteration or change would adversely affect the holders of AFG Common
Stock. The parties hereto shall make such technical changes to this Agreement,
not inconsistent with the purpose hereof, as may be required to effect or
facilitate any governmental approval or acceptance of the Merger or of this
Agreement or of the Option Agreement or to effect or facilitate any filing of
recording required for the consummation of any of the transactions contemplated
hereby. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
SECTION 9.5 Counterparts. This Agreement may be
executed in two or more counterparts each of which shall be deemed to constitute
an original, but all of which together shall constitute one and the same
instrument.
SECTION 9.6 Governing Law. This Agreement shall be
governed by, and interpreted in accordance with, the laws of the State of Ohio.
SECTION 9.7 Expenses. Each party hereto will bear all
expenses incurred by it in connection with this Agreement and the transactions
contemplated hereby, except printing expenses which shall be shared equally.
SECTION 9.8 Notices. All notices, requests,
acknowledgements and other communications hereunder to a party shall be in
writing and shall be deemed to have been duly given
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when delivered by hand, telecopy, telegram or telex (confirmed in writing) to
such party at its address set forth below or such other address as such party
may specify by notice to the other party hereto.
(a) If to AFG, to:
AutoFinance Group, Inc.
601 Oakmont Lane
Westmont, Illinois 60559-5549
Telecopy: (708) 655-0410
Attention: Blair T. Nance
with a copy to:
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, Pennsylvania 19103-6993
Telecopy: (215) 963-5299
Attention: Stephen M. Goodman, Esq.
(b) If to KeyCorp or KeySub:
KeyCorp
Society Tower
127 Public Square
Cleveland, Ohio 44114
Telecopy: (216) 689-3610
Attention: Andrew R. Tyson
with copies to:
KeyCorp Legal Department
Society Tower
127 Public Square
Cleveland, Ohio 44114
Telecopy: (216) 689-4121
Attention: Daniel Stolzer, Esq.
and
Thompson, Hine and Flory
1100 National City Bank Building
Cleveland, Ohio 44114
Telecopy: (216) 566-5583
Attention: Thomas C. Stevens, Esq.
SECTION 9.9 Entire Agreement; Etc. This Agreement,
together with the Option Agreement, and the Voting Agreements represents the
entire understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
heretofore made. All terms and provisions of the Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Except as to Section 5.6, nothing in this Agreement is
intended to confer upon
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any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 9.10 Assignment. This Agreement may not be
assigned by any party hereto without the written consent of the other parties.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their duly authorized officers as of the day
and year first above written.
KEYCORP
By: /s/ Roger Noall
---------------------------
Title: Senior Executive Vice President
and Chief Administrative Officer
By: /s/ Andrew R. Tyson
---------------------------
Title: Senior Vice President
KEYCORP FINANCE INC.
By: /s/ Roger Noall
---------------------------
Title: Executive Vice President
By: /s/ Scott Shope
---------------------------
Title: Chief Financial Officer
AUTOFINANCE GROUP, INC.
By: /s/ A.E. Steinhaus
---------------------------
Title: President and Chief Executive
Officer
By: /s/ Blair N. Nance
---------------------------
Title: Chief Financial Officer,
Treasurer and Secretary
<PAGE> 1
Exhibit 3
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, dated as of March 20, 1995, by and between
AutoFinance Group, Inc., a California corporation ("AFG" or the "Company"),
Patlex Corporation, a Pennsylvania corporation and a wholly owned subsidiary of
the Company ("Patlex"), and KeyCorp, an Ohio corporation.
WHEREAS, the Company intends to cause the distribution (the
"Distribution") of 95.01% of the outstanding shares of common stock, par value
$.10 per share, of Patlex ("Patlex Common Stock") to the holders of the common
stock, no stated par value, of the Company (the "AFG Common Stock") on the
Record Date (as hereafter defined) in a distribution that is intended to be
tax-free to the Company's shareholders and the Company pursuant to Sections
355(a) and 355(c)(1) of the Internal Revenue Code of 1986, as amended (the
"Code"), respectively;
WHEREAS, the Company intends to retain the 4.99% of the outstanding
Patlex Common Stock not distributed in the Distribution;
WHEREAS, the Company and Patlex have determined that it is desirable to
set forth the principal corporate transactions required to effect the
Distribution and to set forth other agreements that will govern certain other
matters prior to or following the Distribution; and
WHEREAS, the Company has entered into an Agreement of Merger, dated as
of the date hereof (the "Merger Agreement"), with KeyCorp providing for the
merger (the "Merger") of the Company with and into KeyCorp Finance Inc., an Ohio
corporation and wholly owned subsidiary of KeyCorp ("KeySub"), immediately
following the Distribution;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth herein, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 General. As used in this Agreement, the following terms
shall have the following
<PAGE> 2
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined);
"AFG Common Stock" shall have the meaning set forth in the introductory
section of this Agreement.
"AFG Consolidated Income Taxes" means the federal income tax, any state
franchise tax, and any state income tax of AFG, Patlex, their subsidiaries,
affiliates, or any consolidated or combined group of which they were a part,
together with any interest and any penalty, addition to tax, or additional
amount imposed by any governmental authority responsible for the imposition of
any such tax.
"AFG Employee Benefit Plan" means any agreement, plan, or arrangement
for employee benefits, including any bonus, deferred compensation, severance,
disability, salary continuation, death benefit, vacation, stock purchase or
stock option, hospitalization or other medical, life, or other insurance,
supplemental unemployment benefit, profit-sharing, pension, or retirement plan
or arrangement maintained or contributed to by the Company, including any
specified fringe benefit plan within the meaning of Section 6039D(d)(1) of the
Code and any employee benefit plan within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended.
"AFG Group" means the affiliated group of corporations, within the
meaning of Section 1504(a) of the Code, of which the Company is the common
parent and any member of such group.
"AFG Option Plans" means the AFG 1991 Stock Option Plan and the AFG
1989 Stock Option Plan.
"AFG Subsidiary" and, collectively, "AFG Subsidiaries" means all of
AFG's subsidiaries.
"AFG Trade Names" shall have the meaning set forth in Section 3.4.
"Agent" means Society National Bank or such other person as AFG may
select to act as its agent for purposes of distributing shares of Patlex Common
Stock pursuant to the Distribution and any successor.
"Closing Date" means the date on which the Merger is consummated.
"Code" shall have the meaning set forth in the introductory section of
this Agreement.
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"Company Liabilities" means all of the Liabilities of AFG and the AFG
Subsidiaries (other than the Patlex Liabilities), whether arising before, on or
after the Distribution Date.
"CS First Boston Fee" means the fee payable to CS First Boston
Corporation under the engagement letter, dated March 2, 1995, from CS First
Boston Corporation to Mr. Frank Borman, Chairman of the Board of AFG, in
connection with the Merger and the Distribution.
"Distribution" shall have the meaning set forth in the introductory
section of this Agreement.
"Distribution Date" means the date on which the Distribution is
consummated, which shall be the same date as the Closing Date.
"Distribution Expenses" means all expenses associated with the
Distribution, including the fees and expenses of the Agent and the fees and
expenses (including attorneys' fees) for the preparation and mailing of the
Spinoff Statement and for the printing of any document other than the Spinoff
Statement (including appendices); it does not, however, include (a) the CS First
Boston Fee or (b) any Liabilities resulting from the failure of the Spinoff
Statement to comply as to form with the provisions of applicable law or from any
untrue statement of a material fact or omission 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.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"KeySub" shall have the meaning set forth in the introductory
section of this Agreement.
"Information" shall have the meaning set forth in Section 6.3 hereof.
"Liabilities" means any and all claims, debts, liabilities and
obligations, whether absolute, accrued, contingent, reflected on a balance sheet
(or in the notes thereto) or otherwise, whenever arising, including all costs
and expenses relating thereto, and including those claims, debts, liabilities
and obligations arising under this Agreement, any law, rule, regulation, action,
order or consent decree of any governmental entity or any award of any
arbitrator of any kind, and those arising under any contract, commitment or
undertaking.
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"Merger" shall have the meaning set forth in the introductory section
of this Agreement.
"Merger Agreement" shall have the meaning set forth in the introductory
section of this Agreement.
"Nasdaq National Market" means the National Association of Securities
Dealers, Inc. Automated Quotations National Market System.
"Non-Plan Options" means options to purchase 25,000 shares of AFG
Common Stock granted outside the AFG Option Plans and the Patlex Option Plan.
"Other Subsidiaries" means the AFG Subsidiaries other than Patlex and
Patlex/Delaware.
"Other Tax Costs" shall have the meaning set forth in Section 3.7(a).
"Patlex Common Stock" shall have the meaning set forth in the
introductory section of this Agreement.
"Patlex/Delaware" means Patlex of Delaware, Inc., a Delaware
corporation and wholly owned subsidiary of Patlex.
"Patlex Employee Benefit Plan" means any agreement, plan, or
arrangement for employee benefits, including any bonus, deferred compensation,
severance, disability, salary continuation, death benefit, vacation, stock
purchase or stock option, hospitalization or other medical, life, or other
insurance, supplemental unemployment benefit, profit-sharing, pension, or
retirement plan or arrangement maintained or contributed to by Patlex or
Patlex/Delaware, including any specified fringe benefit plan within the meaning
of Section 6039D(d)(1) of the Code and any employee benefit plan within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended.
"Patlex Income Taxes" means the federal income tax, any state franchise
tax, and any state income tax of Patlex, its subsidiaries, or any consolidated
or combined group of which they are a part, together with any interest and any
penalty, addition to tax, or additional amount imposed by any governmental
authority responsible for the imposition of any such tax.
"Patlex Liabilities" means all of the Liabilities of Patlex and
Patlex/Delaware, whether arising before, on or after the Distribution Date.
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"Patlex Option Plan" means the Patlex Stock Option Plan assumed by AFG.
"Patlex Tax Returns" means any Tax Returns of Patlex.
"Record Date" means the date determined by the Board of Directors of
the Company as the record date for the Distribution.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Spinoff Registration Statement" means the registration statement on
Form S-1 or Form 10 to be filed by Patlex with the SEC for the purpose of
registering the Patlex Common Stock to be distributed to holders of AFG Common
Stock in connection with the Distribution pursuant to the Securities Act or the
Exchange Act, as applicable.
"Spinoff Statement" means the prospectus or information statement to be
sent to the holders of the Company's equity securities in connection with the
Distribution.
"Surviving Corporation" means KeySub as the surviving corporation in
the Merger.
"Tax" (including with correlative meaning, the terms "Taxes" and
"Taxable") means any income, gross receipts, ad valorem, premium, excise,
value-added, sales, use, transfer, franchise, license, severance, stamp,
occupation, service, lease, withholding, employment, payroll, premium, property
or windfall profits tax, alternative or add-on-minimum tax, or other tax,
together with any interest and any penalty, addition to tax or additional amount
imposed by any governmental authority responsible for the imposition of any such
tax.
"Tax Return" means any return, report, statement, information statement
and the like required to be filed with any authority with respect to Taxes.
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ARTICLE II
THE DISTRIBUTION
Section 2.1 Cooperation Prior to the Distribution. As promptly as
practicable after the date hereof and prior to the Distribution Date:
(a) The Company and Patlex shall prepare the Spinoff Statement, file it
with the SEC, respond to comments of the staff of the SEC, clear the Spinoff
Statement with the staff of the SEC and thereafter mail (at the time of mailing
of the proxy statement/prospectus relating to the Merger in accordance with the
terms of the Merger Agreement) the Spinoff Statement to all holders of record
(as of the applicable record date) of the AFG Common Stock. The Company and
Patlex shall cooperate with each other in the preparation of the Spinoff
Statement. AFG and Patlex shall prepare, and Patlex shall file with the SEC, the
Spinoff Registration Statement as soon as is reasonably practicable following
receipt of final comments from the staff of the SEC on the Spinoff Statement (or
advice that the staff will not review such filing). The Company and Patlex shall
use all reasonable efforts to have the Spinoff Registration Statement declared
effective as promptly as practicable by the SEC under the Exchange Act or, if
the Company reasonably determines that the Distribution may not be effected
without registering the Patlex Common Stock pursuant to the Securities Act,
under the Securities Act, and to maintain the effectiveness of such Spinoff
Registration Statement.
(b) The Company and Patlex shall take any action required to be taken
under state "Blue Sky" or securities laws in connection with the issuance of the
Patlex Common Stock pursuant to the Distribution.
(c) The Company and Patlex shall prepare, and Patlex shall file and
seek to make effective, an application to permit listing of the Patlex Common
Stock on the Nasdaq National Market or any other quotation system of the
National Association of Securities Dealers, Inc., as selected by Patlex in its
sole discretion.
(d) In addition to the actions specifically provided for elsewhere in
this Agreement, each of the Company and Patlex shall use all reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things, reasonably necessary, proper or advisable under applicable laws,
regulations and agreements to consummate and make effective the transactions
contemplated by this Agreement, including using all reasonable efforts to obtain
the consents and
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approvals, to enter into any amendatory agreements and to make the filings and
applications necessary or desirable to have been obtained, entered into or made
in order to consummate the transactions contemplated by this Agreement.
Section 2.2 The Distribution. (a) The Company and Patlex have the
requisite corporate power to execute and deliver this Agreement and to carry out
their obligations hereunder. The execution, delivery, and performance of this
Agreement by the Company and Patlex and the consummation of the transactions
contemplated hereby have been duly authorized and approved by the Board of
Directors of the Company and by the Board of Directors of Patlex, and no other
corporate action is necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement is a valid and binding agreement of
the Company and Patlex enforceable against them in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws affecting the enforcement of
creditor's rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought.
(b) The Company's Board of Directors (or any duly appointed committee
thereof) shall in its sole discretion (but consistent with the provisions of the
Merger Agreement) establish the Record Date and the Distribution Date and any
appropriate procedures in connection with the Distribution (subject in each case
to the provisions of applicable law).
(c) On the Distribution Date or as soon thereafter as practicable,
subject to the conditions set forth in this Agreement, the Company shall deliver
to the Agent one or more share certificates representing the 95.01% of the
outstanding shares of Patlex Common Stock to be distributed in the Distribution
and shall instruct the Agent to distribute, on the Distribution Date, one share
of Patlex Common Stock for each eight shares of AFG Common Stock held by holders
of record of AFG Common Stock on the Record Date. The balance of the outstanding
Patlex Common Stock shall be retained by the Company and not distributed in the
Distribution so that, immediately following the Distribution and the payment of
cash in lieu of fractional shares, the holders of record of AFG Common Stock on
the Record Date shall be the record and beneficial owners of 95.01% of the
outstanding shares of Patlex Common Stock, and the Surviving Corporation shall
be the record and beneficial owner of 4.99% of the outstanding shares of Patlex
Common Stock. Patlex agrees to provide all share
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certificates that the Agent shall require in order to effect the Distribution.
All shares of Patlex Common Stock issued in the Distribution, and all shares of
Patlex Common Stock retained by AFG, shall be duly authorized, validly issued,
fully paid, non-assessable and free of preemptive rights. In the event cash is
paid in lieu of fractional shares in the Distribution, Patlex represents and
warrants to KeyCorp and the Surviving Corporation that the cash issued for the
fractional shares shall not exceed 1% of the total value of Patlex.
(d) Neither the Company nor the Surviving Corporation shall sell or
otherwise dispose any of the share of Patlex Common Stock being retained except
in a transaction registered or exempt from registration under the Securities
Act.
(e) Upon written request by the Surviving Corporation or KeyCorp at any
time and from time to time within the period beginning with the first
anniversary of the Distribution Date and ending with the fifth anniversary of
the Distribution Date, Patlex shall as expeditiously as possible prepare and
file one registration under the Securities Act if such registration is necessary
in order to permit the sale or other disposition of any or all of the shares of
Patlex Common Stock retained by the Company in accordance with the method of
sale or other disposition specified by the Surviving Corporation, including, if
applicable, a "shelf" registration statement pursuant to Rule 415 under the
Securities Act or any successor rule of similar effect, and Patlex shall use its
best efforts to qualify such shares or other securities under any applicable
state securities laws. The Surviving Corporation and KeyCorp shall use
reasonable efforts to cause, and to cause any underwriters of any sale or other
disposition to use reasonable efforts to cause, any sale or other disposition
pursuant to such registration statement to be effected on a widely distributed
basis so that no purchaser or transferee shall purchase or acquire from the
Surviving Corporation and/or the underwriters more than 2% of the Patlex Common
Stock outstanding upon consummation of the sale or disposition. Patlex shall use
reasonable efforts to cause each such registration statement to become
effective, to obtain all consents or waivers of other parties that are required
therefor and to keep such registration statement effective for such period (not
in excess of 90 days in the case of a filing on a form other than Form S-3, or
180 days in the case of a filing on Form S-3, from the day such registration
statement first becomes effective) as may be reasonably necessary to effect such
sale or other disposition. The obligations of Patlex hereunder to file a
registration statement and to maintain its effectiveness may be suspended for
one or more periods
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of time not exceeding 60 days in the aggregate during any consecutive 12-month
period if Patlex's Board of Directors determines that the filing of such
registration statement or the maintenance of its effectiveness would require
disclosure of nonpublic information that Patlex has a bona fide business purpose
for preserving as confidential. Any registration statement prepared and filed
under this Section 2.2(e), and any sale covered thereby, shall be at Patlex's
expense, except for underwriting discounts or commissions, brokers' fees, and
the fees and disbursements of counsel of the Surviving Corporation and KeyCorp
related thereto. The Surviving Corporation and KeyCorp shall provide all
information reasonably requested by Patlex for inclusion in any registration
statement to be filed hereunder. If, during the time referred to in the first
sentence of this Section 2.2(e), Patlex effects a registration under the
Securities Act of any Patlex Common Stock for its own account or for the account
of any shareholder of Patlex (other than a registration on Form S-4, Form S-8 or
any successor form), Patlex shall afford the Surviving Corporation the right to
participate in such registration, and such participation shall not affect the
obligation of Patlex to effect one registration statement for the Surviving
Corporation under this Section 2.2(e); provided, however, that,
if the managing underwriters of such offering advise Patlex in writing that, in
their opinion the offering would be adversely affected by the number of shares
of Patlex Common Stock requested to be included in such registration statement,
then Patlex may exclude the shares requested to be included in the offering by
the Surviving Corporation; and provided, further, if Patlex
shall determine for any reason not to register the shares of the other
shareholder giving rise to such registration statement, then Patlex shall be
relieved of its obligation to include the shares of Patlex Common Stock
requested to be registered by the Surviving Corporation. In connection with any
registration pursuant to this Section 2.2(e), Patlex, the Surviving Corporation
and KeyCorp shall provide each other and any underwriter of the offering with
customary representations, warranties, covenants, indemnification and
contribution in connection with such registration. Patlex shall not be required
to effect any registration under this Section 2.2(e) incidental to the
registration of Patlex Common Stock in connection with mergers, acquisitions,
exchange offers, dividend reinvestment plans or stock option and other executive
or employee benefit or compensation plans.
Section 2.3 Company Approval of Certain Patlex Actions. Unless
otherwise provided in this Agreement, the Company shall cooperate with Patlex in
effecting, and if so requested by Patlex the Company shall, as the sole
stockholder of Patlex, ratify any actions that
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are reasonably necessary or desirable to be taken by Patlex to effectuate, the
transactions contemplated by this Agreement in a manner consistent with the
terms of this Agreement, including the following: (a) the preparation and
approval of the Certificate of Incorporation and By-laws of Patlex to be in
effect at the Distribution Date; (b) the election or appointment of directors
and officers of Patlex to serve in such capacities following the Distribution
Date; (c) the adoption, preparation and implementation of appropriate plans,
agreements and arrangements for Patlex employees and Patlex non-employee
directors; and (d) the registration under applicable securities laws of any
securities of Patlex issued or distributed pursuant to Section 2.2 hereof.
Section 2.4 Conditions Precedent to the Distribution. In no event shall
the Distribution occur unless the following conditions shall, unless waived by
AFG and KeyCorp, have been satisfied:
(a) all necessary regulatory approvals shall have been received;
(b) the Spinoff Registration Statement shall have become effective
under the Securities Act or Exchange Act;
(c) Patlex's Board of Directors, as named in the Spinoff Registration
Statement, shall have been elected by AFG, as sole stockholder of Patlex,
and the Patlex Certificate of Incorporation and Patlex By-laws shall be in
effect;
(d) AFG and AFG's Board of Directors shall have received an opinion (at
least as strong as the most stringent standard set forth in Treasury
Regulation Section 1.6662-4(d)(2)) of Morgan, Lewis & Bockius satisfactory
to it that the Distribution will constitute a distribution within the
meaning of Section 355(a) of the Code, and no gain or loss will be
recognized by AFG on the Distribution pursuant to Section 355(e)(1) of the
Code. In rendering such opinion, such counsel may rely on such assumptions
as are reasonably determined by such counsel to be necessary and on a
reasonable assessment of existing authorities.
Section 2.5 CS First Boston Fee; Distribution Expenses; Distribution
Liabilities. AFG shall pay the portion of the CS First Boston Fee that is
attributable to the Distribution. AFG shall also pay the
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first $50,000 of the Distribution Expenses, and Patlex shall pay all
Distribution Expenses in excess of $50,000. Patlex shall be responsible for, and
shall indemnify and hold AFG, the Surviving Corporation, KeyCorp and their
respective directors and officers against, any Liabilities resulting from the
failure of the Spinoff Registration Statement or the Spinoff Statement to comply
as to form with the provisions of applicable law or from any untrue statement of
a material fact or omission 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.
ARTICLE III
INTERCOMPANY MATTERS
Section 3.1 Settlement of Intercompany Accounts. All intercompany
receivables, payables, loans, cash overdrafts and other accounts in existence as
of the Closing Date between AFG and the Other Subsidiaries, on the one hand, and
Patlex and Patlex/Delaware on the other hand, including amounts owed by Patlex
and Patlex/Delaware for Taxes, shall be settled in full by payment of the net
balance on or prior to the Closing Date. Following the date hereof, all such
intercompany transactions shall be conducted in a manner consistent with past
practice.
Section 3.2 Settlement for Cash Collections and Disbursements. For each
calendar month commencing with the month in which the Closing Date occurs and
continuing until determined by the parties no longer to be necessary, Patlex and
the Company shall cause all cash collections and cash disbursements received by
Patlex and Patlex/Delaware for the benefit of the Company and the Other
Subsidiaries or by the Company and the Other Subsidiaries for the benefit of
Patlex and Patlex/Delaware during the relevant month to be remitted to the party
entitled to the benefit thereof as promptly as possible after the receipt
thereof.
Section 3.3 Capital Contributions; Dividends. From the date of this
Agreement through the Distribution Date, AFG shall not make any capital
contributions to Patlex, whether through the payment of cash, the forgiveness of
indebtedness or otherwise, and shall not purchase any shares of Patlex Common
Stock, other equity securities of Patlex or rights convertible into Patlex
Common Stock or other equity securities. From the date of this Agreement through
the Distribution Date, Patlex is not required to declare or pay any dividend or
make any other distribution (whether in cash, stock or
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property or any combination thereof) on any shares of Patlex Common Stock or
other equity securities.
Section 3.4 AFG Name. After the Distribution Date, neither Patlex nor
Patlex/Delaware shall use the name "AutoFinance Group" or any similar trademarks
(collectively, the "AFG Trade names") or any trade name or trademark likely to
cause confusion with the AFG Trade names.
Section 3.5 AFG Stock Options. (a) If any of the options to purchase
AFG Common Stock granted under the AFG Option Plans that are outstanding on the
Distribution Date and assumed by KeyCorp pursuant to Section 1.8(a) of the
Merger Agreement shall, after the Distribution Date, be exercised in accordance
with their terms then upon notice of such exercise from KeyCorp, Patlex agrees
to deliver or cause to be delivered to the holders of such options one or more
share certificates representing one share of Patlex Common Stock for every eight
shares of AFG Common Stock issuable pursuant to the exercise of such options,
assuming for purposes of this Section 3.5(a) that the exercise date was the
Distribution Date.
(b) Patlex agrees to deliver at the Effective Time to the holders of
options granted under the Patlex Option Plan and Non-Plan Options whose options
are converted into the right to receive cash pursuant to Section 1.8(b) of the
Merger Agreement one or more share certificates representing one share of Patlex
Common Stock for every eight shares of AFG Common Stock issuable pursuant to the
exercise of such options.
Section 3.6 Issuance of Patlex Stock to AFG. Patlex agrees that prior
to the Distribution Date it will issue to AFG and deliver to the Agent the
number of shares of Patlex Common Stock as may be required in order for Patlex,
AFG and the Agent to fulfill their respective obligations pursuant to Section
2.2 thereof.
Section 3.7 Tax Matters.
(a) Patlex Indemnification Obligations.
(i) Patlex Income Taxes. Patlex shall be
liable for, shall pay, and shall indemnify and hold KeyCorp, the
Surviving Corporation, and their subsidiaries harmless against all
Patlex Income Taxes attributable to any taxable period ending on or
before the Closing Date, and for its portion of Patlex Income Taxes for
any taxable periods commencing before and ending after the
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Closing Date, and any and all liabilities, losses, damages, costs and
expenses (including court costs and reasonable professional fees
incurred in the investigation, defense, or settlement of any claims
covered by this indemnity) ("Other Tax Costs") attributable to any such
Patlex Income Taxes. For this purpose, any taxable period for Patlex
Income Taxes that includes but does not end on the Closing Date shall
be treated as ending on the Closing Date, and the income attributable
to the period before and including the Closing Date shall be determined
based on the permanent books and records maintained for federal income
tax purposes.
(ii) Distribution Taxes. In the event that the
Distribution is ultimately determined to be a taxable distribution
(A) by the Internal Revenue Service, any state taxing authority or
court or pursuant to a settlement of a disputed tax deficiency,
regardless of when the Closing Date occurs, or (B) by KeyCorp if the
Closing date occurs on or prior to August 24, 1995 or the closing
condition in Section 6.2(j) of the Merger Agreement is not satisfied,
liability for the payment of any taxes, interest or penalties imposed
on the recipients of the Distribution, AFG, the Surviving Corporation
and KeyCorp shall be treated as provided in Sections 1.9(a) and 5.12
of the Merger Agreement, which are incorporated herein by reference
and agreed to by the parties.
(iii) Refunds and Credits of AFG Consolidated Income
Taxes; Waiver of NOL Carrybacks. Except to the extent provided in the
next sentence, AFG and the Surviving Corporation shall be entitled to
any credits or refunds of AFG Consolidated Income Taxes payable with
respect to any taxable period ending on or before the Closing Date.
Patlex shall be entitled to any credits or refunds of Patlex Income
Taxes payable with respect to any taxable period ending on or before
the Closing Date, provided, however, Patlex waives the right and agrees
not to carryback, or cause any of its subsidiaries or affiliates to
carryback, any net operating loss to any period of Patlex prior to the
Closing Date or any of its tax affiliates prior to the Closing Date and
agrees not to file any claims for any refunds with respect to any such
periods prior to
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the Closing Date for federal or state Taxes with respect to any such
net operating losses.
(iv) Control of Tax Proceedings.
(A) The Surviving Corporation shall be designated as
the agent for the AFG Group pursuant to Section 1.1502-77(d) of
the Treasury Regulations and any similar provisions of state
income or franchise tax laws, and the Surviving Corporation
shall be the sole authority to deal with any matters relating
to AFG Consolidated Income Taxes, including but not limited to
the filing of amended returns and claims for refund.
(B) Whenever any taxing authority asserts a claim,
makes an assessment, or otherwise disputes the amount of AFG
Consolidated Income Taxes or Corporate Spinoff Taxes (as
defined in the Merger Agreement) as provided in Section
3.7(a)(ii) hereof and Sections 1.9(a) and 5.12 of the Merger
Agreement for which Patlex is or may be liable in whole or in
part, under this Agreement, the Surviving Corporation or
KeyCorp shall promptly inform Patlex. KeyCorp shall have the
right to control any resulting proceedings, but Patlex may
participate in the proceedings. Neither KeyCorp nor the
Surviving Corporation shall settle any such claim, assessment
or dispute without Patlex's consent, which consent shall not be
unreasonably withheld, except that KeyCorp may settle such
claim, assessment or dispute without Patlex's consent if Patlex
is not required to make any payment and has no liability with
respect to the settlement. The notification and indemnification
procedures in Sections 4.3 and 4.4 of this Agreement shall
apply to this Section 3.7 to the extent that they are not
inconsistent herewith.
(b) Other Taxes. Except as otherwise provided in this
Section 3.7, all Taxes shall be the responsibility of the taxpayer on which they
are imposed, and any refunds and credits of Taxes shall be for the account of
the taxpayer responsible for such Taxes.
(c) Tax Returns.
(i) The Surviving Corporation shall be responsible for
the preparation and filing of all Tax Returns of AFG with respect to
AFG Consolidated Income Taxes for all taxable periods that end on or
before the Closing Date, including
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Tax Returns of the AFG Group for such periods that are due after the
Closing Date, and of all Tax Returns of AFG required to be filed on or
before the Closing Date. The Surviving Corporation shall be responsible
for the contents of such Tax Returns and the payment of all Taxes shown
to be due thereon. Patlex shall be responsible for the preparation and
filing of all separate Patlex Tax Returns for all taxable periods that
end prior to, on, or after the Closing Date. Patlex shall be
responsible for the contents of such Patlex Tax Returns and the payment
of all Taxes shown to be due thereon.
(ii) KeyCorp shall be responsible for the preparation
and filing of all Surviving Corporation Tax Returns required to be
filed after the Closing Date.
(d) Cooperation. KeyCorp, the Surviving
Corporation, and Patlex shall cooperate with each other in a timely manner in
the preparation and filing of any Tax Returns, payment of any Taxes in
accordance with this Agreement, and the conduct of any audit or other
proceeding. Each party shall execute and deliver such powers of attorney and
make available such other documents as are necessary to carry out the intent of
this Section 3.7. Each party agrees to notify the other party of any audit
adjustments that do not result in tax liability but can reasonably be expected
to affect Tax Returns of the other party.
(e) Retention of Records. The Surviving Corporation
and Patlex shall (i) retain records, documents, accounting data, and other
information (including computer data) necessary for the preparation and filing
of all Tax Returns or the audit of such returns, and (ii) give to the other
reasonable access to such records, documents, accounting data, and other
information (including computer data) and to its personnel (insuring their
cooperation) and premises, for the purpose of the review or audit of such
returns to the extent relevant to an obligation or liability of a party under
this Agreement or under applicable law.
(f) Payments; Disputes. Except as otherwise
provided in this Section 3.7, any amounts owed by Patlex to the Surviving
Corporation or KeyCorp under this Section 3.7 shall be paid within ten days of
notice from the Surviving Corporation or KeyCorp; provided that, if the
Surviving Corporation or KeyCorp has not paid such amounts and such amounts are
being contested before the appropriate governmental authorities in good faith,
Patlex shall not be
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required to make payment until it is determined finally by an appropriate
governmental authority that payment is due. If KeyCorp and Patlex cannot agree
on any calculation of any liabilities under this Section 3.7, such calculation
shall be made by any independent public accounting firm acceptable to both such
parties. The decision of such firm shall be final and binding. The fees and
expenses incurred in connection with such calculation shall be borne equally by
the disputing parties.
(g) Termination of Liabilities. Notwithstanding any
other provision in this Agreement, the liabilities of Patlex for any Tax under
this Section 3.7 shall apply only to Taxes assessed before the expiration of the
applicable statute of limitations for such Tax.
(h) Termination of Tax Sharing Agreement. Except as
specifically provided in this Section 3.7, any tax sharing agreement or policy
of the AFG Group shall be terminated at the Effective Time, and neither AFG, the
Surviving Corporation, nor KeyCorp shall have any obligation under such
agreement or policy after the Effective Time.
Section 3.8. Employee Benefit Plans. Patlex and
Patlex/Delaware shall cease to be participating employers under any AFG Employee
Benefit Plan from and after the Distribution Date. KeyCorp and the Surviving
Corporation shall indemnify Patlex against any losses, claims, damages, or
liabilities, joint or several, arising out of, or in connection with, any AFG
Employee Benefit Plan or arising out of the claim of any employee or former
employee of Patlex or Patlex/Delaware with respect to participation in or
benefits under any AFG Employee Benefit Plan for any period of time before the
Distribution Date. Patlex shall indemnify KeyCorp and the Surviving Corporation
against any losses, claims, damages, or liabilities, joint or several, arising
out of, or in connection with, any Patlex Employee Benefit Plan or arising out
of the claim of any employee or former employee of Patlex or Patlex/Delaware
with respect to participation in or benefits under any Patlex Employee Benefit
Plan for any period of time after the Distribution Date.
ARTICLE IV
INDEMNIFICATION
Section 4.1 Indemnification by KeyCorp and the
Surviving Corporation. KeyCorp and the Surviving Corporation shall indemnify,
defend and hold harmless Patlex and Patlex/Delaware and each of their respective
16
<PAGE> 17
past and present officers and directors against any losses, claims, damages or
liabilities, joint or several, arising out of or in connection with the Company
Liabilities or the operations of the Company and the Other Subsidiaries, and the
Company shall reimburse Patlex and Patlex/Delaware, and each such officer and
director for any legal or any other expenses reasonably incurred by any of them
in connection with investigating or defending any such loss, claim, damage,
liability or action.
Section 4.2 Indemnification by Patlex. Patlex shall
indemnify, defend and hold harmless the Company, each of the Other Subsidiaries,
KeyCorp and the Surviving Corporation and each of their respective past and
present officers and directors against any losses, claims, damages or
liabilities, joint or several, arising out of or in connection with the Patlex
Liabilities or the operations of Patlex or Patlex/Delaware, and Patlex shall
reimburse the Company, each such Other Subsidiary and each such officer and
director for any legal or any other expenses reasonably incurred by any of them
in connection with investigating or defending any such loss, claim, damage,
liability or action.
Section 4.3 Notification of Claims. For the purpose of
this Article IV, the term "Indemnifying Party" shall mean the party having an
obligation hereunder to indemnify the other party pursuant to this Article IV,
and the term "Indemnified Party" shall mean the party having the right to be
indemnified pursuant to this Article IV. Whenever any claim shall arise for
indemnification under this Article IV, the Indemnified Party shall promptly
notify the Indemnifying Party in writing of such claim and, when known, the
facts constituting the basis for such claim (in reasonable detail). Failure by
the Indemnified Party to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of any liability hereunder unless such failure materially
prejudices the Indemnifying Party.
Section 4.4 Indemnification Procedures. (a) After the
notice required by Section 4.3, if the Indemnifying Party undertakes to defend
any such claim, then the Indemnifying Party shall be entitled, if it so elects,
to take control of the defense and investigation with respect to such claim and
to employ and engage attorneys of its own choice to handle and defend the same,
at the Indemnifying Party's cost, risk and expense, upon written notice to the
Indemnified Party of such election, which notice acknowledges the Indemnifying
Party's obligation to provide indemnification hereunder. The Indemnifying Party
shall not settle any third-party claim that is the subject of indemnification
without the written
17
<PAGE> 18
consent of the Indemnified Party, which consent shall not be unreasonably
withheld; provided, however, that the Indemnifying Party may settle a claim
without the Indemnified Party's consent if such settlement (i) makes no
admission or acknowledgment of liability or culpability with respect to the
Indemnified Party, (ii) includes a complete release of the Indemnified Party and
(iii) does not require the Indemnified Party to make any payment or forego or
take any action. The Indemnified Party shall cooperate in all reasonable
respects with the Indemnifying Party and its attorneys in the investigation,
trial and defense of any lawsuit or action with respect to such claim and any
appeal arising therefrom (including the filing in the Indemnified Party's name
of appropriate cross claims and counter-claims. The Indemnified Party may, at
its own cost, participate in any investigation, trial and defense of such
lawsuit or action controlled by the Indemnifying Party and any appeal arising
therefrom.
(b) If, after receipt of a claim notice pursuant to
Section 4.3, the Indemnifying Party does not undertake to defend any such claim
the Indemnified Party may, but shall have no obligation to, contest any lawsuit
or action with respect to such claim and the Indemnifying Party shall be bound
by the result obtained with respect thereto by the Indemnified Party (including,
without limitation, the settlement thereof without the consent of the
Indemnifying Party). If there are one or more legal defenses available to the
Indemnified Party that conflict with those available to the Indemnifying Party,
to assume the defense of the lawsuit or action; provided, however, that the
Indemnified Party may not settle such lawsuit or action without the consent of
the Indemnifying Party, which consent shall not be unreasonably withheld.
(c) At any time after the commencement of defense of
any lawsuit or action, the Indemnifying Party may request the Indemnified Party
to agree in writing to the abandonment of such contest or to the payment or
compromise by the Indemnifying Party of such claim, whereupon such action shall
be taken unless the Indemnified Party determines that the contest should be
continued and so notifies the Indemnifying Party in writing within 15 days of
such request from the Indemnifying Party. If the Indemnified Party determines
that the contest should be continued, the Indemnifying Party shall be liable
hereunder only to the extent of the lesser of (i) the amount which the other
party(ies) to the contested claim had agreed to accept in payment or compromise
as of the time the Indemnifying Party made its request therefor to the
Indemnified Party or (ii) such amount for which the Indemnifying Party may be
liable with respect to such claim by reason of the provisions hereof.
18
<PAGE> 19
ARTICLE V
CERTAIN PATLEX MATTERS
Section 5.1 The Patlex Board. Patlex and the Company
shall take all actions which may be required to elect or otherwise appoint, on
or prior to the Distribution Date, those individuals that the Board of Directors
of the Company may designate as directors of Patlex.
Section 5.2 Officers and Employees. The executive
officers of Patlex as of the date hereof shall be the executive officers of
Patlex on the Closing Date. The employees of Patlex who are employed by Patlex
immediately prior to the Closing Date shall remain as employees of Patlex in
the same capacities.
ARTICLE VI
ACCESS TO INFORMATION
Section 6.1 Provision of the Corporate Records. On the
Closing Date, the Company shall deliver to Patlex all corporate books and
records which are corporate records of Patlex or its subsidiaries, including,
without limitation, original corporate minute books, stock ledgers and
certificates and corporate seals.
Section 6.2 Production of Witnesses. From and after
the Closing Date, each party shall use reasonable efforts to make available to
the other party, upon written request, its officers, directors, employees and
agents as witnesses to the extent that any such person may reasonably be
required in connection with any legal, administrative or other proceedings in
which the requesting party may from time to time be involved.
Section 6.3 Confidentiality. Each party shall hold,
and shall cause its officers, employees, agents, consultants and advisors to
hold, in strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law, all non-public records, books, contracts, instruments, computer data and
other data and information (collectively, "Information") concerning the other
party furnished it by such other party or its representatives or otherwise in
its possession (except to the extent that such Information can be shown to have
been (a) available to such party on a non-confidential basis prior to its
disclosure by the other party, (b) in the public domain through no fault or such
party or (c) later
19
<PAGE> 20
lawfully acquired from other sources by the party to which it was furnished),
and each party shall not release or disclose such Information to any other
person, except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors who have a need to know such Information and who agree
to be bound by the provisions of this Section 6.3. Each party shall be deemed to
have satisfied its obligation to hold confidential Information concerning or
supplied by the other party if it exercises the same care as it takes to
preserve confidentiality for its own similar confidential Information.
ARTICLE VII
TERMINATION; AMENDMENTS; WAIVERS
Section 7.1 Termination. This Agreement may be
terminated and the Distribution abandoned by the Company at any time prior to
the date the Distribution is declared by the Board of Directors of the Company,
but only with the prior written consent of KeyCorp. This Agreement shall
terminate automatically upon any termination of the Merger Agreement. In the
event of such termination, no party shall have any liability of any kind to any
other party; provided, however, that any such termination shall not relieve any
party from liability for any breach of this Agreement.
ARTICLE VIII
OTHER MATTERS
Section 8.1 Interpretation. When a reference is made
in this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The headings contained in this Agreement
are for ease of reference only and shall not affect the meaning or
interpretation of this Agreement. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation." Any singular term in this Agreement shall be deemed
to include the plural, and any plural term the singular.
Section 8.2 Amendment. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 8.3 Counterparts. This Agreement may be
executed in counterparts each of which shall be
20
<PAGE> 21
deemed to constitute an original, but all of which together shall constitute
one and the same instrument.
Section 8.4 Governing Law. This Agreement shall be
governed by, and interpreted in accordance with, the laws of the State of Ohio.
Section 8.5 Notices. Commencing as of the Distribution
Date, all notices, requests, acknowledgements and other communications hereunder
to a party shall be in writing and shall be deemed to have been duly given when
delivered by hand, telecopy, telegram or telex (confirmed in writing) to such
party at its address set forth below or such other address as such party may
specify by notice to the other party hereto.
(a) If to the Company:
AutoFinance Group, Inc.
601 Oakmont Lane
Westmont, IL 60559-5549
Telecopy: (708) 655-0410
Attention: A. E. Steinhaus, President
Prior to the Distribution Date, with
copies to:
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103-6993
Telecopy: (215) 963-5299
Attention: Stephen M. Goodman
On or after the Distribution Date, with
copies to:
KeyCorp Legal Department
Society Tower
127 Public Square
Cleveland, OH 44114
Fax No.: (216) 689-4121
Attention: Daniel Stolzer, Esq.
and
Thompson, Hine and Flory
1100 National City Bank
629 Euclid Avenue
Cleveland, OH 44114-3070
Telecopy: (216) 566-5606
Attention: Thomas C. Stevens
21
<PAGE> 22
(b) If to KeyCorp or KeySub:
KeyCorp
Society Tower
127 Public Square
Cleveland, OH 44114
Fax No.: (216) 689-3610
Attention: Andrew R. Tyson
with copies to:
KeyCorp Legal Department
Society Tower
127 Public Square
Cleveland, OH 44114
Fax No.: (216) 689-4121
Attention: Daniel Stolzer, Esq.
and
Thompson, Hine and Flory
1100 National City Bank Building
629 Euclid Avenue
Cleveland, OH 44114
Fax No.: (216) 566-5583
Attention: Thomas C. Stevens, Esq.
If to Patlex:
(c) Patlex Corporation
250 Cotorro Court, Suite A
Las Cruces, NM 88005
Telecopy: (505) 523-8081
Attention: Frank Borman, President
with copy to:
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103-6993
Telecopy: (215) 963-5299
Attention: Stephen M. Goodman
Section 8.6 Entire Agreement, Etc. This Agreement,
together with the Merger Agreement, represents the entire understanding of the
parties hereto with reference to the transactions contemplated hereby and
supersedes any and all other oral and written agreements heretofore made. All
terms and provisions of this Agreement shall be binding upon and shall inure to
the benefits of the parties hereto and their respective successors and assigns,
including, in the case of the
22
<PAGE> 23
Company, KeyCorp. Nothing in this Agreement is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Agreement.
Section 8.7 Assignment. This Agreement may not be
assigned by any party hereto without the written consent of the other party and
without the prior written consent of KeyCorp.
IN WITNESS WHEREOF, each of the parties has caused
this Distribution Agreement to be executed on its behalf by its officers
thereunto duly authorized on the day and year first above written.
AUTOFINANCE GROUP, INC.
By: /s/ A. E. Steinhaus
---------------------------
Name: A.E.Steinhaus
Title: President and Chief
Executive Officcer
PATLEX CORPORATION
By: /s/ Frank Borman
---------------------------
Name: Frank Borman
Title: Chairman of the Board
of Directors,
President and Chief
Executive Officer
KEYCORP
By: /s/ Andrew R. Tyson
---------------------------
Name: Andrew R. Tyson
Title: Senior Vice President
23
<PAGE> 1
Exhibit 4
VOTING AGREEMENT AND IRREVOCABLE PROXY
This Voting Agreement and Irrevocable Proxy (the
"Agreement") is entered into as of the 20th day of March, 1995, between
KeyCorp, an Ohio corporation ("KeyCorp"), the shareholder ("Shareholder") of
AutoFinance Group, Inc., a California corporation ("AFG"), executing this
Agreement and identified on the last page hereof, and Frank Borman and A. E.
Steinhaus, residents of the States of New Mexico and Illinois, respectively,
each being a shareholder and a Director of AFG (the "Proxies" or each "Proxy").
RECITALS
A. The Shareholder owns or has the power to vote the
number of shares of Common Stock, no stated par value ("AFG Common Stock"), of
AFG (the "AFG Shares") set forth opposite the Shareholder's signature on the
last page of this Agreement.
B. KeyCorp, KeyCorp Finance Inc., an Ohio
corporation and a wholly-owned subsidiary of KeyCorp ("KeySub"), and AFG intend
to enter into an Agreement of Merger (such agreement as from time to time
amended being herein the "Merger Agreement") on the date hereof, providing for
the merger (the "Merger") of AFG with and into KeySub. Pursuant to the Merger
Agreement, each outstanding share of AFG Common Stock will be converted into
the right to receive between .50 and .60 Common Shares, with a par value of $1
each, of KeyCorp ("KeyCorp Common Stock") (depending on the market price of
KeyCorp Common Stock during a specified measuring period), and cash in lieu of
fractional shares. The Merger Agreement contains, among other things,
representations and warranties of the parties with respect to the Merger and
conditions precedent to the obligations of the parties to consummate the
Merger.
C. As an inducement to KeyCorp and KeySub to enter
into the Merger Agreement, the Shareholder has agreed to vote and to
irrevocably appoint the Proxies and their successors as the Proxies of the
Shareholder to vote, the AFG Shares in favor of the Merger.
Execution Copy -1-
<PAGE> 2
AGREEMENTS
Accordingly, the parties hereto agree as follows:
1. AFG SHAREHOLDER VOTE. The Shareholder agrees that
the AFG Shares shall be present in person or by proxy at each shareholder
meeting or meetings of AFG held to consider and to vote upon the Merger or the
Agreement of Merger and to vote the AFG Shares as follows:
(i) in favor of the adoption of the Merger Agreement
and the approval of the Merger at each such shareholder meeting or
meetings of AFG;
(ii) against the approval of any proposal relating
to a competing merger or business combination involving an acquisition
of AFG or the purchase of all or a substantial portion of the AFG
Common Stock, the assets of AFG, or the assets or stock of any
subsidiary of AFG by any person or entity other than KeyCorp or an
affiliate of KeyCorp; and
(iii) against any other transaction which is
inconsistent with the obligation of AFG to consummate the Merger in
accordance with the Merger Agreement.
2. IRREVOCABLE APPOINTMENT OF PROXY. In order to
secure for the benefit of KeyCorp the performance by the Shareholder of the
Shareholder's duty, as set forth in Section 1, to vote the AFG Shares as
specified in Section 1, the Shareholder hereby irrevocably (notwithstanding
Section 705(b), and in accordance with the last paragraph of Section 705(e), of
the California General Corporate Law (the "CGCL")) appoints Frank Borman as
his/her/its Proxy or, in the event of the death, incapacity or other event as a
result of which Frank Borman is no longer able to serve as Proxy of the
Shareholder, A. E. Steinhaus as his/her/its Proxy to vote the AFG Shares in
accordance with the further provisions of this Agreement at any meeting of the
shareholders of AFG from and after the date hereof until the termination of
this Agreement as set forth in Section 4, and each of the Proxies accepts such
appointment as the Proxy of the Shareholder and agrees to be present at each
shareholder meeting or meetings of AFG held to consider and vote upon the
Merger or the Agreement of Merger and to vote the AFG Shares in accordance with
the
Execution Copy -2-
<PAGE> 3
provisions of this Agreement. In the event of the death, incapacity, or any
other event as a result of which neither of the Proxies shall be able to serve
as Proxy of the Shareholder, KeyCorp may appoint one or more successor Proxies
and give written notice of such appointment to the Shareholder.
3. LIMITATION ON VOTING POWER. It is expressly
understood and acknowledged by the parties hereto that nothing contained herein
is intended to restrict the Shareholder (if the Shareholder is also a director
of AFG) from voting on any matter, or otherwise from acting, in the
Shareholder's, capacity as a director of AFG with respect to any matter,
including but not limited to, the general management or over-all operation of
AFG.
4. TERMINATION. Sections 1, 2, and 3 of this
Agreement shall terminate on a date (the "Termination Date") which shall be the
earlier of (a) the date on which the Merger Agreement is terminated in
accordance with the terms thereof, (b) the day after AFG's shareholders approve
the Merger by the requisite vote (but only with respect to AFG Shares
transfered as a gift to a charitable organization), and (c) the date on which
the Merger is consummated.
5. REPRESENTATIONS, WARRANTIES, AND ADDITIONAL
COVENANTS OF THE SHAREHOLDER. The Shareholder hereby represents, warrants and
covenants to KeyCorp and the Proxy that:
(a) the Shareholder has the capacity and all
necessary power and authority to vote the AFG Shares;
(b) the appointment by the Shareholder of the Proxy
is coupled with an interest and is irrevocable in accordance with the
last paragraph of Section 705(e) of the CGCL, and this Agreement in
that respect and otherwise constitutes a legal, valid, and binding
obligation of the Shareholder enforceable in accordance with its terms
except as may be limited by bankruptcy, insolvency, or similar laws
affecting enforcement of creditors rights generally;
(c) except as provided in Section 6 hereof, prior to
the Termination Date, the Shareholder will not sell or otherwise
voluntarily dispose of any of the AFG Shares
Execution Copy -3-
<PAGE> 4
which are owned by the Shareholder or take any voluntary action which
would have the effect of removing the Shareholder's power to vote the
AFG Shares or which would be inconsistent with this Agreement, and any
additional AFG Shares acquired by the Shareholder in any manner shall,
immediately upon such acquisition, be and remain subject to all the
terms and provisions of this Agreement;
(d) in the event that the Shareholder is a
corporation, trust, partnership, fund, limited liability company, or
other entity, (i) the Shareholder has the full corporate or other
power and authority to enter into this Agreement without obtaining the
consent, approval, or authorization of any other individual,
government agency, or other party which has not already given such
consent, approval, or authorization, (ii) the individual or
individuals executing this Agreement on behalf of the Shareholder have
been duly authorized to do so by all necessary corporate or other
action, and (iii) the Shareholder has, if requested to do so by
KeyCorp, delivered to KeyCorp the written opinion of its counsel or of
Morgan, Lewis & Bockius to the effect of the preceding clauses (b),
(d)(i), and (d)(ii) of this Section 5, such counsel (if selected by
the Shareholder) and such opinion being reasonably satisfactory to
KeyCorp; and
(e) the Shareholder is an "accredited investor"
within the meaning of Regulation D promulgated under the Securities
Act of 1933, as amended, and will not resell any KeyCorp Common Stock
received in the Merger except in compliance with applicable federal
and state securities laws.
6. BENEFIT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors, and assigns (except in the case of the Proxy for which any
succession shall be as provided in Section 2 of this Agreement). From and
after the day AFG's shareholders approve the Merger by the requisite vote, the
Shareholder may transfer all or part of his AFG Shares to any members of his
immediate family, any of his lineal descendants or any trust for the benefit of
any of them, PROVIDED, HOWEVER, that the recipient of the
Execution Copy -4-
<PAGE> 5
AFG Shares agrees, in a writing delivered to KeyCorp, to be bound by the
provisions of Sections 1 and 2 hereof.
7. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original for all
purposes, but such counterparts taken together shall constitute one and the
same instrument.
8. SPECIFIC PERFORMANCE. The parties hereto
acknowledge that damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agree that the obligations of the Shareholder
and the Proxy shall be specifically enforceable and KeyCorp shall be entitled
to injunctive and other equitable relief. The Shareholder and the Proxy each
further agree to waive any bond in connection with the obtaining of any such
injunctive or equitable relief. This provision is without prejudice to any
other rights that KeyCorp may have against the Shareholder or the Proxy for any
failure to perform his, her, or its obligations under this Agreement.
9. DEFINED TERMS. Capitalized terms not otherwise
defined herein shall have the meaning assigned to them in the Merger Agreement.
10. GOVERNING LAW. This Agreement shall be
construed and enforced in accordance with the laws of the State of California
with respect to the appointment and authority of the Proxy as provided herein
and otherwise in
Execution Copy -5-
<PAGE> 6
accordance with the laws of the State of Ohio, without regard to its conflict
of laws principles.
IN WITNESS WHEREOF, the parties hereto have executed
this Voting Agreement and Irrevocable Proxy as of the day and year first above
written.
[SHAREHOLDER]
________________________________
________________________________
Print Name(s)
No. of AFG
Shares: ______ - owned
Shares: ______ - owned by spouse
______ - otherwise owned
KEYCORP
By:_____________________________
Title:__________________________
________________________________
Frank Borman
________________________________
A. E. Steinhaus
Execution Copy -6-
<PAGE> 7
accordance with the laws of the State of Ohio, without regard to its conflict
of laws principles.
IN WITNESS WHEREOF, the parties hereto
have executed this Voting Agreement and Irrevocable Proxy as of the day and
year first above written.
INVEMED ASSOCIATES, INC.
By: /s/ Kenneth G. Langone
-------------------------
Kenneth G. Langone
No. of AFG
Shares: _______ - owned
/s/ Kenneth G. Langone
-----------------------------
Kenneth G. Langone
No. of AFG
Shares: _______ - owned
Shares: _______ - owned by spouse
_______ - otherwise owned
KEYCORP
By: /s/ Andrew R. Tyson
-----------------------------
Title: Senior Vice President
/s/ Frank Borman
--------------------------------
Frank Borman
/s/ A. E. Steinhaus
--------------------------------
A. E. Steinhaus
Execution Copy -7-
<PAGE> 8
accordance with the laws of the State of Ohio, without regard to its conflict
of laws principles.
IN WITNESS WHEREOF, the parties hereto
have executed this Voting Agreement and Irrevocable Proxy as of the day and
year first above written.
By: /s/ Bernard Marcus
--------------------------------
Bernard Marcus
No. of AFG
Shares: _______ - owned
Shares: _______ - owned by spouse
_______ - otherwise owned
KEYCORP
By: /s/ Andrew R. Tyson
-------------------------------
Title: Senior Vice President
/s/ Frank Borman
---------------------------------
Frank Borman
/s/ A. E. Steinhaus
----------------------------------
A. E. Steinhaus
Execution Copy -8-
<PAGE> 9
accordance with the laws of the State of Ohio, without regard to its conflict
of laws principles.
IN WITNESS WHEREOF, the parties hereto
have executed this Voting Agreement and Irrevocable Proxy as of the day and
year first above written.
By: /s/ Arthur M. Blank
---------------------------------
Arthur M. Blank
No. of AFG
Shares: _______ - owned
Shares: _______ - owned by spouse
_______ - otherwise owned
KEYCORP
By: /s/ Andrew R. Tyson
-----------------------------
Title: Senior Vice President
/s/ Frank Borman
--------------------------------
Frank Borman
/s/ A. E. Steinhaus
--------------------------------
A. E. Steinhaus
Execution Copy -9-
<PAGE> 10
accordance with the laws of the State of Ohio, without regard to its conflict
of laws principles.
IN WITNESS WHEREOF, the parties hereto
have executed this Voting Agreement and Irrevocable Proxy as of the day and
year first above written.
QUANTUM PARTNERS LDC
By: /s/ Debbie Sharp
-----------------------------
Title: Attorney-in-fact
No. of AFG
Shares: _______ - owned
KEYCORP
By: /s/ Andrew R. Tyson
-------------------------------
Title: Senior Vice President
/s/ Frank Borman
--------------------------------
Frank Borman
/s/ A. E. Steinhaus
--------------------------------
A. E. Steinhaus
Execution Copy -10-
<PAGE> 11
accordance with the laws of the State of Ohio, without regard to its conflict
of laws principles.
IN WITNESS WHEREOF, the parties hereto
have executed this Voting Agreement and Irrevocable Proxy as of the day and
year first above written.
By: /s/ Stephen Levin
---------------------------------
Stephen Levin
No. of AFG
Shares: _______ - owned
Shares: _______ - owned by spouse
_______ - otherwise owned
KEYCORP
By: /s/ Andrew R. Tyson
-------------------------------
Title: Senior Vice President
/s/ Frank Borman
----------------------------------
Frank Borman
/s/ A. E. Steinhaus
----------------------------------
A. E. Steinhaus
Execution Copy -11-
<PAGE> 12
accordance with the laws of the State of Ohio, without regard to its conflict
of laws principles.
IN WITNESS WHEREOF, the parties hereto
have executed this Voting Agreement and Irrevocable Proxy as of the day and
year first above written.
By: /s/ Arthur B. Calcagnini
---------------------------------
Arthur B. Calcagnini
No. of AFG
Shares: _______ - owned
Shares: _______ - owned by spouse
_______ - otherwise owned
KEYCORP
By: /s/ Andrew R. Tyson
-------------------------------
Title: Senior Vice President
/s/ Frank Borman
----------------------------------
Frank Borman
/s/ A. E. Steinhaus
--------------------------------
A. E. Steinhaus
Execution Copy -12-
<PAGE> 13
accordance with the laws of the State of Ohio, without regard to its conflict
of laws principles.
IN WITNESS WHEREOF, the parties hereto
have executed this Voting Agreement and Irrevocable Proxy as of the day and
year first above written.
By: /s/ W. Robert Lappin
------------------------------
W. Robert Lappin
No. of AFG
Shares: _______ - owned
Shares: _______ - owned by spouse
_______ - otherwise owned
KEYCORP
By: /s/ Andrew R. Tyson
------------------------------
Title: Senior Vice President
/s/ Frank Borman
--------------------------------
Frank Borman
/s/ A. E. Steinhaus
---------------------------------
A. E. Steinhaus
Execution Copy -13-
<PAGE> 14
accordance with the laws of the State of Ohio, without regard to its conflict
of laws principles.
IN WITNESS WHEREOF, the parties hereto
have executed this Voting Agreement and Irrevocable Proxy as of the day and
year first above written.
By: /s/ Peter S. Gold
----------------------------
Peter S. Gold
No. of AFG
Shares: _______ - owned
Shares: _______ - owned by spouse
_______ - otherwise owned
KEYCORP
By: /s/ Andrew R. Tyson
------------------------------
Title: Senior Vice President
/s/ Frank Borman
---------------------------------
Frank Borman
/s/ A. E. Steinhaus
--------------------------------
A. E. Steinhaus
Execution Copy -14-
<PAGE> 15
accordance with the laws of the State of Ohio, without regard to its conflict
of laws principles.
IN WITNESS WHEREOF, the parties hereto
have executed this Voting Agreement and Irrevocable Proxy as of the day and
year first above written.
SPSP CORPORATION
By: /s/ Gary E. Erlbaum
------------------------------
Gary E. Erlbaum
No. of AFG
Shares: _______ - owned
/s/ Gary E. Erlbaum
---------------------------------
Gary E. Erlbaum
No. of AFG
Shares: _______ - owned
Shares: _______ - owned by spouse
_______ - otherwise owned
KEYCORP
By: /s/ Andrew R. Tyson
-----------------------------
Title: Senior Vice President
/s/ Frank Borman
----------------------------------
Frank Borman
/s/ A. E. Steinhaus
--------------------------------
A. E. Steinhaus
Execution Copy -15-
<PAGE> 16
accordance with the laws of the State of Ohio, without regard to its conflict
of laws principles.
IN WITNESS WHEREOF, the parties hereto
have executed this Voting Agreement and Irrevocable Proxy as of the day and
year first above written.
W.M. KECK TRUST F/B/O
WILLAMETTA-MYRON KECK
By: /s/ Robert A. Day
____________________________
Robert A. Day
No. of AFG
Shares: _______ - owned
ALICE B. KECK F/B/O ALICE BERTAKECK
By: /s/ Robert A. Day
____________________________
Robert A. Day
No. of AFG
Shares: _______ - owned
W.M. THEODORE TRUST
By: /s/ Robert A. Day
____________________________
Robert A. Day
No. of AFG
Shares: _______ - owned
WILLIAMETTA KECK DAY FOUNDATION
By: /s/ Robert A. Day
____________________________
Robert A. Day
No. of AFG
Shares: _______- owned
Execution Copy -16-
<PAGE> 17
By: /s/ Robert A. Day
______________________________
Robert A. Day
No. of AFG
Shares: _______ - owned
Shares: _______ - owned by spouse
_______ - otherwise owned
KEYCORP
By: /s/ Andrew R. Tyson
______________________________
Title: Senior Vice President
/s/ Frank Borman
______________________________
Frank Borman
/s/ A. E. Steinhaus
______________________________
A. E. Steinhaus
Execution Copy -17-
<PAGE> 1
Exhibit 5
SHAREHOLDERS OF AFG EXECUTING
-----------------------------
VOTING AGREEMENT AND IRREVOCABLE PROXY
--------------------------------------
<TABLE>
<CAPTION>
Name and Address No. of AFG Shares Owned
---------------- -----------------------
<S> <C>
1. Mr. Bernard Marcus 231,774
The Home Depot Inc.
2727 Paces Ferry Road
Atlanta, GA 30339
2. Mr. Arthur Blank 260,422
The Home Depot, Inc.
2727 Paces Ferry Road
Atlanta, GA 30339
3. Mr. Stephen Levin 201,222
350 Royal Poincina Plaza
Suite 322B
Palm Beach, FL 33480
4. Mr. Arthur Calcagnini 213,871
Lombard World Trade, Inc.
20 Exchange Place
New York, NY 10005
5. Mr. George Soros 1,949,933
Soros Fund Management
888 Seventh Avenue
33rd Floor
New York, NY 10106
6. Mr. W. Robbert Lappin 233,582
Lappin Communications,
Inc.
231 Bradley Place
Palm Beach, FL 33480
7. Mr. Peter S. Gold 249,466
2029 Century Park East
Los Angeles, CA 90067
</TABLE>
-1-
<PAGE> 2
<TABLE>
<S> <C>
8. Mr. Gary Erlbaum 402,661
Green Tree Properties
Corporation
44 West Lancaster Avenue
Suite 110
Ardmore, PA 19003
9. Mr. Kenneth G. Langone 958,917
Invemed Associates, Inc.
375 Park Avenue
Suite 2205
New York, NY 10152
10. Mr. Robert A. Day 477,306
c/o Oakmont Corporation
Atten: Steven D. Holzman
865 S. Figueroa Street
Los Angeles, CA 31500
Total 5,179,154
</TABLE>
-2-
