EXHIBIT 99(K)
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
UNITED PARCEL SERVICE, INC.
FIRST INTERNATIONAL BANCORP, INC.
AND
STAG MERGER COMPANY, INC.
DATED AS OF JANUARY 15, 2001
TABLE OF CONTENTS
PAGE
----
1. THE MERGER...............................................
1.1. Merger...............................................
1.2. Effective Time.......................................
1.3. Effect of Merger.....................................
1.4. Additional Actions...................................
1.5. Tax Consequences.....................................
2. CONVERSION OF SHARES.....................................
2.1. Conversion of Shares.................................
2.2. Escrow Shares........................................
2.3. Assumption of Employee and Director Stock Options....
2.4. Exchange of Certificates.............................
2.5. Closing of Target's Transfer Books...................
2.6. Changes in Parent Common Stock.......................
3. REPRESENTATIONS AND WARRANTIES OF PARENT.................
3.1. Corporate Organization...............................
3.2. Authority............................................
3.3. Capitalization.......................................
3.4. Information in Disclosure Documents, Registration
Statement, Etc. .......................................
3.5. Consents and Approvals; No Violation.................
3.6. Reports..............................................
3.7. Financial Statements.................................
3.8. Absence of Certain Changes or Events.................
3.9. Tax Treatment........................................
3.10. Fees................................................
3.11. Parent Action.......................................
3.12. Disclosure Letter...................................
4. REPRESENTATIONS AND WARRANTIES OF TARGET.................
4.1. Corporate Organization...............................
4.2. Authority............................................
4.3. Capitalization.......................................
4.4. Subsidiaries.........................................
4.5. Information in Disclosure Documents, Registration
Statement, Etc. .......................................
4.6. Consents and Approvals; No Violation.................
4.7. Reports..............................................
4.8. Financial Statements.................................
4.9. Taxes................................................
4.10. Officers and Employees..............................
4.11. Employee Plans......................................
4.12. Labor Relations.....................................
4.13. Material Contracts..................................
4.14. Absence of Certain Changes or Events................
4.15. Litigation..........................................
4.16. Compliance with Laws, Orders, Guarantee Programs....
4.17. Agreements with Bank Regulators, Etc. ..............
4.18. Target Ownership of Stock...........................
4.19. Fees................................................
4.20. Target Action.......................................
4.21. Vote Required.......................................
i
PAGE
----
4.22. Material Interests of Certain Persons...............
4.23. Intellectual Property...............................
4.24. Interest Rate Risk Management Instruments...........
4.25. Insurance...........................................
4.26. Real Property and Environmental Matters.............
4.27. Rescission of Repurchases...........................
4.28. Allowances For Possible Loan Losses.................
4.29. Tax Treatment.......................................
4.31. Disclosure Letter...................................
5. COVENANTS................................................
5.1. Acquisition Proposals................................
5.2. Interim Operations of Target.........................
5.3. Employee Matters.....................................
5.4. Access and Information...............................
5.5. Certain Filings, Consents and Arrangements...........
5.6. State Takeover Statutes..............................
5.7. Indemnification and Insurance........................
5.8. Additional Agreements................................
5.9. Publicity............................................
5.10. Preparation of the Registration Statement and the
Proxy Statement; Target Meeting........................
5.11. Stock Exchange Listings.............................
5.12. Shareholder Litigation..............................
5.13. Tax-free Reorganization Treatment...................
5.14. Letter from Target's Accountants....................
5.15. Expenses............................................
5.16. Adverse Action......................................
5.17. Standstill Agreements; Confidentiality Agreements...
5.18. Affiliates..........................................
5.19. Dividends...........................................
5.20 Exemption from Liability Under Section 16(b).........
5.21 Target Stock Options/Registration Statements on Form
S-8....................................................
5.22. Calculation of Net Book Value.......................
5.23. Reserved............................................
5.24. Calculation of Escrow Balance.......................
5.25. Calculation of Escrow Shares........................
5.26. Repayment of Stockholder Loans......................
6. CLOSING MATTERS..........................................
6.1. The Closing..........................................
6.2. Documents and Certificates...........................
7. CONDITIONS...............................................
7.1. Conditions to Each Party's Obligations to Effect the
Merger.................................................
7.2. Conditions to Obligation of Target to Effect the
Merger.................................................
7.3. Conditions to Obligation of Parent to Effect the
Merger.................................................
8. MISCELLANEOUS............................................
8.1. Termination..........................................
8.2. Expense Reimbursement................................
8.3. Non-Survival of Representations, Warranties and
Agreements.............................................
8.4. Waiver and Amendment.................................
8.5. Entire Agreement.....................................
8.6. Applicable Law.......................................
8.7. Certain Definitions..................................
ii
PAGE
----
8.8. Descriptive Headings.................................
8.9. Notices..............................................
8.10. Counterparts........................................
8.11. Assignment..........................................
8.12. Severability........................................
8.13. Void................................................
EXHIBITS
- --------
Exhibit A -- Form of Voting Agreement
Exhibit B -- Form of Affiliate Agreement
Exhibit C -- Form of Escrow and Indemnity Agreement
INDEX TO DEFINED TERMS
TERM SECTION
---- -------
145 Affiliate............................................... 5.18(a)
Acquisition Transaction..................................... 5.1
ADA......................................................... 4.12(i)
ADEA........................................................ 4.12(i)
Affiliate................................................... 8.7(a)
Agreement................................................... First Paragraph
AIG Insurance Policy........................................ 4.16(b)
Allowance................................................... 4.28
Amendments.................................................. 5.3(b)
Applicable Benefit Laws..................................... 4.11(b)
BHC Act..................................................... 4.1
Break-up Fee................................................ 8.2(a)
Burdensome Condition........................................ 7.1(c)
Calculation Date............................................ 5.22
CBD......................................................... 4.7
Certificate................................................. 2.4(a)
Certificate of Merger....................................... 1.2
Class A Common Stock........................................ 3.3
Closing..................................................... 6.1
Closing Date................................................ 6.1
Code........................................................ Recitals
Commission.................................................. 3.4
Confidentiality Agreement................................... 5.4
Consents.................................................... 7.1(c)
Constituent Corporations.................................... 1.2
Control..................................................... 8.7(a)
Costs....................................................... 5.7(a)
Deposit Acquirors........................................... 5.27(a)
Deposit Assumption.......................................... 5.27(a)
Deposit Assumption Agreement................................ 5.27(a)
Deposit Sale Agreement...................................... 5.19(b)
DGCL........................................................ 1.1
Effective Time.............................................. 1.2
Employee/Consulting Agreements.............................. 4.10
Environmental Law........................................... 4.26(a)(i)
iii
TERM SECTION
---- -------
ERISA Affiliate Plan........................................ 8.7(i)
ERISA....................................................... 8.7(h)
Escrow...................................................... 2.2(a)
Escrow and Indemnity Agreement.............................. 2.2(a)
Escrow Calculations......................................... 5.24
Exchange Act................................................ 3.5
Exchange Agent.............................................. 2.4(a)
Exchange Fund............................................... 2.4(a)
Ex-Im....................................................... 4.16(b)
FDIA........................................................ 4.17
FDIC........................................................ 4.7
Federal Reserve Board....................................... 4.7
FLSA........................................................ 4.12(i)
FMLA........................................................ 4.12(i)
GAAP........................................................ 3.7
Governmental Entity......................................... 3.5
Group....................................................... 8.7(j)
Hazardous Substance......................................... 4.26(a)(ii)
HSR Act..................................................... 3.5
Indemnified Party........................................... 5.7(a)
Insurance Amount............................................ 5.7(b)
Interim Financial Statements................................ 4.8
Interim Reports............................................. 5.2(j)
IRS......................................................... 4.11
Labor laws.................................................. 4.12(g)
Market Price................................................ 8.7(q)
Material Adverse Effect..................................... 8.7(r)
Merger...................................................... Recitals
Merger Consideration........................................ 8.7(s)
NLRB........................................................ 4.12(a)
New Option.................................................. 2.3(a)
ORE......................................................... 4.28
OSHA........................................................ 4.12(k)
Parent...................................................... First Paragraph
Parent Common Stock......................................... 3.3
Parent Disclosure Letter.................................... 3.13
Parent SEC Reports.......................................... 3.6
Parent Stock Option Plans................................... 3.3(e)
PBGC........................................................ 4.11
PCBs........................................................ 4.26(a)(ii)
Per Share Merger Consolidation.............................. 8.7(u)
Per Share Stock Consideration............................... 8.7(y)
Person...................................................... 8.7(x)
Preferred Stock............................................. 3.3
Proxy Statement............................................. 3.4
Real Properties............................................. 4.26(a)(iii)
Required Regulatory Changes................................. 5.2(h)
Recommended Regulatory Changes.............................. 4.17(b)
Regulatory Changes.......................................... 5.2(h)
Registration Statement...................................... 3.4
Regulatory Approval......................................... 8.7(y)
iv
TERM SECTION
---- -------
Regulatory Financial Statements............................. 4.30
SBA......................................................... 4.16(b)
Securities Act.............................................. 3.4
Silvers Agreement........................................... 7.3(d)
SROs........................................................ 4.7
Stockholder Loan............................................ 5.26
Sub......................................................... First Paragraph
Subsidiary.................................................. 8.7(dd)
Surviving Corporation....................................... 1.3(a)
Target...................................................... First Paragraph
Target Benefit Plan......................................... 8.7(gg)
Target Common Stock......................................... Recitals
Target Contracts............................................ 4.13
Target Disclosure Letter.................................... 4.29
Target Employee Plans....................................... 4.11
Target Insurance Policies................................... 4.25
Target Intellectual Property................................ 4.23
Target Leases............................................... 4.26(f)
Target Meeting.............................................. 5.10(b)
Target Option............................................... 2.3(a)
Target Preferred Stock...................................... 4.3
Target Real Properties...................................... 4.26(e)
Target SEC Reports.......................................... 4.7
Target Subsidiaries......................................... 4.4
Tax......................................................... 4.9(a)
Tax Return.................................................. 4.9(b)
USDA........................................................ 4.16(b)
WARN........................................................ 4.12(n)
v
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of January 15, 2001
("AGREEMENT"), is made by and among UNITED PARCEL SERVICE, INC., a Delaware
corporation ("PARENT"), FIRST INTERNATIONAL BANCORP, INC., a Delaware
corporation ("TARGET"), and STAG MERGER COMPANY, INC., a Delaware corporation
and a wholly owned subsidiary of Parent ("SUB").
WHEREAS, Parent and Target have each determined that it is in the best
interests of their respective shareholders for Sub to merge with and into Target
upon the terms and subject to the conditions set forth in this Agreement (the
"MERGER"), so that Target will continue as the surviving corporation of the
Merger and will become a wholly owned subsidiary of Parent;
WHEREAS, the respective Boards of Directors of Parent, Target and Sub have
approved and declared advisable the Merger, the terms and provisions of this
Agreement and the transactions contemplated hereby;
WHEREAS, the Board of Directors of Target has determined that the Merger is
in furtherance of and consistent with its long-term business strategies and is
fair to and in the best interests of its stockholders;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "CODE"), and this Agreement is
intended to be and is adopted as a plan of reorganization for purposes of
Section 368 of the Code; and
WHEREAS, as a condition to, and contemporaneously with, the execution of
this Agreement, certain holders of Target's common stock, $.10 par value per
share (the "TARGET COMMON STOCK"), have entered into voting agreements in the
form attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
1. THE MERGER
1.1. Merger. Subject to the terms and conditions of this Agreement, the
Certificate of Merger (as defined in Section 1.2) and the DGCL (as hereinafter
defined) at the Effective Time (as defined in Section 1.2), Sub will be merged
with and into Target in accordance with the applicable provisions of the
Delaware General Corporation Law ("DGCL") and the separate corporate existence
of Sub will thereupon cease.
1.2. Effective Time. As soon as practicable after satisfaction or waiver
of all conditions to the Merger, Sub and Target (the "CONSTITUENT CORPORATIONS")
shall cause a Certificate of Merger complying with the requirements of the DGCL
to be filed with the Secretary of State of the State of Delaware ("CERTIFICATE
OF MERGER"). The Merger will become effective upon the filing of the Certificate
of Merger, or at such later time as shall be specified in such filing
("EFFECTIVE TIME").
1.3. Effect of Merger. The Merger will have the effects specified in the
DGCL. Without limiting the generality of the foregoing:
(a) Target will be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "SURVIVING CORPORATION") and will continue
to be governed by the laws of the State of Delaware, and the separate
corporate existence of Target and all of its rights, privileges, powers and
franchises, public as well as private, and all its debts, liabilities and
duties as a corporation organized under the DGCL, will continue unaffected
by the Merger.
(b) The Certificate of Incorporation and Bylaws of Target in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until amended in
accordance with applicable law.
(c) The directors and officers of Sub 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
1
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 Certificate of Incorporation and Bylaws and the
DGCL.
1.4. Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable to
(i) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Target, or (ii) otherwise carry out the purposes of this
Agreement, Target and its officers and directors shall be deemed to have granted
to the Surviving Corporation an irrevocable power of attorney to execute and
deliver all such deeds, assignments or assurances in law or any other acts as
are necessary or desirable to (y) vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of Target or (z) otherwise carry
out the purposes of this Agreement, in all cases consistent with the terms of
this Agreement.
1.5. Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code and that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
2. CONVERSION OF SHARES
2.1. Conversion of Shares.
(a) Subject to Section 2.4(h), at the Effective Time, each share of
Target Common Stock that is issued and outstanding immediately prior to the
Effective Time (other than shares of Target Common Stock owned by Parent or
any direct or indirect wholly-owned subsidiary of Parent) shall be
automatically canceled, retired and converted into the right to receive the
Per Share Stock Consideration (as defined in Section 8.7);
(b) each share of Target Common Stock that is issued and outstanding
immediately prior to the Effective Time and that is owned by Parent or any
direct or indirect wholly-owned subsidiary of Parent shall be automatically
canceled and retired; and
(c) each share of capital stock of Sub that is issued and outstanding
immediately prior to the Effective Time shall be automatically converted
into and become one fully paid and nonassessable share of common stock, par
value $.10 per share, of the Surviving Corporation.
2.2. Escrow Shares.
(a) Prior to the Effective Time, Parent, the Escrow Agent and the
Stockholder Representative shall enter into the Escrow and Indemnity
Agreement in the form attached hereto as Exhibit C (the "ESCROW AND
INDEMNITY AGREEMENT") to establish an escrow of certain shares of Parent
Common Stock to fund certain indemnification obligations of the
Stockholders of Target (the "ESCROW"). Approval of this Agreement by the
Stockholders of Target at the Target Meeting shall constitute approval of
(i) the establishment of the Escrow contemplated by the Escrow and
Indemnity Agreement, (ii) the appointment of the Escrow Agent and the
Stockholder Representative and (iii) the actions taken by the Stockholder
Representative and the Escrow Agent in accordance with this Agreement and
the Escrow and Indemnity Agreement, as the case may be.
(b) As soon as practicable after the Effective Time, and in any event
within five (5) business days after the Effective Time, the Escrow Shares
(plus a proportionate share of any additional shares of Parent Common Stock
as may be issued with respect to the Escrow Balance upon any stock splits,
stock dividends or other recapitalizations effected by Parent following the
Effective Time), without any act of any Stockholder of Target, will be
deposited in the Escrow with the Escrow Agent, such deposit to be governed
by the terms set forth in the Escrow and Indemnity Agreement. The portion
of the Escrow Shares applicable to each Stockholder of Target shall be in
proportion to the aggregate number of shares of Parent Common Stock which
such holder would otherwise be entitled under Section 2.1. The Escrow
2
Shares shall be held by the Escrow Agent and distributed to Parent or the
former Stockholders of Target in accordance with the terms of the Escrow
and Indemnity Agreement.
(c) The right to receive the Escrow Shares pursuant to the Escrow and
Indemnity Agreement (i) shall not be transferable by the Stockholders of
the Target otherwise than (A) by will or (B) by the laws of descent and
distribution and (ii) shall not be represented by any form of certificate
or instrument. The books and records of Parent shall reflect the fact that
the Stockholders of Target are the beneficial owners of the Escrow Shares,
subject to the Escrow and Indemnity Agreement.
2.3. Assumption of Employee and Director Stock Options.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of any holder of an option, each option granted by
Target to purchase shares of Target Common Stock (any such option to
purchase shares of Target Common Stock being referred to herein as a
"TARGET OPTION") under the Target's 2000 Stock Option Plan that is
outstanding and unexercised, whether vested or unvested, immediately prior
to the Effective Time shall terminate and to the extent that the Per Share
Merger Consideration exceeds the option price per share of such Target
Option, the Parent shall deliver promptly after the Effective Time, and in
any event within five (5) business days after the Effective Time, a cash
payment to the optionee equal to the product of (i) the excess of the value
of the Per Share Merger Consideration over the option price and (ii) the
number of unexercised shares of Target Common Stock subject to such Target
Option.
(b) At the Effective Time, by virtue of the Merger and without any
action on the part of any holder of an option, with respect to each Target
Option granted under the Target's Amended and Restated 1996 Stock Option
Plan that is outstanding and unexercised, whether vested or unvested,
immediately prior to the Effective Time, and with respect to each Target
Option listed in Schedule 4.3(d) hereto that is outstanding and
unexercised, whether vested or unvested, immediately prior to the Effective
Time, Parent shall cause to be granted to each such optionee an option
under the Parent Incentive Compensation Plan (each, a "NEW OPTION") to
purchase such number of shares of Class A Common Stock at an exercise price
determined as provided below (and otherwise having a duration equal to the
remaining duration of each such Target Option and other terms and
conditions as each such Target Option except that such New Option shall
also provide for its exercise using shares of Class A Common Stock pursuant
to the terms of the Parent Incentive Compensation Plan whether or not such
Target Option provided for its exercise with Target Common Stock). The
number of shares of Class A Common Stock to be subject to the New Option
and the exercise price per share under the New Option shall be determined
as follows:
(i) the number of shares of Class A Common Stock to be subject to
the New Option shall be equal to the product (rounded down to the
nearest whole share) of (x) the number of shares of Target Common Stock
subject to the Target Option, and (y) the fraction (rounded to four
decimal places) obtained by dividing (1) the Per Share Merger
Consideration by (2) the Market Price; and
(ii) the exercise price per share of Class A Common Stock under the
New Option shall be equal to the result (rounded up to the nearest
penny) of (x) the exercise price per share of Target Common Stock under
the Target Option, divided by (y) the fraction (rounded to four decimal
places) obtained by dividing (1) the Per Share Merger Consideration by
(2) the Market Price.
(c) At the Effective Time, by virtue of the Merger and without any
action on the part of any holder of an option, with respect to each Target
Option granted under the Target's 1994 Incentive Stock Option Plan that is
outstanding and unexercised, whether vested or unvested, immediately prior
to the Effective Time, Parent shall cause to be granted to each such
optionee a New Option to purchase such number of shares of Class A Common
Stock which shall be intended to qualify as an incentive stock option under
Section 422 of the Code, at such exercise price determined in accordance
with Section 2.3(b), provided, however, that if the methodology described
in Section 2.3(b) above would result in the New Option being treated as a
nonqualified stock option instead of an incentive stock option, then the
method for determining the number of shares of Class A Common Stock subject
to such New Option and the option
3
price of such New Option shall be the method that is consistent with the
requirements of Section 424(a) of the Code.
2.4. Exchange of Certificates.
(a) Prior to the Effective Time, Parent shall designate an exchange
agent (the "EXCHANGE AGENT") in connection with the Merger pursuant to an
exchange agent agreement providing for, among other things, the matters set
forth in this Section 2.4. At or prior to the Effective Time, Parent shall
deposit, or cause to be deposited, with the Exchange Agent, for the benefit
of the holders of Certificates (as hereinafter defined), (i) a sufficient
number of shares of Parent Common Stock to satisfy Parent's obligations
pursuant to Section 2.1 and (ii) cash in lieu of fractional shares (such
cash and certificates for shares of Parent Common Stock being hereinafter
referred to as the "EXCHANGE FUND") to be issued in exchange for
outstanding shares of Target Common Stock in accordance with the terms of
Section 2.4(h). Except as set forth herein, from and after the Effective
Time, each holder of a certificate that immediately prior to the Effective
Time represented outstanding shares of Target Common Stock ("CERTIFICATE")
shall be entitled to receive in exchange therefor, upon surrender thereof
to the Exchange Agent, the Per Share Stock Consideration for each share of
Target Common Stock so represented by the Certificate surrendered by such
holder thereof (less the number of shares of Parent Common Stock deposited
in the Escrow applicable to such holder pursuant to Section 2.2), together
with any dividends or other distributions as provided in Section 2.4(e).
The certificates representing shares of Parent Common Stock issued in
exchange for outstanding shares of Target Common Stock shall be properly
issued and countersigned and executed and authenticated, as appropriate.
(b) Promptly after the Effective Time, and, in any event, within five
(5) business days thereafter, Parent shall cause the Exchange Agent to mail
to each record holder of a Certificate a notice and letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificate shall pass, only upon proper delivery of the
Certificate to the Exchange Agent) advising such holder of the
effectiveness of the Merger and the procedures to be used in effecting the
surrender of the Certificate in exchange for the Per Share Stock
Consideration. Target shall have the right to review both the letter of
transmittal and the instructions prior to the Effective Time and provide
reasonable comments thereon. Upon surrender to the Exchange Agent of a
Certificate, together with such letter of transmittal duly executed and
completed in accordance with the instructions thereon, and such other
documents as may reasonably be requested, the Exchange Agent shall promptly
deliver to the person entitled thereto (i) a certificate representing that
number of whole shares of Parent Common Stock to which such holder of
Target Common Stock shall have become entitled pursuant to the provisions
of Section 2.1 (less the number of shares of Parent Common Stock deposited
in the Escrow applicable to such holder pursuant to Section 2.2), and (ii)
a check in the amount of cash in lieu of fractional shares, if any, which
such holder has the right to receive pursuant to the provisions of Section
2.4(h) in respect of the Certificate surrendered by such holder thereof,
and such Certificate shall forthwith be canceled.
(c) If delivery of all or part of the Per Share Stock Consideration is
to be made to a person other than the person in whose name a surrendered
Certificate is registered, it shall be a condition to such delivery or
exchange that the Certificate 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 surrendered or shall have
established to the reasonable satisfaction of the Exchange Agent that such
tax either has been paid or is not payable.
(d) Subject to Section 2.4(e), until surrendered and exchanged in
accordance with this Section 2.4, each Certificate shall, after the
Effective Time, represent solely the right to receive the Per Share Stock
Consideration, multiplied by the number of shares of Target Common Stock
evidenced by such Certificate, together with any dividends or other
distributions as provided in Section 2.4(e), and shall represent no other
rights. From and after the Effective Time, Parent and Surviving Corporation
shall be entitled to treat such Certificates that have not yet been
surrendered for exchange as evidencing the ownership of the aggregate Per
Share Stock Consideration into which the shares of Target Common
4
Stock represented by such Certificates may be converted, notwithstanding
any failure to surrender such Certificates. Three hundred sixty (360) days
following the Effective Time, the Exchange Agent shall deliver to the
Surviving Corporation any shares of Parent Common Stock and any funds
(including any interest received with respect thereto) in the Exchange Fund
that have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to Parent (subject to abandoned
property, escheat or other similar laws) with respect to the Per Share
Stock Consideration, cash in lieu of fractional shares and unpaid dividends
and distributions thereon (as determined in accordance with Section 2.4(e))
deliverable or payable upon due surrender of their Certificates. Neither
Exchange Agent nor any party hereto shall be liable to any holder of shares
of Target Common Stock for any Per Share Stock Consideration (or dividends,
distributions or interest with respect thereto) delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
(e) Whenever a dividend or other distribution is declared by Parent on
the Parent Common Stock, the record date for which is at or after the
Effective Time, the declaration shall include dividends or other
distributions on all shares issuable pursuant to this Agreement (without
interest thereon), provided that no dividends or other distributions
declared or made with respect to Parent Common Stock shall be paid to the
holder of any unsurrendered Certificate with respect to the share(s) of
Parent Common Stock represented thereby unless and until the holder of such
Certificate shall surrender such Certificate in accordance with this
Section 2.
(f) If any Certificate shall have been lost, stolen or destroyed, the
Exchange Agent shall deliver in exchange for such lost, stolen or destroyed
certificate, upon the making of an affidavit of that fact by the holder
thereof in form satisfactory to the Exchange Agent, the Per Share Stock
Consideration, as may be required pursuant to this Agreement; provided,
however, that the Exchange Agent may, in its sole discretion and as a
condition precedent to the delivery of the Per Share Stock Consideration to
which the holder of such Certificate is entitled as a result of the Merger,
require the owner of such lost, stolen or destroyed certificate to deliver
a bond in such sum as it may direct as indemnity against any claim that may
be made against Target, Parent, the Surviving Corporation or the Exchange
Agent or any other party with respect to the certificate alleged to have
been lost, stolen or destroyed.
(g) Holders of unsurrendered Certificates will not be entitled to vote
at any meeting of Parent stockholders.
(h) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Parent Common Stock
shall be issued upon the surrender for exchange of a Certificate or
Certificates. No dividends or distributions of Parent 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
stockholders of Parent. In lieu of any such fractional shares, holders of
Certificates otherwise entitled to fractional shares shall be entitled to
receive promptly from the Exchange Agent a cash payment in an amount equal
to the fraction of such share of Parent Common Stock to which such holder
would otherwise be entitled multiplied by the Market Price (as defined in
Section 8.7). Payments of any cash in lieu of fractional shares shall be
made without interest thereon.
2.5. Closing of Target's Transfer Books. Immediately after the Effective
Time, the stock transfer books of Target shall be closed. In the event of a
transfer of ownership of Target Common Stock which is not registered in the
transfer records of Target, the Per Share Stock Consideration to be distributed
pursuant to this Agreement may be delivered to a transferee (less the number of
Shares of Parent Common Stock deposited in the Escrow applicable to the holder
of such shares of Parent Common Stock at the Effective Time pursuant to Section
2.2), if a Certificate is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by payment of any
applicable stock transfer taxes. Parent and the Exchange Agent shall be entitled
to rely upon the stock transfer books of Target to establish the identity of
those persons entitled to receive the Per Share Stock Consideration specified in
this Agreement for their shares of Target Common Stock, which books shall be
conclusive with respect to the ownership of such shares. In the event of a
dispute with respect to the ownership of any such shares, the Surviving
Corporation and the Exchange Agent shall be entitled to deposit any Per Share
Stock Consideration
5
represented thereby in escrow with an independent party and thereafter be
relieved with respect to any claims to such Per Share Stock Consideration.
2.6. Changes in Parent Common Stock. If, between the date of this
Agreement and the Effective Time, the shares of Parent 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
Per Share Stock Consideration shall be adjusted accordingly.
3. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Target that:
3.1. Corporate Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified to do business as a foreign
corporation in each jurisdiction in which its ownership or lease of property or
the nature of the business conducted by it makes such qualification necessary,
except for such jurisdictions in which the failure to be so qualified would not
have a Material Adverse Effect (as defined in Section 8.7). Parent has the
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as it is now being conducted. Parent has
heretofore made available to Target true and complete copies of its certificate
of incorporation and bylaws, as amended to date.
3.2. Authority. Each of Parent and Sub has the requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly approved by the Board of Directors of Parent and Sub and no other corporate
proceedings on the part of Parent or Sub are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly executed and delivered by, and constitutes the valid and binding
obligation of, each of Parent and Sub enforceable against each of them in
accordance with its terms, except as enforceability thereof may be limited by
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other 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.
3.3. Capitalization. As of the date hereof, the authorized capital stock
of Parent consists of 4,600,000,000 shares of Class A Common Stock par value
$.01 per share (the "CLASS A COMMON STOCK"), 5,600,000,000 shares of Class B
Common Stock par value $.01 per share (the "PARENT COMMON STOCK") and
200,000,000 shares of preferred stock (the "PREFERRED STOCK"). As of the close
of business on December 31, 2000:
(a) 935,873,745 shares of Class A Common Stock were duly authorized,
validly issued and outstanding, fully paid and nonassessable;
(b) 198,819,384 shares of Parent Common Stock were duly authorized,
validly issued and outstanding, fully paid and nonassessable;
(c) no shares of Preferred Stock were issued and outstanding;
(d) no shares of Class A Common Stock, Parent Common Stock or
Preferred Stock were held in Parent's treasury; and
(e) 29,314,802 shares of Class A Common Stock were reserved for
issuance upon exercise of employee stock options under Parent's various
stock option plans (the "PARENT STOCK OPTION PLANS").
Except as set forth in this Section 3.3, there are no outstanding subscriptions,
options, warrants, rights, convertible securities or any other agreements or
commitments of any character relating to the issued or unissued capital stock or
other securities of Parent obligating Parent to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock of Parent or
obligating Parent to grant, extend or
6
enter into any subscription, option, warrant, right, convertible security or
other similar agreement or commitment. Except as provided in this Agreement,
there are no voting trusts or other agreements or understandings to which Parent
or any Parent subsidiary is a party with respect to the voting of the capital
stock of Parent. All of the shares of Parent Common Stock issuable in exchange
for Target Common Stock at the Effective Time in accordance with this Agreement
and all of the shares of Class A Common Stock issuable upon exercise of New
Options will be, when so issued, duly authorized, validly issued, fully paid and
nonassessable and will not be subject to preemptive rights.
3.4. Information in Disclosure Documents, Registration Statement,
Etc. None of the information with respect to Parent provided by Parent for
inclusion in (i) the Registration Statement to be filed with the Securities and
Exchange Commission (the "COMMISSION") by Parent on Form S-4 under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), for the purpose of
registering the shares of Parent Common Stock to be issued in the Merger (the
"REGISTRATION STATEMENT") and (ii) any proxy statement of Target ("PROXY
STATEMENT") required to be mailed to Target's Stockholders in connection with
the Merger will, in the case of the Proxy Statement or any amendments or
supplements thereto, at the time of the mailing of the Proxy Statement and any
amendments or supplements thereto, and at the time of the Target Meeting (as
defined in Section 5.10(b)), or, in the case of the Registration Statement, at
the time it becomes effective, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Registration Statement will comply as to form
in all material respects with the provisions of the Securities Act and the rules
and regulations promulgated thereunder.
3.5. Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by Parent and Sub nor the consummation by Parent and
Sub of the transactions contemplated hereby will (a) conflict with or result in
any breach of any provision of its certificate of incorporation or bylaws, (b)
violate, conflict with, constitute a default (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 or other encumbrance upon any of the properties or assets
of Parent or any Significant Subsidiary of Parent under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Parent or
any Significant Subsidiary of Parent is a party or to which it or any of Parent
or any of Parent's Significant Subsidiary's properties or assets are subject,
except for such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens or other encumbrances, which, either
individually or in the aggregate, will not have a Material Adverse Effect, (c)
constitute or result in a violation of any law, rule, ordinance or regulation or
judgment, decree, order, award or governmental or non-governmental permit or
license to which Parent is subject, except for the consents, approvals and
notices set forth below and except for such violations which, either
individually or in the aggregate, will not have a Material Adverse Effect, or
(d) require any consent, approval, authorization or permit of or from, or filing
with or notification to, any court, governmental authority or other regulatory
or administrative agency or commission ("GOVERNMENTAL ENTITY"), except (i)
pursuant to the Securities Act and the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), (ii) filing the Certificate of Merger, (iii)
filings required under the securities or blue sky laws of the various states,
(iv) the filing of, and approval by the Connecticut Commissioner of, an
Acquisition Statement pursuant to Conn. Gen. Statutes sec. 36a-184 and such
other filings, notices, reports and other matters as may be required in
connection therewith, (v) for those required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), (vi) filings pursuant to
the rules of the New York Stock Exchange, (vii) filings and approvals pursuant
to any applicable state takeover law, or (viii) consents, approvals,
authorizations, permits, filings or notifications which, if not obtained or made
will not, individually or in the aggregate, have a Material Adverse Effect.
3.6. Reports. Since January 1, 1998, Parent, and its predecessor, United
Parcel Service of America, Inc., has timely filed all reports, registrations and
statements, together with any required amendments thereto, that it was required
to file with the Commission under Sections 12(b), 12(g), 13(a) or 14(a) of the
Exchange Act, including, but not limited to Forms 10-K, Forms 10-Q and proxy
statements ("PARENT SEC REPORTS"), and all other reports and statements required
to be filed by Parent, or such predecessor, including, without
7
limitation, any report or statement required to be filed pursuant to laws, rules
or regulations of the United States, any state, or any Governmental Entity, and
has paid all fees and assessments due and payable in connection therewith,
except where the failure to file such report, registration or statement, or to
pay such fees and assessments, either individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. As of their
respective dates, the Parent SEC Reports complied in all material respects with
the requirements of the Commission and did 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 therein, in light of the circumstances under
which they were made, not misleading.
3.7. Financial Statements. The audited consolidated financial statements
of Parent included in Parent's annual report on Form 10-K as filed with the
Commission for the year ended December 31, 1999, and the unaudited interim
financial statements of Parent as of and for the nine months ended September 30,
2000 included in the quarterly report on Form 10-Q as filed with the Commission,
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis (except as may be indicated therein or in
the notes thereto) and fairly present, in all material respects, the
consolidated financial position of Parent and Parent's consolidated Subsidiaries
as of the dates thereof and the results of their operations and cash flows for
the periods then ended, subject, in the case of the unaudited interim financial
statements, to normal year-end and audit adjustments and any other adjustments
described therein, and are derived from the books and records of Parent and
Parent's consolidated Subsidiaries, which are complete and accurate in all
material respects. There exist no liabilities of Parent and its consolidated
Subsidiaries, contingent or otherwise, of a type required to be disclosed in
accordance with GAAP, except (i) as disclosed in the Parent SEC Reports, (ii)
for liabilities incurred since the latest date of the Parent SEC Reports in the
ordinary course of business, and (iii) for liabilities which, either
individually or in the aggregate, have not had and could not reasonably be
expected to have a Material Adverse Effect.
3.8. Absence of Certain Changes or Events. Except for liabilities incurred
in connection with this Agreement or the transactions contemplated hereby, since
December 31, 1999, Parent and its Significant Subsidiaries have conducted their
business only in the ordinary course or as disclosed in any Parent SEC Reports,
and, except as may be disclosed in any Parent SEC Reports, there has not been
any change or event having a Material Adverse Effect on Parent.
3.9. Tax Treatment. Parent has not taken or agreed to take any action that
could reasonably be expected to cause the Merger to fail to qualify as a
reorganization under Section 368(a) of the Code.
3.10. Fees. Except for the fees paid and payable to Goldman, Sachs & Co.,
neither Parent nor any of Parent's Subsidiaries has paid or will become
obligated to pay any fee or commission to any broker, finder or intermediary in
connection with the transactions contemplated by this Agreement.
3.11. Litigation. There is no claim, suit, action, proceeding or
investigation pending, or, to the knowledge of Parent, threatened, against, or
affecting Parent or any Significant Subsidiary of Parent that has had or could
reasonably be expected to have, a material and adverse effect on Parent's or
Sub's ability to execute and deliver this Agreement or consummate the
transactions contemplated herein.
3.12. Parent Action. The Board of Directors of Parent (at a meeting duly
called, constituted and held) has by the requisite vote of all directors present
(a) determined that the Merger is advisable and in the best interests of Parent
and its stockholders and (b) approved this Agreement and the transactions
contemplated by this Agreement.
3.13. Disclosure Letter. Prior to the execution and delivery of this
Agreement, Parent has delivered to Target a schedule (the "PARENT DISCLOSURE
LETTER") setting forth, among other things, items the disclosure of which is
necessary or appropriate either in response to an express disclosure requirement
contained in a provision hereof or as an exception to Parent's representations
or warranties contained in Section 3 or to Parent's covenants contained in
Section 5; provided, however, that notwithstanding anything in this Agreement to
the contrary, the mere inclusion of an item in the Parent Disclosure Letter as
an exception to a representation or warranty shall not be deemed an admission by
a party that such item represents a material
8
exception or material fact, event or circumstance or that such item has had or
could reasonably be expected to have a Material Adverse Effect with respect to
Parent or any of its Subsidiaries.
4. REPRESENTATIONS AND WARRANTIES OF TARGET
Target hereby represents and warrants to Parent that:
4.1. Corporate Organization. Target is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified to do business as a foreign corporation in each
jurisdiction in which its ownership or lease of property or the nature of the
business conducted by it makes such qualification necessary, except for such
jurisdictions in which the failure to be so qualified have not had, and could
not reasonably be expected to have, a Material Adverse Effect. Target is
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended (the "BHC ACT"). Target has the requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as it is now being conducted. Target has heretofore made available
to Parent true and complete copies of its certificate of incorporation and
bylaws, as amended to date.
4.2. Authority. Target has the requisite corporate power and authority to
execute and deliver this Agreement and, except for any required approval of
Target's Stockholders, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated herein have been duly approved by the Board of
Directors of Target and no other corporate proceedings on the part of Target are
necessary to authorize this Agreement or to consummate the transactions so
contemplated, subject only to approval by the Stockholders of Target as
described in Section 5.10(b) of this Agreement. This Agreement has been duly
executed and delivered by, and constitutes the valid and binding obligation of
Target, enforceable against Target in accordance with its terms, except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and other 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.
4.3. Capitalization. As of the date hereof, the authorized capital stock
of Target consists of 12,000,000 shares of Target Common Stock and 2,000,000
shares of preferred stock, $.10 par value per share ("TARGET PREFERRED STOCK").
As of the close of business on January 12, 2001, (i) 8,283,223 shares of Target
Common Stock were duly authorized, validly issued and outstanding, fully paid
and nonassessable, (ii) 9,283,512 shares of Target Common Stock would have been
issued and outstanding if all outstanding stock options had been exercised as of
the date hereof, and (iii) no shares of Target Preferred Stock were issued or
outstanding. Except as set forth in this Section 4.3 or as set forth in the
Target Disclosure Letter, there are no shares of capital stock of Target
authorized, issued or outstanding and there are no outstanding subscriptions,
options, warrants, rights, convertible securities or any other agreements or
commitments of any character relating to the issued or unissued capital stock or
other securities of Target, obligating Target to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock of
Target or obligating Target to grant, extend or enter into any subscription,
option, warrant, right, convertible security or other similar agreement or
commitment. Except as set forth in the Target Disclosure Letter, there are no
voting trusts or other agreements or understandings to which Target or any of
Target's Subsidiaries is a party with respect to the voting of the capital stock
of Target. As of the date of this Agreement:
(a) there were outstanding under the 1994 Incentive Stock Option Plan
options to purchase 116,188 shares of Target Common Stock, which have a
weighted average exercise price of $4.27;
(b) there were outstanding under the Amended and Restated 1996 Stock
Option Plans options to purchase 847,851 shares of Target Common Stock,
which have a weighted average exercise price of $9.31;
(c) there were outstanding under the 2000 Stock Option Plan options to
purchase 8,250 shares of Target Common Stock which have a weighted average
exercise price of $8.69; and
9
(d) there were 28,000 options outstanding which were previously
granted to those individuals, in the amounts, at the exercise prices and
exercise periods described in Section 4.3 of the Target Disclosure Letter.
4.4. Subsidiaries. Section 4.4 of the Target Disclosure Letter sets forth
the name and state of incorporation of each Subsidiary of Target (including all
Subsidiaries that are not consolidated with Target for financial reporting
purposes) (collectively, the "TARGET SUBSIDIARIES"). Each of the Target
Subsidiaries is a bank, a corporation or other business entity duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation or organization and is duly qualified to do
business as a foreign corporation or foreign business entity in each
jurisdiction in which its ownership or lease of property or the nature of the
business conducted by it makes such qualification necessary, except for such
jurisdictions in which the failure to be so qualified has not had, and could not
be reasonably expected to have, a Material Adverse Effect. Each of the Target
Subsidiaries has the requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its businesses as they are now
being conducted. Except as set forth in the Target Disclosure Letter, all
outstanding shares of capital stock of each Target Subsidiary is owned by Target
or another Target Subsidiary and are validly issued, fully paid and
nonassessable, are not subject to preemptive rights and are owned free and clear
of all liens, claims and encumbrances. There are no outstanding subscriptions,
options, warrants, rights, convertible securities or any other agreements or
commitments of any character relating to the issued or unissued capital stock or
other securities of any Target Subsidiary obligating any Target Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold additional
shares of its capital stock or obligating any Target Subsidiary to grant, extend
or enter into any subscription, option, warrant, right, convertible security or
other similar agreement or commitment.
4.5. Information in Disclosure Documents, Registration Statement,
Etc. None of the information with respect to Target or any Target Subsidiary
provided by Target for inclusion in the Proxy Statement or the Registration
Statement will, in the case of the Proxy Statement or any amendments or
supplements thereto, at the time of the mailing of the Proxy Statement and any
amendments or supplements thereto, and at the time of the Target Meeting (as
defined in Section 5.10(b)), or, in the case of the Registration Statement, at
the time it becomes effective, contain any untrue statement of material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated thereunder. Target has heretofore made available to
Parent true and complete copies of the certificate of incorporation (or articles
of organization) and bylaws of each Target Subsidiary, as amended to date.
4.6. Consents and Approvals; No Violation. Except as set forth in the
Target Disclosure Letter, neither the execution and delivery of this Agreement
by Target nor the consummation by Target of the transactions contemplated hereby
will:
(a) conflict with or result in any breach of any provision of the
certificate of incorporation or bylaws of Target or any Target Subsidiary,
(b) violate, conflict with, constitute a default (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 or other encumbrance upon any of the
properties or assets of Target or any Target Subsidiary under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation
to which Target or any Target Subsidiary is a party or to which they or any
of their respective properties or assets are subject, except for such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens or other encumbrances, which, either individually or in
the aggregate, have not had, and could not be reasonably expected to have,
a Material Adverse Effect,
(c) constitute or result in a violation of any law, rule, ordinance or
regulation or judgment, decree, order, award or governmental or
non-governmental permit or license to which Target or any Target Subsidiary
is subject, except for the consents, approvals and notices set forth below
and except for such
10
violations which, either individually or in the aggregate, have not had,
and could not be reasonably expected to have, a Material Adverse Effect,
(d) assuming that all required notice filings are made in accordance
with such loan guaranty programs, affect Target's or any Target
Subsidiary's status as a "lender," "certified lender" or "preferred lender"
under any of the SBA, USDA or Ex-Im (each as defined in Section 4.16(b))
loan or loan guarantee programs, or
(e) require any consent, approval, authorization or permit of or from,
or filing with or notification to, any Governmental Entity, except (i)
pursuant to the Exchange Act and the Securities Act, (ii) for the filing of
the Certificate of Merger, (iii) for filings required under the securities
or blue sky laws of the various states, (iv) for the applications, notices,
reports and other filings required to be made in connection with obtaining
the Regulatory Approvals, (v) for the applications, notices, reports and
other filings required to be made in connection with Target's satisfaction
of the condition set forth in Section 7.3(i), (vi) filings and approvals
pursuant to any applicable state takeover law, (vii) for those required by
the HSR Act, (viii) pursuant to the rules of the NASDAQ, (ix) filings,
notices, and approvals set forth in Section 4.6 of the Target Disclosure
Letter or (x) consents, approvals, authorizations, permits, filings or
notifications which, if not obtained or made will not, individually or in
the aggregate, have a Material Adverse Effect.
4.7. Reports. Except as set forth in Section 4.7 of the Target Disclosure
Letter, since December 31, 1996, Target and each Target Subsidiary have timely
filed all reports, registrations and statements, together with any required
amendments thereto, that they were required to file with (i) the Commission
under Section 12(b), 12(g), 13(a) or 14(a) of the Exchange Act, including, but
not limited to Forms 10-K, Forms 10-Q and proxy statements ("TARGET SEC
REPORTS"), (ii) the Board of Governors of the Federal Reserve System (the
"FEDERAL RESERVE BOARD"), (iii) the Federal Deposit Insurance Corporation
("FDIC"), (iv) the Connecticut Banking Department (the "CBD"), (v) any other
Governmental Entity, and (iv) any self regulated organization (an "SRO"), and
all other reports and statements required to be filed by Target and the Target
Subsidiaries, including, without limitation, any report or statement required to
be filed pursuant to laws, rules or regulations of the United States, any state,
or any Governmental Entity, and have paid all fees and assessments due and
payable in connection therewith, except where the failure to file such report,
registration or statement, or to pay such fees and assessments, either
individually or in the aggregate, has not had, and could not reasonably be
expected to have, a Material Adverse Effect. As of their respective dates, the
Target SEC Reports complied with the requirements of the Commission in all
material respects, and did 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 therein, in light of the circumstance under which they were
made, not misleading.
4.8. Financial Statements. The audited consolidated financial statements
of Target included in Target's annual report on Form 10-K as filed with the
Commission for the year ended December 31, 1999, and the unaudited interim
financial statements of Target (the "INTERIM FINANCIAL STATEMENTS") as of and
for the nine months ended September 30, 2000, included in a quarterly report on
Form 10-Q as filed with the Commission, have been prepared in accordance with
GAAP applied on a consistent basis and consistent with past practices (except as
may be indicated therein or in the notes thereto) and fairly present, in all
material respects, the consolidated financial position of Target and the Target
Subsidiaries as of the dates thereof and the results of their operations and
cash flows for the periods then ended, subject, in the case of the unaudited
interim financial statements, to normal year-end and audit adjustments and any
other adjustments described therein, and are derived from the books and records
of Target and the Target Subsidiaries, which are complete and accurate in all
material respects and have been maintained in all material respects in
accordance with applicable laws and regulations. The audited and unaudited
consolidated financial statements of Target to be included in Target's reports
on Forms 10-K and 10-Q, respectively, to be filed with the Commission for the
years and quarters ending between the date hereof and the Effective Time (if
any) will be prepared in accordance with GAAP applied on a consistent basis and
consistent with past practices (except as may be indicated therein or in the
notes thereto) and will fairly present, in all material respects, the
consolidated financial position of Target and the Target Subsidiaries as of the
dates thereof and the results of their
11
operations and cash flows for each applicable period, subject, in the case of
the unaudited financial statements to be filed with Forms 10-Q, to normal
year-end and audit adjustments and any other adjustments described therein, and
will be derived from the books and records of Target and the Target
Subsidiaries, which will be complete and accurate in all material respects and
will have been maintained in all material respects in accordance with applicable
laws and regulations. There exist no liabilities of Target and the Target
Subsidiaries, contingent or otherwise of a type required to be disclosed in
accordance with GAAP, except (i) as disclosed in the Target SEC Reports or (ii)
for liabilities which, either individually or in the aggregate, have not had,
and could not reasonably be expected to have, a Material Adverse Effect.
Target's reserve for possible loan losses as shown in its Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 2000 was adequate, within
the meaning of GAAP and safe and sound banking practices.
4.9. Taxes.
(a) "TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
(b) "TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
(c) Each of the Target and Target Subsidiaries has filed all Tax
Returns that it was required to file except where the failure to file any
such returns will not, or could not reasonably be expected to, individually
or in the aggregate, (i) result in the imposition of any material tax or
material penalty or (ii) materially limit the Target's or any Target
Subsidiary's ability to conduct its business in any jurisdiction. All such
Tax Returns were correct and complete in all material respects. All Taxes
owed by any of the Target and Target Subsidiaries (whether or not shown on
any Tax Return) have been paid. None of the Target and Target Subsidiaries
currently is the beneficiary of any extension of time within which to file
any Tax Return. No claim has ever been made or, to Target's knowledge,
threatened by an authority in a jurisdiction where any of the Target and
Target Subsidiaries does not file Tax Returns that it is or may be subject
to taxation in that jurisdiction. There are no security interests on any of
the assets of any of the Target or Target Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax.
(d) Each of the Target and Target Subsidiaries has withheld and paid
all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party except where the failure to withhold such
amounts will not, or could not reasonably be expected to, individually or
in the aggregate, (i) result in the imposition of any material tax or
material penalty or (ii) materially limit the Target's or any Target
Subsidiary's ability to conduct its business in any jurisdiction.
(e) Except as set forth in Section 4.9(e) of the Target Disclosure
Letter, there is no dispute or claim concerning any Tax liability of any of
the Target and Target Subsidiaries raised or, to the knowledge of Target,
threatened by any authority in writing. Section 4.9(e) of the Target
Disclosure Letter lists all income Tax Returns filed with respect to any of
the Target and Target Subsidiaries for taxable periods ended on or after
December 31, 1993, indicates those income Tax Returns that have been
audited, and indicates those income Tax Returns that currently are the
subject of audit. Target and Target Subsidiaries have made available to
Parent correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or
agreed to by any of the Target and Target Subsidiaries since December 31,
1993.
(f) None of the Target and Target Subsidiaries has waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
12
(g) None of the Target and Target Subsidiaries has filed a consent
under Section 341(f) of the Code concerning collapsible corporations. None
of the Target and Target Subsidiaries has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 867(c)(1)(A)(ii) of
the Code. Each of the Target and Target Subsidiaries has disclosed on its
federal income Tax Returns all positions taken therein that could give rise
to a substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code. None of the Target and Target Subsidiaries is a
party to any Tax allocation or sharing agreement. None of the Target and
Target Subsidiaries (A) has been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was the Target) or (B) has any liability for the Taxes of
any Person (other than any of the Target and Target Subsidiaries) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(h) The unpaid Taxes of the Target and Target Subsidiaries did not, as
of September 30, 2000, exceed the reserve for Tax liability (rather than
any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the balance sheet
(disregarding any notes thereto) included in the Target's unaudited interim
financial statements as of and for the nine months ended September 30, 2000
included in the Form 10-Q as filed with the Commission.
4.10. Officers and Employees. Section 4.10 of the Target Disclosure Letter
contains a true and complete list, as of the date hereof, of all of the (a)
officers, (b) employees (whether full-time, part-time or otherwise) and (c)
consultants or independent contractors of each of the Target and each Target
Subsidiary, in each case, specifying, by individual, their position, annual
salary, hourly wages, consulting or other independent contractor fees, date of
birth, date of hire, social security number, home address, work location, length
of service, hours of service, tax withholding history, other amounts paid,
benefits provided and any other information reasonably requested by Parent.
Section 4.10 of the Target Disclosure Letter contains a true and complete list
of all holders of any options, warrants or other rights to purchase Target
Common Stock or Target Preferred Stock specifying the type of options, warrant
or other right, the class of security for which it may be exercised, the number
of shares of such class of security, the exercise price, the expiration date,
the vesting provisions, and the number of shares of such class of security with
respect to which such option has been exercised. Target has made available to
Parent true, correct and complete copies of each option agreement in respect of
the options listed in Section 4.10 of the Target Disclosure Letter. Except as
set forth in Section 4.10 of the Target Disclosure Letter, none of the Target or
the Target Subsidiaries is a party to or bound by any contracts, consulting
agreements, termination or severance agreements, change of control agreements or
any other agreements respecting the terms and conditions of employment or of an
independent contract relationship in respect to any officer, former officer,
employee or former employee, consultant or independent contractor (collectively,
the "EMPLOYEE/CONSULTING AGREEMENTS"). Target has made available to Parent true,
correct and complete copies of each such Employee/Consulting Agreement. Target
has made available to Parent true, correct and complete copies of all
confidentiality agreements between Target or any Target Subsidiary and an
officer, employee, or former employee, consultant or independent contractor of
Target or any Target Subsidiary. None of the Target and the Target Subsidiaries
has received a claim from any Governmental Entity within the last six (6) years
to the effect that Target or any Target Subsidiary has improperly classified as
an independent contractor any person named in the Target Disclosure Letter. None
of the Target and Target Subsidiaries has made any commitments to any such
officers, employees or former employees, consultants or independent contractors
with respect to compensation, promotion, retention, termination, severance or
similar matters in connection with the transactions contemplated by this
Agreement or otherwise. Except as set forth in Section 4.10 of the Target
Disclosure Letter, all officers and employees of the Target and Target
Subsidiaries are active on the date hereof.
4.11. Employee Plans.
(a) Section 4.11 of the Target Disclosure Letter contains a true and
complete list of each Target Benefit Plan sponsored, maintained or
contributed to by any Target or Target Subsidiary within the last six (6)
calendar years. Each Target Benefit Plan currently in effect is identified
as a "current plan" on the
13
Target Disclosure Letter and any special tax status enjoyed by such plan is
noted on the Target Disclosure Letter.
(b) With respect to each current Target Benefit Plan identified on the
Target Disclosure Letter, Target has heretofore made available to Parent
true and complete copies of the plan documents and any amendments thereto
(or if the plan is not written, a written description thereof), any related
trust or other funding vehicle, annual reports required to be filed with
any Governmental Entity with respect to such plan, actuarial reports,
funding and financial information returns and statements contracts with any
parties providing services or insurance to such plan, all material internal
memoranda regarding such plans, copies of material correspondence with all
Governmental Entities, plan summaries or summary plan descriptions, summary
annual reports, booklets and personnel manuals and any other reports or
summaries required under ERISA, the Code and all other applicable laws,
regulations, orders or other legislative, administrative or judicial
promulgations, including those of a jurisdiction outside the United States
of America ("APPLICABLE BENEFIT LAWS"), the most recent determination
letter received from the Internal Revenue Service with respect to each such
plan intended to qualify under Section 401 of the Code and such other
documentation with respect to any Target Benefit Plan as is reasonably
requested by Parent.
(c) Except as set forth in Section 4.11(c) of the Target Disclosure
Letter, Target and Target Subsidiaries have maintained all employee data
necessary to administer each Target Benefit Plan, including data required
to be maintained under Sections 107 and 209 of ERISA, and such data is true
and correct in all material respects and is maintained in a usable form.
(d) No Target Benefit Plan or ERISA Affiliate Plan (as defined in
Section 8.7(i)) is or was subject to Title IV of ERISA or Section 412 of
the Code, nor is any Target Benefit Plan or ERISA Affiliate Plan a
"multiemployer pension plan", as defined in Section 3(37) of ERISA, or
subject to Section 302 of ERISA. Neither the Target, a Target Subsidiary,
an ERISA Affiliate nor a predecessor in interest of any of them has or has
had an obligation to make contributions or reimburse another employer,
either directly or indirectly, including through indemnification or
otherwise, for making contributions to a plan that is or was subject to
Title IV of ERISA.
(e) Each Target Benefit Plan has been established, qualified,
invested, operated and administered in accordance in all material respects
with its terms and in compliance in all material respects with all
Applicable Benefit Laws and in accordance in all material respects with all
understandings, written or oral, between the Target and each Target
Subsidiary and their respective current or former employees, directors,
officers, consultants, independent contractors, contingent workers or
leased employees, as applicable. None of the Target or Target Subsidiaries
has incurred, and no facts exist which reasonably could be expected to
result in any liability to any Target or Target Subsidiary with respect to
any Target Benefit Plan or any ERISA Affiliate Plan, including without
limitation, any liability, tax, penalty or fee under ERISA, the Code or any
Applicable Benefit Law (other than to pay premiums, contributions or
benefits in the ordinary course).
(f) There are no outstanding material defaults or violations by any
party to any Target Benefit Plan. No taxes, penalties or fees are owing
under any Target Benefit Plan.
(g) No fact or circumstance exists that could adversely affect the
tax-exempt status of a Target Benefit Plan that is intended to be
tax-exempt. Further, each Target Benefit Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code and the trusts maintained
thereunder that are intended to be exempt from taxation under Section
501(a) of the Code has received a favorable determination or other letter
indicating that it is so qualified.
(h) The assets of each Target Benefit Plan are reported at their fair
market value on the financial statements of each such plan.
(i) Except as set forth in Section 4.11(i) of the Target Disclosure
Letter, no Target Benefit Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for current or former
employees, directors, officers, consultants, independent contractors,
contingent workers or
14
leased employees (or any of their dependents, spouses or beneficiaries) of
a Target or Target Subsidiary or any predecessor in interest of such Target
or Target Subsidiary for periods extending beyond their retirement or other
termination of service, other than continuation coverage mandated by any
Applicable Benefit Law and only to the extent required under such law.
(j) All contributions or premiums required to be made by any Target or
Target Subsidiary under the terms of each Target Benefit Plan or by
Applicable Benefit Laws have been made in a timely fashion in all material
respects in accordance with Applicable Benefit Laws and the terms of the
Target Benefit Plan. Each Target Benefit Plan is fully funded or fully
insured on both an ongoing and termination or wind-up basis, pursuant to
the actuarial assumptions set forth in Section 4.11(j) of the Target
Disclosure Letter.
(k) Except as set forth in Section 4.11(k) of the Target Disclosure
Letter, no insurance policy or any other contract or agreement affecting
any Target Benefit Plan requires or permits a retroactive increase in
premiums or payments due thereunder. Except as set forth in Section 4.11(k)
of the Target Disclosure Letter, the level of insurance reserves under each
insured Target Benefit Plan is reasonable and sufficient to provide for all
incurred but unreported claims.
(l) There have been no improper withdrawals, applications or transfers
of assets from any Target Benefit Plan or the trusts or other funding media
relating thereto, and neither the Target or Target Subsidiaries nor any of
their agents has been in breach of any fiduciary obligation with respect to
the administration of any Target Benefit Plan or the trusts or other
funding media relating thereto.
(m) A Target or Target Subsidiary has the right under the terms of
each Target Benefit Plan and under Applicable Benefit Law to amend, revise,
merge or terminate such plan (or its participation in such plan) or
transfer the assets of such plan to another arrangement, plan or fund at
any time exclusively by action of such Target or Target Subsidiary, and no
additional contributions would be required to properly effect such
termination.
(n) Except as set forth in Section 4.11(n) of the Target Disclosure
Letter, the execution, delivery and performance of, and consummation of the
transactions contemplated by, this Agreement will not (i) entitle any
current or former employee, director, officer, consultant, independent
contractors, contingent worker or leased employee (or any of their
dependents, spouses or beneficiaries) of Target or any Target Subsidiary to
severance pay, unemployment compensation or any other payment, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such individual.
(o) None of the Target or Target Subsidiaries has made any payments,
is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate Target or any Target Subsidiary
to make any payments that will not be deductible for federal income tax
purposes by reason of Section 280G of the Code.
(p) There are no pending, anticipated, or, to Target's knowledge,
threatened claims, investigations, examinations, audits or other
proceedings or actions by, against, involving, or on behalf of any Target
Benefit Plan, by any current or former employee, director, officer,
consultant, independent contractors, contingent worker or leased employee
(or any of their dependents, spouses or beneficiaries) of Target or any
Target Subsidiary or any predecessor in interest covered under such Target
Benefit Plan, by any Governmental Entities or otherwise involving any such
Target Benefit Plan (other than routine claims for benefits) and there
exists no state of facts which after notice or lapse of time or both
reasonably could be expected to give rise to any such claim, investigation,
examination, audit or other proceeding or to affect the registration of any
Target Benefit Plan required to be registered.
4.12. Labor Relations.
(a) The employees of any of the Target and each Target Subsidiary have
not been, and currently are not, represented by a labor organization or
group which was either certified or voluntarily recognized
15
by any labor relations board, including, without limitation, the United
States National Labor Relations Board ("NLRB");
(b) No Target or Target Subsidiary is or has been a signatory to a
collective bargaining agreement with any trade union, labor organization or
group;
(c) No representation election petition or application for
certification has been filed by employees of any Target or Target
Subsidiary or is pending with the NLRB and no union organizing campaign or
other attempt to organize or establish a labor union, employee organization
or labor organization or group involving employees of any Target or Target
Subsidiary has occurred, is in progress or is threatened;
(d) None of the Target or Target Subsidiaries has engaged in any
unfair labor practice and there is no pending or, to the knowledge of
Target, threatened labor board proceeding of any kind, including any such
proceeding against any Target or Target Subsidiary or any trade union,
labor union, employee organization or labor organization representing
Target or any Target Subsidiary's employees;
(e) No grievance or arbitration demand or proceeding, whether or not
filed pursuant to a collective bargaining agreement, has been threatened,
filed or is pending against Target or any Target Subsidiary;
(f) No labor dispute, walk out, strike, slowdown, hand billing,
picketing, work stoppage (sympathetic or otherwise), or other "concerted
action" (as such terms are understood under federal and state labor laws)
involving the employees of Target or any Target Subsidiary has occurred, is
in progress or has been threatened;
(g) No breach of contract and/or denial of fair representation claim
has been filed or is pending or threatened against Target or any Target
Subsidiary and/or any trade union, labor union, employee organization or
labor organization representing Target or any Target Subsidiary's
employees;
(h) No claim, complaint, charge or investigation for unpaid wages,
bonuses, commissions, employment withholding taxes, penalties, overtime or
other compensation, benefits, child labor or record keeping violations has
been filed or is pending or threatened against Target or any Target
Subsidiary under the Fair Labor Standards Act, Davis-Bacon Act,
Walsh-Healey Act, or Service Contract Act or any other federal, state,
local, provincial or foreign law, regulation or ordinance;
(i) No discrimination and/or retaliation claim, complaint, charge or
investigation has been filed or is pending or threatened against Target or
any Target Subsidiary under the 1866 or 1964 Civil Rights Acts, the Equal
Pay Act, the Age Discrimination in Employment Act ("ADEA"), the Americans
with Disabilities Act ("ADA"), the Family and Medical Leave Act ("FMLA"),
the Fair Labor Standards Act ("FLSA"), ERISA or any other federal law or
comparable state fair employment practices act or foreign law, including
any provincial law regulating discrimination in the workplace;
(j) If any Target or Target Subsidiary is a federal or state
contractor obligated to develop and maintain an affirmative action plan, no
discrimination claim, show cause notice, conciliation proceeding, sanction
or debarment proceeding has been threatened or filed or is pending with the
Office of Federal Contract Compliance Programs or any other federal agency
or any comparable state or foreign agency or court and no desk audit or
on-site review is in progress;
(k) No citation has been issued by the Occupational Safety and Health
Administration ("OSHA") against Target or any Target Subsidiary and no
notice of contest, claim, complaint, charge, investigation or other
administrative enforcement proceeding involving Target or any Target
Subsidiary has been filed or is pending or threatened against Target or any
Target Subsidiary under OSHA or before any provincial or federal
occupational safety and health ministry or department pursuant to any other
applicable law relating to occupational safety and health;
(l) No workers' compensation or retaliation claim, complaint, charge
or investigation has been filed or is pending or, to the knowledge of
Target, threatened against Target or any Target Subsidiary;
16
(m) No investigation or citation of Target or any Target Subsidiary
has occurred and no enforcement proceeding has been initiated or is pending
or, to the knowledge of Target, threatened under federal or foreign
immigration law;
(n) None of the Target or Target Subsidiaries has taken any action
that would constitute a "mass layoff", "mass termination" or "plant
closing" within the meaning of the Worker Adjustment and Retraining
Notification Act ("WARN") or any similar provincial law or otherwise
trigger notice requirements or liability under any federal, local, state or
foreign plant closing notice or collective dismissal law;
(o) No wrongful discharge, retaliation, libel, slander or other claim,
complaint, charge or investigation that arises out of the employment
relationship between Target or any Target Subsidiary and its respective
employees has been filed or is pending or, to the knowledge of Target,
threatened against Target or any Target Subsidiary under any applicable
law;
(p) Each of the Target and Target Subsidiaries has maintained and
currently maintains adequate insurance as required by applicable law with
respect to workers' compensation claims and unemployment benefits claims;
(q) Each of the Target and Target Subsidiaries is in compliance in all
material respects with all applicable laws, regulations and orders and all
contracts or collective bargaining agreements governing or concerning labor
relations, union and collective bargaining, conditions of employment,
employment discrimination and harassment, pay equity, wages, hours or
occupational safety and health, and all record keeping, filing and record
retention requirements thereunder, including, without limitation, ERISA,
the Immigration Reform and Control Act of 1986, the National Labor
Relations Act, the Civil Rights Acts of 1866 and 1964, the Equal Pay Act,
ADEA, ADA, FMLA, WARN, OSHA, the Davis-Bacon Act, the Walsh-Healy Act, the
Service Contract Act, Executive Order 11246, FLSA and the Rehabilitation
Act of 1973 and all regulations under such acts, each as amended
(collectively, the "LABOR LAWS");
(r) None of the Target or Target Subsidiaries are liable for any
liabilities, judgements, decrees, orders, arrearage of wages or taxes,
fines or penalties for failure to comply with any of the Labor Laws;
(s) Target has provided Parent with a copy of the policy of each of
the Target and Target Subsidiaries for providing leaves of absence under
the FMLA and Section 4.12(s) of the Target Disclosure Letter identifies
each employee who is eligible to request FMLA leave and the amount of FMLA
leave utilized by each such employee during the current leave year; each
employee who will be on FMLA leave at the Closing Date and his or her job
title and description, salary and benefits; each employee who has requested
FMLA leave to begin after the Closing Date; a description of the leave
requested; and a copy of all notices provided to such employee regarding
that leave; and
(t) Each of the Target and Target Subsidiaries has paid or accrued, as
required by GAAP, all current assessments under workers' compensation
legislation, and none of the Target or Target Subsidiaries have been
subject to any special or penalty assessment under such legislation which
has not been paid.
4.13. Material Contracts. Except as set forth in Section 4.13 of the
Target Disclosure Letter or disclosed in the Target SEC Reports, neither Target
nor any Target Subsidiary is a party to or bound by any (a) loan servicing
agreements; (b) credit insurance policy; (c) agreements or arrangements for the
purchase or sale of any material assets (otherwise than in the ordinary course
of business); (d) agreements with the FDIC, Federal Reserve Board, CBD, SBA,
USDA, Ex-Im (each as defined in Section 4.16(b)), (e) agreements with any
foreign government or agency, any other federal or state agency or any SRO; (f)
contracts or agreements containing covenants limiting the freedom of Target or
any Target Subsidiary or any other Affiliate of Target, to engage in any line of
business or to compete with any entity; (g) any joint venture, partnership or
similar agreement; (h) exchange traded or over-the-counter swap, forward,
future, option, cap, floor or collar financial contract, or any other interest
rate or foreign currency protection contract; (i) agreement providing for
aggregate payments to any director, officer, or consultant or former officer,
directors or consultant of Target or any Target Subsidiary in any calendar year
in excess of $50,000,
17
(j) material agreement, indenture or other instrument relating to the borrowing
of money by Target or any Target Subsidiary, the guarantee by Target or any
Target Subsidiary of any such obligation (other than trade payables and
instruments relating to transactions entered into in the ordinary course of
business), or the sale, securitization or servicing of loans or loan portfolios
of Target or any Target Subsidiary; (k) leases regarding real or personal
property; (l) master agency agreement (or similar agreement or arrangement); (m)
other contract or agreement or amendment thereto that, for purposes of this
clause (m), would be required to be filed as an exhibit to a Form 10-K filed by
Target with the Commission as of the date of this Agreement (collectively, the
"TARGET CONTRACTS"). Neither Target nor any Target Subsidiary is in breach or
default under any Target Contract, which default or breach has had or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect, and there has not occurred any event that with the
lapse of time or the giving of notice or both would constitute such a default.
4.14. Absence of Certain Changes or Events. Except for any liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, since December 31, 1999, Target and its subsidiaries have conducted
their business only in the ordinary course or as disclosed in any Target SEC
Reports, and there has not been (1) any change or event that has had, or that
could reasonably be expected to have, a Material Adverse Effect on Target or any
Target Subsidiary, (2) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock, or property) with respect to any
of Target's capital stock, other than dividends declared and paid in the
ordinary course of business consistent with past practice, (3) any split,
combination or reclassification of any of Target's capital stock or any
substitution for shares of Target's capital stock, except for issuances of
Target's Common Stock upon the exercise of options awarded prior to the date
hereof in accordance with the Target Option Plans, (4) except as set forth in
Section 4.14 of the Target Disclosure Letter (A) any granting by Target or any
Target Subsidiary, to any current or former director, executive officer or other
key employee of Target or any Target Subsidiary of any increase in compensation,
bonus or other benefits, except for normal increases in the ordinary course of
business or as were required under any Employment/Consulting Agreements listed
in Section 4.10 of the Target Disclosure Letter, (B) any granting by Target or
any Target Subsidiary, to any such current or former director, executive officer
or key employee of any increase in severance or termination pay, or (C) any
entry by Target or any Target Subsidiary, into, or any amendment of, any
employment, deferred compensation, consulting, severance, termination or
indemnification agreement with any such current or former director, executive
officer or key employee, (5) except insofar as may have been disclosed in the
Target SEC Reports or required by GAAP, any change in accounting methods,
principles or practices by Target or any Target Subsidiary, materially affecting
its assets, liabilities or business or (6) except insofar as may have been
disclosed in the Target SEC Reports, any tax election that individually or in
the aggregate, has had, or could reasonably be expected to have, a Material
Adverse Effect.
4.15. Litigation. Except as set forth in the Target Disclosure Letter,
there is no claim, suit, action, proceeding or investigation pending, or, to the
knowledge of Target, threatened, against or affecting Target or any Target
Subsidiary which, either individually or in the aggregate, has had, or could be
reasonably expected to have, a Material Adverse Effect, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator, outstanding or, to the knowledge of Target, threatened against
Target or any Target Subsidiary which, either individually or in the aggregate,
has had, or could reasonably be expected to have, a Material Adverse Effect.
4.16. Compliance with Laws, Orders, Guarantee Programs.
(a) Except as disclosed in the Target SEC Reports filed by Target with
the Commission prior to the date of this Agreement, the businesses of
Target and the Target Subsidiaries are not being conducted in violation of
any law, ordinance, regulation, judgment, order, decree, writ, injunction,
license or permit of any Governmental Entity (including, without
limitation, in the case of Target Subsidiaries that are banks, all
statutes, rules and regulations pertaining to the conduct of the banking
business and the exercise of trust powers), except for violations which
have not had, and could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. No investigation or review by
any Governmental Entity with respect to Target or any Target Subsidiary is
pending or, to the knowledge of Target threatened, nor has any Governmental
Entity indicated an intention to conduct the same, in each
18
case other than those the outcome of which have not had, and could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
(b) Target and each applicable Target Subsidiary is an approved
"lender," "certified lender" or "preferred lender" as the case may be,
under and pursuant to the loan guarantee programs of the United States
Small Business Administration (the "SBA"), the United States Department of
Agriculture (the "USDA"), and the Export-Import Bank of the United States
("EX-IM"). Target and Target Subsidiaries have complied in all material
respects at all times with the applicable provisions of Target's and Target
Subsidiaries' loan guarantee insurance policy with AIG and any other
insurers (collectively, the "AIG INSURANCE POLICY"). Target and all Target
Subsidiaries have at all times complied, in all material respects, with the
rules and regulations of the loan and loan guarantee programs of each of
the SBA, the USDA, and Ex-Im. All loans originated by Target or any Target
Subsidiary pursuant to or guaranteed by any of the SBA, USDA or Ex-Im were
made pursuant to all applicable SBA, USDA or Ex-Im (as the case may be)
rules and regulations and met all applicable underwriting criteria
necessary to qualify for the loan or loan guarantee programs of the SBA,
USDA or Ex-Im (as the case may be). All loans made or originated by Target
under or pursuant to loan or loan programs of the SBA, USDA or Ex-Im have
been made on standard loan documents approved if required by the
appropriate agency. All loans originated by Target or any Target Subsidiary
pursuant to, guaranteed by or insured by the AIG Insurance Policy were made
pursuant to the AIG Insurance Policy and met all applicable underwriting
criteria thereunder.
(c) Except as set forth in Section 4.16(c) of the Target Disclosure
Letter, neither Target nor any Target Subsidiary has received notice
denying or limiting all or any portion of any guarantee or insurance for
any loan pursuant to the SBA, USDA or Ex-Im loan or loan guarantee programs
or pursuant to the AIG Insurance Policy.
4.17. Agreements with Bank Regulators, Etc.
(a) Except as set forth in Section 4.17(a) of the Target Disclosure
Letter, neither Target nor any Target Subsidiary is a party to any written
agreement or memorandum of understanding with, or a party to any commitment
letter, board resolution or similar undertaking to, or is subject to any
order or directive by, or is a recipient of any extraordinary supervisory
letter from, the Federal Reserve Board, FDIC or any Governmental Entity
which restricts materially the conduct of its business, or in any manner
relates to its capital adequacy, its credit or reserve policies or its
management, nor has Target been advised by the Federal Reserve Board, FDIC
or any Governmental Entity that it is contemplating issuing or requesting
(or is considering the appropriateness of issuing or requesting) any such
order, decree, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar submission.
(b) Except as set forth in Section 4.17(b) of the Target Disclosure
Letter there have been no suggested or recommended changes to, or methods
of reporting with respect to, Target's or any Target Subsidiary's books and
records, financial statements, Regulatory Financial Statements (as
hereinafter defined) or Interim Reports (as hereinafter defined) made by
any federal or state bank examiner in charge of such examination (or more
senior federal or state bank regulatory officials) or other regulatory
authority (any such being a "RECOMMENDED REGULATORY CHANGE") that (i) are
currently pending or have not been withdrawn or abandoned and (ii) have not
been implemented in the books and records, financial statements, Regulatory
Financial Statements, or Interim Reports, as appropriate, of the Target or
such Target Subsidiary as suggested or recommended.
Target knows of no reason why the regulatory approvals referred to in Section
4.6(d) and Section 7 would not be obtained.
4.18. Target Ownership of Stock. As of the date of this Agreement, neither
Target, Target Subsidiaries nor any of its Affiliates (i) beneficially owns,
directly or indirectly, or (ii) are parties to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of,
Parent Common Stock (other than held in trust accounts, managed accounts or in
any similar manner as trustee or in a
19
fiduciary capacity), which in the aggregate, represent 5% or more of the
outstanding shares of Parent Common Stock.
4.19. Fees. Except for fees paid and payable to J.P. Morgan and Keefe,
Bruyette & Woods, neither Target nor any Target Subsidiary has paid or will
become obligated to pay any fee or commission to any broker, finder or
intermediary in connection with the transactions contemplated by this Agreement.
4.20. Target Action. The Board of Directors of Target (at a meeting duly
called, constituted and held) has, by the requisite vote of all directors
present, (a) determined that the Merger is advisable and in the best interests
of Target and Target's Stockholders, (b) approved this Agreement and the
transactions contemplated hereby, including the Merger, and (c) directed that
the Merger be submitted for consideration by Target's Stockholders at the Target
Meeting. Target has taken all steps necessary to exempt (i) the execution of
this Agreement, (ii) the Merger and (iii) the transactions contemplated hereby
and thereby from, (x) any statute of the State of Delaware that purports to
limit or restrict business combinations or the ability to acquire or to vote
shares, and (y) any applicable provision of Target's certificate of
incorporation or bylaws containing change of control or anti-takeover
provisions.
4.21. Vote Required. The affirmative vote of holders of a majority of the
outstanding shares of Target Common Stock entitled to vote thereon is the only
vote of the holders of any class or series of Target capital stock necessary to
approve this Agreement and the transactions contemplated by the Agreement.
4.22. Material Interests of Certain Persons. Except as disclosed in
Target's Proxy Statement for its 2000 Annual Meeting of Stockholders or as set
forth in the Target Disclosure Letter, no officer or director of Target or any
Target Subsidiary, or any associate of any such officer or director, has any
material interest in any material contract or property (real or personal),
tangible or intangible, used in or pertaining to the business of Target or any
Target Subsidiary. Except as set forth in Section 4.22 of the Target Disclosure
Letter and except for commercial loans made in the ordinary course and except
for the Target 401(k) plan loans, neither Target nor any Target Subsidiary has
made any loans to any officer or director of Target or any Target Subsidiary, or
any associate of any such officer or director, or to any holder or beneficial
owner of five percent (5%) or more of the outstanding shares of Target Common
Stock.
4.23. Intellectual Property. Section 4.23 of the Target Disclosure Letter
sets forth a list of all trademarks, service marks and trade names (including
any registrations or applications for registration of any of the foregoing)
(collectively, the "TARGET INTELLECTUAL PROPERTY") owned by Target or used in
the business of Target and the Target Subsidiaries and, in the case of each such
item of Target Intellectual Property not owned by Target or any Target
Subsidiary, sets forth the name of the owner thereof and a description of the
agreement or other contract under which Target or the Target Subsidiaries have a
right to use such Target Intellectual Property. Neither Target nor any Target
Subsidiary has received any notice of infringement of or conflict with, and, to
Target's knowledge, there are no infringements of or conflicts with, the rights
of others with respect to the use of any Target Intellectual Property. Neither
the execution nor delivery of this Agreement nor the consummation of the
transactions contemplated hereby shall adversely affect the right of the Target
or any Target Subsidiary to use its name currently as used in its business in
any location where Target or any such Target Subsidiary conducts its business.
4.24. Interest Rate Risk Management Instruments. Except as have not had
and could not reasonably be expected to have, a Material Adverse Effect, all
interest rate swaps, caps, floors and option agreements and other interest rate
risk management arrangements, whether entered into for the account of Target or
any Target Subsidiary for the account of a customer of Target or a Target
Subsidiary, were entered into in the ordinary course of business and, to
Target's knowledge, in accordance with prudent banking practices and applicable
rules, regulations and policies of any Governmental Entity and with
counterparties believed to be financially responsible at the time and are legal,
valid and binding obligations of Target or any Target Subsidiary enforceable in
accordance with their terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally and the availability of equitable remedies), and are in full force and
effect. Except as have not, and could not reasonably be expected to have, a
Material Adverse Effect, Target and each of the Target Subsidiaries have duly
performed all of their
20
obligations thereunder to the extent that such obligations to perform have
accrued, and, to Target's knowledge, there are no breaches, violations or
defaults or allegations or assertions of such by any party thereunder.
4.25. Insurance. Section 4.25 of the Target Disclosure Letter contains a
complete and correct list of all insurance policies currently maintained by
Target or any Target Subsidiary, (the "TARGET INSURANCE POLICIES"). With respect
to each Target Insurance Policy, Section 4.25 of the Target Disclosure Letter
specifies (i) the insurer, (ii) the amount of and nature of coverage, (iii) the
risk insured against, (iv) the deductible amount (if any) and (v) the date
through which coverage will continue by virtue of premiums already paid. Target
and Target Subsidiaries currently have in effect insurance coverage with
reputable insurers which, in respect of amounts, premiums, types and risks
insured, constitutes reasonable coverage against all risks customarily insured
against by bank holding companies and their subsidiaries comparable in size and
operations to Target and the Target Subsidiaries. Neither Target nor any Target
Subsidiary has reached or exceeded its policy limits for any insurance policies
in effect as of the date hereof. There are no self-insurance arrangements
affecting the Target or any Target Subsidiary. With respect to each Target
Insurance Policy:
(a) neither Target nor any Target Subsidiary has received written
notice of any pending or threatened cancellation or material premium
increase (retroactive or otherwise) with respect thereto;
(b) to Target's knowledge, the policy is legal, valid, binding,
enforceable and in full force and effect;
(c) the policy will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms through the Closing Date
and following the consummation of the transactions contemplated herein;
(d) neither Target, any Target Subsidiary, nor, to the knowledge of
Target, any other party to any Target Insurance Policy is in breach or
default (including with respect to the payment of premiums or giving of
notices), and no event has occurred which, with notice, lapse of time or
both, would constitute such a breach or default, or permit termination,
modification, or acceleration, under such policy;
(e) no party has repudiated any provision thereof;
(f) there are no pending claims against such insurance as to which
insurers are defending under reservation of rights or have denied
liability; and
(g) there exists no claim under such insurance policy that has not
been properly filed by the Target or any Target Subsidiary.
4.26. Real Property and Environmental Matters.
(a) For purposes of this Agreement, the following terms shall have the
indicated meanings:
(i) "ENVIRONMENTAL LAW" means any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, determination, judgment,
decree, injunction or agreement with any Governmental Entity relating to
the (1) health, protection, preservation, containment or restoration of
the environment including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface
soil, wetlands, plant and animal life or any other natural resource,
conservation, and/or (2) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production,
release or disposal of Hazardous Substances. The term "Environmental
Law" includes without limitation the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C. Section
9601, et seq.; the Superfund Amendments and Reauthorization Act of 1986,
42 U.S.C. 9601(2)(D); the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901, et seq.; the Clean Air Act, as amended,
42 U.S.C. Section 7401, et seq.; the Federal Water Pollution Control
Act, as amended by the Clean Water Act, 33 U.S.C. Section 1251, et seq.;
the Toxic Substances Control Act, as amended, 15 U.S.C. Section 9601, et
seq.; the Emergency Planning and Community Right to Know Act, 42 U.S.C.
Section 11001, et seq.; the Safe Drinking
21
Water Act, 42 U.S.C. Section 300f, et seq.; and all comparable state and
local laws, ordinances, rules, regulations respecting the interpretation
or enforcement of same.
(ii) "HAZARDOUS SUBSTANCE" means (i) any hazardous wastes, toxic
chemicals, materials, substances or wastes as defined by or for the
purposes of any Environmental Law; (ii) any "oil", as defined by the
Clean Water Act, as amended from time to time, and regulations
promulgated thereunder (including crude oil or any fraction thereof and
any petroleum products or derivatives thereof); (iii) any substance, the
presence of which is prohibited, regulated or controlled by any
applicable federal, state or local laws, regulations, statutes or
ordinances now in force or hereafter enacted relating to waste disposal
or environmental protection with respect to the exposure to, or
manufacture, possession, presence, use, generation, storage,
transportation, treatment, release, emission, discharge, disposal,
abatement, cleanup, removal, remediation or handling of any such
substance; (iv) any asbestos or asbestos-containing materials,
polychlorinated biphenyls ("PCBS") in the form of electrical equipment,
fluorescent light fixtures with ballasts, cooling oils or any other
form, urea formaldehyde or atmospheric radon; (v) any solid, liquid,
gaseous or thermal irritant or contaminant, such as smoke, vapor, soot,
fumes, alkalis, acids, chemicals, pesticides, herbicides, sewage,
industrial sludge or other similar wastes; (vi) industrial, nuclear or
medical by-products; (vii) any lead based paint or coating and (viii)
any underground storage tank(s).
(iii) "REAL PROPERTIES" means any real property, interest in real
property, improvements, appurtenances, rights and personal property
attendant thereto, which is owned, leased as a landlord or a tenant,
licensed as a licensor or licensee, managed or operated or upon which is
held a mortgage, deed of trust, deed to secure debt or other security
interest by Target or any Target Subsidiary whether directly, as an
agent, as trustee or other fiduciary or otherwise.
(b) Neither Target nor any Target Subsidiary is in violation of or has
any liability, absolute or contingent, in connection with or under any
Environmental Law which could reasonably be expected to result in the
imposition of any liability which could have a Material Adverse Effect.
(c) None of the Real Properties of Target or any Target Subsidiary is
in violation of or has any liability, absolute or contingent, under any
Environmental Law which could reasonably be expected to result in the
imposition of any liability which could have a Material Adverse Effect.
(d) There are no actions, suits, demands, notices, claims,
investigations or proceedings pending or, to the knowledge of Target,
threatened relating to any Real Properties including, without limitation
any notices, demand letters or requests for information from any federal or
state environmental agency relating to any such liability under or
violation of Environmental Law which could reasonably be expected to result
in the imposition of any liability which could have a Material Adverse
Effect.
(e) Section 4.26(e) of the Target Disclosure Letter sets forth a true,
correct and complete list of all Real Properties owned or leased by Target
or any Target Subsidiary (collectively, the "TARGET REAL PROPERTIES") and
all Real Properties owned by Target or any Target Subsidiary at any time
during the last five (5) years. Target and each Target Subsidiary has good
and marketable title to, or a valid leasehold interest in, all of the
Target Real Properties and all personal properties or assets reflected on
the balance sheet contained in the Interim Financial Statements or acquired
after September 30, 2000 (other than assets disposed of since September 30,
2000 in the ordinary course of business consistent with past practices) in
each case free and clear of all title defects, liens, encumbrances and
restrictions except for (i) liens, encumbrances or restrictions which
secure indebtedness described in the Target SEC Reports, (ii) liens for
Taxes accrued but not yet payable, (iii) liens arising as a matter of law
in the ordinary course of business with respect to obligations incurred
after September 30, 2000 provided that the obligations secured by such
liens are not delinquent and (iv) liens which do not materially impair the
value or use of any such asset. Each of the Target Real Properties, and
each building and improvement located thereon, is, and has at all times
been, in compliance in all material respects with all applicable federal,
state and local laws, rules, regulations, ordinances and statutes,
including those relating to zoning, building, land use, health and safety,
fire, air sanitation and noise control. The improvements on the Target Real
Property are (x) in good operating condition, (y) in a state of good
maintenance and repair,
22
ordinary wear and tear excepted, and (z) adequate and suitable for the
purposes for which they are presently being used.
(f) Section 4.26(e) of the Target Disclosure Letter sets forth a true,
correct and complete list of all leases (including all amendment,
modifications or extensions thereof) for all Target Real Properties leased
by Target or any Target Subsidiary (collectively, the "TARGET LEASES").
Neither Target nor any Target Subsidiary has sent or received any written
notice of any default under any of the Target Leases. Neither Target nor
any Target Subsidiary has breached or is in default under any material
covenant, agreement, term or condition of or contained in any Target Lease
and there has not occurred any event that with the lapse of time or the
giving of notice or both would constitute such a default or breach.
4.27. Rescission of Repurchases. Except as set forth in Section 4.27 of
the Target Disclosure Letter, all share repurchase programs previously
authorized by the Board of Directors of Target (if any) have been revoked by
resolution duly adopted on or prior to the date hereof.
4.28. Allowances For Possible Loan Losses. The allowance for possible loan
or credit losses, including any allowances or reserves for losses on ORE (as
hereinafter defined) and other collateral taken in satisfaction, or partial
satisfaction of a debt previously contracted (the "ALLOWANCE") shown on the
consolidated balance sheets of Target included in the most recent Regulatory
Financial Statements dated prior to the date of this Agreement was, and the
Allowance shown on the consolidated balance sheets of Target included in the
Regulatory Financial Statements as of dates subsequent to the execution of this
Agreement and as of the Closing Date will be, as of the dates thereof, in the
reasonable opinion of management of Target adequate (within the meaning of GAAP
and applicable regulatory requirements or guidelines) to provide for all known
and reasonably anticipated losses relating to or inherent in the loan and lease
portfolios (including accrued interest receivables and ORE reserves) of Target
and other extensions of credit (including letters of credit and commitments to
make loans or extend credit) by Target and the Target Subsidiaries as of the
dates thereof. Neither Target nor any Target Subsidiary has any loan or other
extension of credit which has been (or should have been in management's
reasonable opinion) classified as "Other Assets Especially Mentioned,"
"Substandard," "Doubtful" or "Loss," or similar classifications, that were not
classified in Target's or any Target Subsidiary's most recent report of
examination. Section 4.28 of the Target Disclosure Letter also lists all loans
or extensions of credit that are included on Target's or any Target Subsidiary's
"watch list." The net book value of Target's or any Target Subsidiary's assets
acquired through foreclosure in satisfaction of problem loans ("ORE") is carried
on the balance sheet of the Regulatory Financial Statements at fair value at the
time of acquisition less estimated selling costs which approximate the net
realizable value of the ORE in accordance with the American Institute of
Certified Public Accountants' Statement of Position 92-3.
4.29. Tax Treatment. Neither Target nor any Target Subsidiary has taken or
agreed to take any action that could reasonably be expected to cause the Merger
to fail to qualify as a reorganization under Section 368(a) of the Code.
4.30. Call Reports. Except as set forth in Section 4.30 of the Target
Disclosure Letter, all Call Reports, Federal Reserve FRY-6 Reports, and FRY-9C
Reports, including any amendments thereto, filed with the Federal Reserve Board,
the FDIC, CBD or any other federal or state Governmental Entity for the years
ending December 31, 1998 and 1999 and thereafter, together with any
correspondence with any of the Federal Reserve Board, the FDIC, CBD or any other
federal or state Governmental Entity concerning the aforesaid financial
statements and reports (the "REGULATORY FINANCIAL STATEMENTS"):
(a) were prepared from the books and records of Target and each Target
Subsidiary;
(b) were prepared, in all material respects, in accordance with
regulatory accounting principles consistently applied;
(c) present in all material respects Target's and each Target
Subsidiary's financial condition and the results of its operations, changes
in stockholder's equity and cash flows at the relevant dates thereof and
for the periods covered thereby; and
23
(d) contain and reflect all adjustments and accruals necessary for the
accurate presentation (in all material respects) of Target's and each
Target Subsidiary's financial condition and the results of Target's and
each Target Subsidiary's operations and cash flow for the period covered by
such financial statements (subject to any normal recurring year end
adjustments that are not material).
4.31. Disclosure Letter. Prior to the execution and delivery of this
Agreement, Target has delivered to Parent a disclosure letter (the "TARGET
DISCLOSURE LETTER") setting forth, in the appropriate section of the Target
Disclosure Letter, items the disclosure of which is necessary or appropriate
either in response to an express disclosure requirement contained in a
corresponding section of this Agreement or as an exception to Target's
representations or warranties contained in the corresponding section of this
Agreement; provided, however, that notwithstanding anything in this Agreement to
the contrary, the mere inclusion of an item in the Target Disclosure Letter as
an exception to a representation or warranty shall not be deemed an admission by
a party that such item represents a material exception or material fact, event
or circumstance or that such item has had or could reasonably be expected to
have a Material Adverse Effect with respect to Target. At any time up to the
date which is the tenth (10th) business day prior to the Closing Date, Target
may supplement or amend the Target Disclosure Letter with respect to facts or
circumstances first existing or occurring after the date hereof which, if
existing or occurring on or prior to the date hereof, would have been required
to be set forth or described in the Target Disclosure Letter or which is
necessary to correct any information in the Agreement or the Target Disclosure
Letter in order to make any of the representations and warranties of Target
contained in Section 4 true and correct when made and true and correct as of the
Effective Time as if made on and as of such time. No such supplement or
amendment to the Target Disclosure Letter shall have any effect for the purpose
of determining satisfaction of the closing condition set forth in Section 7.3(b)
of this Agreement if the facts or circumstances disclosed in such supplement or
amendment, individually or in the aggregate, (x) would so materially and
adversely impact the economic or business benefits to Parent of the transactions
contemplated by this Agreement that, had such facts or circumstances been known,
Parent would not, in its reasonable judgment, have entered into this Agreement
or (y) would impose on Parent or any of its Subsidiaries (including Target or
any Target Subsidiary) any substantial limitations or conditions on the
businesses and activities engaged in by Parent or any such Subsidiary that would
not be applicable in the absence of such facts or circumstances. The delivery by
Target of a supplement or amendment to the Target Disclosure Letter in
accordance with this Section 4.31 shall relieve Target of any liability,
regardless of whether or not the transactions contemplated hereby are
consummated, for a breach of a representation or warranty contained in Section 4
which, without the disclosure of the facts and circumstances in such supplement
or amendment, would not be true and correct when made or true and correct as of
the Effective Time as if made on and as of such time; provided that regardless
of whether or not the transactions contemplated hereby are consummated, the
delivery by Target of a supplement or amendment to the Target Disclosure Letter
pursuant to this Section 4.31 shall not, subject to the provisions of Section
8.2, relieve Target of any liability for a breach by Target of any covenant or
agreement of Target contained in this Agreement.
5. COVENANTS
5.1. Acquisition Transactions. Target shall not, nor shall it permit any
Target Subsidiary to, nor shall it authorize or permit any officer, director or
employee of, or any investment banker, attorney or other advisor or
representative or agent of, Target or any Target Subsidiary to, directly or
indirectly, (i) solicit, initiate, encourage or facilitate the submission of any
proposal relating to or involving an Acquisition Transaction (as hereinafter
defined) or (ii) enter into, encourage or facilitate any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to encourage or facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, or constitute an effort to facilitate, any proposal relating to or involving
an Acquisition Transaction; provided, however, that nothing contained in this
Section 5.1 shall prohibit the Board of Directors of Target from furnishing
information to, or entering into discussions or negotiations with, any person or
entity that makes an unsolicited, written bona fide proposal regarding an
Acquisition Transaction if, and only to the extent that (A) the Board of
Directors of Target concludes in good faith, after consultation with and based
upon the advice of outside counsel, that it is required to furnish such
information or enter into such discussions or negotiations in order to
24
comply with its fiduciary duties to Target's stockholders under applicable law,
(B) prior to taking such action, Target receives from such person or entity an
executed confidentiality agreement and an executed standstill agreement, each in
reasonably customary form (provided that such agreement is at least as limiting
as any such agreement between Parent and Target), and (C) the Board of Directors
of Target concludes in good faith that there is a reasonable likelihood that
such Acquisition Proposal constitutes or is reasonably likely to result in a
Superior Proposal (as hereinafter defined). Notwithstanding anything in this
Agreement to the contrary, Target shall (i) immediately advise Parent orally and
in writing of (A) the receipt by it (or any of the other entities or persons
referred to above) of any proposal regarding an Acquisition Transaction, or any
inquiry which could reasonably be expected to lead to any such proposal, (B) the
material terms and conditions of such proposal or inquiry (whether written or
oral), and (C) the identity of the person making any such proposal or inquiry,
(ii) keep Parent reasonably informed of the status and details of any such
proposal or inquiry, and (iii) negotiate in good faith with Parent to make such
adjustments in the terms and conditions of this Agreement such that such
Acquisition Proposal would no longer constitute a Superior Proposal. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in the first sentence of this Section 5.1 by any officer or director
of Target or any Target Subsidiary or any investment banker, attorney or other
advisor, representative or agent of Target or any Target Subsidiary, acting on
behalf of or at the request of the Board of Directors of Target, shall be deemed
to be a breach of this Section 5.1 by Target. Target shall immediately terminate
and cease any and all discussions, negotiations and/or contacts with any other
person or entity which may exist relating to or involving an Acquisition
Transaction. For purposes of this Agreement, "ACQUISITION TRANSACTION" means any
tender offer, exchange offer, merger, consolidation, share exchange, joint
venture, business combination or similar transaction involving Target or any
Target Subsidiary, or any purchase of all or substantially all of the assets of
Target or any Target Subsidiary. For purposes of this Agreement, "SUPERIOR
PROPOSAL" means a bona fide written Acquisition Proposal which the Board of
Directors of Target concludes in good faith, after consultation with its
financial advisors and legal advisors, taking into account all legal, financial,
regulatory and other aspects of the proposal and the person making the proposal
(including any break-up fees, expense reimbursement provisions and conditions to
consummation), (i) is more favorable to the Stockholders of Target from a
financial point of view, than the transactions contemplated by this Agreement
and (ii) is fully financed or reasonably capable of being fully financed and
otherwise reasonably capable of being completed on the terms proposed. Nothing
contained in this Section 5.1 shall prohibit the Target or its Board of
Directors from taking and disclosing to Target's stockholders a position with
respect to a tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act or from making such disclosure to the
Target's stockholders which, in the judgment of the Board of Directors as
determined in good faith and as advised in writing by outside counsel, may be
required under applicable law.
5.2. Interim Operations of Target. During the period from the date of this
Agreement to the Effective Time, except as specifically contemplated by this
Agreement, set forth in the Target Disclosure Letter or as otherwise approved
expressly in writing by Parent:
(a) Target shall, and shall cause each of the Target Subsidiaries to,
conduct their respective businesses only in, and not take any action except
in, the ordinary course of business consistent with past practice. Target
shall use all commercially reasonable efforts to preserve intact the
business organization of Target and each of the Target Subsidiaries, to
keep available the services of its and their present officers and key
employees and to preserve the goodwill of those having business
relationships with Target or the Target Subsidiaries. Other than in the
ordinary course of business consistent with past practice, Target shall not
(i) incur any indebtedness for borrowed money (it being understood and
agreed that incurrence of indebtedness in the ordinary course of business
shall include, without limitation, purchases of federal funds, borrowings
pursuant to existing lines of credit, sales of certificates of deposit and
entering into repurchase agreements), (ii) assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of any
other individual, corporation or other entity, or (iii) make any loan or
advance.
(b) Target shall not and shall not permit any Target Subsidiary to
make any change or amendment to their respective certificates' (or
articles) of incorporation, charter or bylaws (or comparable governing
25
instruments) in a manner that would materially and adversely affect either
party's ability to consummate the Merger or the economic benefits of the
Merger to either party.
(c) Target shall not, and shall not permit any Target Subsidiary to,
(i) issue or sell any shares of capital stock or any other securities of
any of them (other than (A) pursuant to outstanding exercisable stock
options granted pursuant to one of the Target Option Plans or pursuant to
outstanding exercisable stock awards reflected in the Target Disclosure
Letter, or (B) pursuant to the terms of 401(k) plans of Target and any
Target Subsidiary in effect as of the date hereof), (iii) issue any
securities convertible into or exchangeable for, or options, warrants to
purchase, scrip, rights to subscribe for, calls or commitments of any
character whatsoever relating to, (iii) enter into any contract,
understanding or arrangement with respect to the issuance of, any shares of
capital stock or any other securities of any of them (other than pursuant
to the Target Option Plans) or (iv) enter into any arrangement or contract
with respect to the purchase or voting of shares of Target's or any Target
Subsidiary's capital stock, or adjust, split, combine or reclassify any of
their capital stock or other securities or make any other changes in
Target's or any Target Subsidiary's capital structures. Neither Target nor
any Target Subsidiaries shall grant any additional stock options except for
up to an aggregate of 25,000 options granted by Target for new hires or
promotions.
(d) Target shall not, and shall not permit any Target Subsidiary to,
declare, set aside, pay or make any dividend or other distribution or
payment (whether in cash, stock or property) with respect to, or purchase
or redeem, any shares of the capital stock of any of them other than
dividends paid in the ordinary course of business consistent with past
practice and dividends paid by any Target Subsidiary to Target or another
Target Subsidiary with respect to its capital stock between the date hereof
and the Effective Time.
(e) Target shall not, and shall not permit any Target Subsidiary to,
acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner,
any business or any person.
(f) Target shall not, and shall not permit any Target Subsidiary to,
sell, lease, license, mortgage or otherwise encumber or subject to any lien
or otherwise dispose of any material properties or assets (including
securitizations), other than in the ordinary course of business consistent
with past practice; it being understood that Target and the Target
Subsidiaries shall be permitted to sell or participate whole loans,
portions of loans, and investments to third parties and into Target's or
such Target Subsidiary's warehouse and commercial paper facilities,
provided that all such sales or participations shall be in the ordinary
course of business.
(g) Except as set forth in the Target Disclosure Letter or as
otherwise provided in this Agreement, Target shall not, and shall not
permit any Target Subsidiary to, (i) adopt or amend (except as required by
law or contractual obligations described in the Target SEC Reports or
Target Disclosure Letter) any Target Benefit Plan, Employee/Consulting
Agreement or any other bonus, profit sharing, compensation, severance,
termination, stock option, pension, retirement, deferred compensation,
employment or other employee benefit agreements, trusts, plans, funds or
other arrangements for the benefit or welfare of any current or former
director, officer or employee, (ii) except for normal merit increases and
bonuses paid or accrued in the ordinary course of business consistent with
past practice, increase the compensation or fringe benefits of any
director, officer or employee, (iii) pay any benefit not required by any
Target Benefit Plan or Employee/Consulting Agreement (including, without
limitation, the granting of stock options or stock appreciation rights),
(iv) loan or advance any moneys or funds to any director, officer or
employee, (v) take any action or grant any benefit not required under the
terms of any Target Benefit Plan or Employee/Consulting Agreement or (vi)
enter into any contract, agreement, commitment or arrangement (oral or
written) to do any of the foregoing.
(h) Target shall (i) inform Parent of any Recommended Regulatory
Change or any changes to the Target Parties' books and records, financial
statements, Regulatory Financial Statements, or Interim Reports required by
any state or federal examiner or other regulatory authority (any such
change being a "REQUIRED REGULATORY CHANGE" and together with the
Recommended Regulatory Changes, the "REGULA-
26
TORY CHANGES") and, to the extent permitted by applicable law, provide
Parent with copies of any report or similar correspondence describing any
Recommended Regulatory Change or Required Regulatory Change; (ii)
diligently pursue with the appropriate federal or state examiner or other
regulatory authority the resolution of any objections regarding any
Recommended Regulatory Changes; (iii) promptly implement all Required
Regulatory Changes to the extent required after taking the steps required
in clause (ii); and (iv) consult with Parent on and keep Parent reasonably
informed with respect to all such Regulatory Changes and the Target
Parties' proposed actions with respect thereto.
(i) Target shall consult Parent and shall keep Parent reasonably
informed with respect to Target's operations, including without limitation
Target's capital plans and access to capital sources, and shall consult
with Parent prior to implementing any capital plan.
(j) Target and each Target Subsidiary shall timely file all Call
Reports, Federal Reserve FRY-6 Reports, and FRY-9C Reports required to be
filed by Target or any Target Subsidiary (the "INTERIM REPORTS") and shall
promptly provide Parent with copies of each such Interim Report. All such
Interim Reports shall:
(i) be prepared from the books and records of Target and each
Target Subsidiary;
(ii) be prepared in all material respects in accordance with
regulatory accounting principles consistently applied;
(iii) present in all material respects Target's and each Target
Subsidiary's financial condition and the results of its operations,
changes in stockholder's equity and cash flows at the relevant dates
thereof and for the period covered thereby; and
(iv) contain and reflect all adjustments and accruals necessary for
the accurate presentation (in all material respects) of Target's and
each Target Subsidiary's financial condition and the results of Target's
and each Target Subsidiary's operations and cash flow for the period
covered by such financial statements.
(k) Target shall not, and shall not permit any Target Subsidiary to,
authorize, or commit or agree (orally or in writing) to take, any actions
contrary to or prohibited by those set forth in clauses (a) through (j) of
this Section 5.2.
Subject to the provisions of Sections 5.2(a) through 5.2(k) above, nothing
contained herein shall give Parent the right to control or direct the operations
of Target or any Target Subsidiary prior to the Effective Time.
5.3. Employee Matters.
(a) Target shall terminate or shall cause each Target Subsidiary to
terminate, the Target 401(k) plan effective immediately prior to the
Closing, to cease all further contributions to such plan with respect to
pay periods beginning on and after the Closing Date (other than as required
to repay loans made thereunder) and to cease making any additional loans to
participants under the Target 401(k) plan effective as of the termination
of such plan and shall provide written resolutions reasonably satisfactory
to Parent authorizing the same, and a copy of such resolutions shall be
delivered to Parent prior to the Closing Date.
(b) From and after the date hereof, Target and each Target Subsidiary
shall use their respective best efforts to enter into amendments to the
employment agreements (in the form set forth in Section 5.3 of the Target
Disclosure Letter (the "AMENDMENTS") with each officer or employee of
Target (other than Brett N. Silvers and Leslie A. Galbraith) that has an
employment agreement (or similar agreement) with Target or any Target
Subsidiary, amending such employment agreements. From and after the date
hereof, Target shall use its best efforts to retain all employees of any
Target Subsidiary as of the date hereof.
(c) From and after the Effective Time, Parent agrees to provide the
employees of Target and the Target Subsidiaries (the "TARGET EMPLOYEES")
who remain employed by Target through and after the Effective Time
(collectively, the "TRANSFERRED TARGET EMPLOYEES") with the types and
levels of employee
27
benefits maintained by Parent for similarly situated employees of Parent in
the same business unit with Target. Parent shall continue to maintain
Target plans (other than stock based plans or the Target 401(k) plan),
including Target's "Team Incentive Program" and "Annual Incentive Plan,"
each of which shall remain in place through 2001 (provided that Parent may
modify applicable targets and measures under such plans), or provide other
transition coverage until the Target Employees are permitted to participate
in Parent's plans. To the extent that the Target Employees are permitted to
participate in the Parent's plans, Parent will treat, and cause its
vacation and other paid time off, flexible benefit (including medical,
dental, life insurance and disability) and 401(k) plans to treat, the
service of Target Employees with Target or any Target Subsidiary as service
rendered to Parent for purposes of eligibility to participate, vesting and
for other appropriate benefits under such plans. The service of Target
Employees with Target or any Target Subsidiary shall not be considered as
service rendered for Parent for any purposes of any defined benefit plan
sponsored by Parent. Without limiting the foregoing, Parent shall not treat
any Transferred Target Employee as a "new" employee for purposes of any
exclusions under any health or similar plan of Parent for employee for
purposes of any exclusions under any health or similar plan of Parent for a
pre-existing medical condition, and will make appropriate arrangements with
its insurance carrier(s) to ensure such result. Following the Effective
Time, except as otherwise contemplated herein, Parent shall cause Target or
such appropriate Target Subsidiaries to honor in accordance with their
terms all individual employment agreements, consulting agreements, and
severance agreements set forth in the Target Disclosure Letter, each as may
be amended by the Amendments pursuant to Section 7.3(g).
5.4. Access and Information. Upon reasonable notice, each of the parties
shall (and shall cause each of the parties' subsidiaries to) afford to the other
parties and their representatives (including, without limitation, directors,
officers and employees of the parties and their affiliates, and counsel,
accountants and other professionals retained) such access throughout the period
prior to the Effective Time, at reasonable times, to the books, records
(including, without limitation, tax returns and work papers of independent
auditors), properties, personnel of such party and its subsidiaries and to such
other information as any party may reasonably request; provided, however, that
no party shall be required to provide access to any such information if the
providing of such access (i) would be reasonably likely, in the written opinion
of counsel, to result in the loss or impairment of any privilege generally
recognized under law with respect to such information or (ii) would be precluded
by any law, ordinance, regulation, judgment, order, decree, license or permit of
any Governmental Entity. The parties hereto will use reasonable efforts to make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentences apply. All information furnished by one
party to any of the others in connection with this Agreement or the transactions
contemplated hereby shall be kept confidential by such other party in accordance
with the terms of the letter dated November 28, 2000, from Target to United
Parcel Service General Services Corporation and the letter dated September 29,
2000 from United Parcel Service General Services Corporation to Target
(collectively, the "CONFIDENTIALITY AGREEMENT").
5.5. Certain Filings, Consents and Arrangements.
(a) The parties hereto shall cooperate with each other and use their
commercially reasonable efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings,
and to obtain as promptly as practicable all permits, consents, approvals
and authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger). Target and Parent
shall have the right to review in advance, and to the extent practicable
each will consult the other on, in each case subject to applicable laws
relating to the exchange of information, all the information relating to
Target Parties or Parent, as the case may be, and any of their respective
Subsidiaries, which appears in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection with
the transactions contemplated by this Agreement. In exercising the
foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult
with each other with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the
28
transactions contemplated by this Agreement and each party will keep the
other apprised of the status of matters relating to completion of the
transactions contemplated herein. Parent and Target shall promptly furnish
each other with copies of written communications received by Parent or
Target Parties, as the case may be, or any of their respective Subsidiaries
or Affiliates from, or delivered by any of the foregoing to, any
Governmental Entity in respect of the transactions contemplated hereby.
(b) Parent and Target shall (i) as promptly as practicable after the
date hereof, with each of Parent and Target using their commercially
reasonable efforts to make a prompt filing, make such filings as may be
required by the HSR Act with respect to the transactions contemplated
hereby, (ii) respond promptly to inquiries from the Department of Justice
and the Federal Trade Commission in connection with such filings, (iii)
file or cause to be filed as promptly as practicable with the Department of
Justice and Federal Trade Commission any supplemental information that may
be requested pursuant to the HSR Act, and (iv) seek the earliest possible
termination or waiver of the waiting period under such statute. Each of
Parent and Target shall promptly inform each other of any material
communication made to, or received by such party from, the Federal Trade
Commission, the Antitrust Division of the Department of Justice or any
other Governmental Authority.
(c) Notwithstanding anything in this Section 5.5, Parent shall not be
obligated to consent to or approve any Burdensome Condition.
5.6. State Takeover Statutes. Target shall take all reasonable steps to
(i) exempt Target and the Merger by action of Target's Board of Directors or
otherwise from any law or statute that purports to limit or restrict business
combinations or the ability to acquire or to vote shares and (ii) upon the
request of Parent, assist in any challenge by Parent to the applicability to the
Merger of any such law or statute.
5.7. Indemnification and Insurance.
(a) From and after the Effective Time, Parent shall indemnify, defend
and hold harmless the present and former directors and officers of Target
and the Target Subsidiaries (each, an "INDEMNIFIED PARTY") against all
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "COSTS") incurred in
connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, arising out of
actions or omissions occurring at or prior to the Effective Time, which is
based upon or relates to such Indemnified Party's capacity as a director or
officer, to the fullest extent that such persons are permitted to be
indemnified under Target's certificate of incorporation and bylaws as in
effect on the date hereof, as supplemented by the agreements referred to in
Section 5.7(a) of the Target Disclosure Letter, except as may be limited by
the DGCL.
(b) Parent shall cause the persons serving as officers and directors
of Target immediately prior to the Effective Time to be covered for a
period of six years from the Effective Time by the directors' and officers'
liability insurance policy maintained by Target on the date hereof
(provided that Parent may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are not less
advantageous than such policy) with respect to acts or omissions occurring
prior to the Effective Time which were committed by such officers and
directors in their capacity as such; provided, however, that in no event
shall Parent be required to provide greater insurance coverage than the
provided by the current terms, conditions, and limitations of the policy
currently maintained by Target and to expend, on any annual basis, more
than 200% of the current amount expended by Target (the "INSURANCE AMOUNT")
to maintain or procure insurance coverage, and further provided that if
Parent is unable to maintain or obtain the insurance called for by this
Section 5.7(b), Parent shall use all reasonable efforts to obtain as much
comparable insurance as is available for the Insurance Amount.
(c) In the event Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of Parent assume the obligations set forth in this section.
29
(d) The provisions of this Section 5.7 are intended to be for the
benefit of, and enforceable by, each Indemnified Party and his or her heirs
and representatives, and nothing herein shall affect any indemnification
rights that any Indemnified Party and his or her heirs and representatives
may have under the certificate of incorporation or by-laws of Target or any
of Target Subsidiaries, any contract or applicable law.
5.8. Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its commercially 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
as promptly as practicable the transactions contemplated by this Agreement,
including using its commercially reasonable 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 including the Regulatory Approvals.
5.9. Publicity. The initial press release announcing this Agreement shall
be a joint press release approved by both Parent and Target and, thereafter,
Target and Parent 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.
5.10. Preparation of the Registration Statement and the Proxy Statement;
Target Meeting.
(a) As soon as practicable following the date of this Agreement,
Target and Parent shall prepare the Proxy Statement and the Registration
Statement and (i) Target shall file the Proxy Statement with the Commission
and (ii) Parent shall file the Registration Statement with the Commission.
Each of Target and Parent shall use all commercially reasonable efforts to
have the Registration Statement declared effective under the Securities Act
as promptly as practicable after such filing and Target shall use all
commercially reasonable efforts to cause the Proxy Statement to be mailed
to Target's Stockholders as promptly as practicable after clearance of the
Proxy Statement by the Commission; provided that the Registration Statement
declared effective and Proxy Statement mailed to the Stockholders shall
reflect the audited financial statements of Parent and Target for the year
ended December 31, 2000. Parent shall also take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified or to file a general consent to service of process) required to
be taken under any applicable state securities laws in connection with the
issuance of Parent Common Stock in the Merger and Target shall furnish
Parent all information concerning Target and the holders of its capital
stock and shall take any action as Parent may reasonably request in
connection with any such action. If at any time prior to the Effective Time
any information relating to Target or Parent or any of their respective
Affiliates, officers or directors, should be discovered by Target or Parent
which should be set forth in an amendment or supplement to any of the
Registration Statement or the Proxy Statement, so that any of such
documents would not include any misstatement of a material fact or omit to
state any material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, Target or
Parent (as the case may be) shall promptly notify the other and shall
cooperate in the filing of any appropriate amendment or supplement
describing such information with the Commission and, to the extent
required, any dissemination thereof to the stockholders of Target or
Parent.
(b) Except as provided below, Target shall, as soon as practicable
following the date of clearance of the Proxy Statement by the Commission,
duly call, give notice of, convene and hold a meeting of its Stockholders
(the "TARGET MEETING") for the purpose of approving this Agreement, and the
Board of Directors of Target (i) shall recommend to its Stockholders the
approval and adoption of this Agreement, the Merger and the other
transactions contemplated hereby, (ii) shall use all reasonable efforts to
solicit such approval and adoption, (iii) shall not recommend or present
for Stockholder consideration in any manner any other Acquisition
Transaction, and (iv) shall not withdraw or modify in any manner the
approval or recommendation by the Board of Directors of Target of this
Agreement or the Merger;
30
provided, however, that nothing in this Section 5.10(b) shall prohibit the
Board of Directors of Target from withdrawing or modifying in a manner
adverse to Parent its recommendation to the Stockholders or recommending
any other Acquisition Transaction if Target is not in breach of, and has
not breached, in any material respect any of the provisions of Section 5.1,
Target receives an unsolicited, written bona fide proposal regarding an
Acquisition Transaction, and as a result of such proposal (A) the Board of
Directors of Target concludes in good faith that it is required to take
such action, but only after consultation with outside counsel and only if
Target's Board of Directors concludes that the failure to take such action
would result in a substantial risk that the Board of Directors would
violate any fiduciary duties of the Target Board to Target Stockholders
under applicable law, and (B) the proposal regarding the Acquisition
Transaction constitutes a Superior Proposal.
(c) Target shall use all commercially reasonable efforts to hold the
Target Meeting as soon as practicable after the date hereof and will not
adjourn or postpone the Target Meeting, other than for the absence of a
quorum.
5.11. Stock Exchange Listings. Parent shall cause to be listed on the New
York Stock Exchange, upon official notice of issuance, the Parent Common Stock
to be issued pursuant to the Merger.
5.12. Stockholder Litigation. Each of Target and Parent shall give the
other the reasonable opportunity to participate in the defense of any
stockholder litigation against Target or Parent, as applicable, and its
directors relating to the transactions contemplated by this Agreement.
5.13. Tax-free Reorganization Treatment. None of Parent, Sub or Target (i)
shall knowingly 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 of the Code, or (ii) shall file any return or
take any position inconsistent with the treatment of the Merger as a
reorganization described in Section 368(a) of the Code. Each of Parent, Sub and
Target shall comply with the record-keeping and information reporting
requirements set forth in Treas. Reg. sec. 1.368-3.
5.14. Letter from Target's Accountants. Target shall use all commercially
reasonable efforts to cause to be delivered to Parent two letters from Target's
independent accountants, one dated a date within two business days before the
date on which the Registration Statement shall become effective and one dated a
date within two business days before the Closing Date, each addressed to Parent,
in form and substance reasonably satisfactory to Parent and customary in scope
and substance for comfort letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement.
5.15. Expenses. Except as otherwise provided in Section 8.2 and the Escrow
and Indemnity Agreement, each party shall bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
that if this Agreement is terminated in accordance with Section 8 hereof, the
printing expenses, Commission filing and registration fees and filing fees
required pursuant to the HSR Act shall be shared equally between Target and
Parent.
5.16. Adverse Action. During the period from the date of this Agreement
through the Effective Time, except as expressly contemplated by this Agreement,
neither party will, and will not permit any Subsidiary to, without the written
consent of the other party (which consent will not be unreasonably withheld or
delayed) knowingly take any action that (x) would, or would be reasonably likely
to result in (a) any of its representations and warranties set forth in the
Agreement being or becoming untrue in any material respect, (b) any of the
conditions to the Merger set forth in Section 7 not being satisfied or (c) a
material violation of any provision of the Agreement except, in each case, as
may be required by applicable law or applicable regulatory requirements and (y)
has, or could reasonably be expected to have, a Material Adverse Effect. Each
party shall promptly notify the other party in writing of any action taken by it
in reliance on the foregoing exception, unless such notification would be
prohibited by applicable law.
5.17. Standstill Agreements; Confidentiality Agreements. During the period
from the date of this Agreement through the Effective Time, Target shall not
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which it or any of its respective Subsidiaries is a
party (other than the Confidentiality Agreement). During such period, Target
shall enforce, to the fullest extent permitted
31
under applicable law, the provisions of any such agreement, including by
obtaining injunctions to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof in any court having jurisdiction.
5.18. Affiliates.
(a) Prior to the Effective Time, Target shall identify to Parent all
persons who were, at the time of the Target Meeting, "affiliates" (the "145
AFFILIATES") (as that term is used in sections (c) and (d) of Rule 145
promulgated pursuant to the Securities Act) of Target, including without
limitation, all those persons subject to the reporting requirements of Rule
16(a) of the Exchange Act.
(b) Target shall use its commercially reasonable efforts to obtain and
deliver, prior to the Effective Time, an agreement, in the form of Exhibit
B, from each of the 145 Affiliates.
5.19. Dividends. After the date of this Agreement, each of Parent and
Target shall coordinate with the other the declaration of any dividends in
respect of Parent Common Stock and Target Common Stock and the record dates and
payment dates relating thereto, it being the intention of the parties hereto
that holders of Target Common Stock shall not receive two dividends, or fail to
receive one dividend, for any quarter with respect to their shares of Target
Common Stock and any shares of Parent Common Stock any such holder receives in
exchange therefor in the Merger. Nothing contained in this Section shall be
construed to confer on either party any right to disapprove any dividend
proposed to be declared and paid by the other party or to establish the amount
or terms thereof.
5.20. Exemption from Liability Under Section 16(b). Provided that Target
delivers to Parent the Section 16 Information in a timely fashion, the Board of
Directors of Parent, or a committee of Non-Employee Directors thereof (as such
term is defined for purposes of Rule 16b-3(d) under the Exchange Act), shall
adopt a resolution providing that the receipt by the Target Insiders of Class A
Common Stock in exchange for shares of Target Common Stock, and of options on
Parent Common Stock upon conversion of options on Target Common Stock, in each
case pursuant to the transactions contemplated hereby and to the extent such
securities are listed in the Section 16 Information, are intended to be exempt
from liability pursuant to Section 16(b) under the Exchange Act. "SECTION 16
INFORMATION" shall mean information accurate in all material respects regarding
the Target Insiders, the number of shares of Target Common Stock held by each
such Target Insider and expected to be exchanged for Parent Common Stock in the
Merger, and the number and description of the options on Target Common Stock
held by each such Target Insider and expected to be converted into options on
Class A Common Stock in connection with the Merger. "TARGET INSIDERS" shall mean
those officers and directors of Target who are subject to the reporting
requirements of Section 16(a) of the Exchange Act and who are listed in the
Section 16 Information.
5.21. Target Stock Options/Registration Statements on Form S-8. Parent
shall reserve for issuance the number of shares of Class A Common Stock that
will be issuable upon exercise of Target Stock Options assumed pursuant to
Section 2.3 hereof. On the Closing Date, Parent shall file with the SEC one or
more registration statements on Form S-8 for the shares of Class A Common Stock
issuable with respect to Target Stock Options and will maintain the
effectiveness of such registration statements for so long as any of such options
or other rights remain outstanding.
5.22. Calculation of Net Book Value.
(a) As promptly as practicable after the date on which all conditions
to the closing of the transactions contemplated hereby in Sections 7.1
(other than Section 7.1(g)), 7.2 and 7.3 are satisfied or waived, and in
any event within ten business days thereafter, Target shall provide to
Parent a certificate of the Chief Executive Officer and Chief Financial
Officer of Target certifying the Net Book Value of Target as of the last
day of the calendar month end preceding the date on which such conditions
to closing are satisfied or waived (the "CALCULATION DATE") with supporting
calculations and other information used by Target to calculate the Net Book
Value of Target as of the Calculation Date. Target shall also provide such
other information as Parent shall reasonably require to confirm the
accuracy of Target's calculation of the Net Book Value as of the
Calculation Date.
32
(b) If Parent proposes no modifications to Target's calculation of Net
Book Value, within ten business days after delivery of the certificate
referred to in (a), the Net Book Value of Target as certified by Target
shall be the Net Book Value of Target used to calculate the Merger
Consideration hereunder.
(c) If, within ten business days after delivery of the certificate
referred to in (a), Parent proposes modifications to Target's calculation
of Net Book Value in excess of $1,000,000 in the aggregate, Parent and
Target shall use their commercially reasonable efforts to resolve any such
proposed modifications as promptly as practicable. If despite such
commercially reasonable efforts any such proposed modifications are not
resolved within three business days, Target shall send Parent written
notice that it has either (i) agreed to engage the New York, New York
office of Arthur Andersen, LLP (the "ACCOUNTING FIRM") to determine whether
any such proposed modifications to Target's calculation of Net Book Value
shall be made or (ii) elected to terminate this Agreement pursuant to
Section 8.1(g).
(d) If Target agrees to engage the Accounting Firm in accordance with
Section 5.22(c), Parent and Target shall use their commercially reasonable
efforts to cause the Accounting Firm to resolve any such proposed
modifications as promptly as practicable and in any event within ten
business days after the delivery of the notice referred to in (c). The
determination by the Accounting Firm shall be final and conclusive. The Net
Book Value calculated by Target (as modified as provided herein) shall be
the Net Book Value of Target used to calculate the Merger Consideration
5.23. Reserved.
5.24. Calculation of Escrow Balance. As promptly as practicable after the
Calculation Date, Target shall provide to Parent a written certification from
the Chief Executive Officer and Chief Financial Officer of Target of the (i)
Escrow Balance and (ii) Closing Date ALLL (as defined in the Escrow and
Indemnity Agreement) (collectively, the "ESCROW CALCULATIONS") with supporting
calculations and other information used by Target to calculate the Escrow
Calculations; provided that for purposes of this Section 5.24 the Closing Date
ALLL shall be the ALLL determined pursuant to Section 5.22. Target shall also
provide such other information as Parent shall reasonably request to confirm the
accuracy of Target's calculation of the Escrow Balance. The Escrow Calculations
proposed by Target (as modified by any changes proposed by Parent acceptable to
Target) shall be (x) the Escrow Balance for purposes of Section 2.2 hereof and
(y) the Closing Date ALLL for purposes of the Escrow and Indemnity Agreement.
5.25. Calculation of Escrow Shares. As promptly as practicable after the
Calculation Date and prior to the Closing Date, Parent shall provide to Target
its certified calculation of the Escrow Shares based on the Escrow Calculations
calculated in accordance with Section 5.24, with supporting calculations and
other information used by Parent to calculate the Escrow Shares. Parent shall
also provide such other information as Target shall reasonably request to
confirm the accuracy of Parent's calculation of the Escrow Shares. The Escrow
Shares certified by Parent (as modified by any changes proposed by Parent
acceptable to Target) shall be the Escrow Shares for purposes of Section 2.2
hereof and the Escrow and Indemnity Agreement.
5.26. Repayment of Stockholder Loans. Target shall cause each and all of
the loans or advances made to Brett N. Silvers (the "STOCKHOLDER LOAN") to be
satisfied and discharged in accordance with a method detailed in Section 5.26 of
the Target Disclosure Letter.
5.27. Deposit Sale.
(a) As soon as practicable following the execution and delivery of
this Agreement, Target shall cause the Bank to diligently seek one or more
"insured banks" (within the meaning of the FDIC Act) to acquire in the
aggregate all of the Bank's deposit liabilities (the "DEPOSIT ACQUIRORS"
and the "DEPOSIT ASSUMPTION", respectively) and to execute and deliver to
the Deposit Acquirors one or more purchase and assumption agreements and
such other documentation necessary to complete the Deposit Assumption, in
each case containing terms as are customary in the context of similar
transactions, including, without limitation, customary representations and
warranties, closing conditions, and indemnities. Such purchase and
assumption agreements and other documentation are herein referred to as the
"DEPOSIT ASSUMPTION AGREEMENTS."
33
(b) All terms and conditions of the Deposit Assumption and the Deposit
Assumption Agreements shall be reasonably satisfactory to Parent in its
reasonable discretion and shall, in any event:
(i) provide for the assumption by the Deposit Acquirors of all (and
not less than all) of the deposit liabilities of the Bank that shall be
existing on the date the Deposit Assumption is consummated;
(ii) authorize the Bank to furnish copies of the Deposit Assumption
Agreements to the CBD, the FDIC, the Board of Governors of the Federal
Reserve System, the Federal Reserve Bank of Boston and Parent (and
Target hereby agrees to cause the Bank to furnish such copies to such
persons);
(iii) require the Deposit Acquiror to prepare and file with the
appropriate bank regulatory authorities such applications and other
filings as may be required in the circumstances for the consummation of
the Deposit Assumption, including an appropriate application under the
Bank Merger Act (12 U.S.C. sec. 1828(c));
(iv) require the Deposit Acquiror to furnish to the Bank, and
authorize the Bank to furnish to the CBD, the FDIC, the Board of
Governors of the Federal Reserve System, the Federal Reserve Bank of
Boston and Parent, copies of all such applications and filings (and
Target hereby agrees to cause Bank to furnish such copies to such
persons); and
(v) if determined by Parent, in its reasonable discretion, to be
necessary to obtain any Regulatory Approval or to satisfy any conditions
set forth in Section 7, require the Deposit Acquiror, immediately upon
the consummation of the Deposit Assumption (with time being of the
essence), to furnish to the CBD, the FDIC, the Board of Governors of the
Federal Reserve System and the Federal Reserve Bank of Boston (with
copies to the Bank and to Parent) a certificate meeting the requirements
of 12 C.F.R. Part 307.1 and such other evidence of the consummation of
the Deposit Assumption as any of such persons may request without undue
burden upon the Deposit Acquiror.
(c) In addition, Target shall cause the Bank to furnish to the CBD,
the FDIC, the Board of Governors of the Federal Reserve System and the
Federal Reserve Bank of Boston (with copies to Parent) such certificates or
other evidences of the consummation of the Deposit Assumption as any of
such persons may request to establish that the Bank has ceased to be an
"insured bank" (within the meaning of the FDIC Act) and a "bank" within the
meaning of the BHC Act.
6. CLOSING MATTERS
6.1. The Closing. Unless this Agreement shall have been terminated and the
Merger herein contemplated shall have been abandoned pursuant to Section 8.1 and
subject to the satisfaction or waiver of the conditions set forth in Section 7,
the consummation of the Merger shall take place as promptly as practicable (and
in any event within three business days) after satisfaction or waiver of the
conditions set forth in Section 7, at a closing (the "CLOSING") to be held at
the offices of King & Spalding, 191 Peachtree Street, Atlanta, Georgia, unless
another date, time or place is agreed to by Parent and Target.
6.2. Documents and Certificates. Parent and Target shall, on or prior to
Closing, execute and deliver all such instruments, documents or certificates as
may be reasonably necessary or advisable, on the advice of counsel, for the
consummation at the Closing of the transactions contemplated by this Agreement
to occur as soon as practicable.
7. CONDITIONS
7.1. Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) The Merger shall have been approved and adopted by the requisite
vote of the holders of Target Common Stock.
34
(b) The Parent Common Stock issuable in the Merger shall have been
authorized for listing on the New York Stock Exchange, upon official notice
of issuance.
(c) All authorizations, consents, orders or approvals of, and all
expirations of waiting periods imposed by, any Governmental Entity
(including without limitation those required to obtain the Regulatory
Approvals) (collectively, "CONSENTS") which are necessary for the
consummation of the Merger (other than immaterial Consents, the failure to
obtain which would not be materially adverse to the business of the
Surviving Corporation) shall have been obtained or shall have occurred and
shall be in full force and effect at the Effective Time; provided, however,
that none of the preceding Consents shall be deemed obtained if (i) it
shall have imposed any condition or requirement which would so materially
and adversely impact the economic or business benefits to Parent or Target
of the transactions contemplated by this Agreement that, had such condition
or requirement been known, such party would not, in its reasonable
judgment, have entered into this Agreement or (ii) such Consent causes the
ownership of Target and the Target Subsidiaries by Parent, after the
Effective Time, to impose on Parent or any of its Subsidiaries (including
Target or any Target Subsidiary) any limitations or conditions on the
businesses and activities engaged in by Parent or any such Subsidiary that
would not be applicable in the absence of such ownership (any such
condition or limitation described in clause (i) or (ii) being referred to
herein as a "Burdensome Condition"); provided, however, that none of those
conditions and requirements set forth in Section 7.1 of the Target
Disclosure Letter hereto shall constitute a Burdensome Condition for any
purpose under this Agreement.
(d) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the Commission and remain in effect.
(e) No temporary restraining order, preliminary or permanent
injunction or other order by any federal or state court in the United
States which prevents the consummation of the Merger shall have been issued
and remain in effect.
(f) All applicable waiting periods with respect to any "Notification
and Report Form for Certain Mergers and Acquisitions" filed by Parent,
Target or any of their "ultimate parent entities" in compliance with the
HSR Act pursuant to the transactions contemplated hereby shall have passed,
or early termination of such waiting periods shall have been granted.
(g) The Net Book Value of Target as of the Calculation Date shall have
been determined in accordance with Section 5.22.
7.2. Conditions to Obligation of Target to Effect the Merger. The
obligation of Target to effect the Merger shall be subject to the fulfillment or
waiver at or prior to the Effective Time of the additional following conditions:
(a) Parent and Sub shall have performed in all material respects all
covenants contained in this Agreement required to be performed by each of
them at or prior to the Effective Time.
(b) The representations and warranties of Parent contained in Section
3 shall be true and correct when made and shall be true and correct, in all
material respects, as of the Effective Time as if made at and as of such
time (other than those representations and warranties that are qualified as
to materiality or similar language, which shall be true and correct in all
respects as of the Effective Time, as if made at and as of such time),
except for representations and warranties relating to a time or times other
than the Effective Time which were or will be true and correct, in all
material respects, at such time or times.
(c) Parent shall have furnished Target a certificate dated the date of
the Closing, signed by the Chief Executive Officer and Chief Financial
Officer of Parent that the conditions set forth in Sections 7.2(a) and
7.2(b) have been satisfied.
(d) The Registration Statement contemplated by Section 5.10(a),
registering at least the number of shares of Parent Common Stock necessary
to satisfy Parent's obligations under Section 2.1 and 2.2, shall have been
declared effective by the Commission under the Securities Act and no stop
order
35
suspending the effectiveness of the Registration Statement shall have been
issued by the Commission and no proceedings for such purpose shall have
been initiated or threatened by the Commission. Parent shall have reserved
for issuance the number of shares of Parent Common Stock necessary to
satisfy Parent's obligations under Section 2.1(c).
(e) No event or events shall have occurred that has had, or could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect with respect to Parent or any Significant
Subsidiary.
(f) Target shall have received an opinion of Bingham Dana LLP, special
counsel to Target, dated the Closing Date, substantially to the effect that
(i) the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code, and (ii) no gain or loss will be recognized by
stockholders of Target who exchange all of their Target Common Stock solely
for Parent Common Stock pursuant to the Merger, except with respect to
cash, if any, received in lieu of a fractional share interest in Parent
Common Stock. In rendering its opinion, such counsel shall be entitled to
require and rely upon representations contained in certificates of the
officers of Target, Parent and Sub. If Bingham Dana LLP shall fail to
deliver such opinion, the condition set forth in this Section 7.2(f) may be
satisfied, at the option of Parent, by an opinion of King & Spalding.
(g) Parent shall have loaned or otherwise provided or caused to be
provided or otherwise assisted Target in procuring, each in such as manner
as the parties shall have agreed, sufficient funds to fund the deposit sale
contemplated by Section 7.3(f) hereof on terms described in Section 7.2(g)
of the Parent Disclosure Letter.
7.3. Conditions to Obligation of Parent to Effect the Merger. The
obligation of Parent to effect the Merger shall be subject to the fulfillment or
waiver at or prior to the Effective Time of the additional following conditions:
(a) Target shall have performed in all material respects its covenants
contained in this Agreement required to be performed at or prior to the
Effective Time.
(b) The representations and warranties of Target contained in Section
4 shall be true and correct when made and shall be true and correct, in all
material respects, as of the Effective Time as if made at and as of such
time (other than those representations and warranties that are qualified as
to materiality or similar language, which shall be true and correct in all
respects as of the Effective Time, as if made at and as of such time),
except for representations and warranties relating to a time or times other
than the Effective Time which were or will be true and correct, in all
material respects, at such time or times.
(c) Target shall have furnished Parent a certificate dated the date of
the Closing signed by the Chief Executive Officer and Chief Financial
Officer of Target that the conditions set forth in Sections 7.3(a) and
7.3(b) have been satisfied.
(d) Target and Brett N. Silvers shall have entered into an agreement,
in a form and substance reasonably satisfactory to Parent, terminating the
registration rights agreement, employment agreement, and related agreements
between Brett N. Silvers and the Company (the "SILVERS AGREEMENT").
(e) Target, Nancy W. Silvers, and the Silvers Family Trust shall have
entered into an agreement, in a form and substance reasonably satisfactory
to Parent terminating all of Nancy W. Silvers' and the Silvers Family
Trust's registration or similar rights.
(f) Target shall have, and shall have caused each Target Subsidiary to
have, sold and transferred all existing deposits (including all
certificates of deposits) on terms and conditions reasonably acceptable to
Parent and the FDIC shall have provided to the Federal Reserve Board, the
Federal Reserve Bank of Boston and Parent such evidence as any of them may
require (or in the case of Parent, may reasonably require) to demonstrate
that, at the Effective Time, all such Target Subsidiaries have ceased to be
an "insured bank" within the meaning of the Federal Deposit Insurance Act
of 1940, as amended (the "FDIC ACT") and no Target Subsidiary shall be an
"insured bank" within the meaning of the FDIC Act.
36
(g) First International Bank (a wholly owned subsidiary of Target)
shall have entered into a retention agreement (the "RETENTION AGREEMENTS"),
substantially in the form set forth in Section 7.3(g) of the Target
Disclosure Schedule, with each of Leslie Galbraith and Brett N. Silvers and
Amendments with not less than 70% of those other officers or employees of
Target that have an employment agreement (or similar agreement) with Target
or any Target Subsidiary as of the date hereof, and such Retention
Agreements and Amendments shall, on the Effective Time, be in full force
and effect.
(h) No event or events shall have occurred that have had, or could
reasonably be expected to have, individually or in the aggregate a Material
Adverse Effect with respect to Target or any Target Subsidiary.
(i) At the Effective Time, no Target Subsidiary shall be a "bank"
within the meaning of the BHC Act, and Target shall have ceased to be a
"bank holding company" within the meaning of the BHC Act.
(j) Parent, Escrow Agent and Stockholder Representative shall have
executed and delivered the Escrow and Indemnity Agreement.
(k) Parent shall have received from each 145 Affiliate an agreement in
the form of Exhibit B attached hereto.
(l) Target shall have caused the Stockholder Loan to be satisfied in
accordance with Section 5.26 and the Chief Financial Officer of Target
shall deliver a certificate, on behalf of Target, certifying the amount of
the Shareholder Loan satisfied through the redemption or surrender of
Target Common Stock.
(m) At the Effective Time, at least 70% of those persons who have
employment agreements with Target or any Target Subsidiary on the date
hereof shall be employed by Target or any Target Subsidiary.
(n) Parent and Sub shall have received a written notice pursuant to
Conn. Gen. Statutes sec. 36a-185 of the Connecticut Commissioner's intent
not to disapprove the Merger or the consummation of the other transactions
contemplated herein. In addition, Parent, shall have received such
assurances as it may reasonably require that:
(i) neither Target nor any Target Subsidiary will be required to be
or become an "insured institution" under the FDIC Act at any time
following the consummation of the Merger;
(ii) the minimum capital requirements to be applicable to Target
for the period immediately following the consummation of the Merger will
not exceed those specified in Section 7.3(n)(ii) of the Parent
Disclosure Letter;
(iii) following the consummation of the Merger, the regulatory
obligations of Parent and its Subsidiaries with respect to compliance
with the regulations of the CDB, shall be limited to (A) furnishing to
the CDB copies of the reports required to be filed by Parent under the
Exchange Act and (B) ensuring that Target will comply with all capital
requirements applicable to it; and
(iv) the ownership of Target and the Target Subsidiaries by Parent
will not impose on Parent and its Subsidiaries (other than Target) any
Burdensome Condition.
8. MISCELLANEOUS
8.1. Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval by the stockholders of both
Target and Parent:
(a) by mutual consent of the Board of Directors of Parent and the
Board of Directors of Target set forth in a written instrument;
(b) by either Parent or Target if (i) the Merger shall not have been
consummated on or before August 31, 2001, provided, however, that the right
to terminate this Agreement pursuant to this Section 8.1(b)(i) shall not be
available to any party that is in material breach of its obligations under
this Agreement or whose failure to fulfill any of its obligations contained
in this Agreement has been the cause of, or resulted in, the failure of the
Merger to have occurred on or prior to the aforesaid date or
37
(ii) any court or other Governmental Entity having jurisdiction over a
party hereto shall have issued an order enjoining, restraining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and nonappealable;
(c) by either Parent or Target if the conditions specified in Section
7.1 have not been met or waived by the other at such time as such condition
can no longer be satisfied provided, however, that the right to terminate
this Agreement pursuant to this Section 8.1(c) shall not be available to
any party that is in material breach of its obligations under this
Agreement or whose failure to fulfill any of its obligations contained in
this Agreement has been the cause of, or resulted in, the failure of the
condition or conditions to be satisfied;
(d) by Parent, if the Board of Directors of Target withdraws, or
modifies in any manner, the approval or recommendation by such Board of
Directors of this Agreement or the Merger or approves an Acquisition
Transaction, or by either Parent or Target if the Board of Directors of
Target approves, recommends or causes Target to enter into any agreement
with respect to any Acquisition Transaction that constitutes a Superior
Proposal;
(e) by Target if any of the conditions specified in Section 7.2 has
not been met by Parent or waived by Target at such time as such condition
can no longer be satisfied provided, however, that Target's right to
terminate this Agreement pursuant to this Section 8.1(e) shall not be
available if Target is in material breach of its obligations under this
Agreement or its failure to fulfill any of its obligations contained in
this Agreement has been the cause of, or resulted in, the failure of the
condition or conditions to be satisfied;
(f) by Parent if any of the conditions specified in Section 7.3 has
not been met by Target or waived by Parent at such time as such condition
can no longer be satisfied provided, however, that Parent's right to
terminate this Agreement pursuant to this Section 8.1(f) shall not be
available if Parent is in material breach of its obligations under this
Agreement or its failure to fulfill any of its obligations contained in
this Agreement has been the cause of, or resulted in, the failure of the
condition or conditions to be satisfied;
(g) by Target in accordance with Section 5.22; or
(h) by Parent for Target's failure to call, give notice of, convene
and hold the Target Meeting in accordance with Section 5.10(b).
8.2. Expense Reimbursement.
(a) In order to induce Parent to enter into this Agreement and to
reimburse and compensate Parent for its time, expenses and lost opportunity
costs of pursuing the Merger and seeking to consummate the transactions
contemplated by this Agreement, Target will make a cash payment to Parent
of an amount equal to (x) three million five hundred thousand dollars
($3,500,000) plus (y) all out-of-pocket expenses and fees actually incurred
by Parent (including without limitation fees and expenses payable to all
legal, accounting, financial and other professional advisors) relating to
the Merger or the transactions contemplated by this Agreement (provided
that in no event shall such fees and expenses described in clause (y)
exceed $1,000,000) (the "BREAK-UP FEE") if:
(i) Parent terminates this Agreement pursuant to Section 8.1(d) or
pursuant to Section 8.1(h);
(ii) Target terminates this Agreement pursuant to Section 8.1(d) or
pursuant to Section 8.1(g); or
(iii) Parent or Target terminates this Agreement pursuant to
Section 8.1(c) because this Agreement was not approved at the Target
Meeting, but only if, (A) at the time of the Target Meeting and at the
time of termination there shall have been announced and not withdrawn an
Alternative Transaction, and (B) within one year of the date of
termination, an Alternative
38
Transaction is closed, in which case such fee shall be payable on the
closing date of such Alternative Transaction.
(b) Any payment required by this Section 8.2 must be paid by Target to
Parent (by wire transfer of immediately available funds to an account
designated by such party) within one (1) business day after demand by such
party.
(c) The parties agree that the agreements contained in this Section
8.2 are an integral part of the transactions contemplated by this
Agreement. The parties acknowledge and agree that damages upon termination
of the Agreement in the circumstances referred to in Section 8.2(a) are not
reasonably ascertainable and the payment pursuant to Section 8.2(a)
constitutes liquidated damages and not a penalty. The payment pursuant to
Section 8.2(a) shall not relieve Target from liability for any breach of
its representations, warranties, covenants or agreements contained in this
Agreement and Parent may pursue any remedies available to it at law or in
equity, including recovery of such damages to which it may be entitled, if
such breach by Target of its representations, warranties, covenants or
agreements contained in this Agreement is a result of or arises out of the
willful or intentional misconduct of Target, any Target Subsidiary, or any
of their respective officers or directors.
Notwithstanding anything to the contrary contained in this Agreement, (i) in
addition to any amounts paid or payable pursuant to this Section 8.2, Target
shall pay Parent the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken by Parent to collect the Break-up Fee, together with interest on
the unpaid amount at the publicly announced prime rate of Citibank, N.A. from
the date such amount was required to be paid hereunder and (ii) each party
hereto shall have liability for such party's breach of its representations,
warranties, covenants or agreements contained in this Agreement and the other
party may pursue any remedies available to it at law or in equity, including
recovery of such damages to which it may be entitled, if, but only if, such
breach of such party's representations, warranties, covenants or agreements
contained in this Agreement is a result of or arises out of the willful or
intentional misconduct of such party, any of such party's Subsidiaries, or any
of their respective officers or directors.
8.3. Non-Survival of Representations, Warranties and Agreements.
(a) The representations, warranties, covenants and agreements in the
this Agreement shall survive the Closing and the consummation of the
transactions contemplated herein, subject to the limitations on claims
arising out of or related to such representations, warranties, covenants,
and agreements in the Escrow and Indemnity Agreement provided that Sections
1.4, 2.1 through 2.5, 5.3, 5.4, 5.7 and 5.13 and this Section 8.3 shall
survive consummation of this transactions contemplated hereby to the extent
contemplated by such Sections.
(b) The representations, warranties, covenants and agreements in this
Agreement will terminate upon termination of this Agreement pursuant to
Section 8.1; provided, however, that Section 5.15, the last sentence of
Section 5.4 and all of Section 8.2 will in all events survive any
termination of this Agreement.
8.4. Waiver and Amendment. Any provision of this Agreement may be waived
at any time by the party which is, or whose stockholders are, entitled to the
benefits thereof, and this Agreement may be amended or supplemented at any time,
provided that no amendment will be made after Target's Stockholders approve the
Merger which reduces or changes the form of the Per Share Stock Consideration
without further Stockholder approval. No such waiver, amendment or supplement
will be effective unless in a writing which makes express reference to this
Section 8.4 and is signed by the party or parties sought to be bound thereby.
8.5. Entire Agreement. This Agreement together with the Escrow and
Indemnity Agreement, the Voting Agreements and Confidentiality Agreement,
contain the entire agreement among Parent and Target with respect to the Merger
and the other transactions contemplated hereby and thereby, and supersedes all
prior agreements among the parties with respect to such matters.
39
8.6. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware.
8.7. Certain Definitions. When used in this Agreement, the following terms
shall have the following meanings.
(a) "Affiliate", "associate" and "significant subsidiary" shall have
the respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act, as in effect on the date
hereof.
(b) "Allowance for Loan and Lease Losses" or "ALLL" means, as of any
calculation date, the Target Parties' Allowance for Loan and Lease Losses
solely with respect to the remaining balance of the Closing Date Portfolio
determined in accordance with the Current Methodology, Prevailing
Regulatory Requirements and GAAP.
(c) "Bank" means First International Bank, a Connecticut state bank
and trust company.
(d) "Closing Date Price" shall equal the average of the per share 4:00
p.m. closing prices on the New York Stock Exchange of the Parent Common
Stock for the 20 consecutive trading days ending at the end of the third
trading day immediately preceding the Closing Date.
(e) "Connecticut Commissioner" means the Connecticut Banking
Commissioner.
(f) "Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock,
as trustee or executor, by contract or credit arrangement or otherwise.
(g) "Current Methodology" means the methodology of Target Parties for
the calculation of Non-Performing Assets, Risk Rating and the ALLL as
outlined in Bank's Credit Policy Manual and the October 12, 2000 Memorandum
to the Audit Committee of Target Re: "Adequacy of the Allowance for Loan
(and Lease) Losses as of September 30, 2000", as such methodology is in
effect on September 30, 2000.
(h) "Employee Benefit Plan" shall mean with respect to any Person each
plan, fund, program, agreement, arrangement or scheme, including, but not
limited to each plan, fund, program, agreement, arrangement or scheme
maintained or required to be maintained under the laws of a jurisdiction
outside the United States of America, in each case, that is at any time
sponsored or maintained or required to be sponsored or maintained by such
Person or to which such Person makes or has made, or has or has had an
obligation to make, contributions providing for employee benefits or for
the remuneration, direct or indirect, of the employees, former employees,
directors, officers, consultants, independent contractors, contingent
workers or leased employees of such Person or the dependents of any of them
(whether written or oral), including, without limitation, each deferred
compensation, bonus, incentive compensation, pension, retirement, stock
purchase, stock option and other equity compensation plan, "welfare" plan
(within the meaning of Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), determined without regard to
whether such plan is subject to ERISA); each "pension" plan (within the
meaning of Section 3(2) of ERISA, determined without regard to whether such
plan is subject to ERISA); each severance plan or agreement, health,
vacation, summer hours, supplemental unemployment benefit, hospitalization
insurance, medical, dental, legal and each other employee benefit plan,
fund, program, agreement or arrangement.
(i) "ERISA Affiliate Plan" shall mean each Employee Benefit Plan
sponsored or maintained or required to be sponsored or maintained at any
time by any Person (whether incorporated or unincorporated), that together
with Target or any Target Subsidiary would be deemed a "single employer"
within the meaning of Section 414 of the Code, (an "ERISA AFFILIATE"), or
to which such ERISA Affiliate makes or has made, or has or has had an
obligation to make, contributions at any time.
(j) "Escrow Agent" means Citibank, N.A., a national banking
association.
40
(k) "Escrow Balance" means an amount determined as of the Calculation
Date equal to the greater of (i) $8,000,000 or (ii) the aggregate principal
balance of Non-Performing Assets held by the Target Parties as of the
Calculation Date.
(l) "Escrow Shares" means the number of shares to be held in the
Escrow determined on the Closing Date by dividing the Escrow Balance by the
Closing Date Price.
(m) "Guaranteed or Insured Portion" of any Loan or Non-Performing
Asset means as of any date of calculation that amount of the principal
balance of any Loan or Non-Performing Asset (or portion thereof) which as
of such date is either guaranteed as to repayment under a Qualified Agency
Guaranty in effect as of such date or insured as to repayment under a
Qualified Insurance Policy in effect as of such date.
(n) "Group" shall have the meaning ascribed to such term in Section
13(d) of the Exchange Act, as in effect on the date hereof.
(o) "Knowledge of Target" and words of similar import shall mean all
facts known by those officers or directors of Target or Target Subsidiaries
set forth in Section 8.7(p) of the Target Disclosure Letter after due
inquiry and diligence with respect to the matters at hand.
(p) "Loan" means each loan and lease held by the Target Parties as of
the Closing Date, including uncancelled commitments and contingent
exposures thereunder.
(q) "Market Price" shall equal (i) $57.68, if the Closing Date is on
or before July 31, 2001 or (ii) the Closing Date Price, if the Closing Date
is after July 31, 2001.
(r) "Material Adverse Effect" means an event, change or occurrence
which has a material negative impact on the financial condition,
businesses, prospects or results of operations of Target and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, as the case may be, or the ability of Target or Parent, as the case
may be, to consummate the transactions contemplated hereby provided,
however, that Material Adverse Effect shall not be deemed to include the
impact of (a) changes after the date hereof in interest rates, (b) changes
after the date hereof in GAAP, (c) changes after the date hereof in general
economic conditions in the United States or in other markets in which
Target or Parent, as the case may be, is engaged in business, (d) the
effects of the Merger and compliance by Parent and Target with the
provisions of this Agreement on the business, financial condition or
results of operations of Target or Parent, (e) any change after the date
hereof in the market price or trading volume of Target Common Stock or
Parent Common Stock, or (f) any changes or effects as a result of the
announcement of the Merger or any of the other transactions contemplated
herein.
(s) "Merger Consideration" shall equal
(i) $76,328,627, if the Closing Date is on or before July 31, 2001;
(ii) the product of 1,323,311.84 and the Closing Date Price, if the
Closing Date is after July 31, 2001, and the Closing Date Price is
between $51.91 and $63.45 inclusive;
(iii) $83,961,489.62, if the Closing Date is after July 31, 2001
and the Closing Date Price is greater than $63.45; or
(iv) $68,695,764.24, if the Closing Date is after July 31, 2001 and
the Closing Date Price is less than $51.91;
minus (A) that amount of Stockholder Loans satisfied through the redemption
or surrender of Target Common Stock and (B) if, but only if, the Minimum
Net Worth exceeds Net Book Value by more than $1,000,000, the amount that
Minimum Net Worth exceeds Net Book Value.
(t) "Minimum Net Worth" shall mean $58,904,000.
(u) "Net Book Value" shall mean that amount, determined in accordance
with Section 5.22 hereof, equal to (x) the total assets of Target as of the
Calculation Date minus (y) the total liabilities of Target
41
as of the Calculation Date, determined in accordance with GAAP consistently
applied and consistent with prior practices provided that in all cases Net
Book Value shall be computed consistent with Prevailing Regulatory
Requirements even if such Prevailing Regulatory Requirements are
inconsistent with GAAP or prior practice. For purposes of calculating Net
Book Value, (i) there shall be excluded the effect on Net Book Value of the
exercise of Target Options outstanding as of September 30, 2000, between
September 30, 2000 and the Calculation Date; and (ii) any and all director,
officer or employee compensation, bonus, and remuneration and all expenses
and costs of the Merger and any other transactions contemplated herein, to
the extent not actually paid prior to the Effective Time, shall be included
as a part of the liabilities of Target as of the Calculation Date.
(v) "Non-Performing Assets" means as of any date of calculation the
sum of the aggregate principal balance of all Loans, Other Real Estate
Owned, and Other Assets Owned of Target held by the Target Parties that as
of such calculation date are classified on the books and records of the
Target Parties as Non-Performing Assets in accordance with the Current
Methodology and Prevailing Regulatory Requirements, which shall include,
but not be limited to, (a) the aggregate principal balance of all Loans
that as of such calculation date are 90 or more days past due as to
principal or interest or are otherwise deemed to be Non-Performing Assets,
determined as a result of a compelling business reason or in accordance
with the Current Methodology and Prevailing Regulatory Requirements and
(b) Guaranteed or Insured Portions of such assets to the extent of the
amount of any repair required by, or claim denied by, sponsoring agencies
under guarantee programs or insurance policies as a result of actions of a
Target Party prior to the Closing Date. For the avoidance of doubt, except
as otherwise referred to in (b) above, Non-Performing Assets shall not
include the Guaranteed or Insured Portion of any Non-Performing Assets.
(w) "Per Share Merger Consideration" shall mean that amount per share
of Target Common Stock determined by dividing the Merger Consideration by
the number of shares of Target Common Stock issued and outstanding
immediately prior to the Effective Time.
(x) "Person" means an individual, corporation, partnership,
association, trust or unincorporated organization.
(y) "Per Share Stock Consideration" shall mean that number of shares
of Parent Common Stock equal to the product of (A) 1.00 and (B) the
fraction (rounded to four decimal places) obtained by dividing (1) the Per
Share Merger Consideration by (2) the Market Price.
(z) "Prevailing Regulatory Requirements" means (i) all federal and
state regulatory or statutory requirements applicable to the Target Parties
on the Closing Date (including without limitation all Required Regulatory
Changes), (ii) all Recommended Regulatory Changes adopted by the Target
Parties, (iii) all Required Regulatory Changes, and (iv) all federal and
state regulatory requirements applicable to the Target Parties based on
regulatory examinations being conducted as of the Closing Date the results
of which are unknown on the Closing Date.
(aa) "Qualified Agency Guaranty" means in respect of any Loan, a
guaranty issued with respect to such Loan by (i) the SBA, pursuant to SBA
Loan Guarantee Agreement Forms 750 or 750B each dated July 1, 1999, (ii)
the USDA pursuant to the applicable loan note guarantee or (iii) Ex-Im Bank
pursuant to the Master Guarantee Agreement for short and medium term loans
dated September 11, 1995, as amended; the Medium Term Express Credit
Program Agreement dated July 10, 2000; or the Working Capital Guarantee
Program Delegated Authority Letter Agreement CT DA-99-002 as supplemented
by the "Super" Delegated Authority Letter dated January 3, 2001, as
applicable, each as amended or replaced from time to time.
(bb) "Qualified Insurance Policy" means in respect of any Loan an
insurance policy issued with respect to such Loan by AIG or Lloyds of
London.
42
(cc) "Regulatory Approval" shall refer to the fact that:
the Connecticut Commissioner shall have approved the indirect
acquisition of Target by Parent and the direct acquisition by Target by
Sub without imposition of any Burdensome Condition;
(i) to the extent required by any agreement, contract, or
understanding to which Target or any Target Subsidiary is a party or by
any applicable federal or state law, statute, rule, or regulation, the
SBA, the USDA, and Ex-Im shall have approved the indirect acquisition of
Target by Parent or have provided assurances satisfactory to Parent that
such approvals will be forthcoming;
(ii) the SBA, the USDA and Ex-Im Bank shall each have confirmed
that the consummation of the transactions contemplated herein will not
affect Target's status as a "lender," "certified lender" or "preferred
lender" under each such agency's loan or loan guarantee programs; and
(iii) Target has obtained such consents and approvals satisfactory
to Parent, in its sole discretion, ensuring that consummation of the
transactions contemplated herein will not cause Parent or any Affiliate
of Parent (including, without limitation, Target and each Target
Subsidiary) to become or continue to be subject to regulation under the
Bank Holding Company Act of 1956, as amended or any other federal
banking statute.
(dd) "Risk Rating" means, as of any calculation date, risk ratings
assigned in accordance with the Bank's current risk rating system as
documented in Section J.3 of the Bank's Credit Policy Manual dated February
1, 2000 and definitions of risk ratings in Prevailing Regulatory
Requirements.
(ee) "Stockholder Representative" shall mean that person designated in
the Escrow and Indemnity Agreement.
(ff) "Subsidiary" of Target, Parent or any other person means, except
where the context otherwise requires, any corporation, partnership, trust
or similar association of which Target, Parent or any other person, as the
case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, more than 50% of the capital
stock or other equity interests, the holders of which are generally
entitled to vote for the election of the board of directors or other
governing body of such corporation.
(gg) "Target Benefit Plan" shall mean each Employee Benefit Plan
sponsored or maintained or required to be sponsored or maintained at any
time by Target or any Target Subsidiary or to which Target or any Target
Subsidiary makes or has made, or has or has had an obligation to make,
contributions at any time.
(hh) "Target Parties" means collectively Target, the Bank and all
Unconsolidated Affiliates.
(ii) "Unconsolidated Affiliates" means all directly or indirectly
owned subsidiaries of Target whose financial results are not accounted for
on a consolidated basis by Target for financial reporting purposes
including, but not limited to, FNBNE Funding Corp., FIB Holdings, Inc. and
FIB Funding Corp.
8.8. Descriptive Headings. The descriptive headings contained in this
Agreement are for convenience and reference only and will not affect in any way
the meaning or interpretation of this Agreement. Unless the context of this
Agreement expressly indicates otherwise, (i) any singular term in this Agreement
will include the plural and any plural term will include the singular and (ii)
the term section or schedule will mean a section or schedule of or to this
Agreement.
8.9. Notices. All notices, consents, requests, demands and other
communications hereunder will be in writing, signed by or on behalf of the party
making the same, will specify the Sections under this Agreement pursuant to
which it is given or being made and will be delivered personally or sent by
registered or certified
43
mail (return receipt requested) or by UPS Next Day Air (with evidence of
delivery and postage and other fees prepaid) as follows:
If to Target:
First International Bancorp, Inc.
280 Trumbull Street
Hartford, CT 06130
Attn: Brett N. Silvers
With a copy to:
Bingham Dana
150 Federal Street,
Boston, MA 02110-1726
Attn: Neal J. Curtin
If to Parent or Sub:
United Parcel Service, Inc.
55 Glenlake Parkway NE
Atlanta, GA 30328
Attn: David Mounts
With copies to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30338
Attn: John D. Capers, Jr.
and
United Parcel Service, Inc.
55 Glenlake Parkway, N.E.
Atlanta, GA 30328-3498
Attn: Legal Department -- Cathy Harper
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section 8.9. Any such notice communication or
delivery will be deemed to be given or made (a) on the date of delivery if
delivered in person, (b) on the first business day after delivery to a UPS
customer service representative or (c) on the fifth business day after it is
mailed by registered or certified mail.
8.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original but all of which
together will constitute but one agreement.
8.11. Assignment. This Agreement is not intended to nor will it confer
upon any other person (other than the parties hereto) any rights or remedies.
Without the prior written consent of the other parties to this Agreement,
neither Parent, Target nor Sub shall assign any rights or delegate any
obligations under this Agreement. Any such purported assignment or delegation
made without prior consent of the other parties hereto shall be null and void.
8.12. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party hereto. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
44
8.13. Void. Notwithstanding anything in this Agreement to the contrary,
this Agreement shall become void ab initio and shall be immediately of no force
and effect if and upon the determination by a Governmental Entity having
authority to make such determination that the execution of this Agreement or
adherence by Target to one or more of the covenants contained in Section 5
(without giving effect to the Merger) causes Parent or any Affiliate of Parent
to be a "bank holding company" or a "bank" within the meaning of the BHC Act or
subject to any federal or state banking, thrift or similar regulations.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
UNITED PARCEL SERVICE, INC.
/s/ JOSEPH P. MODEROW
--------------------------------------
By:
Title:
STAG MERGER COMPANY, INC.
/s/ ROBERT J. BERNABUCCI
--------------------------------------
By:
Title:
FIRST INTERNATIONAL BANCORP, INC.
/s/ BRETT N. SILVERS
--------------------------------------
By:
Title:
45