EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 4, 2005
BY AND AMONG
HSBC FINANCE CORPORATION,
HSBC CORPORATION I
AND
METRIS COMPANIES INC.
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TABLE OF CONTENTS
i
Section 3.25 Controls...................................................................................31
Section 3.26 Insurance..................................................................................31
Section 3.27 No Undisclosed Liabilities; Reserves.......................................................32
Section 3.28 Insurance Matters..........................................................................32
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...............................................33
Section 4.1 Organization, Standing and Power...........................................................33
Section 4.2 Authority..................................................................................33
Section 4.3 Information Supplied.......................................................................35
Section 4.4 Legal Proceedings..........................................................................35
Section 4.5 Ownership of Merger Sub; No Prior Activities...............................................35
Section 4.6 Compliance with Applicable Laws............................................................35
Section 4.7 Financing..................................................................................35
Section 4.8 Brokers or Finders.........................................................................35
Section 4.9 Ownership of Company Capital Stock.........................................................36
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS..............................................................36
Section 5.1 Covenants of the Company...................................................................36
Section 5.2 Investigation..............................................................................40
ARTICLE VI ADDITIONAL AGREEMENTS.................................................................................40
Section 6.1 Preparation of Proxy Statement; Stockholders Meeting.......................................40
Section 6.2 Advice of Changes; Government Filings......................................................41
Section 6.3 Control of the Company's Business..........................................................42
Section 6.4 Access to Information......................................................................42
Section 6.5 Reasonable Best Efforts....................................................................42
Section 6.6 Acquisition Proposals......................................................................44
Section 6.7 Employees; Employee Benefit Plans..........................................................46
Section 6.8 Fees and Expenses..........................................................................49
Section 6.9 Indemnification; Directors' and Officers' Insurance........................................49
Section 6.10 Public Announcements.......................................................................51
Section 6.11 Additional Agreements......................................................................51
Section 6.12 Other Actions by Parent....................................................................51
ARTICLE VII CONDITIONS PRECEDENT.................................................................................51
Section 7.1 Conditions to Each Party's Obligation To Effect the Merger.................................51
Section 7.2 Conditions to Obligations of Parent and Merger Sub.........................................52
Section 7.3 Conditions to Obligations of the Company...................................................54
ARTICLE VIII TERMINATION AND AMENDMENT...........................................................................55
Section 8.1 Termination................................................................................55
Section 8.2 Effect of Termination......................................................................56
Section 8.3 Amendment..................................................................................57
Section 8.4 Extension; Waiver..........................................................................57
ii
ARTICLE IX GENERAL PROVISIONS....................................................................................57
Section 9.1 Non-Survival of Representations, Warranties and Agreements.................................57
Section 9.2 Notices....................................................................................58
Section 9.3 Interpretation.............................................................................59
Section 9.4 Counterparts...............................................................................59
Section 9.5 Entire Agreement; No Third Party Beneficiaries.............................................59
Section 9.6 Governing Law..............................................................................60
Section 9.7 Severability...............................................................................60
Section 9.8 Assignment.................................................................................60
Section 9.9 Submission to Jurisdiction.................................................................60
Section 9.10 Enforcement................................................................................61
Section 9.11 Waiver of Jury Trial.......................................................................61
iii
DEFINED TERMS
2
Company Stock Plans.....................................................................................Section 3.2
Company Stockholders Meeting.........................................................................Section 6.1(a)
Company Termination Fee..............................................................................Section 8.2(b)
Company's Current Premium............................................................................Section 6.9(b)
Confidentiality Agreement............................................................................Section 6.4(b)
Covered Employees.................................................................................Section 6.7(b)(i)
Covered Receivables....................................................................................Section 3.19
Derivative Transactions................................................................................Section 3.23
DGCL....................................................................................................Section 1.1
Dissenting Shares.......................................................................................Section 2.3
Dissenting Stockholder..................................................................................Section 2.3
Effective Time..........................................................................................Section 1.1
Environmental Laws..................................................................................Section 3.21(a)
ERISA.............................................................................................Section 3.9(a)(v)
ERISA Affiliate..................................................................................Section 3.9(a)(vi)
Exchange Act.........................................................................................Section 3.4(a)
Exchange Fund........................................................................................Section 2.2(a)
FDIC.................................................................................................Section 2.1(e)
Florida DFS..........................................................................................Section 3.3(c)
Governmental Entity..................................................................................Section 3.3(c)
Hazardous Materials.................................................................................Section 3.21(e)
Holders..............................................................................................Section 2.2(a)
HSR Act..............................................................................................Section 3.3(c)
ICOM.................................................................................................Section 3.1(a)
Indemnified Liabilities..............................................................................Section 6.9(a)
Indemnified Parties..................................................................................Section 6.9(a)
Injunction...........................................................................................Section 7.1(c)
Insurance and Warranty Subsidiaries..................................................................Section 3.1(a)
Insurance Authorities................................................................................Section 3.4(d)
Insurance or Warranty Subsidiary.....................................................................Section 3.1(a)
Insurance Policies.....................................................................................Section 3.26
Insurance SAP Documents..............................................................................Section 3.4(d)
IRS...............................................................................................Section 3.9(c)(i)
Knowledge of Parent.....................................................................................Section 4.4
Knowledge of the Company.............................................................................Section 3.5(b)
Law..................................................................................................Section 3.5(a)
Liability.......................................................................................Section 3.9(a)(vii)
material................................................................................................Article III
Material Adverse Effect.................................................................................Article III
MBOs..............................................................................................Section 6.7(b)(i)
Merger.....................................................................................................Preamble
Merger Consideration.................................................................................Section 2.1(g)
Merger Sub.................................................................................................Preamble
MES..................................................................................................Section 3.1(a)
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Minnesota DOC........................................................................................Section 3.3(c)
MIP...............................................................................................Section 6.7(b)(i)
MRI..................................................................................................Section 3.4(a)
MWSF.................................................................................................Section 3.1(a)
MWSI.................................................................................................Section 3.1(a)
Notice of Superior Proposal..........................................................................Section 6.6(c)
OCC..................................................................................................Section 2.1(e)
Organizational Documents.............................................................................Section 3.1(a)
Parent.....................................................................................................Preamble
Parent Bank Sub............................................................................................Preamble
Parent Benefit Plan..................................................................................Section 6.7(c)
Parent Disclosure Schedule...............................................................................Article IV
Parent SEC Report.......................................................................................Section 4.4
Paying Agent.........................................................................................Section 2.2(a)
Pension Plan...................................................................................Section 3.9(a)(viii)
Per Common Share Price...............................................................................Section 2.1(c)
Person...............................................................................................Section 2.2(d)
Proxy Statement......................................................................................Section 6.1(b)
PTO..............................................................................................Section 6.7(b)(iv)
Qualified Plan...................................................................................Section 3.9(a)(ix)
RAP..................................................................................................Section 3.4(c)
Receivables............................................................................................Section 3.19
Regulatory Agreement...................................................................................Section 3.11
Related Employer..................................................................................Section 3.9(a)(x)
Required Company Vote..................................................................................Section 3.14
Requisite Regulatory Approvals.......................................................................Section 7.1(b)
SAP..................................................................................................Section 3.4(d)
SEC..................................................................................................Section 3.3(c)
SEC Investigation.......................................................................................Section 5.2
Securities Act.......................................................................................Section 3.2(c)
Securitization Disclosure Documents.................................................................Section 3.18(a)
SERP..............................................................................................Section 6.7(b)(v)
Stockholder Agreement......................................................................................Preamble
Stub Period.......................................................................................Section 6.7(b)(i)
Subsidiary...........................................................................................Section 3.1(b)
Superintendent.......................................................................................Section 3.3(c)
Superior Proposal....................................................................................Section 6.6(e)
Surviving Bank..........................................................................................Section 1.6
Surviving Corporation...................................................................................Section 1.3
tax..................................................................................................Section 3.7(a)
taxable..............................................................................................Section 3.7(a)
taxes................................................................................................Section 3.7(a)
Trust Account Shares.................................................................................Section 2.1(b)
U.S. Affiliates...................................................................................Section 6.7(b)(i)
Violation.............................................................................................Section3.3(b)
Voting Debt...........................................................................................Section3.2(b)
WARN Act..........................................................................................Section3.9(d)(iv)
4
AGREEMENT AND PLAN OF MERGER dated as of AUGUST 4, 2005 (this
"Agreement") by and among HSBC FINANCE CORPORATION, a
Delaware corporation
("Parent"), HSBC CORPORATION I, a
Delaware corporation and directly wholly owned
subsidiary of Parent ("Merger Sub"), and
METRIS COMPANIES INC., a
Delaware
corporation (the "Company").
WHEREAS, the Boards of Directors of each of Parent, Merger Sub and the
Company have approved, and deem it advisable and in the best interests of their
respective stockholders to consummate, the business combination transaction
provided for herein in which (i) Merger Sub would merge with and into the
Company (the "Merger") and, as a result of the Merger, the Company would be the
surviving entity and a wholly owned subsidiary of Parent and (ii) immediately
following the Merger, the Company's Subsidiary, Direct Merchants Credit Card
Bank, National Association (the "Bank") would be merged with and into HSBC Bank
Nevada, N.A. ("Parent Bank Sub") (the "Bank Merger") and, as a result of the
Bank Merger, Parent Bank Sub would be the surviving entity and a wholly owned
subsidiary of Parent.
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to Parent's willingness to enter into this
Agreement, the stockholders of the Company listed on Schedule I have entered
into a Stockholder Agreement, dated as of the date of this Agreement, in the
form attached hereto as Exhibit I (the "Stockholder Agreement"), pursuant to
which the stockholders have, among other things, agreed to give Parent a proxy
to vote all of the shares of capital stock of the Company that such stockholders
beneficially own or otherwise have the right to vote in favor of adoption of
this Agreement and approval of the Merger and against any Acquisition Proposal;
and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and the
other transactions contemplated herein (including the Bank Merger) and also to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 Effective Time of the Merger. Subject to the provisions of
this Agreement, a certificate of merger (the "Certificate of Merger") shall be
duly prepared, executed and acknowledged by the Surviving Corporation (as
defined in Section 1.3) and thereafter delivered to the Secretary of State of
the State of
Delaware for filing, as provided in the
Delaware General
Corporation Law (the "DGCL"), on the Closing Date (as defined in Section 1.2).
The Merger shall become effective upon the filing of the Certificate of Merger
with the Secretary of State of the State of
Delaware or at such time thereafter
as is provided in the Certificate of Merger (the "Effective Time").
Section 1.2 Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. on the date (the "Closing Date") that is the second
business day after the satisfaction or waiver (subject to applicable Law) of the
conditions set forth in Article VII (excluding conditions that, by their terms,
are to be satisfied on the Closing Date), unless another time or date is agreed
to in writing by the parties hereto. The Closing shall be held at the offices of
Xxxxxx & Xxxxxxx LLP, 00 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, 00000,
unless another place is agreed to in writing by the parties hereto.
Section 1.3 Effects of the Merger. At the Effective Time, Merger Sub
shall be merged with and into the Company and the separate existence of Merger
Sub shall cease, and the Company shall be the surviving corporation (the
"Surviving Corporation") and shall continue its existence under the laws of the
State of
Delaware. As a result of the Merger, the Company shall become a wholly
owned subsidiary of Parent. The Merger will have the effects set forth in the
DGCL.
Section 1.4 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation of the Company shall be the Certificate of Incorporation of the
Surviving Corporation. The Bylaws of Merger Sub, as set forth in Exhibit 1.4
hereto, shall be the Bylaws of the Surviving Corporation.
Section 1.5 Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation as of the Effective Time. The officers of the Surviving Corporation
shall be elected by the directors of the Surviving Corporation as of the
Effective Time.
Section 1.6 Bank Merger. A bank
merger agreement shall be entered into
immediately following the Effective Time and shall provide that (i) the Bank
shall be merged with and into Parent Bank Sub and the separate existence of the
Bank shall cease, and Parent Bank Sub shall be the surviving bank (the
"Surviving Bank") and shall continue its existence under the laws of the United
States, (ii) the Articles of Association of Parent Bank Sub shall be the
Articles of Association of the Surviving Bank, and (iii) the Bylaws of Parent
Bank Sub shall be the Bylaws of the Surviving Bank.
ARTICLE II
CONVERSION OF SECURITIES; PAYMENT OF MERGER CONSIDERATION
Section 2.1 Conversion of Securities. As of the Effective Time, by
virtue of the Merger and without any action on the part of any holder of any
shares of Company Capital Stock (as defined in this Section 2.1(g)):
(a) Conversion of Merger Sub Stock. Each issued and
outstanding share of common stock, par value $1.00 per share, of Merger
Sub shall be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation and shall constitute the only shares of capital
stock of the Surviving Corporation outstanding immediately after the
Effective Time.
2
(b) Cancellation of Treasury Stock. All shares of Company
Common Stock (as defined in Section 2.1(c)) that are owned by the
Company as treasury stock and all shares of Company Common Stock that
are owned, directly or indirectly, by Parent or Company (other than
shares of Company Common Stock held directly or indirectly in trust
accounts, managed accounts and the like or otherwise held in a
fiduciary capacity for the benefit of third parties ("Trust Account
Shares")) shall be cancelled and retired and shall cease to exist, and
no stock of Parent, cash or other consideration shall be delivered in
exchange therefor.
(c) Conversion of Common Stock. Subject to Section 2.3 with
regard to Dissenting Shares (as defined in Section 2.3(a)), each share
of Common Stock, par value $.01 per share, of the Company (the "Company
Common Stock") issued and outstanding immediately prior to the
Effective Time (other than as provided in Section 2.1(b)), shall be
converted into the right to receive $15.00 in cash to be distributed in
accordance with Section 2.2, without interest (the "Per Common Share
Price"); provided, however, that if the Effective Time occurs after
December 9, 2005, then the Per Common Share Price shall instead be the
amount set forth in Annex 2.1. All such shares of Company Common Stock
shall otherwise no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist. The Company will amend
the terms of any existing restricted stock agreements with respect to
outstanding shares of Company Common Stock that do not provide for
acceleration of termination of restrictions in connection with the
Merger such that all such restrictions will terminate as of the
Effective Time.
(d) Conversion of Company Series C Preferred Stock. Subject to
Section 2.3 with regard to Dissenting Shares, all of the shares of
Series C Perpetual Convertible Preferred Stock, par value $.01 per
share, of the Company (the "Company Series C Preferred Stock") issued
and outstanding immediately prior to the Effective Time shall be
converted into the right to receive in the aggregate $682,561,140.00 in
cash to be distributed in accordance with Section 2.2, without
interest; provided, however, that if the Effective Time occurs after
December 9, 2005, then all of the shares of Company Series C Preferred
Stock issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive in the aggregate the
amount set forth in Annex 2.1. All such shares of the Company Series C
Preferred Stock shall otherwise no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist.
(e) Cancellation and Conversion of Company Stock Options. Each
option to purchase Company Common Stock (a "Company Stock Option") that
is outstanding immediately prior to the Effective Time (whether or not
exercisable) shall be cancelled as of the Effective Time, in exchange
for the right to receive a single lump sum cash payment equal to the
excess, if any, of (i) the product of the Per Common Share Price and
the number of shares of Company Common Stock subject to such Company
Stock Option over (ii) the product of the exercise price per share with
respect to each share of Company Common Stock subject to such Company
Stock Option and the number of shares of Company Common Stock subject
to such Company Stock Option, such lump sum cash payment to be made
less any applicable withholding tax at the Effective Time
3
or, if consent or approval of the Office of the Comptroller of the
Currency ("OCC") or the Federal Deposit Insurance Corporation ("FDIC")
is required for such lump sum cash payment, at such time as such
consent or approval is obtained (but in no event before the Effective
Time), and subject in that case to any conditions, requirements or
restrictions imposed by the OCC or the FDIC; provided, that if the
exercise price per share of any such Company Stock Option is equal to
or greater than the Per Common Share Price, such Company Stock Option
shall be cancelled without any cash payment being made in respect
thereof. Prior to the Closing, the Company, in consultation with
Parent, shall take or cause to be taken any and all actions reasonably
necessary, including the amendment of the Company Stock Plans (as
defined in Section 3.2(a)) and, as necessary, any stock option
agreements entered into under the Company Stock Plans, and shall use
reasonable best efforts to obtain any necessary consent of each holder
of a Company Stock Option, to give effect to the treatment of Company
Stock Options pursuant to this Section 2.1(e), to the extent such
treatment is not expressly provided for by the terms of the applicable
Company Stock Plan and related award agreements.
(f) Cancellation and Conversion of Company Stock Units. Each
right to be issued shares of Company Common Stock pursuant to a
restricted stock unit agreement of the Company (a "Company Restricted
Stock Unit Agreement") that is outstanding immediately prior to the
Effective Time (whether vested or unvested) shall be cancelled as of
the Effective Time, in exchange for the right to receive a single lump
sum cash payment equal to the product of (i) the Per Common Share Price
and (ii) the number of shares of Company Common Stock subject to
issuance upon settlement of such Company Restricted Stock Unit
Agreement, such lump sum cash payment to be made less any applicable
withholding tax. Payments with respect to the Company Restricted Stock
Unit Agreements shall be made at the Effective Time or, if consent or
approval of the OCC or the FDIC is required for such lump sum cash
payment, at such time as such consent or approval is obtained (but in
no event before the Effective Time), and subject in that case to any
conditions, requirements or restrictions imposed by the OCC or the
FDIC. Prior to the Closing, the Company, in consultation with Parent,
shall take or cause to be taken any and all actions reasonably
necessary, including the amendment of the Company Stock Plans and, as
necessary, any Company Restricted Stock Unit Agreements, and shall use
reasonable best efforts to obtain any necessary consent of each holder
of a Company Restricted Stock Unit Agreement, to (x) provide that all
shares of Company Common Stock issuable pursuant to outstanding Company
Restricted Stock Unit Agreements will vest in connection with the
Merger and (y) give effect to the treatment of Company Restricted Stock
Unit Agreements pursuant to this Section 2.1(f), to the extent such
treatment is not expressly provided for by the terms of the applicable
Company Stock Plan and related Company Restricted Stock Unit
Agreements.
(g) Merger Consideration. The aggregate consideration payable
by Parent pursuant to Sections 2.1(c), (d), (e) and (f) is referred to
herein as the "Merger Consideration." The components of the Merger
Consideration are detailed on Annex 2.1. The Merger Consideration will
in no event exceed the sum of $1,593,667,377 plus the aggregate amount
of cash received by the Company, if any, on or after the date hereof up
4
to the Effective Time from the exercise of Company Stock Options (it
being understood that the maximum number of shares subject to Company
Stock Options which will become exercisable during such period is
2,326,556 and the maximum cash proceeds to the Company from such
exercises, assuming all such Options were exercised for cash, would be
$19,124,290.32). At the Effective Time, each holder of Company Common
Stock and Company Series C Preferred Stock (the Company Common Stock
and the Company Series C Preferred Stock are collectively referred to
as the "Company Capital Stock") shall cease to have any rights (other
than Dissenting Shares as set forth in Section 2.3) with respect to
such issued and outstanding shares of Company Capital Stock (including,
without limitation, the right to vote), except for the right to receive
his, her or its respective portion of the Merger Consideration.
Section 2.2 Payment of Merger Consideration.
(a) Paying Agent. Prior to the Effective Time, Parent shall
appoint a commercial bank or trust company reasonably acceptable to the
Company as a paying agent (the "Paying Agent") for the benefit of the
holders of Company Common Stock that are not Dissenting Shares and who
are entitled to receive the Merger Consideration (collectively, the
"Holders"). At the Effective Time, Parent shall make available to the
Paying Agent an amount of cash sufficient to permit payment of the
Merger Consideration to the Holders (other than the cash portion of the
Merger Consideration to be paid by Parent as provided in Section
2.2(h)) (the "Exchange Fund"). The Paying Agent shall invest the
Exchange Fund as directed by Parent, and any interest and other income
resulting from such investments shall be paid to Parent. The Paying
Agent shall exchange the shares of Company Common Stock for the Merger
Consideration in accordance with the terms of this Article II, through
such reasonable procedures as the Paying Agent or Parent may adopt.
(b) Payment Procedures. As soon as practicable after the
Effective Time, Parent or the Paying Agent shall cause to be mailed to
each record holder of a certificate or certificates that immediately
prior to the Effective Time represented Company Capital Stock converted
in the Merger (the "Certificates") a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon actual delivery of the
Certificates to the Paying Agent, and shall contain instructions for
use in effecting the surrender of the Certificates and payment of the
Merger Consideration). The Paying Agent shall accept Certificates upon
compliance with such reasonable terms and conditions as the Paying
Agent may impose to effect an orderly exchange thereof in accordance
with normal exchange practices. Upon surrender for cancellation to the
Paying Agent of a Certificate held by any Holder or holder of a
Certificate of Company Series C Preferred Stock, together with such
letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Paying Agent, the Holder of such
Certificate or holder of a Certificate of Company Series C Preferred
Stock shall be entitled to receive in exchange therefor that amount of
cash equal to the Per Common Share Price for each share of Company
Common Stock or, in the case of a holder of a Certificate of Company
Series C Preferred Stock, such holder's
5
ratable portion of the aggregate cash amount payable pursuant to
Section 2.1(d) hereof. Any Certificate so surrendered shall forthwith
be cancelled.
(c) No Further Ownership Rights in Company Capital Stock. All
amounts paid upon conversion of shares of Company Capital Stock in
accordance with the terms hereof (including any cash paid pursuant to
Section 2.2(e)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Capital
Stock. At the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of
the shares of Company Capital Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates
are presented to the Surviving Corporation for any reason, they shall
be cancelled and exchanged as provided in this Article II.
(d) Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact
by the Person (as defined below) claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent or the Paying Agent, the
posting by such Person of a bond, in such reasonable amount as Parent
or the Paying Agent may direct as indemnity against any claim that may
be made against them with respect to such Certificate, Parent will pay
in exchange for such lost, stolen or destroyed Certificate the amounts
to which the holders thereof are entitled pursuant to Section 2.1. As
used in this Agreement, "Person" means any person, employee,
individual, corporation, limited liability company, partnership, trust,
joint venture or any other non-governmental entity or any governmental
or regulatory authority or body.
(e) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the stockholders of the Company for
six months after the Effective Time shall be delivered to Parent, upon
demand, and any stockholders of the Company who have not theretofore
complied with this Article II shall thereafter look only to Parent for
payment of their claim for Merger Consideration.
(f) No Liability. None of Parent, the Company or the Surviving
Corporation shall be liable to any holder of shares of Company Capital
Stock for cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Law.
If any Certificate shall not have been surrendered prior to eighteen
months after the Effective Time (or immediately prior to such earlier
date on which any cash payable to the holder of such Certificate
pursuant to this Article II would otherwise escheat to or become the
property of any Governmental Entity), any such cash in respect of such
Certificate shall, to the extent permitted by applicable Law, become
the property of Parent, free and clear of all claims or interest of any
person previously entitled thereto.
(g) Withholding. Parent, the Surviving Corporation or the
Paying Agent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any
holder of shares of Company Capital Stock or Dissenting Shares such
amounts as it is required to deduct and withhold with respect to the
making of such
6
payment pursuant to the Internal Revenue Code of 1986, as amended (the
"Code") and the rules and regulations promulgated thereunder, or any
provision of state, local or foreign tax Law, and to collect such tax
forms, including Form W-9, the appropriate series of Form W-8 or any
other forms, as may be necessary to prevent or reduce any such
deduction or withholding. To the extent that amounts are so withheld by
Parent, the Surviving Corporation or the Paying Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Capital Stock or
Dissenting Shares in respect of which such deduction and withholding
was made by Parent, the Surviving Corporation or the Paying Agent.
(h) Payment to Holders of the Company Series C Preferred
Stock. On the Closing Date, immediately following the Effective Time
and upon the surrender to Parent of the Certificates representing all
shares of the Company Series C Preferred Stock, Parent shall pay to the
holders of the Company Series C Preferred Stock, by wire transfer of
immediately available funds to an account designated by such holders,
that amount of cash constituting the Merger Consideration which such
holders are entitled to receive pursuant to Section 2.1(d).
Section 2.3 Dissenters' Rights.
(a) Shares of Company Capital Stock with respect to which a
demand for payment and appraisal has been properly made and perfected
in accordance with Section 262 of the DGCL ("Dissenting Shares") will
not be converted into the right to receive from Parent the portion of
the Merger Consideration otherwise payable with respect to such shares
at or after the Effective Time and the holder thereof shall be entitled
only to such rights as are granted by Section 262 of the DGCL. If a
holder of Dissenting Shares (a "Dissenting Stockholder") shall
withdraw, in accordance with Section 262 of the DGCL, such holder's
demand for such appraisal or shall become ineligible for such
appraisal, then, as of the later of the Effective Time or the
occurrence of such event, such holder's Dissenting Shares shall cease
to be Dissenting Shares and shall be converted into the right to
receive from Parent the Merger Consideration into which such holder's
Company Capital Stock was converted as of the Effective Time pursuant
to this Agreement.
(b) The Company shall give Parent notice of any demand
received by the Company from a holder of Dissenting Shares for
appraisal of shares of Company Capital Stock, withdrawals of such
demands and any other instruments served pursuant to the DGCL and
received by the Company, and copies of any correspondence received by
the Company relating to any such demand or potential demand, and Parent
shall have the right to participate in and, after the Effective Time,
to direct, all negotiations and proceedings with respect to such
demand. The Company agrees that, except with the prior written consent
of Parent, or as required under the DGCL, it will not voluntarily make
any payment with respect to, or settle or offer or agree to settle, any
such demand for appraisal. Each Dissenting Stockholder who, pursuant to
the provisions of Section 262 of the DGCL, becomes entitled to payment
of the value of the Dissenting Shares will
7
receive payment therefor after the value therefor has been agreed upon
or finally determined pursuant to such provisions, and any Merger
Consideration that would have been payable with respect to such
Dissenting Shares will be retained by Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the Company
to Parent and Merger Sub concurrently herewith (the "Company Disclosure
Schedule"), the Company represents and warrants to Parent and Merger Sub as set
forth below. Information disclosed in any section of the Company Disclosure
Schedule shall be deemed to be disclosed with respect to such other subsections
of this Agreement or the Company Disclosure Schedule only to the extent that it
is reasonably apparent from a reading of such disclosure that it also qualifies
or applies to such other subsections.
As used in this Agreement, (i) any reference to any event, change or
effect being "material" with respect to any entity means an event, change or
effect which is material in relation to the business, assets, liabilities,
capitalization, financial condition or results of operations of such entity and
its Subsidiaries (as defined in Section 3.1(b)) taken as a whole; and (ii) the
term "Material Adverse Effect" means, with respect to any entity, an effect
which (A) is materially adverse to the business, assets, liabilities,
capitalization, financial condition or results of operations of such entity and
its Subsidiaries taken as a whole, or (B) materially impairs the ability of such
entity to perform its obligations hereunder; provided that, in any such case
referred to in clause (i) or (ii)(A) the following shall not be deemed
"material" or to have a Material Adverse Effect: any change or event caused by
or resulting from (1) changes, after the date hereof, in prevailing interest
rates, currency exchange rates or other economic or monetary conditions in the
United States, (2) changes, after the date hereof, in United States securities
markets, including changes in price levels or trading volumes, (3) changes or
events, after the date hereof, affecting the credit card industry, the consumer
finance industry, and/or financial services industry generally and not
specifically relating to the Company or any of its Subsidiaries, as the case may
be, (4) changes, after the date hereof, in U.S. generally accepted accounting
principles or regulatory accounting requirements applicable to companies
operating in the U.S. credit card industry, the U.S. consumer finance industry
and/or the U.S. financial services industry generally; (5) changes, after the
date hereof, in Laws of general applicability or interpretations thereof by any
Governmental Entity (as defined in Section 3.3(c)), (6) the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby or the announcement thereof or (7) any outbreak, after the date hereof,
of major hostilities in which the United States is involved or any act of
terrorism within the United States or directed against its facilities or
citizens wherever located; other than, in the case of clauses (1), (2), (4), (5)
and (7), to the extent that any such change or outbreak has a disproportionate
adverse effect (other than a disproportionate adverse effect where the
disproportion is de minimis) on the Company and its Subsidiaries relative to
comparable businesses generally.
Section 3.1 Organization, Standing and Power.
8
(a) The Company is a
Delaware corporation duly organized,
validly existing and in good standing under the Laws of
Delaware. The
Bank is a limited purpose credit card bank chartered as a national
banking association. The Company has not registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended
("BHCA"). The business and activities conducted by the Bank qualify it
as a credit card bank exempt from the definition of "bank" under the
BHCA pursuant to Section 2(c)(2)(F) thereof. The Company's Subsidiary,
MES Insurance Agency, LLC, a Minnesota limited liability company, is an
insurance agency licensed and located in Minnesota ("MES"), the
Company's Subsidiary, ICOM Limited, a Bermuda company, is a Class 2
Insurer licensed and located in Bermuda ("ICOM"), the Company's
Subsidiary, Metris Warranty Services, Inc., a
Delaware corporation, is
a service contract obligor organized in Delaware, located in Minnesota
and licensed in various states ("MWSI"), and the Company's Subsidiary,
Metris Warranty Services of Florida, Inc., a Florida corporation, is a
service contract obligor organized and licensed in Florida and located
in Minnesota ("MWSF" and together with MES, ICOM, and MWSI, the
"Insurance and Warranty Subsidiaries" and, each individually, an
"Insurance or Warranty Subsidiary "). Each of the Company's
Subsidiaries (as defined in Section 3.1(b)) is an organization duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its organization. Each of the Company and its
Subsidiaries has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being
conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership
or leasing of its properties makes such qualification necessary, other
than in such jurisdictions where the failure so to qualify, either
individually or in the aggregate, has not had and would not reasonably
be expected to have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole. True, complete and correct copies of
the Amended and Restated Certificate of Incorporation (the "Certificate
of Incorporation") and Amended and Restated Bylaws (the "Bylaws") of
the Company and the certificate of incorporation and bylaws or other
comparable organizational documents of the Company's Subsidiaries (the
"Organizational Documents") as in effect on the date of this Agreement
have been provided to Parent.
(b) As used in this Agreement, the word "Subsidiary" when used
with respect to any party means any corporation or other organization,
whether incorporated or unincorporated, (i) of which such party or any
other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the
voting interests in such partnership), or (ii) at least a majority of
the securities or other interests of which that have by their terms
ordinary voting power to elect a majority of the board of directors or
others performing similar functions with respect to such corporation or
other organization is directly or indirectly owned or controlled by
such party, or by such party and one or more of its Subsidiaries.
Section 3.2 Capital Structure.
9
(a) The authorized capital stock of the Company consists of
three hundred million (300,000,000) shares of Company Common Stock, and
ten million (10,000,000) shares of preferred stock, of which two
million (2,000,000) shares have been designated Company Series C
Preferred Stock. As of August 2, 2005 (i) 58,461,687 shares of Company
Common Stock were issued and outstanding, 10,904,381 shares of Company
Common Stock were reserved for issuance upon the exercise or payment of
stock options, stock units or other awards granted or subject to grant
under the
Metris Companies Inc. Amended and Restated Long-Term
Incentive and Stock Option Plan,
Metris Companies Inc. Amended and
Restated Non-Employee Directors Stock Option Plan,
Metris Companies
Inc. Employee Stock Purchase Plan, the Non-Qualified Employee Stock
Purchase Plan,
Metris Companies Inc. Management Stock Purchase Plan and
Metris Companies Inc. Annual Incentive Bonus Plan for Designated
Corporate Officers (such stock options, units and other awards and
plans, collectively, the "Company Stock Plans"), and 7,055,300 shares
of Company Common Stock were held by the Company in its treasury or by
its Subsidiaries; and (ii) 1,444,186 shares of Company Series C
Preferred Stock were issued and outstanding and 57,599 shares of
Company Series C Preferred Stock that will accrue through December 9,
2005 with respect to the payment-in-kind dividends thereon. All
outstanding shares of Company Common Stock and Company Series C
Preferred Stock have been duly authorized and validly issued and are
fully paid and non-assessable. Such outstanding shares of Company
Common Stock and Company Series C Preferred Stock (x) are not subject
to and (y) were not issued in violation of, any purchase option, call
option, right of first refusal, preemptive right, subscription right or
any similar right under any provision of the DGCL, the Company's
Certificate of Incorporation or Bylaws or any agreement to which the
Company is a party or is otherwise bound.
(b) No bonds, debentures, notes or other indebtedness having
the right to vote on any matters on which stockholders of the Company
may vote ("Voting Debt") are issued or outstanding.
(c) Except for (i) this Agreement, (ii) options, restricted
stock units or awards issued or to be issued under the Company Stock
Plans which represented, as of August 2, 2005, the right to acquire up
to an aggregate of 5,328,039 shares of Company Common Stock (1,227,685
restricted stock units, 2,323,982 stock options with an exercise price
less than the Per Common Share Price, and 1,776,372 stock options with
an exercise price equal to or greater than the Per Common Share Price),
(iii) the declaration and payment of regular quarterly payment-in-kind
dividends on the Company Series C Preferred Stock in accordance with
the Series C Certificate of Designation and (iv) agreements entered
into and securities and other instruments issued after the date of this
Agreement as permitted by Section 5.1(c), there are no options,
warrants, calls, rights, commitments or agreements of any character to
which the Company or any Subsidiary of the Company is a party or by
which it or any such Subsidiary is bound obligating the Company or any
Subsidiary of the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or any
Voting Debt or stock appreciation rights of the Company or of any
Subsidiary of the Company or
10
obligating the Company or any Subsidiary of the Company to grant,
extend or enter into any such option, warrant, call, right, commitment
or agreement. There are no outstanding contractual obligations of the
Company or any of its Subsidiaries (x) to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of
its Subsidiaries, or (y) pursuant to which the Company or any of its
Subsidiaries is or could be required to register shares of Company
Capital Stock or other securities under the Securities Act of 1933, as
amended (the "Securities Act").
(d) Since March 31, 2005, other than regular quarterly payment
in kind dividends on the Company Series C Preferred Stock in accordance
with the Series C Certificate of Designation, the Company has not (i)
issued or permitted to be issued any shares of capital stock, stock
appreciation rights or securities exercisable or exchangeable for or
convertible into shares of capital stock of the Company or any of its
Subsidiaries, other than pursuant to the Company Stock Plans, any
Company Stock Options, Company Restricted Stock Units and other awards
issued prior to the date hereof under the Company Stock Plans (or
issued after the date hereof in compliance with Section 5.1(c) and
Section 5.1(i)); (ii) repurchased, redeemed or otherwise acquired,
directly or indirectly through one or more of the Company's
Subsidiaries, any shares of capital stock of the Company or any of its
Subsidiaries; or (iii) declared, set aside, made or paid to the
stockholders of the Company, dividends or other distributions on the
outstanding shares of capital stock of the Company.
Section 3.3 Authority.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and, subject in the case of the
consummation of the Merger to the adoption of this Agreement by the
requisite vote of the holders of Company Capital Stock, to consummate
the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on
the part of Company, subject in the case of the consummation of the
Merger to the adoption of this Agreement by the stockholders of the
Company. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar Laws of general applicability relating to or
affecting creditors' rights and to general equitable principles.
(b) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, (i)
conflict with, or result in any violation of, or constitute a default
(with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any
obligation or the loss of a benefit under, or constitute a change in
control under, require the payment of a penalty under, or result in the
creation of a lien, pledge, security interest, charge or other
encumbrance on any assets pursuant to (any such conflict, violation,
default, right of termination, cancellation or acceleration, loss,
change in control,
11
requirement or creation, a "Violation"), any provision of the
Certificate of Incorporation or Bylaws of the Company or any of the
Organizational Documents of any Subsidiary of the Company, or (ii)
subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in
subsection (c) of this Section 3.3, result in any Violation of any Law
or any loan or credit agreement, note, mortgage, indenture, lease,
Company Plan (as defined in Section 3.9(a)), or agreement entered into
in connection with a Company Sponsored Asset Securitization
Transaction, or other agreement, obligation, instrument, permit,
concession, franchise or license, applicable to the Company or any
Subsidiary of the Company or their respective properties or assets,
except in the case of clause (ii) of this Section 3.3(b), for any such
Violations that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.
(c) No consent, approval, waiver, order or authorization of,
or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or
instrumentality, domestic or foreign, or industry self-regulatory
organization (a "Governmental Entity") or any other Person is required
by or with respect to the Company or any Subsidiary of the Company in
connection with the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions
contemplated hereby (including the Bank Merger), except for (i) the
filing of applications and notices with the OCC and FDIC and approval
thereof, (ii) the filing of applications and notices with the Board of
Governors of the Federal Reserve, (iii) the filing of applications and
notices with the Superintendent of the Arizona State Banking Department
("Superintendent"), (iv) the filing of notices with the Minnesota
Department of Commerce ("Minnesota DOC"), (v) the filing of
applications and notices with the Florida Department of Financial
Services, including any department thereof ("Florida DFS") and approval
thereof, (vi) the filing of applications and notices with the Bermuda
Monetary Authority and approval thereof, (vii) the filing of the
Certificate of Merger with the Secretary of State of the State of
Delaware, (viii) the filing with the Securities and Exchange Commission
(the "SEC") of (A) the Proxy Statement (as defined in Section 6.1(b)
and (B) such reports under Sections 13(a), 13(d), 13(g) and 16(a) of
the Exchange Act as may be required in connection with this Agreement
and the transactions contemplated hereby, (ix) the Required Company
Vote (as defined in Section 3.14), (x) notices or filings under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), if applicable, and (xi) such other consents, approvals,
waivers, orders, authorizations, registrations, declarations and
filings the failure of which to obtain or make would not reasonably be
expected to have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.
Section 3.4 SEC Documents; Regulatory Reports.
(a) Each of the Company and its Subsidiary, Metris
Receivables, Inc., a Delaware corporation ("MRI"), has filed all
required reports, schedules and other documents with the SEC pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), since December 31, 2001 (such reports, schedules and other
documents, the
12
"Company SEC Documents"). The Company SEC Documents (i) were filed on a
timely basis, (ii) as of their respective dates of filing with the SEC
(or, if amended or superseded by a filing prior to the date hereof, as
of the date of such filing), complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the
SEC thereunder applicable to such Company SEC Documents, and (iii) did
not at the time they were filed (or, if amended or superseded by a
filing prior to the date hereof, as of the date of such filing) 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. The financial statements of the Company and its
Subsidiaries (including any related notes and schedules) included in
the Company SEC Documents as of their respective dates of filing with
the SEC (or, if amended or superseded by a filing prior to the date
hereof, as of the date of such filing), complied in all material
respects with all applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto
(except, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be disclosed therein) and fairly presented in
all material respects the consolidated financial position of Company
and its consolidated Subsidiaries and the consolidated results of
operations, changes in stockholders' equity and cash flows of such
companies as of the dates and for the periods shown. No Subsidiary of
the Company other than MRI is subject to the reporting requirements of
Section 13(a) or Section 15(d) of the Exchange Act.
(b) Other than the Company SEC Documents, which are addressed
in subsection (a), the Bank RAP Documents, which are addressed in
subsection (c), and the Insurance SAP Documents, which are addressed in
subsection (d), each of the Company and its Subsidiaries has (i) timely
filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that it was
required to file since December 31, 2001 with any Governmental Entity,
(ii) paid all fees and assessments due and payable in connection
therewith and (iii) made available, to the extent permitted by
applicable Law, to Parent copies of all such reports, registrations and
statements (and amendments thereto).
(c) The Bank has filed all reports, registrations, statements
and other documents, together with any amendments required to be made
with respect thereto and any exhibits and other information required to
be incorporated therein, that it was required to file with the OCC, the
Superintendent, the Board of Governors of the Federal Reserve, and the
FDIC (collectively, the "Banking Authorities") since December 31, 2001
(the "Bank RAP Documents"). The Bank RAP Documents (i) were filed on a
timely basis, (ii) were prepared in conformity with regulatory
accounting practices prescribed or permitted by the Banking Authorities
("RAP") consistently applied, for the periods covered thereby (or, if
amended or superseded by a filing prior to the date hereof, as of the
date of such filing) and (iii) fairly present in all material respects
the statutory financial position of the Bank in accordance with RAP as
at the respective dates thereof and the results of operations of the
Bank for the respective periods then ended. No material deficiency has
13
been asserted with respect to any Bank RAP Documents by the Banking
Authorities or any other Governmental Entity. The audited annual
balance sheets and income statements of the Bank as of and for the
years ended December 31, 2001, 2002, 2003 and 2004 have been prepared
in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be
disclosed therein) and fairly presented in all material respects the
financial position of the Bank and the results of operations, changes
in stockholder's equity and cash flows of the Bank as of the dates and
for the periods shown. The Company or the Bank has provided to Parent
true and complete copies of (i) all Bank RAP Documents for the years
ended December 31, 2001, December 31, 2002, December 31, 2003 and
December 31, 2004 and the quarterly periods ended March 31, 2005 and
June 30, 2005, and (ii) to the extent permitted by applicable Law and
subject to regulatory approval, all examination reports of any Banking
Authorities conducted since December 31, 2001 and relating to the Bank.
(d) Each of the Company and the Insurance and Warranty
Subsidiaries has filed all required annual and quarterly statements and
other documents (including exhibits and all other information
incorporated therein) required to be filed with the Minnesota DOC, the
Florida DFS, and the Bermuda Monetary Authority (collectively, the
"Insurance Authorities") since December 31, 2001 (the "Insurance SAP
Documents"). The Insurance SAP Documents (i) were filed on a timely
basis, (ii) were prepared in conformity with regulatory accounting
practices prescribed or permitted by the Insurance Authorities,
including the Bermuda generally accepted auditing standards ("SAP"),
consistently applied, for the periods covered thereby (or, if amended
or superseded by a filing prior to the date hereof, as of the date of
such filing) and (iii) fairly present in all material respects the
statutory financial position of the Company and the relevant Insurance
and Warranty Subsidiaries in accordance with applicable SAP as at the
respective dates thereof and the results of operations of the Company
and the relevant Insurance and Warranty Subsidiaries for the respective
periods then ended. No material deficiency has been asserted with
respect to any Insurance SAP Documents by the Insurance Authorities or
any other Governmental Entity. The Company has provided to Parent true
and complete copies of (i) all Insurance SAP Documents for the years
ended December 31, 2001, December 31, 2002, December 31, 2003 and
December 31, 2004 and the quarterly periods ended March 31, 2005 and
June 30, 2005, and (ii) to the extent permitted by applicable Law and
subject to regulatory approval, all examination or other supervisory
reports of the Insurance Authorities conducted since December 31, 2001
and relating to the Company or any Insurance or Warranty Subsidiary.
(e) Except as disclosed in the Company SEC Documents filed
prior to the date of this Agreement, neither the Company nor any of its
Subsidiaries has entered into any transaction that would be subject to
disclosure pursuant to Item 404 of Regulation S-K. All agreements and
transactions between or among any of the Company and any of its
Subsidiaries are, to the extent required, in compliance with the terms
of any applicable Laws and agreements with Governmental Entities. As
used in this Agreement, "Affiliate" of any Person means another Person
that directly or indirectly, through one or
14
more intermediaries, controls, is controlled by, or is under common
control with, such first Person.
Section 3.5 Compliance with Applicable Laws.
(a) Each of the Company and its Subsidiaries holds all
permits, licenses, variances, exemptions and approvals of all
Governmental Entities that are material to the operation of its
business (the "Company Permits"). Each of the Company and its
Subsidiaries is and has been in compliance with the terms of the
Company Permits, except where the failure to so comply would not
reasonably be expected to have a Material Adverse Effect on the Company
and its Subsidiaries, taken as a whole. To the Knowledge of the Company
(as defined in Section 3.5(b)), no Company Permit shall cease to be
effective as a result of the consummation of the transactions
contemplated by this Agreement. Each of the Company and its
Subsidiaries is and has been in compliance in all material respects
with all federal, state, local or foreign laws, statutes, ordinances,
codes, rules, regulations, judgments, orders, injunctions, decrees,
writs or operating or written agreements of any Governmental Entity
(individually, a "Law" and collectively, the "Laws") applicable to the
conduct of its business or the ownership or operation of its properties
or assets, including state usury Laws, consumer lending and insurance
Laws, the Truth in Lending Act, the Consumer Credit Protection Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair
Debt Collection Practices Act, the USA Patriot Act of 2001, the
Securities Act, the Exchange Act, the Xxxxxxxx-Xxxxx Act of 2002, the
rules and regulations under any of the foregoing, and the rules and
regulations of the New York Stock Exchange (all as amended from time to
time). Each of the Company and its Subsidiaries is and has been in
compliance in all material respects with all applicable Laws with
respect to collection practices in seeking payment under any loan or
credit extension of the Company or the Bank. Except for normal
examinations conducted by a Governmental Entity in the ordinary course
of the business of the Company and its Subsidiaries, no investigation,
examination, audit, review or disciplinary proceeding by any
Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or, to the Knowledge of the Company,
threatened.
(b) As used in this Agreement, "Knowledge of the Company"
means the actual knowledge of (i) the executive officers of the Company
and its Subsidiaries and (ii) the individuals with the primary
responsibility over operational or functional areas of the Company and
its Subsidiaries.
Section 3.6 Legal Proceedings. Except as disclosed in the Company SEC
Documents filed prior to the date of this Agreement, there is no suit, action,
claim, investigation or proceeding (whether judicial, arbitral, administrative
or other) pending or, to the Knowledge of the Company, threatened, against or
affecting the Company or any Subsidiary of the Company as to which there is a
substantial possibility of a material adverse outcome. Except as disclosed in
the Company SEC Documents filed prior to the date of this Agreement, there is no
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any Subsidiary of Company that is
material to the Company.
15
Section 3.7 Taxes.
(a) The Company and each of its Subsidiaries have filed, or
caused to be filed, on a timely basis (taking into account any
extension of time within which to file), all material tax returns
required to be filed by any of them and have paid in full (or the
Company has paid in full on behalf of any of its Subsidiaries), or have
set up an adequate reserve for the payment of, all material taxes
required to be paid. All such tax returns were true, complete and
correct in all material respects. The most recent financial statements
contained in the Company SEC Documents filed prior to the date of this
Agreement reflect an adequate reserve, in accordance with generally
accepted accounting principles, for all taxes payable by the Company
and its Subsidiaries accrued through the date of such financial
statements. No material deficiencies or other claims for any taxes have
been proposed, asserted or assessed in writing against the Company or
any of its Subsidiaries that are not adequately reserved for. As used
in this Agreement, the term "tax" (including, with correlative meaning,
the terms "taxes" and "taxable") shall mean (i) all Federal, state,
local and foreign income, profits, franchise, gross receipts, payroll,
sales, employment, use, property, withholding, excise, occupancy and
other taxes, duties or assessments of any nature whatsoever, together
with all interest, penalties and additions imposed with respect to such
amounts, (ii) liability for the payment of any amounts of the type
described in clause (i) as a result of being or having been a member of
an affiliated, consolidated, combined or unitary group, and (iii)
liability for the payment of any amounts as a result of being party to
any tax sharing agreement or as a result of any express or implied
obligation to indemnify any other Person with respect to the payment of
any amounts of the type described in clauses (i) or (ii).
(b) The Company (i) has delivered to Parent or made available
to Parent for inspection complete and correct copies of all material
tax returns of the Company or any Subsidiary of the Company relating to
taxes for the taxable periods ending December 31, 2002 and December 31,
2003, and (ii) has retained and will deliver or make available to
Parent, on Parent's reasonable request, complete and correct copies of
material tax returns of the Company or any Subsidiary of the Company
relating to taxes for all taxable periods for which the applicable
statute of limitations has not yet expired, as well as all related
books and records so as to meet the requirements of Section 6001 of the
Code.
(c) The federal income tax returns of the Company and each
Subsidiary of the Company have been audited by the Internal Revenue
Service or are closed by the applicable statute of limitations for all
taxable years through 1997. No examination or audit of any tax return
of the Company or any Subsidiary of the Company by any Governmental
Entity is currently in progress. Neither the Company nor any Subsidiary
of the Company has been informed in writing by any jurisdiction where
the Company or any Subsidiary of the Company does not file a tax return
that the jurisdiction believes that the Company or any Subsidiary of
the Company was required to file any material tax return that was not
filed. Neither the Company nor any Subsidiary of the Company has (i)
waived any statute of limitations with respect to taxes or agreed to
extend the period for assessment or collection of any taxes, (ii)
requested any extension of time within
16
which to file any tax return, which tax return has not yet been filed,
or (iii) executed or filed any power of attorney with any taxing
authority.
(d) Neither the Company nor any Subsidiary of the Company is
or has ever been a member of a group of corporations with which it has
filed (or been required to file) consolidated, combined or unitary tax
returns other than (i) the group of which the Company is the common
parent, and (ii) the group of which Fingerhut Companies, Inc. and its
successors and assigns is the common parent.
(e) Neither the Company nor any Subsidiary of the Company is a
party to any tax sharing agreement or arrangement other than with each
other and with Fingerhut Companies, Inc. and its successors and
assigns.
(f) Neither the Company nor any Subsidiary of the Company: (i)
is a "consenting corporation" within the meaning of former Section
341(f) of the Code, and none of the assets of the Company or any
Subsidiary of the Company is subject to an election under former
Section 341(f) of the Code; or (ii) 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
897(c)(l)(A)(ii) of the Code.
(g) Neither the Company nor any Subsidiary of the Company has
distributed to its stockholders or security holders stock or securities
of a controlled corporation, nor has stock or securities of the Company
or any Subsidiary of the Company been distributed, in a transaction to
which Section 355 of the Code applies (i) in the two years prior to the
date of this Agreement or (ii) in a distribution that could otherwise
constitute part of a "plan" or "series of related transactions" (within
the meaning of Section 355(e) of the Code) that includes the
transactions contemplated by this Agreement.
(h) There are no material liens or other encumbrances with
respect to taxes upon any of the assets or properties of the Company or
any Subsidiary of the Company, other than with respect to taxes not yet
due and payable.
(i) Neither the Company nor any of its Subsidiaries has
entered into a transaction that is identified by published guidance as
a listed transaction under Treas. Reg. Section 1.6011-4(b)(2).
(j) The Company and each of its Subsidiaries have withheld
from amounts owing to any employee, creditor or other person all taxes
required by Law to be withheld and have paid over to the proper
governmental authority in a timely manner all such withheld amounts to
the extent due and payable, except for immaterial failures to withhold
and pay over.
Section 3.8 Certain Agreements. Except for this Agreement, neither the
Company nor any of its Subsidiaries is a party to or bound by any contract,
arrangement, commitment or understanding (i) with respect to the employment of
any directors or executive officers, or with
17
any consultants that are natural persons, involving the payment of $250,000 or
more per annum, (ii) which involves the payment or receipt of payment of $1
million or more per annum or is otherwise material to the conduct of the
business of the Company and its Subsidiaries, taken as a whole, as currently
conducted or currently contemplated to be conducted by the Company and its
Subsidiaries, (iii) which limits the ability of the Company or any of its
Subsidiaries to compete in any line of business, in any geographic area or with
any Person, or which requires referrals of business or requires the Company or
any of its Affiliates to make available investment opportunities to any Person
on a priority, equal or exclusive basis, and in each case which limitation or
requirement would reasonably be expected to be material to the Company and its
Subsidiaries taken as a whole, (iv) with or to a labor union or guild (including
any collective bargaining agreement), (v) in the case of a Company Plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement, or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement, (vi) which relates to indebtedness of the Company or any of its
Subsidiaries in the principal amount of $5 million or more, or (vii) which would
prohibit or delay the consummation of any of the transactions contemplated by
this Agreement. The Company has made available to Parent complete and accurate
copies of each contract, arrangement, commitment or understanding of the type
described in this Section 3.8 (collectively referred to herein as the "Company
Contracts"). All of the Company Contracts are valid and in full force and
effect, except to the extent they have previously expired in accordance with
their terms, and are enforceable against the Company or the applicable
Subsidiary of the Company and, to the Company's Knowledge, against the other
parties thereto, in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of
general applicability relating to or affecting creditors' rights and to general
equitable principles. Neither the Company nor any of its Subsidiaries has, and
to the Knowledge of the Company, none of the other parties thereto has, violated
any material provision of, or committed or failed to perform any material act,
and no event or condition exists, which with or without notice, lapse of time or
both would constitute a material default under the provisions of, any Company
Contract.
Section 3.9 Benefit Plans.
(a) Definitions.
(i) "Benefit Arrangement" means any benefit
arrangement, obligation, custom, or practice to provide
benefits (other than merely as salary or under a Benefit Plan)
as compensation for services rendered, to present or former
directors, employees, agents, or independent contractors,
including employment or consulting agreements, severance
agreements or pay policies, stay or retention bonuses or
compensation, executive or incentive compensation programs or
arrangements, sick leave, vacation pay, plant closing
benefits, patent award programs, salary continuation for
disability, workers' compensation, retirement, deferred
compensation, bonus, equity compensation, stock option or
purchase plans or programs, tuition reimbursement or
scholarship programs, employee discount programs, meals,
travel, or vehicle allowances, any plans subject to Code
18
Section 125 and any plans providing benefits or payments in
the event of a change in control, change in ownership or
effective control, or sale of a substantial portion (including
all or substantially all) of the assets of any business or
portion thereof, in each case with respect to any present or
former employees, directors, independent contractors, or
agents.
(ii) "Benefit Plan" has the meaning given in ERISA
Section 3(3), together with plans or arrangements that would
be so defined if they were not (A) otherwise exempt from ERISA
by that or another section, (B) maintained outside the United
States, or (C) individually negotiated or applicable only to
one person.
(iii) "Company Benefit Arrangement" means any Benefit
Arrangement any Related Employer sponsors or maintains or with
respect to which any Related Employer has or may have any
current or future Liability, in each case with respect to any
present or former directors, employees, officers, or agents
of, or service providers to, any Related Employer.
(iv) "Company Plan" means any Benefit Plan any
Related Employer sponsors or maintains or to which any Related
Employer is obligated to make payments or has or may have any
Liability, in each case with respect to any present or former
employees of any Related Employer, and any Qualified Plan that
was terminated on or after January 1, 1995.
(v) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and all regulations and
rules issued thereunder, or any successor Law.
(vi) "ERISA Affiliate" means any Person that,
together with any Related Employer, would be or was at any
time treated as a single employer under Section 414 of the
Code or Section 4001 of ERISA.
(vii) "Liability" means any direct or indirect
liability, indebtedness, guaranty, endorsement, claim, loss,
damage, deficiency, cost, expense, obligation or
responsibility, whether accrued, absolute, contingent, mature,
unmature or otherwise and whether known or unknown, fixed or
unfixed, xxxxxx or inchoate, liquidated or unliquidated,
secured or unsecured (individually, a "Liability" and
collectively, the "Liabilities").
(viii) "Pension Plan" means any Benefit Plan subject
to Code Section 412 or ERISA Section 302 or Title IV
(including any multiemployer plan as described in Section
3(37) of ERISA) or any comparable plan not covered by ERISA.
19
(ix) "Qualified Plan" means any Benefit Plan that is
intended to meet the requirements of Section 401(a) of the
Code, including any such Benefit Plan that was terminated on
or after January 1, 1995.
(x) "Related Employer" means the Company and any
Subsidiary of the Company employing any non-Company employee
or service provider.
(b) Section 3.9(b) of the Company Disclosure Schedule contains
a complete and accurate list of all Company Plans and Company Benefit
Arrangements and other employment contracts.
(c) With respect, as applicable, to Benefit Plans and Benefit
Arrangements:
(i) The Company has delivered to Parent true and
complete copies of the following documents with respect to
each Company Plan and Company Benefit Arrangement, to the
extent applicable: (A) all plan or arrangement documents (or,
if no plan document exists, a written description of the
Company Plan or Company Benefit Arrangement), including trust
agreements, insurance policies, service agreements and formal
and informal amendments to each; (B) the most recent Form 5500
or other comparable documents and any attached financial
statements and those for the prior three years and any related
actuarial reports; (C) the last Internal Revenue Service
("IRS") determination or opinion letter and the last IRS
determination or opinion letter that covered the qualification
of the entire plan (if different); (D) summary plan
descriptions, summaries of material modifications, any
prospectuses that describe the Company Plans or Company
Benefit Arrangements, and Statement of Financial Accounting
Standards Nos. 87, 106, 112, and 123R reports or other
comparable documents; (E) the most recent written descriptions
of all non-written agreements relating to any such plan or
arrangement; (F) all material notices the IRS, Department of
Labor, or any other domestic or foreign Governmental Entity
issued to the Related Employers within the four years
preceding the date of this Agreement; and (G) employee manuals
or handbooks containing personnel or employee relations
policies.
(ii) Each Company Plan and each Company Benefit
Arrangement has been maintained in all material respects in
accordance with its constituent documents and with all
applicable provisions of domestic and foreign Laws, including
federal and state securities Laws and any reporting and
disclosure requirements. With respect to any Company Plan or
Company Benefit Arrangement that is subject to Section 409A of
the Code, the Company will adopt amendments by December 31,
2005 (or such other extended deadline as the Treasury may
permit under Section 409A of the Code), so that no such
Company Plan or Company Benefit Arrangement is likely to
result in any participant's incurring income acceleration or
penalties under Section 409A of the Code. Section 3.9(c)(ii)
of the Company Disclosure Schedule lists all Company Plans or
Company Benefit Arrangement that are or may be subject to
Section 409A of the
20
Code. The only Qualified Plan currently in operation is the
401(k) Retirement Benefit Plan. No Related Employer has
maintained or contributed to another Qualified Plan. The
Company has received a favorable determination letter from the
IRS that has not been revoked, no Qualified Plan has been
amended since the date of its most recent determination letter
or application therefor in any material respect, and, to the
Knowledge of the Company, nothing has occurred with respect to
the operation of any Qualified Plan that could cause the loss
of such qualification or exemption or the imposition of any
Liability, lien, penalty or Tax under ERISA or the Code or
materially increase its cost; with respect to each Company
Plan, to the Knowledge of the Company, no transactions
prohibited by Code Section 4975 or ERISA Section 406 and no
breaches of fiduciary duty described in ERISA Section 404 have
occurred; the Related Employers have fiduciary liability
insurance of at least $55.0 million in effect covering the
fiduciaries of the Company Plans with respect to whom the
Related Employers could have Liability; no Qualified Plan has
experienced a termination or partial termination; no act or
omission has occurred and, to the Knowledge of the Company, no
condition exists with respect to any Company Plan that would
subject the Related Employers to any contractual
indemnification or contribution obligation protecting any
fiduciary, insurer or service provider with respect to any
Company Plan, nor, to the Knowledge of the Company, will any
of the transactions contemplated by this agreement give rise
to such an obligation; and the Related Employers have never
sponsored an employee stock ownership plan. Each Qualified
Plan that provides for compliance with ERISA Section 404(c),
or is intended to comply with such provision, so complies.
(iii) Neither any Related Employer nor any ERISA
Affiliate has ever sponsored or maintained or had any
Liability with respect to any Pension Plan.
(iv) There are no pending claims (other than routine
benefit claims) or lawsuits that have been asserted or
instituted by, against, or relating to, any Company Plans or
Company Benefit Arrangements nor, to the Knowledge of the
Company, is there any basis for any such claim or lawsuit. No
Company Plans or Company Benefit Arrangements are or have been
under audit or examination (nor has notice been received of a
potential audit or examination) by any Governmental Entity;
and no matters are pending under the IRS's Employee Plans
Compliance Resolutions System or any successor or predecessor
program.
(v) No Company Plan or Company Benefit Arrangement
contains any provision or is subject to any Law that would (A)
increase, accelerate, or vest any benefit; (B) require
severance, termination or other payments; (C) provide any term
of employment or compensation guarantee; (D) trigger any
Liabilities (including any obligation to provide a tax
gross-up); or (E) measure any values of benefits on the basis
of any of the transactions contemplated by this Agreement. Any
payments that would be treated as change in control payments
for purposes of bank regulation under 12 CFR 359.4(a)(3) will
comport with such regulation
21
and, prior to being made, will have received proper approval
from the OCC and, as may be required, with the concurrence of
the FDIC. No stockholder, employee, officer, or director of
any Related Employer has been promised or paid any bonus or
incentive compensation related to the transactions
contemplated pursuant to this Agreement. The Related Employers
have provided to Parent such accurate information as Parent
would reasonably be expected to need to enable Parent to
calculate any excise tax due under Code Section 4999 as a
result of the transactions contemplated by this Agreement for
which any Related Employer or Parent may directly or
indirectly become liable, and the amount of deductions that
may be disallowed under Code Section 280G as a result of the
transactions contemplated by this Agreement.
(vi) Each Company Plan and Company Benefit
Arrangement is amendable and terminable unilaterally by the
applicable Related Employer at any time without liability or
expense to the Related Employers or such plan or arrangement
as a result thereof (other than for benefits accrued through
the date of amendment or termination and reasonable
administrative expenses related thereto), and no plan
documentation or agreement or communication distributed
generally to employees by its terms prohibits the Related
Employers from amending or terminating such Company Plan or
Company Benefit Arrangement.
(vii) Each Related Employer has paid all amounts it
is required to pay as contributions to the Company Plans as of
the date hereof; all benefits accrued under any unfunded
Company Plan or Company Benefit Arrangement will have been
paid, accrued, or otherwise adequately reserved in accordance
with generally accepted accounting principles and records of
such Related Employer; all monies withheld from employee
paychecks for Company Plans have been transferred to the
relevant plan within the time applicable regulations specify;
the assets of each Company Plan that is funded are reported at
their fair market value on the books and records of such
Company Plan; within the preceding three (3) fiscal years, no
Related Employer has, as a result of a retroactive rate
adjustment or loss sharing arrangement, incurred any material
liability with respect to a Company Plan or state workers'
compensation arrangement that is funded wholly or partially
through an insurance policy or public or private fund.
(viii) All group health plans of the Related
Employers and their ERISA Affiliates materially comply with
the requirements of Part 6 of Title I of ERISA ("COBRA"), Code
Section 5000, the Health Insurance Portability and
Accountability Act, and any other comparable domestic or
foreign Laws; no Related Employer has any Liability under or
with respect to COBRA for its own actions or omissions or
those of any predecessor or ERISA Affiliate; no Related
Employer provides benefits through a voluntary employee
beneficiary association as defined in Code Section 501(c)(9);
no current or former employee or director (or beneficiary of
any of the foregoing) of any Related Employer is now, or after
completing additional service or applying at a future date
will be, entitled to
22
receive any post-employment benefits from any Related
Employer, including death or medical benefits (whether or not
insured) beyond retirement or other termination of employment,
other than as applicable Law or the terms of the Qualified
Plan require and there have been no written or oral
commitments inconsistent with the foregoing.
(ix) No Related Employer has taken any action since
March 31, 2005 that would have required consent under Section
5.1(i) if Section 5.1(i) had been in effect beginning as of
such date.
(x) No Related Employer has had any Benefit Plan or
Benefit Arrangement covering any employee which plan or
arrangement is subject to the Laws of any jurisdiction outside
the United States.
(xi) All actions to be taken under this Agreement
with respect to equity or equity-based compensation (A) are
permitted by the terms of the applicable Company Benefit
Arrangements (or appropriate consents have been or will be
obtained from the affected participants); (B) will be
consistent with material communications to recipients of such
compensation; and (C) will comply in all material respects
with applicable Law.
(d) With respect to employees of and independent contractors
to the Related Employers:
(i) Each Related Employer has complied in all
material respects with all applicable domestic and foreign
Laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including any
such Laws respecting employment discrimination, employee
classification, workers' compensation, family and medical
leave, the Immigration Reform and Control Act, and
occupational safety and health requirements, and has complied
in all material respects with all employment agreements, and
no claims, controversies, investigations or suits are pending
or, to the Knowledge of the Company, threatened, with respect
to such Laws or agreements, either by private individuals or
by Governmental Entities; and all employees are at-will.
(ii) No labor union has ever represented the Related
Employer's employees and no collective bargaining agreement
has been binding against the Related Employers; the Related
Employers have not engaged in any unfair labor practice, and
there is not now, nor within the past three years has there
been, any unfair labor practice complaint against the Related
Employers pending or, to the Knowledge of the Company,
threatened, before the National Labor Relations Board or any
other comparable foreign or domestic authority or any workers'
council.
23
(iii) All persons who have performed services for the
Related Employers while classified as independent contractors
have satisfied the requirements of Law to be so classified,
and the applicable Related Employer has fully and accurately
reported their compensation on IRS Forms 1099 or other
applicable Tax forms for independent contractors when required
to do so.
(iv) Since January 1, 2004, no Related Employer has
effectuated (A) a plant closing as defined in the Worker
Adjustment and Retraining Notification Act of 1988, as amended
from time to time (the "WARN Act") affecting any site of
employment or one or more operating units within any site of
employment of the Company or (B) a mass layoff as defined in
the WARN Act, nor has any Related Employer been affected by
any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of
any similar state or local Law. Since January 1, 2004, the
Related Employers have provided notices under the WARN Act as
described in Section 3.9(d)(iv) of the Company Disclosure
Schedule.
(v) There are no loans or extensions of credit (other
than (A) for routine business expenses or (B) under credit
cards issued by the Bank, in either case, in compliance with
Regulation O under 12 C.F.R. Part 215) between the Related
Employers and any current director, officer, or employee in
excess of $1,000, and any such loans or extensions comply with
applicable Law.
(vi) All employees of the Related Employers are
employed within the United States. All persons employed in the
United States are citizens of the United States. Section
3.9(d)(vi) of the Company Disclosure Schedule indicates the
immigration status of any persons employed in the United
States who are not citizens of the United States.
(vii) The Company has provided to Parent a complete
and accurate list, as of the date hereof, of (A) all employees
of a Related Employer who earned more than $100,000 in 2004 or
who it is reasonably expected will earn more than $100,000 in
2005; (B) all officers and all directors of the Related
Employers; (C) all employment agreements with any employees,
officers, and directors; and (D) the current annual
compensation (and the portions thereof attributable to salary,
bonus, and other compensation respectively) of each such
employee, officer or director as of (x) the date of this
Agreement and (y) as of the Closing Date. Any accruals for
incentive bonuses to employees of the Company for the fiscal
year 2005 are accurately reflected on the Company's financial
statements and will be accurately reflected on the Company's
financial statements through the Closing Date. The Company has
provided to Parent a complete and accurate list as of July 28,
2005 of the totals accrued for paid time off for all
employees.
Section 3.10 Subsidiaries. Section 3.10 of the Company Disclosure
Schedule sets forth a complete and accurate list, as of the date of this
Agreement, of the Company's Subsidiaries and
24
the Company's direct or indirect equity interest therein. All of the shares of
capital stock or other equity interests of each of the Subsidiaries held by the
Company or by a Subsidiary of the Company are owned by the Company or a
Subsidiary of the Company free and clear of any claim, lien, charge, security
interest or encumbrance of any nature whatsoever and, in the case of shares of
capital stock, are fully paid and non-assessable.
Section 3.11 Agreements with Regulators. Neither the Company nor any
Subsidiary of the Company (i) is a party to any operating or other written
agreement, consent decree or memorandum of understanding with, or any commitment
letter or similar undertaking to, or is subject to any cease-and-desist or other
order or directive by, or is a recipient of any extraordinary supervisory letter
from, or has adopted any policies, procedures or board resolutions at the
request of, any Governmental Entity which restricts in any material respect the
conduct of its business, or in any manner relates to its capital adequacy, its
policies, its management or its business (each, a "Regulatory Agreement"), or
(ii) has, since December 31, 2001, been advised by any Governmental Entity that
it is considering issuing or requesting any such Regulatory Agreement.
Section 3.12 Absence of Certain Changes or Events. Except as permitted
by Section 5.1, since March 31, 2005 (a) the Company and its Subsidiaries have
conducted their respective businesses in the ordinary course consistent with
their past practices and (b) there has not been (i) any change, circumstance or
event which has had, or would reasonably be expected to have, a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole, or (ii) any other
action or event that would have required the consent of Parent pursuant to
Section 5.1 had such action or event occurred after the date of this Agreement.
Section 3.13 Board Approval. The Board of Directors of the Company, by
resolutions duly adopted by unanimous vote of those voting at a meeting duly
called and held (the "Company Board Approval"), has (i) determined that this
Agreement and the Merger are fair to and in the best interests of Company and
its stockholders and declared the Merger to be advisable, (ii) approved this
Agreement and the Merger in accordance with the provisions of the DGCL, and
(iii) recommended that the stockholders of Company approve this Agreement
(including the Merger) and directed that such matter be submitted for
consideration by Company stockholders at the Company Stockholders Meeting (as
defined in Section 6.1(a)), and (iv) to the extent necessary, assuming the
accuracy of Parent's representations in Section 4.9, adopted a resolution or
taken such action having the effect of causing the Company not to be subject to
any state takeover Law or similar Law or similar provision in the Certificate of
Incorporation that might otherwise apply to this Agreement, the Stockholder
Agreement, the Merger or the Bank Merger or any other transactions contemplated
by this Agreement or the Stockholder Agreement.
Section 3.14 Vote Required. Assuming the accuracy of Parent's
representations in Section 4.9, the affirmative vote of the holders of a
majority of the voting power of the outstanding Company Common Stock and the
outstanding Company Series C Preferred Stock (voting on an as converted to
Company Common Stock basis), voting together as a single class (the "Required
Company Vote"), is the only vote of the holders of any class or series of
25
Company Capital Stock necessary to approve and adopt this Agreement and the
transactions contemplated hereby (including the Merger).
Section 3.15 Properties. The Company or one of its Subsidiaries (i) has
good and marketable title to all the properties and assets reflected in the
latest audited balance sheet included in the Company SEC Documents filed prior
to the date of this Agreement as being owned by the Company or one of its
Subsidiaries or acquired after the date thereof that are material to the
Company's business on a consolidated basis (except properties sold or otherwise
disposed of since the date thereof in the ordinary course of business), free and
clear of all claims, liens, charges, security interests or encumbrances of any
nature whatsoever, except (A) statutory liens securing payments not yet due, (B)
liens on assets of Subsidiaries of the Company which are banks incurred in the
ordinary course of their banking business, (C) liens for taxes not yet due and
payable or for taxes being contested in good faith for which adequate reserves
have been made and (D) such imperfections or irregularities of title, claims,
liens, charges, security interests or encumbrances as do not materially affect
the use of the properties or assets subject thereto or affected thereby or
otherwise materially impair business operations at such properties, and (ii) is
the lessee of all leasehold estates reflected in the latest audited financial
statements included in such Company SEC Documents or acquired after the date
thereof which are material to its business on a consolidated basis (except for
leases that have expired by their terms since the date thereof) and is in
possession of the properties purported to be leased thereunder, and each such
lease is, to the Knowledge of the Company, valid and in full force and effect
without material existing default thereunder by the lessee or the lessor, and
enforceable against the Company or the applicable Subsidiary of the Company and,
to the Company's Knowledge, against the other parties thereto, in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar Laws of general applicability relating to
or affecting creditors' rights and to general equitable principles.
Section 3.16 Company Information. The information relating to the
Company and its Subsidiaries that is provided by the Company or any of its
Affiliates or representatives for inclusion in the Proxy Statement or any other
document filed with any Governmental Entity in connection with the transactions
contemplated by this Agreement will not 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 were made, not misleading. The Proxy Statement
will comply in all material respects with the provisions of the Exchange Act and
the rules and regulations thereunder, except that no representation or warranty
is made by the Company with respect to statements made or incorporated by
reference therein based on information supplied by Parent specifically for
inclusion or incorporation by reference in the Proxy Statement.
Section 3.17 Intellectual Property. The Company and its Subsidiaries
own or have a valid license to use all trademarks, service marks and trade names
(including any registrations or applications for registration of any of the
foregoing) necessary to carry on their businesses substantially as currently
conducted (collectively, the "Company Intellectual Property"). Neither the
Company nor any such Subsidiary has received any written notice of infringement
of or
26
conflict with, and to the Knowledge of the Company, there are no infringements
of or conflicts with, the rights of others with respect to the use of any of the
Company Intellectual Property.
Section 3.18 Securitization Matters.
(a) No registration statement, prospectus, private placement
memorandum or other offering document, or any amendments or supplements
to any of the foregoing (collectively, "Securitization Disclosure
Documents"), utilized in connection with the offering of securities in
any Company Sponsored Asset Securitization Transaction (as defined
below), as of its effective date (in the case of a registration
statement) or its issue date (in the case of any other such document),
contained any untrue statement of any material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they
were made, not misleading. Each Securitization Disclosure Document
complied, as of its effective date (in the case of a registration
statement) or its issue date (in the case of any other such document),
in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations of
the SEC thereunder applicable to such Securitization Disclosure
Document. As used in this Agreement, "Company Sponsored Asset
Securitization Transaction" means any loan or other asset
securitization transaction in which the Company or any of its
Subsidiaries was an issuer, sponsor, depositor or transferor.
(b) Section 3.18(b) of the Company Disclosure Schedule sets
forth a true and correct list as of the date hereof of all outstanding
Company Sponsored Asset Securitization Transactions, and for each such
transaction a list of all outstanding securities issued therein,
including securities retained by the Company and its Subsidiaries, and
includes the original and current rating (where such ratings exist) and
the principal amount as of the most current reporting date for each
security listed thereon.
(c) Neither the Company nor any of its Subsidiaries nor, to
the Knowledge of the Company, any trustee, servicer or issuer with
respect to any Company Sponsored Asset Securitization Transaction has
taken or failed to take any action which would reasonably be expected
to affect adversely the intended tax characterization or tax treatment
for federal, state or local income or franchise tax purposes of the
issuer or any securities issued in any such Company Sponsored Asset
Securitization Transaction. To the Knowledge of the Company, all
federal, state and local income or franchise tax and information
returns and reports required to be filed by the issuer, servicer or
trustee relating to any Company Sponsored Asset Securitization
Transactions, and all tax elections required to be made in connection
therewith, have been properly filed or made.
Section 3.19 Covered Receivables. All currently outstanding secured or
unsecured loans, advances, credit lines or credit card receivables that were
originated by the Company or any of its Subsidiaries (whether or not currently
held by the Company or its Subsidiaries) or acquired by the Company or any of
its Subsidiaries from third parties (collectively, the "Receivables") were
originated, solicited or acquired, as the case may be, in all material respects
27
in accordance with the Bank's written policies regarding such matters as in
effect at the time of such origination, solicitation or acquisition, which
policies are listed on Section 3.19 of the Company Disclosure Schedule, and true
and complete copies of which have been provided to Parent. Each note, credit
agreement or security instrument related to the Covered Receivables (as defined
below) is in full force and effect and constitutes a valid, legal and binding
obligation of the obligor thereunder, enforceable against such obligor in
accordance with the terms thereof, except, in the case of enforceability, as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar Laws
affecting creditors' rights and remedies generally and except for failures to be
in full force and effect or enforceable that, individually or in the aggregate,
would not reasonably be expected to have more than a de minimis effect on the
Company or any of its Subsidiaries. The Company has in all material respects
kept complete and accurate books and records in connection with the Covered
Receivables. To the Knowledge of the Company, there are no oral modifications or
amendments related to the Covered Receivables that are not reflected in the
Company's records. To the Knowledge of the Company, no defenses as to the
enforceability of any Covered Receivables have been asserted that are not
reflected in the Company's records. To the Knowledge of the Company, there have
been no acts or omissions which would give rise to any claim or right of
rescission, set-off, counterclaim or defense. As used in this Agreement,
"Covered Receivables" means those receivables that are currently owned by the
Company, any of its Subsidiaries or the Metris Master Trust.
Section 3.20 Servicing Rights.
(a) The Bank is the sole owner and holder of the Bank
Servicing Rights (as defined below), subject to the terms and
conditions relating to servicing in the Company Sponsored Asset
Securitization Transaction documents, with respect to the Covered
Receivables that have been sold to the Metris Master Trust. The Bank
Servicing Rights have not been assigned or pledged, and the Bank has
good and marketable interest in and to the Bank Servicing Rights. The
Bank does not service any receivables other than the Covered
Receivables. As used in this Agreement, "Bank Servicing Rights" means,
with respect to each Covered Receivable, any and all of the following:
(i) all rights to service such Covered Receivable; (ii) all rights to
receive servicing fees, reimbursements or indemnification for servicing
such Covered Receivable; (iii) possession and use of any and all
servicing files pertaining to such Covered Receivable; and (iv) all
rights, powers and privileges incident to any of the foregoing.
(b) No document under any Company Sponsored Asset
Securitization Transaction contains any provisions under which any
party has recourse against the Bank or any of its Affiliates for losses
relating to their servicing of the Covered Receivables or the
performance of the Covered Receivables being serviced; provided that
the fact that the Bank or any of its Affiliates holds a residual or
subordinate interest that may experience reduced payments as a result
of such losses or a cash collateral account or similar account subject
to reduction as a result of such losses shall not be deemed to
represent a right of recourse against the Bank or any of its Affiliates
by any party.
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Section 3.21 Environmental Matters.
(a) Each of the Company and its Subsidiaries is and has been
in compliance in all material respects with all applicable Laws and
with all applicable permits, licenses, variances, exemptions and
approvals, in each case relating to (i) the protection, investigation
or restoration of the environment, human health and safety, or natural
resources or (ii) the handling, use, storage, treatment, manufacture,
transportation, presence, disposal, release or threatened release of
any Hazardous Materials (as defined below) in the environment or
workplace ("Environmental Laws").
(b) There is no suit, claim, action or proceeding pending or,
to the Knowledge of the Company, threatened, before any Governmental
Entity or other forum in which the Company or any of its Subsidiaries
has been or, with respect to threatened proceedings, is reasonably
likely to be, named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Laws or (ii)
relating to the release, threatened release or exposure of any
Hazardous Material whether or not occurring at or on a site owned,
leased or operated by the Company or any of its Subsidiaries (or any of
their predecessors).
(c) To the Knowledge of the Company, during the period of the
Company's or any of its Subsidiaries' ownership or operation of any of
their respective current or former properties, there has been no
release of Hazardous Materials in, on, under or affecting any such
property, which could reasonably be expected to require remediation by
the Company or any Subsidiary of the Company pursuant to any
Environmental Law. To the Knowledge of the Company, prior to the period
of the Company's or any of its Subsidiaries' ownership or operation of
any of their respective current or former properties, there was no
release or threatened release of Hazardous Materials in, on, under or
affecting any such property which could reasonably be expected to
require remediation by the Company or any Subsidiary of the Company
pursuant to any Environmental Law.
(d) Section 3.21(d) of the Company Disclosure Schedule sets
forth a complete and accurate list of all Phase I environmental
investigations and reports relating to premises currently or previously
owned or operated by the Company or any of its Subsidiaries (whether
conducted by or on behalf of the Company or any of its Subsidiaries or
a third party, and whether done at the initiative of the Company or any
of its Subsidiaries or directed by a Governmental Entity or other third
party) which were issued or conducted during the past five years and of
which the Company or any of its Subsidiaries has possession or to which
the Company or any of its Subsidiaries has access. A complete and
accurate copy of each such report has been provided to Parent. Other
than those items listed in Section 3.21(d) of the Company Disclosure
Schedule, there are no other documents that contain any environmental,
human health and safety, or natural resources reports, investigations
or audits relating to premises currently or previously owned or
operated by the Company or any of its Subsidiaries (whether conducted
by or on behalf of the Company or any of its Subsidiaries or a third
party, and
29
whether done at the initiative of the Company or any of its
Subsidiaries or directed by a Governmental Entity or other third party)
which were issued or conducted during the past five years and of which
the Company or any of its Subsidiaries has possession or to which the
Company or any of its Subsidiaries has access.
(e) As used in this Agreement, "Hazardous Materials" means any
substance that is (i) listed, classified, regulated or which falls
within the definition of a "hazardous substance," "hazardous waste" or
"hazardous material" pursuant to any Environmental Law, (ii) any
petroleum product or by-product, asbestos-containing material,
lead-containing paint, pipes or plumbing, polychlorinated biphenlys,
radioactive materials or radon, or (iii) any other chemicals,
pollutants, contaminants, wastes or toxic substances or materials which
are the subject of regulatory action by any Governmental Entity
pursuant to any Environmental Law.
Section 3.22 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person retained by the Company and/or any
Subsidiary of the Company is or will be entitled to any broker's or finder's fee
or any other similar commission or fee in connection with any of the
transactions contemplated by this Agreement, except Xxxxxxx, Xxxxx & Co. and UBS
Securities LLC, all of whose fees and expenses shall be paid by the Company. The
Company has delivered to Parent a complete and accurate copy of all agreements
pursuant to which Xxxxxxx, Sachs & Co. or UBS Securities LLC is entitled to any
fees and expenses in connection with any of the transactions contemplated by
this Agreement.
Section 3.23 Derivative Transactions. All Derivative Transactions (as
defined below) entered into by the Company or any of its Subsidiaries were
entered into in accordance with applicable rules, regulations and policies of
relevant Governmental Entities and in accordance with the applicable investment,
securities, commodities, risk management and other policies, practices and
procedures of the Company and its Subsidiaries. The Company and each of its
Subsidiaries have duly performed in all material respects all of their
obligations under the Derivative Transactions to the extent that such
obligations to perform have accrued. There are no material breaches, violations
or defaults by the Company or any of its Subsidiaries under any Derivative
Transactions, and, to the Knowledge of the Company, there are no material
breaches, violations or defaults by any counterparty to the Company or any of
its Subsidiaries under any Derivative Transaction. There are no allegations or
assertions by the Company or any of its Subsidiaries of any material breach,
violation or default by any counterparty to the Company or any of its
Subsidiaries under any Derivative Transactions, and to the Knowledge of the
Company, there are no allegations or assertions by the counterparty to the
Company or any of its Subsidiaries of any material breach, violation or default
by the Company or any of its Subsidiaries under any Derivative Transaction. As
used in this Agreement, "Derivative Transactions" means any swap transaction,
option, warrant, forward purchase or sale transaction, futures transaction, cap
transaction, floor transaction or collar transaction relating to one or more
currencies, commodities, bonds, equity securities, loans, interest rates,
credit-related events or conditions or any indexes, or any other similar
transaction or combination of any of these transactions, including
collateralized mortgage obligations or other similar instruments or any
30
debt or equity instruments evidencing or embedding any such types of
transactions, and any credit support, collateral or other similar arrangements
related to such transactions.
Section 3.24 Opinions. The Board of Directors of the Company has
received the opinions of Xxxxxxx, Xxxxx & Co. and UBS Securities LLC, each dated
the date of this Agreement, to the effect that, as of such date, the Per Common
Share Price is fair, from a financial point of view, to the holders of Company
Common Stock, signed copies of which opinions will be delivered to Parent solely
for informational purposes following receipt thereof by the Company.
Section 3.25 Controls.
(a) Since December 31, 2004, the Company and each of its
Subsidiaries has had in place "disclosure controls and procedures" (as
defined in Rule 13a-15(e) promulgated under the Exchange Act) designed
to ensure that information required to be disclosed by each of the
Company and MRI in the reports that it files or submits to the SEC
under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the SEC and
that such information is accumulated and communicated to the Company's
and MRI's management as appropriate to allow timely decisions regarding
required disclosure.
(b) Each of the Company and MRI (i) maintains a system of
"internal control over financial reporting" (as defined in Rule
13a-15(f) promulgated under the Exchange Act) designed to provide
reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles, including
policies and procedures that (A) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of each of the Company's and MRI's
assets, (B) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles and, in the
case of the Bank, RAP, and that receipts and expenditures are being
made only in accordance with authorizations of each of the Company's
and MRI's management and directors and (C) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Company's or MRI's assets that could have a
material effect on their financial statements and (ii) has disclosed,
based on its most recent evaluation prior to the date hereof, to its
independent auditors and its audit committee (A) any significant
deficiencies or material weaknesses in the design or operation of its
internal control over financial reporting that are reasonably likely to
adversely affect its ability to record, process, summarize and report
financial information, and (B) any fraud, whether or not material, that
involves management or other employees who have a significant role in
its internal control over financial reporting.
Section 3.26 Insurance. Each of the Company and its Subsidiaries
maintains insurance with reputable insurance carriers against such risks and in
such amounts as management of the
31
Company reasonably believes to be prudent in accordance with industry practice,
adequate for all normal risks incident to the current businesses of the Company
and its Subsidiaries and their respective properties and assets, and appropriate
for the businesses currently conducted by the Company and its Subsidiaries.
Section 3.26 of the Company Disclosure Schedule sets forth a list of all
insurance policies maintained by the Company and its Subsidiaries as of the date
hereof (the "Insurance Policies") and the coverages under each Insurance Policy.
The Company has provided to Parent a true and complete list of the history of
any claims (other than de minimis claims) made and claims (other than de minimis
claims) paid under the Insurance Policies since December 31, 2001. Each
Insurance Policy is outstanding and in full force and effect (other than due to
the ordinary expiration of the term thereof) and enforceable, to the Company's
Knowledge, against the insurers thereto in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar Laws of general applicability relating to or affecting creditors' rights
and to general equitable principles. All premiums due on each Insurance Policy
have been paid in full. Each of the Company and its Subsidiaries has complied in
all material respects with the provisions of each Insurance Policy under which
it is the insured party. No insurer under any Insurance Policy has cancelled or
disclaimed liability under any such policy or indicated any intent to do so or
not to renew any such policy. To the Knowledge of the Company, all material
claims under the Insurance Policies have been filed in a timely fashion.
Section 3.27 No Undisclosed Liabilities; Reserves. Except as disclosed
in the Company SEC Documents filed prior to the date of this Agreement, and
except for normal recurring liabilities incurred since June 30, 2005 in the
ordinary course of business, the Company and its Subsidiaries do not have any
liabilities, either accrued, contingent or otherwise (whether or not required to
be reflected in the financial statements in accordance with generally accepted
accounting principles, RAP or SAP, as applicable), and whether due or to become
due that, individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.
The reserves, allowances and other liabilities established or reflected on the
financial statements contained in the Company SEC Documents, the Bank RAP
Documents and the Insurance SAP Documents were, as of the respective dates of
such documents, (i) determined in accordance with generally accepted accounting
principles, RAP or SAP, as applicable, and (ii) established based on good
business judgment and industry practice and with past practices and experiences
of the Company and its Subsidiaries.
Section 3.28 Insurance Matters.
(a) To the extent required under applicable Law regulating the
business of insurance, all policies, binders, slips, certificates,
annuity contracts and participation agreements and other agreements of
insurance (including all applications, supplements, endorsements,
riders and ancillary agreements in connection therewith), whether
individual or group, that are issued by the Company or any Insurance or
Warranty Subsidiary, and any and all marketing materials related
thereto, are on forms that comply in all material respects with such
applicable Laws and, as to premium rates established by the Company or
any Insurance or Warranty Subsidiary that are required to be filed with
32
or approved by any applicable Insurance Authority, the premiums charged
conform in all material respects, with such applicable Law.
(b) With respect to reinsurance and coinsurance treaties or
agreements, including retrocessional agreements, to which the Company
or any Insurance or Warranty Subsidiary is a party or under which the
Company or any Insurance or Warranty Subsidiary has any existing
rights, obligations or liabilities, the Company and the Insurance and
Warranty Subsidiaries were entitled to take credit in their most recent
Insurance SAP Document for that portion of their ceded liabilities
under each such reinsurance or coinsurance treaty as to which credit
was taken in such Insurance SAP Document.
(c) The Company has provided to Parent a true and complete
copy of any actuarial reports prepared by actuaries, independent or
otherwise, with respect to the Insurance and Warranty Subsidiaries
since December 31, 2001, and all attachments, addenda, supplements and
modifications thereto (the "Company Actuarial Analyses"). The
information and data furnished by the Company or any Insurance or
Warranty Subsidiary to its independent actuaries in connection with the
preparation of the Company Actuarial Analyses were complete and
accurate in all material respects.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedule delivered by Parent and
Merger Sub to the Company concurrently herewith (the "Parent Disclosure
Schedule"), Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company as set forth below. Information disclosed in any section
of the Parent Disclosure Schedule shall be deemed to be disclosed with respect
to such other subsections of this Agreement or the Parent Disclosure Schedule
only to the extent that it is reasonably apparent from a reading of such
disclosure that it also qualifies or applies to such other subsections.
Section 4.1 Organization, Standing and Power. Each of Parent and Merger
Sub is an organization duly organized, validly existing and in good standing
under the Laws of the jurisdiction of its organization, has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary, other
than in such jurisdictions where the failure so to qualify, either individually
or in the aggregate, has not had and would not reasonably be expected to have a
Material Adverse Effect on Parent and its Subsidiaries, taken as a whole. True,
complete and correct copies of the Certificate of Incorporation and Bylaws of
Merger Sub as in effect on the date of this Agreement have been provided to the
Company.
Section 4.2 Authority.
(a) Each of Parent and Merger Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of Parent and Merger Sub. This Agreement has been duly executed and
delivered by Parent and Merger Sub and constitutes a valid and binding
obligation of each of Parent and Merger Sub, enforceable against each
of Parent and Merger Sub in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar Laws of general applicability relating to or affecting
creditors' rights and to general equitable principles.
(b) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, (i)
result in any Violation pursuant to any provision of the Certificate of
Incorporation or Bylaws of Parent or Merger Sub, or (ii) subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in subsection (c)
of this Section 4.2, result in any Violation of any Law or any loan or
credit agreement, note, mortgage, indenture, lease, employee benefit
plan of Parent or other agreement, obligation, instrument, permit,
concession, franchise or license applicable to Parent or any of its
Subsidiaries or their respective properties or assets except in the
case of clause (ii) of this Section 4.2(b) for any such Violations
that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Parent and its
Subsidiaries, taken as a whole.
(c) No consent, approval, waiver, order or authorization of,
or registration, declaration or filing with, any Governmental Entity or
any other Person is required by or with respect to Parent or any of its
Subsidiaries in connection with the execution and delivery of this
Agreement by Parent and Merger Sub or the consummation by Parent and
Merger Sub of the transactions contemplated hereby (including the Bank
Merger), except for (i) the filing of applications and notices with the
OCC, FDIC, and approval thereof, (ii) the filing of applications and
notices with the Board of Governors of the Federal Reserve, (iii) the
filing of applications and notices with the Superintendent, (iv) the
filing of notices with the Minnesota DOC, (v) the filing of
applications and notices with the Florida DFS and approval thereof,
(vi) the filing of applications and notices with the Bermuda Monetary
Authority and approval thereof, (vii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (viii) the
filing with the SEC of (A) the Proxy Statement and (B) such reports
under Sections 13(a), 13(d), 13(g) and 16(a) of the Exchange Act as may
be required in connection with this Agreement and the transactions
contemplated hereby, (ix) notices or filings under the HSR Act, if
applicable and (x) such other consents, approvals, waivers, orders,
authorizations, registrations, declarations and filings the failure of
which to obtain or make would not reasonably be expected to have a
Material Adverse Effect on Parent and its Subsidiaries, taken as a
whole.
34
Section 4.3 Information Supplied. The information relating to Parent
and its Subsidiaries that is provided by Parent for inclusion in the Proxy
Statement or any other document filed with any Governmental Entity in connection
with the transactions contemplated by this Agreement will not 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 were made, not misleading.
Section 4.4 Legal Proceedings. Except as disclosed in any Parent SEC
Report filed prior to the date of this Agreement, there is no suit, action,
claim, investigation or proceeding (whether judicial, arbitral, administrative
or other) pending or, to the Knowledge of Parent (as defined below), threatened,
against or affecting Parent or any Subsidiary of Parent which has had, or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent and its Subsidiaries, taken as a whole, nor is there
any judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Parent or any Subsidiary of Parent that has had
or would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent and its Subsidiaries, taken as a whole. As
used in this Agreement, "Knowledge of Parent" means the actual knowledge of the
executive officers of the Parent and the individuals with primary responsibility
over operational or functional areas of the Parent. "Parent SEC Report" means
all required reports, schedules and other documents Parent has filed with the
SEC pursuant to the Exchange Act since December 31, 2001.
Section 4.5 Ownership of Merger Sub; No Prior Activities. Merger Sub is
a direct wholly owned subsidiary of Parent. Merger Sub has not conducted any
activities other than in connection with the organization of Merger Sub, the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby. Merger Sub has no Subsidiaries.
Section 4.6 Compliance with Applicable Laws. Since January 1, 2004,
Parent has not (i) violated in any material respect any Laws applicable to the
conduct of its business or the ownership or operation of its properties or
assets or (ii) received any written or, to the Knowledge of Parent, oral notice
from any Governmental Entity that alleges any material noncompliance (or that
Parent is under investigation by any such Governmental Entity for such alleged
noncompliance) with any Laws applicable to the conduct of its business or the
ownership or operation of its properties or assets.
Section 4.7 Financing. As of the date hereof, Parent has, and will have
at the Closing Date, sufficient cash or other sources of immediately available
funds to enable it to pay the Merger Consideration as required by this
Agreement.
Section 4.8 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person retained by Parent and/or Merger Sub
is or will be entitled to any broker's or finder's fee or any other similar
commission or fee in connection with any of the transactions contemplated by
this Agreement, except HSBC Securities (USA) Inc., all of whose fees and
expenses shall be paid by Parent.
35
Section 4.9 Ownership of Company Capital Stock. Except for the
Stockholder Agreement, (i) neither Parent nor any of its "affiliates" or
"associates" (as such terms are defined for purposes of the Exchange Act), (A)
"beneficially owns" (as such term is defined for purposes of Section 13(d) of
the Exchange Act), directly or indirectly, or (B) is a party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, shares of Company Capital Stock representing in
excess of 15% of the voting power of the shares of Company Capital Stock
outstanding, and (ii) Parent does not "beneficially own" (as such term is
defined for purposes of Section 13(d) of the Exchange Act), directly or
indirectly, shares of Company Capital Stock representing in excess of 5% of the
voting power of the shares of Company Capital Stock outstanding.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Covenants of the Company. During the period from the date
of this Agreement and continuing until the Effective Time, the Company agrees as
to itself and its Subsidiaries that, except (i) as expressly contemplated or
permitted by this Agreement, (ii) in connection with any Company Sponsored Asset
Securitization Transaction in the ordinary course of business consistent with
past practice, (iii) as set forth in Section 5.1 of the Company Disclosure
Schedule, or (iv) to the extent that Parent shall otherwise consent in writing:
(a) Ordinary Course. The Company shall and shall cause its
Subsidiaries to carry on their respective businesses in the ordinary
course consistent with past practice since January 1, 2003 and use
commercially reasonable efforts to (x) preserve intact their respective
business organizations, (y) maintain their rights, franchises, licenses
and other authorizations issued by Governmental Entities and (z)
preserve their relationships with employees, customers, suppliers and
others having business dealings with them to the end that their
goodwill and ongoing businesses shall not be impaired in any material
respect at the Effective Time. The Company shall not, nor shall it
permit any of its Subsidiaries to, (i) enter into any new material line
of business, (ii) change its or any of its Subsidiaries' lending,
investment, underwriting, risk and asset-liability management and other
material banking or operating policies in any respect which is material
to the Company or such Subsidiary, except as required by Law or by
policies imposed by a Governmental Entity, (iii) make any changes in
significant accounting methods, principles or practices, except to the
extent required by a change in generally accepted accounting
principles, RAP or SAP, (iv) incur or commit to any capital
expenditures or other expenditures with respect to property, plant or
equipment in excess of $250,000 in the aggregate for the Company and
its Subsidiaries, taken as a whole, other than as provided in the
Company's 2005 annual budget, a true and complete copy of which the
Company has provided to Parent (the "2005 Company Budget"), (v) except
as otherwise permitted by this Section 5.1, enter into, modify, amend,
extend or terminate any agreement or agreements for goods, property,
property rights, or services between the Company or any of its
Subsidiaries and (A) any director, officer, or any Affiliate of such
Person, or (B) any other Person which agreement obligates the Company,
or any Affiliate of the Company, to pay in excess of $500,000 in any
twelve month period, other than, in
36
the case of agreements covered by clause (v)(B), actions that are
provided for in the 2005 Company Budget, (vi) knowingly waive, release
or assign any material right or claims (including any write-off or
other compromise of accounts receivable of the Company or any of its
Subsidiaries), (vii) initiate, compromise or settle any material
investigation, litigation, arbitration proceeding or other proceeding
with any Government Entity, provided that the foregoing shall only
apply to a compromise or settlement if it would (A) involve amounts
that exceed the corresponding reserves as of the date of this Agreement
or (B) result in a material restriction on the Company's or any of its
Subsidiaries' business, (viii) open or close any facility or office,
(ix) fail to maintain insurance at levels substantially comparable to
levels existing as of the date of this Agreement, (x) fail to pay
accounts payable and other obligations in the ordinary course of
business, or (xi) enter into any new co-branding or secondary issuer
arrangement under which the Company or any of its Subsidiaries
reasonably expects to (A) originate more than 50,000 accounts in any
twelve-month period or (B) make payments to the counterparty to such
co-branding or secondary issuer arrangement in amounts in excess of $5
million in any twelve-month period.
(b) Dividends; Changes in Stock. Except for declaration and
payment of regular quarterly dividends on the Company Series C
Preferred Stock in accordance with the Series C Certificate of
Designation, the Company shall not, and shall not permit any of its
Subsidiaries to, (i) declare or pay any dividends on or make other
distributions in respect of any Company Capital Stock, except for
dividends or distributions paid by wholly-owned Subsidiaries of the
Company to the Company, or to other wholly-owned Subsidiaries of the
Company, (ii) split, combine, reclassify, subdivide, recapitalize or
exchange any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock or any other of its
securities, or (iii) repurchase, redeem or otherwise acquire, or permit
any Subsidiary of the Company to redeem, repurchase or otherwise
acquire any shares of its capital stock or any of its other securities
or any securities convertible into or exercisable for any shares of its
capital stock or any of its other securities.
(c) Issuance of Securities. The Company shall not, and shall
not permit any of its Subsidiaries to, issue, deliver, sell, grant,
pledge or authorize or propose the issuance, delivery, sale, grant or
pledge of, any shares of its capital stock, any Voting Debt, any stock
appreciation rights, or any securities convertible into or exercisable
or exchangeable for, or any rights, warrants or options to acquire, any
such shares or Voting Debt, or enter into any agreement with respect to
any of the foregoing, other than (i) the issuance of Company Common
Stock upon the exercise or settlement of Company Stock Options, Company
Restricted Stock Units or other equity rights or obligations under
grants made on or before March 31, 2005 under the Company Stock Plans
or Company Plans in accordance with the terms of the applicable Company
Stock Plan or Company Plan in effect on the date of this Agreement,
(ii) the declaration and payment of regular quarterly dividends on the
Company Series C Preferred Stock in accordance with the Series C
Certificate of Designation, and (iii) issuances by one of the Company's
wholly-
37
owned Subsidiaries of such Subsidiary's capital stock to its parent or
to another wholly-owned Subsidiary of the Company.
(d) Governing Documents, Etc. The Company shall not amend or
propose to amend the Certificate of Incorporation or Bylaws and shall
not permit any of its Subsidiaries to amend or propose to amend its
Organizational Documents. The Company shall not enter into, and, except
as permitted by Section 5.1(e), (f) or (j), shall not permit any of its
Subsidiaries to enter into, a plan of consolidation, merger or
reorganization with any Person other than a wholly-owned Subsidiary of
the Company.
(e) No Acquisitions. The Company shall not, and shall not
permit any of its Subsidiaries to, acquire or agree to acquire, by
merging or consolidating with, by purchasing a substantial equity
interest in or a substantial portion of the assets of, by forming a
partnership or joint venture with, or by any other manner, any business
or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to
acquire any material amount of assets; provided, however, that the
foregoing shall not prohibit (i) foreclosures and other
debt-previously-contracted acquisitions in the ordinary course of
business or (ii) acquisitions of financial assets and securitization
activities in the ordinary course of business consistent with past
practice.
(f) No Dispositions. Other than (i) dispositions referred to
in the Company SEC Documents filed prior to the date of this Agreement
and (ii) securitization activities and other activities in the ordinary
course of business consistent with past practice, the Company shall
not, and shall not permit any of its Subsidiaries to, sell, lease,
license, pledge, assign, encumber or otherwise dispose of, or agree to
sell, lease, license, pledge, assign, encumber or otherwise dispose of,
any of its assets (including capital stock of its Subsidiaries and
indebtedness of others held by the Company and its Subsidiaries) which
are material, individually or in the aggregate, to the Company.
(g) Indebtedness. The Company shall not, and shall not permit
any of its Subsidiaries to, incur, create, suffer to exist or assume
any indebtedness for borrowed money (or modify any of the material
terms of any such outstanding indebtedness), guarantee any such
indebtedness or issue or sell any debt securities or any warrants or
rights to acquire any debt securities of the Company or any of its
Subsidiaries or guarantee any debt securities of others, other than (i)
indebtedness of any Subsidiary of the Company to the Company or to
another Subsidiary of the Company, or (ii) debt securities maturing not
more than 90 days after the date of issuance that are sold in the
ordinary course of business consistent with past practice.
(h) Other Actions. The Company shall not, and shall not permit
any of its Subsidiaries to, take any action that would, or would
reasonably be expected to, result in any of its representations and
warranties set forth in this Agreement being or becoming untrue,
subject to such exceptions as do not have, and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole, or in any
of the conditions to the Merger set forth in
38
Article VII not being satisfied or in a violation of any provision of
this Agreement, or (unless such action is required by applicable Law)
which would adversely affect the ability of the parties to obtain any
of the Requisite Regulatory Approvals. The Company shall not, and shall
not permit any of its Subsidiaries to, (i) other than as permitted
pursuant to Section 5.1(a)(vii), pay, discharge, settle or satisfy any
material claims, liabilities or obligations (whether absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business
or in accordance with their terms as in effect on the date of this
Agreement, of claims, liabilities or obligations reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of the Company included in the
Company SEC Documents filed prior to the date of this Agreement (to the
extent so reflected or reserved against) or incurred since the date of
such financial statements in the ordinary course of business or (ii)
waive any material benefits of, modify in any adverse respect, fail to
enforce, or consent to any matter with respect to which its consent is
required under, any confidentiality, standstill or similar agreements
to which the Company or any of its Subsidiaries is a party.
(i) Compensation and Benefit Plans. During the period from the
date of this Agreement and continuing until the Effective Time, the
Company agrees as to itself and its Subsidiaries that it will not,
without the prior written consent of Parent, (i) other than in the
ordinary course of business or as otherwise provided in this Agreement,
enter into, adopt, amend (except for such amendments as may be required
by Law) or terminate any Company Plan or Company Benefit Arrangement,
(ii) except for normal payments, awards and increases in the ordinary
course of business or as required by any Company Plan or Company
Benefit Arrangement as in effect as of March 31, 2005, increase in any
manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any Company Plan or Company
Benefit Arrangement as in effect as of March 31, 2005, or enter into
any contract, agreement, commitment or arrangement to do any of the
foregoing, and (iii) enter into or renew any contract, agreement,
commitment or arrangement (other than a renewal occurring in accordance
with the terms thereof) providing for the payment to any director,
officer or employee of such party of compensation or benefits
contingent, or the terms of which are materially altered, upon the
occurrence of any of the transactions contemplated by this Agreement.
(j) No Liquidation or Reorganization. Other than the execution
and delivery of a
merger agreement and related documents with respect
to the Bank Merger, the Company shall not, and shall not permit any of
its Subsidiaries to, enter into an agreement with respect to any
merger, consolidation or business combination, or any acquisition or
disposition of all or substantially all of the assets or securities of
the Company or any of its Subsidiaries, or adopt a plan of complete or
partial liquidation or resolutions providing for or authorizing such a
liquidation or a dissolution, restructuring, recapitalization or
reorganization.
(k) Taxes. Except as consistent with past practices or to the
extent that Parent shall otherwise consent in writing (which consent
shall not be unreasonably delayed or
39
withheld), the Company shall not, and shall not permit any of its
Subsidiaries to, make or rescind any material tax election (except as
required by Law), settle or compromise any material tax liability or
amend any material tax return.
(l) Other Agreements. The Company shall not, and shall not
permit any of its Subsidiaries to, agree to, or make any commitment to,
take, or authorize, any of the actions prohibited by this Section 5.1.
Section 5.2 Investigation. During the period from the date of this
Agreement and continuing until the Effective Time, the Company shall, and shall
cause its Subsidiaries to, use commercially reasonable efforts to (a) obtain
notice from the Staff of the SEC that it will not recommend that charges be
brought against the Company and its Subsidiaries with respect to the allegations
against the Company set forth in the "Xxxxx Notices" dated as of July 12, 2005
with respect to the Company and one or more of its Subsidiaries (the "SEC
Investigation") and (b) in the event the notice referred to in clause (a) is not
obtained by September 30, 2005 and is not reasonably likely to be obtained in
the Company's good faith determination after consultation with its outside legal
counsel, obtain a final court or administrative order as to the Company and its
Subsidiaries with respect to the SEC Investigation. The Company shall use
commercially reasonable efforts to confer and consult on a regular basis with
Parent with respect to the SEC Investigation, to keep the Parent apprised of the
status of the SEC Investigation and to promptly advise Parent of any material
event, change, circumstance or development relating to or arising from the SEC
Investigation.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Preparation of Proxy Statement; Stockholders Meeting.
(a) In accordance with the Company's Certificate of
Incorporation and Bylaws, the Company shall promptly call, give notice
of, convene and hold a meeting of its stockholders as promptly as
reasonably practicable for the purpose of obtaining the Required
Company Vote with respect to the transactions contemplated by this
Agreement (the "Company Stockholders Meeting").
(b) The Company will promptly prepare and file all materials
required to be filed under the Exchange Act as well as all other
applicable state or foreign securities Laws and the rules and
regulations thereunder, and Parent and Merger Sub will cooperate with
the Company in the preparation of such materials. Such materials shall
include a proxy statement in the form mailed by the Company to its
stockholders, together with any and all amendments or supplements
thereto, which materials are herein referred to as the "Proxy
Statement." The Company will use reasonable best efforts to file the
initial Proxy Statement with the SEC within twenty-one (21) days of the
date hereof and to respond promptly to any comments of the SEC with
respect to the Proxy Statement, and will cause the Proxy Statement to
be mailed to the Company's stockholders as promptly as reasonably
practicable following completion of any SEC review of the Proxy
Statement.
40
If at any time prior to the Effective Time any fact or event relating
to the Company or any of its Affiliates which causes the Company to
determine to prepare a supplement to the Proxy Statement should be
discovered by the Company or should to the Knowledge of the Company
occur, the Company shall promptly inform Parent of such fact or event.
(c) Parent and Merger Sub will furnish the Company with such
information concerning Parent and its Subsidiaries as is necessary in
order to cause the Proxy Statement, insofar as it relates to Parent and
its Subsidiaries, to comply with the applicable provisions of the
Exchange Act and the rules and regulations thereunder. Parent and
Merger Sub agree to promptly advise the Company if, at any time prior
to the Company Stockholders Meeting, any information provided by them
or the Company in the Proxy Statement is or becomes incorrect or
incomplete in any material respect and to provide the Company with the
information needed to correct such inaccuracy or omission. Parent and
Merger Sub will furnish the Company with such supplemental information
as may be necessary in order to cause the Proxy Statement, insofar as
it relates to Parent and Merger Sub, to comply with the Exchange Act
and the rules and regulations thereunder after the mailing thereof to
the stockholders of the Company.
(d) The Company will, through its Board of Directors,
recommend to its stockholders the approval and adoption of this
Agreement and the consummation of the transactions contemplated hereby;
provided, however, that the Company's Board of Directors may withdraw,
modify, condition or refuse to make such recommendation if it
determines in good faith after consultation with its outside legal
counsel that its fiduciary obligations require it to do so.
Notwithstanding anything to the contrary contained herein, unless this
Agreement has been terminated, this Agreement shall be submitted to the
stockholders of the Company at the Company Stockholders Meeting for the
purpose of voting on the approval and adoption of this Agreement and
the consummation of the transactions contemplated hereby, and nothing
contained herein shall be deemed to relieve the Company of such
obligations.
Section 6.2 Advice of Changes; Government Filings. Each party shall
confer on a regular basis with the other, report on operational matters and
promptly advise the other orally and in writing of any change or event which has
or would reasonably be expected to have, a Material Adverse Effect on such
party, would materially impair or delay completion of the transactions
contemplated herein or would cause or constitute a material breach of any of the
representations, warranties or covenants of such party contained herein;
provided, however, that any noncompliance with the foregoing shall not
constitute the failure to be satisfied of a condition set forth in Article VII
or give rise to any right of termination under Article VIII unless the
underlying breach shall independently constitute such a failure or give rise to
such a right. In exercising the foregoing right, each of the parties hereto
agrees to act reasonably and as promptly as practicable. Each party hereto
agrees that to the extent practicable it will consult with the other parties
hereto 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 transactions contemplated by this Agreement and each
party will keep the other
41
parties apprised of the status of matters relating to completion of the
transactions contemplated hereby.
Section 6.3 Control of the Company's Business. Nothing contained in
this Agreement shall give Parent or Merger Sub, directly or indirectly, the
right to control or direct the operations of the Company prior to the Effective
Time. Prior to the Effective Time, the Company shall exercise, consistent with
the terms and conditions of this Agreement, complete control and supervision
over its and its Subsidiaries' operations.
Section 6.4 Access to Information.
(a) Upon reasonable notice, the Company shall afford to the
representatives of Parent reasonable access at reasonable times, during
normal business hours during the period prior to the Effective Time, to
the Company Employees and the Company's properties, books, contracts
and records and, during such period, the Company shall not be required
to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of its customers,
jeopardize the attorney-client privilege of the institution in
possession or control of such information or contravene any Law or
binding agreement to which the Company is subject. The parties will
make appropriate substitute disclosure arrangements under circumstances
in which the restrictions of the preceding sentence apply, including,
to the extent possible, entering into appropriate agreements for the
disclosure of non-public information of any Governmental Entity,
including OCC examination reports of the Bank, as may be required by
such Governmental Entity.
(b) Parent will hold any such information which is nonpublic
in confidence to the extent required by, and in accordance with, the
provisions of the letter dated January 25, 2005, between Company and
HSBC North America Holdings Inc. (the "Confidentiality Agreement"),
which Confidentiality Agreement will remain in full force and effect.
Section 6.5 Reasonable Best Efforts.
(a) Each of the Company and Parent shall, and shall cause its
respective Subsidiaries to, use reasonable best efforts as promptly as
practicable (i) to take, or cause to be taken, all actions necessary to
comply promptly with all legal requirements which may be imposed on
such party or its Subsidiaries with respect to the Merger and to
consummate the transactions contemplated by this Agreement (including
the Bank Merger), (ii) to obtain (and to cooperate with each other
party to obtain) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity and/or any other public or
private third party which is required to be obtained or made by such
party or any of its Subsidiaries in connection with the Merger and the
transactions contemplated by this Agreement (including the Bank
Merger), provided, that this clause (ii) shall not apply to the SEC
Investigation, which is covered by Section 5.2, (iii) to make all
necessary filings, and thereafter make any other required submissions,
with respect to this Agreement, the Merger and the Bank Merger required
(A) under the
42
Exchange Act and any other applicable federal and state securities
Laws, (B) under the HSR Act and any related governmental request
thereunder, if applicable, (C) with the Secretary of State of the State
of Delaware, SEC, OCC, FDIC, Board of Governors of the Federal Reserve,
Superintendent, Minnesota DOC, Florida DFS and Bermuda Monetary
Authority and (D) under any other applicable Law, and (iv) to execute
or deliver any additional instruments that the other parties, or any of
them, may reasonably request that are necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of,
this Agreement (including the Merger and the Bank Merger). Each of the
Company and Parent will promptly cooperate with and furnish information
to the other in connection with any such efforts by, or requirement
imposed upon, any of them or any of their Subsidiaries in connection
with the foregoing. In furtherance of the foregoing, each of the
Company and Parent shall, and shall cause its respective Subsidiaries
to, use reasonable best efforts to cause to be made all filings under
the HSR Act, if applicable, no later than ten (10) business days after
the date hereof and all other filings contemplated by clause (iii) no
later than thirty (30) days after the date hereof.
(b) Parent agrees to execute and deliver, or cause to be
executed and delivered by or on behalf of the Surviving Corporation, at
or prior to the Effective Time, those supplemental indentures and other
instruments listed in Section 6.5(b) of the Company Disclosure
Schedule, which supplemental indentures and other instruments are
required for the due assumption of the Company's outstanding debt,
guarantees and other securities to the extent required by the terms of
such debt, guarantees and securities and the instruments and agreements
relating thereto.
(c) Each of the Company and Parent and their respective Boards
of Directors shall, if any state takeover statute, similar statute or
similar provision in the Certificate of Incorporation becomes
applicable to this Agreement, the Stockholder Agreement, the Merger,
the Bank Merger or any other transactions contemplated hereby and
thereby, use reasonable best efforts to ensure that the Merger, the
Bank Merger and the other transactions contemplated by this Agreement
and the Stockholder Agreement may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise to minimize
the effect of such statute or provision on this Agreement, the
Stockholder Agreement, the Merger, the Bank Merger and any other
transactions contemplated hereby and thereby.
(d) The Company shall, and shall cause its Subsidiaries to,
use commercially reasonable efforts to take all actions necessary and
appropriate to cause the Metris Companies Foundation and the
Metris
Companies Inc. Political Action Committee to be fully liquidated and
dissolved in accordance with applicable Laws. The Company shall, and
shall cause its Subsidiaries to, continue using commercially reasonable
efforts to work toward the liquidation and dissolution of MWSI and MWSF
in accordance with applicable Laws.
43
Section 6.6 Acquisition Proposals.
(a) The Company agrees that neither it nor any of its
Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall use best efforts to cause its and
its Subsidiaries' employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, directly or indirectly, (i) initiate, solicit,
encourage or knowingly facilitate any inquiries or the making of any
proposal or offer with respect to, or a transaction to effect, a
merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving it or any of its Subsidiaries (other than any
such transaction permitted by Section 5.1 (e), (f) or (j)) or any
purchase or sale of 10% or more of the consolidated assets (including,
without limitation, stock of its Subsidiaries) of it and its
Subsidiaries, taken as a whole, or any purchase or sale of, or tender
or exchange offer for, its voting securities that, if consummated,
would result in any Person (or the stockholders or equity holders of
such Person) beneficially owning securities representing 10% or more of
its total voting power (or of the surviving parent entity in such
transaction) or any of its Subsidiaries (any such proposal, offer or
transaction (other than a proposal or offer made by Parent or an
Affiliate thereof) being hereinafter referred to as an "Acquisition
Proposal"), (ii) have any discussions with or provide any confidential
information or data to any Person relating to an Acquisition Proposal,
or engage in any negotiations concerning an Acquisition Proposal, or
(iii) approve or recommend, or propose to approve or recommend, or
execute or enter into, any letter of intent, agreement in principle,
merger agreement, asset purchase or share exchange agreement, option
agreement or other similar agreement related to any Acquisition
Proposal.
(b) Notwithstanding the foregoing, the Board of Directors of
the Company shall be permitted, prior to the Company Stockholders
Meeting to be held pursuant to Section 6.1, and subject to compliance
with the other terms of this Section 6.6 and to first entering into a
customary confidentiality agreement, to engage in discussions and
negotiations with, or provide any nonpublic information or data to, any
Person in response to an unsolicited bona fide written Acquisition
Proposal by such Person made after the date of this Agreement which the
Board of Directors of the Company concludes in good faith, after
consultation with a nationally recognized financial advisor and legal
counsel, constitutes or is reasonably likely to result in a Superior
Proposal (as defined in Section 6.6(e)), if and only to the extent that
the Board of Directors of the Company determines in good faith (after
consultation with outside legal counsel) that its fiduciary obligations
require it to do so.
(i) The Company shall notify Parent promptly (but in
no event later than 24 hours) after receipt of any Acquisition
Proposal, or any request for nonpublic information relating to
the Company or any of its Subsidiaries by any Person that
informs the Company or any of its Subsidiaries that it is
considering making, or has made, an Acquisition Proposal, or
any inquiry from any Person seeking to have discussions or
negotiations with the Company relating to a
44
possible Acquisition Proposal. Such notice shall be made
orally and confirmed in writing, and shall indicate the
identity of the Person making the Acquisition Proposal,
inquiry or request and the material terms and conditions of
any inquiries, proposals or offers. The Company shall also
promptly, and in any event within 24 hours, notify Parent,
orally and in writing, if it enters into discussions or
negotiations concerning any Acquisition Proposal or provides
nonpublic information or data to any Person in accordance with
this Section 6.6(b).
(ii) Nothing contained in this Section 6.6 shall
prohibit the Company from taking and disclosing to its
stockholders a position required by Rule 14e-2(a) or Rule
14d-9 promulgated under the Exchange Act; provided, however,
that compliance with such rules shall not in any way limit or
modify the effect that any action taken pursuant to such rules
has under any other provision of this Agreement, including
Section 8.1(f).
(c) Notwithstanding anything in this Agreement to the
contrary, at any time prior to obtaining the Required Company Vote, the
Board of Directors of the Company may, in response to a Superior
Proposal, cause the Company to terminate this Agreement pursuant to
Section 8.1(g) and concurrently or promptly thereafter enter into a
definitive agreement with respect to a Superior Proposal; provided,
however, that the Company shall not exercise its right to terminate
this Agreement pursuant to Section 8.1(g) until the third business day
following Parent's receipt of written notice (a "Notice of Superior
Proposal") from the Company advising Parent that the Board of Directors
of the Company has received a Superior Proposal specifying the terms
and conditions of the Superior Proposal, identifying the Person making
such Superior Proposal and stating that the Board of Directors of the
Company intends to exercise its right to terminate this Agreement
pursuant to Section 8.1(g).
(d) The Company agrees that it will and will cause its
Subsidiaries, and its and their officers, directors, agents,
representatives and advisors to, cease immediately and terminate any
and all existing activities, discussions or negotiations with any third
parties conducted heretofore with respect to any proposal that
constitutes, or could reasonably be expected to lead to, an Acquisition
Proposal.
(e) For purposes of this Agreement, "Superior Proposal" means
a bona fide written Acquisition Proposal which the Board of Directors
of the Company, concludes in good faith (after consultation with its
legal advisors and a nationally recognized financial advisor) (i) is
more favorable to the stockholders of the Company, from a financial
point of view, than the transactions contemplated by this Agreement,
taking into account all the terms and conditions of such proposal and
this Agreement (including any proposal by Parent to amend the terms of
the Agreement) and (ii) is fully financed or reasonably capable of
being fully financed, reasonably likely to receive all required
approvals on a timely basis and otherwise reasonably capable of being
completed on the terms proposed; provided that, for purposes of this
definition of "Superior Proposal," the term Acquisition Proposal shall
have the meaning assigned to such term in Section 6.6(a), except that
the
45
reference to "10% or more" in the definition of "Acquisition Proposal"
shall be deemed to be a reference to "a majority."
Section 6.7 Employees; Employee Benefit Plans.
(a) Through the six month anniversary of the Effective Time
(except as applicable Law or third party providers require otherwise),
Parent and the Surviving Corporation will provide persons employed by
the Related Employers at the Effective Time ("Company Employees")
annual base compensation, incentive compensation (other than equity
based compensation), and Benefit Plans and Benefit Arrangements (other
than equity based compensation) that are, in the aggregate, at least as
favorable as those in effect immediately before the Effective Time. For
purposes of comparability, the parties agree that the determination
shall not take into account any equity, equity-based, or equity
measured compensation nor the level of employee contributions in effect
before the Effective Time, provided any contributions required after
the Effective Time and during 2005 shall not be in excess of prevailing
market levels. For purposes of any seniority or length of service
requirements, waiting periods, vesting periods, or differential
benefits based on length of service in any such plan or policy of
Parent as of the Effective Time for which a Company Employee may be
eligible after the Effective Time, Parent and the Surviving Corporation
shall treat service by such employee with the Company as though it had
been service with Parent for all purposes under any such plan or policy
to the extent the Company credited such service under its similar
plans, excluding vesting, benefit accruals, or accrual or account
formulas under any Pension Plan maintained by Parent, so long as this
crediting of service does not violate applicable Laws and is consistent
with the rules governing Benefit Plans qualified under Section 401(a)
of the Code and permitted by third-party administrators and insurers.
Notwithstanding any other provision herein, no provision of this
Agreement shall obligate any of Parent, the Surviving Corporation or
any of its Affiliates to continue the employment of any Company
Employee for any period following the Effective Time or to refrain from
revising the terms of any such Company Employee's employment or
transferring any such Company Employees, nor shall it prevent those
entities from amending or terminating any Benefit Plan or Benefit
Arrangement.
(b) In addition:
(i) Any Company Employee covered by the Management
Incentive Plan ("MIP") or the Annual Incentive Plan ("AIP")
for Designated Corporate Officers ("Covered Employees") (each
of the MIP and the AIP, as provided to Parent on May 11, 2005)
shall receive a 2005 bonus payable as follows. As of the
Effective Time, all Covered Employees shall be credited with a
bonus based on Payout Achievement Level as set forth on
Section 6.7(b) of the Company Disclosure Schedule based on the
Company's Net Income, as set forth in the MIP and the AIP,
with payment of such bonuses to be made on or before March 15,
2006 (or such earlier date as may be required by applicable
state Law), which payment shall be made whether or not a
particular Covered Employee who is
46
entitled to such bonus payment is employed at the time of
payment, provided that such Covered Employee has not been
terminated for Cause (as defined in Section 6.7(b)(vi)) before
the time of payment. In addition, all Covered Employees shall
receive a prorated bonus on or before March 15, 2006 (or such
earlier date as may be required by applicable state Law), to
reflect the achievement of Individual Management Bonus
Objectives ("MBOs") through the Effective Time, which shall be
determined at the Effective Time by the Company in a manner
consistent with the Company's past practice and agreed to by
Parent (which agreement shall not be unreasonably withheld).
By March 15, 2006 (or such earlier date as may be required by
applicable state Law), all Covered Employees who are employed
by Parent or its Affiliates with operations in the United
States (the "U.S. Affiliates") as of December 31, 2005 shall
receive a prorated bonus to cover the period from the
Effective Time through December 31, 2005 ("Stub Period") and
persons whose employment was terminated without cause will
receive a prorated bonus for the shorter period during which
the persons were employed during the Stub Period. Such
prorated bonus will reflect the achievement of MBOs achieved
by the Covered Employee during the Stub Period as determined
by the Surviving Corporation in a manner consistent with the
Company's past practice and agreed to by Parent (which
agreement shall not be unreasonably withheld).
(ii) For a period of 12 months following the
Effective Time, any Company Employees who are offered
employment with Parent or its U.S. Affiliates that would
require them to relocate to a different work location that is
more than 40 miles from their current work location will be
allowed to choose one of the following two options: (i) accept
the position, in which case each such relocated Company
Employee will be entitled to receive relocation benefits under
the Company's relocation policy as in effect March 31, 2005,
or (ii) decline the position and receive the severance benefit
under the Company's Severance Plan as in effect on March 31,
2005, or, if applicable, as outlined in such employee's Change
of Control Severance Agreement or Key Employee Severance
Protection Agreement.
(iii) Any Company Employee terminated without Cause
within 12 months following the Effective Time who is not
otherwise covered by an individual agreement with respect to
severance shall be eligible to receive severance under the
Company's Severance Pay Plan (including, but not limited to,
outplacement benefits) as in effect on March 31, 2005. For
those Company Employees who receive severance benefits under
this clause (iii) and who are then eligible for COBRA
coverage, Parent, the Surviving Corporation, or their
Affiliates will, during the months in which each such severed
Company Employee receives severance payments, pay that portion
of the severed Company Employee's monthly COBRA insurance
coverage costs equal to the amount of the monthly difference
between (1) the severed employee's monthly COBRA cost and (2)
the monthly amount that the severed employee would have paid
to obtain
47
medical and dental coverage under the applicable plans if the
severed employee were an active employee.
(iv) Following the Effective Time, all Company
Employees shall be credited with the amount of their accrued
but unused paid time off ("PTO") under the paid time off
program (or equivalent) of Parent in effect at the Effective
Time; provided that any Company Employee who has accrued but
unused PTO in excess of the amount that may be credited under
Parent's paid time off program (or equivalent) shall receive a
payment, as soon as reasonably practical after the Effective
Time, equal to the value of such excess accrued but unused
PTO.
(v) Participants in the Company's Supplemental
Executive Retirement Plans ("SERP") who are age 55 or older
will receive a pro-rata payment to their SERP account at the
Effective Time based on the expected Company annual
contribution for 2005.
(vi) For purposes of this Section 6.7(b), "Cause"
shall mean a Company Employee's (A) failure to perform his/her
material duties, which failure continues for ten (10) days
after the Parent or Surviving Corporation has given written
notice to the employee specifying in reasonable detail the
manner in which the employee has failed to perform such
duties; (B) commission of an act or omission constituting (x)
a felony, (y) embezzlement, theft or material dishonesty with
respect to the Surviving Corporation, Parent, or their
Affiliates, or (z) fraud; (C) commission of an act or omission
that (x) could adversely and materially affect the Surviving
Corporation's, Parent's, or their Affiliates' business or
reputation, or (y) involves moral turpitude; or (D) breach,
non-performance or non-observance of any restrictive covenant
or any other written agreement with the Surviving Corporation,
Parent, or their Affiliates prohibiting any or all of (x) the
disclosure of confidential trade secrets and other
information, (y) competitive activities or the solicitation of
customers, or (z) the solicitation of employees or former
employees.
(c) Parent shall cause any and all pre-existing condition (or
actively at work or similar) limitations, eligibility waiting periods
and evidence of insurability requirements under each employee medical
plan of Parent ("Parent Benefit Plan") in which Company Employees
participate after the Effective Time to be waived with respect to such
Company Employees and their eligible dependents who were covered under
comparable Company Plans and shall provide them with credit for any
co-payments, deductibles, and offsets (or similar payments) made during
the plan year including the Effective Time for the purposes of
satisfying any applicable deductible, out-of-pocket, or similar
requirements under any of Parent's Benefit Plans in which they are
eligible to participate during the plan year including the Effective
Time. Parent or the Surviving Corporation shall continue the life
insurance and disability coverage for at least six months following the
Effective Time for Company Employees who are covered by Company Plans
providing such coverage immediately prior to the Effective Time.
48
(d) Any communications proposed to be delivered by the Company
or Parent to the Company Employees before the Effective Time regarding
the matters contained in or the transactions contemplated by this
Agreement or otherwise respecting any changes or potential changes in
employee benefit plans, practices, or procedures that may or will occur
in connection with the transactions contemplated by this Agreement,
shall be subject to the prior approval of Parent and the Company,
respectively, which approval shall not be unreasonably withheld. Each
of Parent and the Company shall be deemed to have approved a proposed
communication absent objection provided within 72 hours of receipt of
that proposed communication.
(e) Parent and the Surviving Corporation shall be entitled to
deduct and withhold from any compensatory payments otherwise payable to
any Company Employee pursuant to this Section 6.7 such amounts as they
are required to deduct and withhold under any applicable tax Laws.
Section 6.8 Fees and Expenses. In the event the Merger is not
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expense, provided, however, that the costs and expenses of printing and
mailing the Proxy Statement to the stockholders of the Company, and all filing
and other fees paid to the SEC in connection with the Proxy Statement or any
other Governmental Entity in connection with the Merger and the other
transactions contemplated hereby, shall be borne equally by Parent and the
Company. In the event the Merger is consummated, the Surviving Corporation shall
pay all then unpaid costs and expenses incurred by the Company in connection
with the Agreement. Nothing contained in this Section 6.8 shall limit either
party's rights to recover any liabilities or damages arising out of the other
party's breach of any provision of this Agreement.
Section 6.9 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, Parent shall, and shall
cause the Surviving Corporation to, to the fullest extent permitted by
applicable Law, indemnify, defend and hold harmless, and provide
advancement of expenses to, each person who is now, or has been at any
time prior to the date hereof or who becomes prior to the Effective
Time, a director, officer employee or agent of the Company or any of
its Subsidiaries or who is or was serving at the request of the Company
or any of its Subsidiaries as a director, officer, employee or agent of
another Person (the "Indemnified Parties") against all losses, claims,
damages, costs, expenses, liabilities or judgments or amounts that are
paid in settlement of or in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was an
Indemnified Party, and pertaining to any matter existing or occurring,
or any acts or omissions occurring, at or prior to the Effective Time,
whether asserted or claimed prior to, or at or after, the Effective
Time (including matters, acts or omissions occurring in connection with
the approval of this Agreement and the consummation of the transactions
contemplated hereby) ("Indemnified Liabilities") to the same extent
such persons are indemnified or have the right to advancement of
expenses as of the date of
49
this Agreement by the Company pursuant to the Company's Certificate of
Incorporation, Bylaws and those indemnification agreements with
directors, officers and employees of the Company and its Subsidiaries
that are listed on Section 6.9(a) of the Company Disclosure Schedule.
To the extent permitted by applicable Law, Parent's and Surviving
Corporation's obligations under this Section 6.9(a) shall be limited to
a period of six years from and after the Effective Time.
(b) For a period of six years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect the
current policies of directors' and officers' liability insurance
maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies with a substantially comparable insurer of
at least the same coverage and amounts containing terms and conditions
which are no less advantageous to the insured) with respect to claims
arising from facts or events which occurred at or before the Effective
Time; provided, however, that the Surviving Corporation shall not be
obligated to make annual premium payments for such insurance to the
extent such premiums exceed 300% of the premiums paid as of the date
hereof by the Company for such insurance (the "Company's Current
Premium"), and if such premiums for such insurance would at any time
exceed 300% of the Company's Current Premium, then the Surviving
Corporation shall cause to be maintained policies of insurance which,
in the Surviving Corporation's good faith determination, provide the
maximum coverage available at an annual premium equal to 300% of the
Company's Current Premium.
(c) Until six years from the Effective Time, unless otherwise
required by applicable Law, the certificate of incorporation and bylaws
of the Surviving Corporation shall contain provisions no less favorable
with respect to the elimination of liability of directors and the
indemnification of Indemnified Parties (including as to advancement of
expenses) than those set forth in Article X of the Certificate of
Incorporation and Article V of the Bylaws, as in effect on the date
hereof.
(d) The Surviving Corporation shall pay (as incurred) all
expenses, including reasonable fees and expenses of counsel, that an
Indemnified Person may incur in the successful enforcement of the
indemnity and other obligations provided for in this Section 6.9.
(e) If the Surviving Corporation 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 the Surviving Corporation,
as the case may be, shall assume the obligations set forth in this
Section 6.9.
(f) The provisions of this Section 6.9 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party,
his or her heirs and representatives and
50
are in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such person may have by
contract or otherwise.
Section 6.10 Public Announcements. At all times at or before the
Closing, neither party shall, without the prior written consent of the other,
which consent shall not be unreasonably withheld or delayed, issue or make,
directly or indirectly, any reports, statements or releases to the public with
respect to (a) this Agreement or the transactions contemplated hereby or (b)
(except to the extent disclosed in or consistent with the Proxy Statement in
accordance with the provisions of Section 6.1 or as otherwise permitted under
Section 6.2) the other party or the other party's business, financial condition
or results of operations; provided, however, that either party and its
Affiliates may, without the prior written consent of the other, issue or make,
directly or indirectly, any report, statement or release required by Law
(including any periodic reports required to be filed under the Exchange Act or
the rules and regulations thereunder with the SEC) or any listing agreement or
arrangement with a national securities exchange or national market system
(including the NYSE, the London Stock Exchange, the Hong Kong Stock Exchange,
the Bermuda Stock Exchange, and Euronext Paris) to which such party or any of
its Affiliates is subject, provided, however, that, to the extent practicable,
the other parties to this Agreement are so notified as soon as possible in
advance of such report, statement or release and, to the extent practicable,
given a reasonable opportunity to review and comment on the report, statement or
release. The parties will agree to the text of the press releases announcing the
signing of this Agreement.
Section 6.11 Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of the
Company and its Subsidiaries, the proper officers and directors of each party to
this Agreement shall take all such necessary action.
Section 6.12 Other Actions by Parent. Parent shall not, and shall not
permit any of its Subsidiaries to, take any action that would, or would
reasonably be expected to, result in any of its representations and warranties
set forth in this Agreement being or becoming untrue, subject to such exceptions
as do not have, and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent and its Subsidiaries, taken
as a whole, or in any of the conditions to the Merger set forth in Article VII
not being satisfied or in a violation of any provision of this Agreement, or
(unless such action is required by applicable Law) which would adversely affect
the ability of the parties to obtain any of the Requisite Regulatory Approvals.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
51
(a) Stockholder Approval. The Company shall have obtained the
Required Company Vote in connection with the adoption of the
Merger
Agreement.
(b) Other Approvals. Other than the filing provided for by
Section 1.1, all authorizations, consents, orders or approvals of, or
declarations or filings with, and all expirations of waiting periods
required from, any Governmental Entity which are necessary for the
consummation of the Merger and the Bank Merger or those the failure of
which to be obtained would reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect on the
Surviving Corporation or the Surviving Bank, shall have been filed,
have occurred or been obtained (all such authorizations, consents,
orders, approvals, declarations and filings and the lapse of all such
waiting periods being referred to as the "Requisite Regulatory
Approvals") and all such Requisite Regulatory Approvals shall be in
full force and effect. The parties specifically agree that the
Requisite Regulatory Approvals include the filing of all appropriate
applications and notices with the OCC and the approval thereof with
respect to the Merger and the Bank Merger.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint
or prohibition (an "Injunction") preventing the consummation of the
Merger or the Bank Merger shall be in effect. There shall not be any
action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger or the Bank
Merger, by any Governmental Entity of competent jurisdiction which
makes the consummation of the Merger or the Bank Merger illegal.
Section 7.2 Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of the following conditions unless waived by Parent and Merger Sub:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and
correct as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except to the extent such
representations and warranties are specifically made as of an earlier
date, in which case such representations and warranties shall be true
and correct as of such date; provided, that for purposes of determining
the satisfaction of this condition, no effect shall be given to any
exception or qualification in such representations and warranties
relating to materiality or a Material Adverse Effect and, instead, for
purposes of this condition (i) such representations and warranties
(other than the representations and warranties in Section 3.2 (Capital
Structure), the last three sentences of Section 3.5(a) (Compliance with
Applicable Laws) solely with respect to the business or operations of
the Bank or MRI, Section 3.8 (Certain Agreements) solely with respect
to Regulatory Agreements, and Section 3.11 (Agreements with
Regulators), which are addressed in clause (ii)) shall be deemed to be
true and correct unless the failure or failures of such representations
and warranties to be so true and correct, individually or in the
aggregate,
52
has had, or would reasonably be expected to have, a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole, and (ii)
the representations and warranties in Section 3.2 must be true and
correct in all but de minimis respects, and the representations and
warranties in the last three sentences of Section 3.5(a) solely with
respect to banking or consumer lending Laws, the Securities Act or
Exchange Act as applicable to the business or operations of the Bank or
MRI, the representations and warranties in Section 3.8 solely with
respect to Regulatory Agreements and the representations and warranties
in Section 3.11 must be true and correct in all material respects. Each
of Parent and Merger Sub shall have received from the Company a
certificate signed on behalf of Company by the Chief Executive Officer
and Chief Financial Officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing
Date, and each of Parent and Merger Sub shall have received a
certificate signed on behalf of the Company by the Chief Executive
Officer and Chief Financial Officer of the Company to such effect.
(c) Third Party Consents. The Company shall have obtained all
consents and approvals of third parties listed in Section 7.2(c) of the
Company Disclosure Schedule.
(d) Resignations. Parent shall have received copies of the
resignations, effective as of the Effective Time, of each director of
the Company and its Subsidiaries.
(e) Stockholders Agreement. The Stockholders Agreement shall
not have been terminated without the consent of Parent and shall be in
full force and effect.
(f) Senior Notes. The Company shall have repurchased, redeemed
or otherwise paid in full all of the outstanding 10 1/8% Senior Notes
due 2006, and have paid any prepayment penalties associated therewith.
(g) SEC Investigation. The Company shall have either (i)
received notice from the Staff of the SEC that it will not recommend
that charges be brought against the Company and its Subsidiaries with
respect to the SEC Investigation or (ii) in the event the notice
referred to in clause (i) is not obtained by September 30, 2005 and is
not reasonably likely to be obtained in the Company's good faith
determination after consultation with its outside legal counsel,
obtained a final court or administrative order as to the Company and
its Subsidiaries with respect to the SEC Investigation, which order may
include fines, penalties or settlement; provided, however that the
aggregate of any such fines, penalties or settlement is not substantial
in relation to the Company's consolidated financial condition, assets
or stockholders' equity and shall not include provisions that impose
adverse restrictions or limitations on the business or operations of
the Company or any of its Subsidiaries (it being understood that (i)
nothing herein shall require that any order shall have been entered
with respect to any investigation, action, claim or proceeding against
any director, officer or employee of the Company in his or
53
her individual capacity as such in order for this condition to be
satisfied and (ii) administrative or supervisory obligations or
restrictions imposed upon the Company and its Subsidiaries shall not
constitute adverse restrictions or limitations on the business or
operations of the Company or any of its Subsidiaries).
(h) Liquidation and Dissolution of Certain Entities. Metris
Companies Foundation and the
Metris Companies Inc. Political Action
Committee shall have been fully liquidated and dissolved.
Section 7.3 Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is subject to the satisfaction of the following
conditions unless waived by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub set forth in this Agreement shall
be true and correct as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date except to the
extent such representations and warranties are specifically made as of
an earlier date, in which case such representations and warranties
shall be true and correct as of such date; provided, that for purposes
of determining the satisfaction of this condition, no effect shall be
given to any exception or qualification in such representations and
warranties relating to materiality or a Material Adverse Effect and,
instead, for purposes of this condition such representations and
warranties (other than the representations and warranties in Section
4.9 (Ownership of Company Capital Stock), which must be true and
correct in all respects) shall be deemed to be true and correct unless
the failure or failures of such representations and warranties to be so
true and correct, individually or in the aggregate, has had, or would
reasonably be expected to have, a Material Adverse Effect on Parent and
its Subsidiaries, taken as a whole. The Company shall have received a
certificate from each of Parent and Merger Sub signed on behalf of each
of Parent and Merger Sub by their respective Chief Executive Officers
and Chief Financial Officers to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Each
of Parent and Merger Sub shall have performed in all material respects
all obligations required to be performed by it under this Agreement at
or prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of each of Parent and Merger Sub by their
respective Chief Executive Officers and Chief Financial Officers to
such effect.
54
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, by action taken or authorized by the Board of
Directors of the terminating party or parties, whether before or after approval
of the Merger by the stockholders of the Company:
(a) by mutual consent of Parent and Merger Sub and the Company
in a written instrument;
(b) by either Parent or the Company, upon written notice to
the other party, if (i) a Governmental Entity of competent jurisdiction
which must grant a Requisite Regulatory Approval has denied approval of
the Merger and such denial has become final and non-appealable; or (ii)
any Governmental Entity of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger, and such
order, decree, ruling or other action has become final and
nonappealable; provided, however, that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party
whose failure to comply with any provision of this Agreement has been
the cause of, or has resulted in, the denial described in clause (i)
above or the issuance described in clause (ii) above;
(c) by either Parent or the Company, upon written notice to
the other party, if the Merger shall not have been consummated on or
before March 31, 2006; provided, however, that the right to terminate
this Agreement under this Section 8.1(c) shall not be available to any
party whose failure to comply with any provision of this Agreement has
been the cause of, or has resulted in, the failure of the Effective
Time to occur on or before such date;
(d) by either Parent or the Company, if the Required Company
Vote shall not have been obtained upon a vote taken thereon at the duly
convened Company Stockholders Meeting;
(e) by either Parent and Merger Sub on the one hand or the
Company on the other hand, upon written notice to the other party, if
there shall have been a breach by the other party of any of the
covenants or agreements or any of the representations or warranties set
forth in this Agreement on the part of such other party, which breach,
either individually or in the aggregate, would result in, if occurring
or continuing on the Closing Date, the failure of any of the conditions
set forth in Section 7.2 or Section 7.3, as the case may be, and which
breach has not been cured within 30 days following written notice
thereof to the breaching party or, by its nature, cannot be cured
within such time period;
(f) by Parent upon written notice to the Company, if (x) the
Company shall have (i) failed to recommend adoption of this Agreement
at the Company Stockholders Meeting, or withdrawn, modified or
qualified in any manner adverse to Parent such
55
recommendation, whether or not permitted by the terms hereof, or (ii)
materially breached its obligations under this Agreement by reason of a
failure to call the Company Stockholders Meeting in accordance with
Section 6.1(a) or (y) the Stockholder Agreement has been breached in
any material manner by any stockholder that is a party thereto; or
(g) by the Company, upon written notice to the Parent, in
accordance with the terms of Section 6.6.
Section 8.2 Effect of Termination.
(a) In the event of termination of this Agreement by either
the Company or Parent as provided in Section 8.1, this Agreement shall
forthwith become void and there shall be no liability or obligation on
the part of Parent or the Company or their respective officers or
directors, except with respect to Section 6.4(b), Section 6.8, this
Section 8.2 and Article IX, which shall survive such termination and
except that no party shall be relieved or released from any liabilities
or damages arising out of its willful and material breach of this
Agreement.
(b) The Company shall pay Parent, by wire transfer of
immediately available funds, the sum of $57.4 million (the "Termination
Fee") if this Agreement is terminated as follows:
(i) if Parent shall terminate this Agreement pursuant
to Section 8.1(f)(x), and within 12 months after the date of
such termination, the Company or any of its Subsidiaries
consummates an Acquisition Transaction (as defined in Section
8.2(c)), then the Company shall pay Parent the Termination Fee
on the date of such consummation; and
(ii) if the Company shall terminate this Agreement
pursuant to Section 8.1(g) and within 12 months after the date
of such termination, the Company or any of its Subsidiaries
consummates an Acquisition Transaction, then the Company shall
pay Parent the Termination Fee on the date of such
consummation.
(c) For purposes of this Agreement, the term "Acquisition
Transaction" shall mean (i) the direct or indirect acquisition,
purchase or assumption of all or substantially all of the assets of the
Company or its Subsidiaries, (ii) the acquisition by any Person of
direct or indirect beneficial ownership (including by way of merger,
consolidation, share exchange or otherwise) of voting stock
representing 50% or more of the voting power of the outstanding shares
of voting stock of the Company, or (iii) a merger, consolidation,
business combination, liquidation, dissolution or similar transaction
of or involving the Company, other than a merger, business combination
or similar transaction if the stockholders of the Company immediately
before such transaction own at least 60% of
56
the voting stock of the entity surviving such transaction (or the
parent thereof) immediately following such transaction.
(d) The Company acknowledges that the agreements contained in
Section 8.1 and this Section 8.2 are integral parts of the transactions
contemplated by this Agreement, and that, without these agreements,
Parent would not have entered into this Agreement; accordingly, if the
Company fails to promptly pay any amounts due pursuant to this Section
8.2 and, in order to obtain such payment, Parent commences a suit which
results in a judgment against the Company for the fee set forth in this
Section 8.2, the Company shall pay to Parent its reasonable costs and
expenses (including reasonable attorney's fees and expenses) in
connection with such suit, together with interest from the date of
termination of this Agreement on the amounts owed at the prime rate of
The Bank of New York as in effect from time to time during such period.
Section 8.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of the Company, but, after any such approval, no
amendment shall be made which by Law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 8.4 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. The failure of
a party to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of those rights. No single or partial exercise of any right,
remedy, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
Any waiver shall be effective only in the specific instance and for the specific
purpose for which given and shall not constitute a waiver to any subsequent or
other exercise of any right, remedy, power or privilege hereunder.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants, and agreements, shall survive the Effective Time, except for those
covenants and agreements contained herein and therein that by their terms apply
or are to be performed in whole or in part after the Effective Time.
57
Section 9.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed duly given (a) on the date of delivery
if delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (b) on the first business day following the date of dispatch if
delivered by a recognized next-day courier service, or (c) on the third business
day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice.
(a) if to Parent, to
HSBC Finance Corporation
0000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Telecopy No.: (000) 000-0000
with a copy to
Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP
0000 X Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
(b) if to Merger Sub, to
HSBC Corporation I
0000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Telecopy No.: (000) 000-0000
with a copy to
Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP
0000 X Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
and
58
(c) if to Company, to
Metris Companies Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel
Telecopy No.: (000) 000-0000
with copies to
Xxxxxx & Xxxxxxx LLP
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx, III, Esq.
Telecopy No.: (000) 000-0000
Section 9.3 Interpretation. When a reference is made in this Agreement
to Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "herein," "hereof,"
"hereunder" and words of similar import shall be deemed to refer to this
Agreement as a whole, including the Exhibits and Schedules hereto, and not to
any particular provision of this Agreement. Any pronoun shall include the
corresponding masculine, feminine and neuter forms.
Section 9.4 Counterparts. This Agreement may be executed in
counterparts, each of which shall be considered one and the same agreement and
shall become effective when both counterparts have been signed by each of the
parties and delivered to the other party, it being understood that both parties
need not sign the same counterpart.
Section 9.5 Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents and the instruments referred to herein, (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof, other than the Confidentiality Agreement, which shall
59
survive the execution and delivery of this Agreement and (b) except as provided
in Section 6.9, is not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
Section 9.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware (without giving
effect to choice of law principles thereof).
Section 9.7 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability and, unless
the effect of such invalidity or unenforceability would prevent the parties from
realizing the major portion of the economic benefits of the Merger that they
currently anticipate obtaining therefrom, shall not render invalid or
unenforceable the remaining terms and provisions of this Agreement or affect the
validity or enforceability of any of the terms or provisions of this Agreement
in any other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Section 9.8 Assignment. This Agreement shall not be assignable by
operation of Law or otherwise without the prior written consent of the other
party, and any attempt to make any such assignment without such consent shall be
null and void; provided, however, that Parent and Merger Sub may designate, by
written notice to the Company, another wholly-owned subsidiary of Parent to
effect the Merger in lieu of Merger Sub, in which event all reference herein to
Merger Sub shall be deemed references to such other subsidiary, except that all
representations and warranties made herein with respect to Merger Sub as of the
date of this Agreement shall be deemed representations and warranties made with
respect to such other subsidiary as of the date of such designation, provided
further, however, that Parent and Merger Sub shall not have the benefit of
designation set forth in the foregoing proviso unless such designation will not
affect the consideration to be received by the stockholders of the Company in
the Merger or the treatment of the Merger for federal income tax purposes and
will not delay the completion of the Merger or the satisfaction of the
conditions set forth in Article VII. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
Section 9.9 Submission to Jurisdiction. Each party hereby irrevocably
and unconditionally submits, for itself and its property, to the jurisdiction of
the Delaware Court of Chancery, the Delaware Superior Court or any federal court
sitting in the City of Wilmington, and any appellate court from any such court,
in any suit, action or proceeding arising out of or relating to this Agreement,
or for recognition or enforcement of any judgment resulting from any such suit,
action or proceeding, and each party hereby irrevocably and unconditionally
agrees that all claims in respect of any such suit, action or proceeding may be
heard and determined in the Delaware Court of Chancery, the Delaware Superior
Court or, to the extent permitted by Law, by removal or otherwise, in such
federal court. The Parties further agree, to the extent permitted by Law, that
final and unappealable judgment against any of them in any action or proceeding
contemplated above shall be conclusive and may be enforced in any other
60
jurisdiction within or outside the United States by suit on the judgment, a
certified copy of which shall be conclusive evidence of the fact and amount of
such judgment.
Section 9.10 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms on a timely basis or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or other equitable relief to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any
court identified in Section 9.9 above, this being in addition to any other
remedy to which they are entitled at law or in equity.
Section 9.11 Waiver of Jury Trial. EACH OF THE PARTIES HEREBY WAIVES
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, IN ANY MATTERS
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
61
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first set forth above.
HSBC FINANCE CORPORATION
By: /s/ SIDDHARTH X. XXXXX
-----------------------------
Name: Siddharth X. Xxxxx
Title: Chairman and Chief
Executive Officer
HSBC CORPORATION I
By: /s/ XXXXX X. XXXX
----------------------------
Name: Xxxxx X. Xxxx
Title: Vice President
METRIS COMPANIES INC.
By: /s/ XXXXX X. XXXXXXXXX
----------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Chairman and CEO
62
EXHIBIT I
STOCKHOLDER AGREEMENT
EXHIBIT 1.4
BYLAWS OF MERGER SUB
ANNEX 2.1
TO COMMON
STOCKHOLDERS,
PER COMMON RESTRICTED STOCK UNITS TO SERIES C MERGER
DATE SHARE PRICE AND STOCK OPTIONS PREFERRED STOCK CONSIDERATION
-------- -------------- ---------------------- --------------- --------------
8/4-12/9 $ 15.000000 $ 911,106,237 $ 682,561,140 $1,593,667,377
12/10 $ 14.998413 $ 911,007,820 $ 682,659,557 $1,593,667,377
12/11 $ 14.996826 $ 910,909,430 $ 682,757,947 $1,593,667,377
12/12 $ 14.995240 $ 910,811,061 $ 682,856,316 $1,593,667,377
12/13 $ 14.993654 $ 910,712,713 $ 682,954,664 $1,593,667,377
12/14 $ 14.992069 $ 910,614,386 $ 683,052,991 $1,593,667,377
12/15 $ 14.990483 $ 910,516,079 $ 683,151,298 $1,593,667,377
12/16 $ 14.988899 $ 910,417,793 $ 683,249,583 $1,593,667,377
12/17 $ 14.987314 $ 910,319,528 $ 683,347,849 $1,593,667,377
12/18 $ 14.985730 $ 910,221,284 $ 683,446,093 $1,593,667,377
12/19 $ 14.984146 $ 910,123,060 $ 683,544,316 $1,593,667,377
12/20 $ 14.982562 $ 910,024,858 $ 683,642,519 $1,593,667,377
12/21 $ 14.980979 $ 909,926,676 $ 683,740,701 $1,593,667,377
12/22 $ 14.979396 $ 909,828,515 $ 683,838,862 $1,593,667,377
12/23 $ 14.977814 $ 909,730,374 $ 683,937,003 $1,593,667,377
12/24 $ 14.976231 $ 909,632,254 $ 684,035,122 $1,593,667,377
12/25 $ 14.974649 $ 909,534,155 $ 684,133,221 $1,593,667,377
12/26 $ 14.973068 $ 909,436,077 $ 684,231,300 $1,593,667,377
12/27 $ 14.971487 $ 909,338,020 $ 684,329,357 $1,593,667,377
12/28 $ 14.969906 $ 909,239,983 $ 684,427,394 $1,593,667,377
12/29 $ 14.968325 $ 909,141,967 $ 684,525,410 $1,593,667,377
12/30 $ 14.966745 $ 909,043,971 $ 684,623,406 $1,593,667,377
12/31 $ 14.965165 $ 908,945,996 $ 684,721,380 $1,593,667,377
1/1 $ 14.963585 $ 908,848,042 $ 684,819,334 $1,593,667,377
1/2 $ 14.962006 $ 908,750,109 $ 684,917,268 $1,593,667,377
1/3 $ 14.960427 $ 908,652,196 $ 685,015,181 $1,593,667,377
1/4 $ 14.958849 $ 908,554,304 $ 685,113,073 $1,593,667,377
1/5 $ 14.957271 $ 908,456,433 $ 685,210,944 $1,593,667,377
1/6 $ 14.955693 $ 908,358,582 $ 685,308,795 $1,593,667,377
1/7 $ 14.954115 $ 908,260,752 $ 685,406,625 $1,593,667,377
1/8 $ 14.952538 $ 908,162,942 $ 685,504,435 $1,593,667,377
1/9 $ 14.950961 $ 908,065,153 $ 685,602,223 $1,593,667,377
1/10 $ 14.949384 $ 907,967,385 $ 685,699,992 $1,593,667,377
1/11 $ 14.947808 $ 907,869,637 $ 685,797,739 $1,593,667,377
1/12 $ 14.946232 $ 907,771,910 $ 685,895,466 $1,593,667,377
1/13 $ 14.944657 $ 907,674,204 $ 685,993,173 $1,593,667,377
1/14 $ 14.943081 $ 907,576,518 $ 686,090,859 $1,593,667,377
1/15 $ 14.941507 $ 907,478,853 $ 686,188,524 $1,593,667,377
1/16 $ 14.939932 $ 907,381,208 $ 686,286,168 $1,593,667,377
1/17 $ 14.938358 $ 907,283,584 $ 686,383,792 $1,593,667,377
1/18 $ 14.936784 $ 907,185,981 $ 686,481,396 $1,593,667,377
1/19 $ 14.935210 $ 907,088,398 $ 686,578,979 $1,593,667,377
1/20 $ 14.933637 $ 906,990,835 $ 686,676,541 $1,593,667,377
1/21 $ 14.932064 $ 906,893,294 $ 686,774,083 $1,593,667,377
1/22 $ 14.930491 $ 906,795,772 $ 686,871,604 $1,593,667,377
1/23 $ 14.928919 $ 906,698,272 $ 686,969,105 $1,593,667,377
1/24 $ 14.927347 $ 906,600,791 $ 687,066,585 $1,593,667,377
1/25 $ 14.925776 $ 906,503,332 $ 687,164,045 $1,593,667,377
1/26 $ 14.924204 $ 906,405,893 $ 687,261,484 $1,593,667,377
1/27 $ 14.922633 $ 906,308,474 $ 687,358,903 $1,593,667,377
1/28 $ 14.921063 $ 906,211,076 $ 687,456,301 $1,593,667,377
1/29 $ 14.919493 $ 906,113,698 $ 687,553,678 $1,593,667,377
1/30 $ 14.917923 $ 906,016,341 $ 687,651,036 $1,593,667,377
1/31 $ 14.916353 $ 905,919,004 $ 687,748,372 $1,593,667,377
2/1 $ 14.914784 $ 905,821,688 $ 687,845,688 $1,593,667,377
2/2 $ 14.913215 $ 905,724,393 $ 687,942,984 $1,593,667,377
2/3 $ 14.911646 $ 905,627,117 $ 688,040,259 $1,593,667,377
2/4 $ 14.910078 $ 905,529,863 $ 688,137,514 $1,593,667,377
2/5 $ 14.908510 $ 905,432,628 $ 688,234,748 $1,593,667,377
2/6 $ 14.906942 $ 905,335,414 $ 688,331,962 $1,593,667,377
2/7 $ 14.905375 $ 905,238,221 $ 688,429,156 $1,593,667,377
2/8 $ 14.903808 $ 905,141,048 $ 688,526,329 $1,593,667,377
2/9 $ 14.902241 $ 905,043,895 $ 688,623,481 $1,593,667,377
2/10 $ 14.900675 $ 904,946,763 $ 688,720,613 $1,593,667,377
2/11 $ 14.899109 $ 904,849,652 $ 688,817,725 $1,593,667,377
2/12 $ 14.897544 $ 904,752,560 $ 688,914,816 $1,593,667,377
2/13 $ 14.895978 $ 904,655,489 $ 689,011,887 $1,593,667,377
2/14 $ 14.894413 $ 904,558,439 $ 689,108,938 $1,593,667,377
PER COMMON RESTRICTED STOCK UNITS TO SERIES C MERGER
DATE SHARE PRICE AND STOCK OPTIONS PREFERRED STOCK CONSIDERATION
-------- -------------- ---------------------- --------------- --------------
2/15 $ 14.892849 $ 904,461,409 $ 689,205,968 $1,593,667,377
2/16 $ 14.891284 $ 904,364,399 $ 689,302,978 $1,593,667,377
2/17 $ 14.889720 $ 904,267,410 $ 689,399,967 $1,593,667,377
2/18 $ 14.888157 $ 904,170,441 $ 689,496,936 $1,593,667,377
2/19 $ 14.886593 $ 904,073,492 $ 689,593,885 $1,593,667,377
2/20 $ 14.885030 $ 903,976,564 $ 689,690,813 $1,593,667,377
2/21 $ 14.883467 $ 903,879,656 $ 689,787,721 $1,593,667,377
2/22 $ 14.881905 $ 903,782,768 $ 689,884,608 $1,593,667,377
2/23 $ 14.880343 $ 903,685,901 $ 689,981,476 $1,593,667,377
2/24 $ 14.878781 $ 903,589,054 $ 690,078,323 $1,593,667,377
2/25 $ 14.877220 $ 903,492,228 $ 690,175,149 $1,593,667,377
2/26 $ 14.875659 $ 903,395,421 $ 690,271,955 $1,593,667,377
2/27 $ 14.874098 $ 903,298,635 $ 690,368,741 $1,593,667,377
2/28 $ 14.872538 $ 903,201,870 $ 690,465,507 $1,593,667,377
3/1 $ 14.870978 $ 903,105,124 $ 690,562,252 $1,593,667,377
3/2 $ 14.869418 $ 903,008,399 $ 690,658,977 $1,593,667,377
3/3 $ 14.867859 $ 902,911,695 $ 690,755,682 $1,593,667,377
3/4 $ 14.866299 $ 902,815,010 $ 690,852,367 $1,593,667,377
3/5 $ 14.864741 $ 902,718,346 $ 690,949,031 $1,593,667,377
3/6 $ 14.863182 $ 902,621,702 $ 691,045,675 $1,593,667,377
3/7 $ 14.861624 $ 902,525,078 $ 691,142,298 $1,593,667,377
3/8 $ 14.860066 $ 902,428,475 $ 691,238,902 $1,593,667,377
3/9 $ 14.858509 $ 902,331,892 $ 691,335,485 $1,593,667,377
3/10 $ 14.856951 $ 902,235,303 $ 691,432,074 $1,593,667,377
3/11 $ 14.855394 $ 902,138,734 $ 691,528,643 $1,593,667,377
3/12 $ 14.853837 $ 902,042,185 $ 691,625,192 $1,593,667,377
3/13 $ 14.852281 $ 901,945,657 $ 691,721,720 $1,593,667,377
3/14 $ 14.850724 $ 901,849,149 $ 691,818,228 $1,593,667,377
3/15 $ 14.849168 $ 901,752,661 $ 691,914,716 $1,593,667,377
3/16 $ 14.847613 $ 901,656,193 $ 692,011,184 $1,593,667,377
3/17 $ 14.846058 $ 901,559,745 $ 692,107,631 $1,593,667,377
3/18 $ 14.844503 $ 901,463,318 $ 692,204,059 $1,593,667,377
3/19 $ 14.842948 $ 901,366,911 $ 692,300,466 $1,593,667,377
3/20 $ 14.841394 $ 901,270,524 $ 692,396,853 $1,593,667,377
3/21 $ 14.839840 $ 901,174,157 $ 692,493,220 $1,593,667,377
3/22 $ 14.838286 $ 901,077,810 $ 692,589,566 $1,593,667,377
3/23 $ 14.836733 $ 900,981,484 $ 692,685,893 $1,593,667,377
3/24 $ 14.835180 $ 900,885,178 $ 692,782,199 $1,593,667,377
3/25 $ 14.833627 $ 900,788,892 $ 692,878,485 $1,593,667,377
3/26 $ 14.832075 $ 900,692,626 $ 692,974,751 $1,593,667,377
3/27 $ 14.830523 $ 900,596,380 $ 693,070,997 $1,593,667,377
3/28 $ 14.828971 $ 900,500,154 $ 693,167,222 $1,593,667,377
3/29 $ 14.827420 $ 900,403,949 $ 693,263,428 $1,593,667,377
3/30 $ 14.825869 $ 900,307,763 $ 693,359,613 $1,593,667,377
3/31 $ 14.824318 * $ 900,211,598 $ 693,455,779 ** $1,593,667,377
* In the event the Effective Time occurs after March 31, 2006, appropriate
adjustment will be made to the Per Common Share Price, determined in a
manner consistent with the foregoing.
** In the event the Effective Time occurs after March 31, 2006, appropriate
adjustment will be made to the amount payable to the holders of Company
Series C Preferred, determined in a manner consistent with the foregoing.
