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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE XXXXXXX XXXXXX CORPORATION,
PATRIOT MERGER CORPORATION
AND
U.S. TRUST CORPORATION
DATED AS OF JANUARY 12, 2000
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 12, 2000, by and
among The Xxxxxxx Xxxxxx Corporation, a Delaware corporation ("SCHWAB"), Patriot
Merger Corporation, a New York corporation and a wholly-owned subsidiary of
SCHWAB ("MERGER SUB"), and U.S. Trust Corporation, a New York corporation
("UST").
WHEREAS, the Boards of Directors of SCHWAB and UST have determined
that it is in the best interests of their respective companies and shareholders
to consummate the strategic business combination transaction provided for herein
in which MERGER SUB will merge (the "Merger") with and into UST so that UST is
the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") in the Merger;
WHEREAS, as a condition to, and simultaneously with the execution
and delivery of this Agreement, SCHWAB and UST are entering into a stock option
agreement (the "UST Option Agreement") pursuant to which UST is granting SCHWAB
an option to purchase shares of UST Common Stock (as defined in Section 1.4) on
the terms and subject to the conditions set forth therein;
WHEREAS, as a condition to, and simultaneously with the execution
and delivery of this Agreement, certain key employees of UST are entering into
employment agreements to be effective at the closing of the Merger (the
"Employment Agreements"); and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger.
NOW THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
Agreement, in accordance with New York Business Corporation Law (the "NYBCL"),
at the Effective Time (as defined in Section 1.2), MERGER SUB shall merge with
and into UST. UST shall be the Surviving Corporation in the Merger, and shall
continue its corporate existence under the laws of the State of New York. Upon
consummation of the Merger, the separate corporate existence of MERGER SUB shall
terminate.
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1.2 Effective Time. The Merger shall become effective as set forth
in the certificate of merger relating to the Merger (the "New York Certificate
of Merger") which shall be filed with the Department of State of the State of
New York (the "New York Department") on or before the Closing Date (as defined
in Section 9.1) in accordance with Section 904 of the NYBCL. The date and time
when the Merger becomes effective shall be the Closing Date or such other date
and time as is mutually agreed by UST and SCHWAB and set forth in the New York
Certificate of Merger (the "Effective Time").
1.3 Effects of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in Section 906 of the NYBCL.
1.4 Conversion of UST Common Stock. At the Effective Time, in each
case, subject to Section 2.2(e), by virtue of the Merger and without any action
on the part of SCHWAB, UST or the holder of any of the following securities:
(a) Each share of the common stock, par value $1.00 per
share, of UST (the "UST Common Stock") issued and outstanding immediately prior
to the Effective Time (other than shares of UST Common Stock held by SCHWAB,
MERGER SUB or UST (except for Trust Account Shares, as such term is defined in
Section 1.4(d))) shall be converted into the right to receive 3.427 shares (the
"Exchange Ratio") of common stock, par value $.01 per share, of SCHWAB (the
"SCHWAB Common Stock").
(b) All of the shares of UST Common Stock converted into
SCHWAB Common Stock pursuant to this Article I shall no longer be outstanding
and shall automatically be cancelled and shall cease to exist as of the
Effective Time, and each certificate (each a "Common Certificate") previously
representing any such shares of UST Common Stock shall thereafter represent the
right to receive (i) a certificate representing the number of whole shares of
SCHWAB Common Stock, (ii) cash in lieu of fractional shares into which the
shares of UST Common Stock represented by such Common Certificate have been
converted pursuant to this Section 1.4 and Section 2.2(e) and (iii) any
dividends or distributions which the holder thereof has the right to receive
pursuant to Section 2.2(b). Common Certificates previously representing shares
of UST Common Stock shall be exchanged for certificates representing whole
shares of SCHWAB Common Stock, cash in lieu of fractional shares issued in
consideration therefor and any such dividends or distributions upon the
surrender of such Common Certificates in accordance with Section 2.2, without
any interest thereon.
(c) If, prior to the Effective Time, the outstanding shares
of SCHWAB Common Stock or UST Common Stock shall have been increased, decreased,
changed into or exchanged for a different number or kind of shares or securities
as a result of a reorganization, recapitalization, reclassification, stock
dividend, issuance of securities pursuant to the UST Rights Agreement (as
defined below), stock split, reverse stock split, or other similar change in
capitalization, then an appropriate and proportionate adjustment shall be made
to the Exchange Ratio.
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(d) At the Effective Time, all shares of UST Common Stock
held by SCHWAB, MERGER SUB or UST (other than shares of UST Common Stock held,
directly or indirectly, in trust accounts, managed accounts and the like or
otherwise held in a fiduciary or custodial capacity that are beneficially owned
by third parties (any such shares, and shares of SCHWAB Common Stock which are
similarly held, whether held directly or indirectly by SCHWAB, MERGER SUB or
UST, as the case may be, being referred to herein as "Trust Account Shares")),
shall be cancelled and shall cease to exist and no stock of SCHWAB or other
consideration shall be delivered in exchange therefor.
1.5 MERGER SUB Common Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of SCHWAB or UST, each share of the
common stock, $.01 par value, of MERGER SUB shall be converted into one share of
UST Common Stock (which shares of UST Common Stock shall not be deemed
outstanding immediately prior to the Effective Time for the purposes of this
Agreement).
1.6 SCHWAB Common Stock. At and after the Effective Time, each share
of SCHWAB Common Stock issued and outstanding immediately prior to the Effective
Time shall remain an issued and outstanding share of SCHWAB Common Stock and
shall not be affected by the Merger.
1.7 Options and Contingent Issuances.
(a) At the Effective Time, each award, option, or other right
to purchase or acquire shares of UST Common Stock pursuant to stock options
granted by UST under its stock option plans, each of which is identified in
Section 3.2 of the UST Disclosure Schedule (each, a "Stock Option Plan"), and
all other rights, obligations, commitments or agreements of any character,
whether fixed or contingent, calling for the purchase or issuance of any shares
of UST Common Stock or any other equity securities of UST or any securities
representing the right to purchase or otherwise receive any shares of UST Common
Stock (collectively with such Stock Option Plans, the "UST Rights"), which are
outstanding at the Effective Time, whether or not vested or exercisable, unless
otherwise vested or exercised at or prior to the Effective Time in accordance
with the terms then in effect of the applicable UST Stock Plans (as defined in
Section 6.10), shall automatically be converted into and become options or other
equivalent rights with respect to SCHWAB Common Stock, and SCHWAB shall assume
each UST Right, in accordance with the same terms and conditions of the Stock
Option Plan or other agreement by which each respective UST Right is evidenced,
except from and after the Effective Time, (i) SCHWAB and its Board of Directors
and Compensation Committee shall be substituted for the Committee of UST's Board
of Directors (including, if applicable, the entire Board of Directors of UST)
administering the respective Stock Option Plans, (ii) each UST Right assumed by
SCHWAB may be exercised solely for shares of SCHWAB Common Stock, (iii) the
number of shares of SCHWAB Common Stock subject to such UST Right shall be equal
to the number of shares of UST Common Stock subject to such UST Right
immediately prior to the Effective Time multiplied by the Exchange Ratio,
provided that any fractional shares of SCHWAB Common Stock resulting from such
multiplication shall be rounded down to
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the nearest whole share and (iv) the per share exercise price under each such
UST Right shall be adjusted by dividing the per share exercise price under each
such UST Right by the Exchange Ratio and rounding to the nearest whole cent. As
to any UST Rights that are vested or that would vest by reason of the
transactions contemplated hereby, UST shall take the requisite action necessary,
including amending any applicable plan documents, to eliminate any cash payments
in connection with such options or rights and to provide for the conversion of
such options or rights at the Effective Time only into the number of shares of
SCHWAB Common Stock determined by dividing the net spread value of each such
option or right immediately prior to the Effective Time by the value of one
share of UST Common Stock as quoted on the New York Stock Exchange immediately
prior to the Effective Time and multiplying the resulting quotient by the
Exchange Ratio, and, as to any right to receive UST stock under any other
contract, UST shall take all action necessary to convert each such right into a
right to receive the number of shares of SCHWAB Common Stock determined by
dividing the net spread value of each such right immediately prior to the
Effective Time by the value of one share of UST Common Stock as quoted on the
New York Stock Exchange immediately prior to the Effective Time and multiplying
the resulting quotient by the Exchange Ratio. Notwithstanding the foregoing,
each UST Right which is an "incentive stock option" shall be adjusted as
required by Section 424 of the Code so as not to constitute a modification,
extension, or renewal of the option, within the meaning of Section 424(h) of the
Code. SCHWAB agrees to take all reasonable steps that are necessary to
effectuate the foregoing provisions of this Section.
(b) Prior to the Effective Time, SCHWAB shall take all
corporate action necessary to reserve for issuance sufficient shares of SCHWAB
Common Stock for delivery upon exercise of UST Rights assumed by SCHWAB in
accordance with this Section.
(c) As soon as practicable after the Effective Time, SCHWAB
shall deliver to each holder of UST Rights appropriate notices setting forth
such holder's rights pursuant to the Stock Option Plans and the agreements
pursuant to which such options were issued, and the Stock Option Plans and the
agreements evidencing the grants of such UST Rights shall continue in effect on
the same terms and conditions (subject to the conversion required by this
Section 1.7 after giving effect to the Merger and the assumption by SCHWAB as
set forth above). To the extent necessary to effectuate the provisions of this
Section 1.7, UST and SCHWAB shall deliver new or amended agreements reflecting
the terms of this Agreement and of each UST Right assumed by SCHWAB and amend
the Stock Option Plans to reflect the terms hereof.
1.8 Certificate of Incorporation. Subject to the terms and
conditions of this Agreement, at the Effective Time, the Certificate of
Incorporation of UST shall be amended as stated in Exhibit A hereto, and, as so
amended, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended in accordance with applicable law.
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1.9 Bylaws. Subject to the terms and conditions of this Agreement,
at the Effective Time, the Bylaws of MERGER SUB shall be the Bylaws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
1.10 Directors and Officers of Surviving Corporation and
Subsidiaries.
(a) At the Effective Time, the officers of UST and its
subsidiaries immediately prior to the Effective Time shall be the officers of
the Surviving Corporation and its subsidiaries following the Merger.
(b) Immediately prior to the Effective Time, the directors of
UST shall submit their resignations from the Board of Directors of UST. At the
Effective Time, SCHWAB shall take all necessary actions so that, at the
Effective Time, the persons listed on Section 1.10(b) of the UST Disclosure
Schedule shall be appointed to the Board of Directors of the Surviving
Corporation.
(c) Immediately prior to the Effective Time, the directors of
the subsidiaries of UST shall submit their resignations from the Board of
Directors of such subsidiaries. At the Effective Time, SCHWAB shall take all
action necessary so that, immediately following the Effective Time, the Persons
listed on Section 1.10(c) of the UST Disclosure Schedule shall be appointed to
the Board of Directors of the subsidiaries of the Surviving Corporation.
(d) Prior to the Effective Time, UST shall take all corporate
actions necessary such that all directors of the Surviving Corporation and its
subsidiaries may be removed without cause following the Effective Time at the
discretion of the shareholder of each such corporation.
1.11 Representation on SCHWAB Board of Directors and Management
Committee.
(a) At the Effective Time, SCHWAB shall take all necessary
actions so that, immediately following the Effective Time, the persons listed on
Section 1.11(a) of the UST Disclosure Schedule shall be appointed to the Board
of Directors of SCHWAB.
(b) At the Effective Time, SCHWAB shall take all action
necessary so that, immediately following the Effective Time, the Persons listed
on Section 1.11(b) of the UST Disclosure Schedule shall be appointed to the
SCHWAB management committee.
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ARTICLE II
EXCHANGE OF SHARES
2.1 SCHWAB to Make Shares Available. At or prior to the Effective
Time, SCHWAB shall deposit, or shall cause to be deposited, with a bank or trust
company selected by SCHWAB and reasonably acceptable to UST (the "Exchange
Agent"), for the benefit of the holders of Common Certificates, for exchange in
accordance with this Article II, certificates representing the shares of SCHWAB
Common Stock and cash in lieu of any fractional shares (such cash and
certificates for shares of SCHWAB Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 1.4 and paid pursuant to
Section 2.2(a) in exchange for outstanding shares of UST Common Stock.
2.2 Exchange of Shares.
(a) As soon as practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of one or more Common
Certificates a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Common Certificates shall pass, only
upon delivery of the Common Certificates to the Exchange Agent) and instructions
for use in effecting the surrender of the Common Certificates in exchange for
certificates representing the shares of SCHWAB Common Stock, any dividends or
distributions which a holder of Common Certificates has a right to receive
pursuant to Section 2.2(b) and any cash in lieu of fractional shares into which
the shares of UST Common Stock represented by such Common Certificate or Common
Certificates shall have been converted pursuant to this Agreement. Upon proper
surrender of a Common Certificate for exchange and cancellation to the Exchange
Agent, together with such properly completed letter of transmittal, duly
executed, the holder of such Common Certificate shall be entitled to receive in
exchange therefor (i) a certificate representing that number of whole shares of
SCHWAB Common Stock to which such holder of UST Common Stock shall have become
entitled pursuant to the provisions of Article I and (ii) a check representing
the aggregate amount of (x) any cash dividends or distributions which such
holder has a right to receive pursuant to Section 2.2(b) and (y) any cash
(rounded to the nearest whole cent) in lieu of fractional shares of SCHWAB
Common Stock which such holder has the right to receive in respect of the Common
Certificate surrendered pursuant to the provisions of this Article II, and the
Common Certificate so surrendered shall forthwith be cancelled. No interest will
be paid or accrued on any cash in lieu of fractional shares or on any unpaid
dividends or distributions payable to holders of Common Certificates.
(b) No dividends or other distributions declared after the
Effective Time with respect to SCHWAB Common Stock shall be paid to the holder
of any unsurrendered Common Certificate until the holder thereof shall surrender
such Common Certificate in accordance with this Article II. After the surrender
of a Common Certificate in accordance with this Article II, the record holder
thereof shall be entitled to receive any such dividends or other distributions,
without any interest thereon, which
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theretofore had become payable with respect to shares of SCHWAB Common Stock
represented by such Common Certificate. In addition, after the surrender of a
Common Certificate in accordance with this Article II, the record holder thereof
shall be entitled to receive any dividends or distributions, without interest
thereon, with a record date prior to the Effective Time which may have been
declared or made by UST with respect to shares of UST Common Stock represented
by such Common Certificate and which remain unpaid at the Effective Time.
(c) If any certificate representing shares of SCHWAB Common
Stock is to be issued in a name other than that in which the Common Certificate
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the Common Certificate so surrendered shall be properly
endorsed (or accompanied by an appropriate instrument of transfer) and otherwise
in proper form for transfer, and that the person requesting such exchange shall
pay to the Exchange Agent in advance any transfer or other taxes required by
reason of the issuance of a certificate representing shares of SCHWAB Common
Stock in any name other than that of the registered holder of the Common
Certificate surrendered, or required for any other reason, or shall establish to
the reasonable satisfaction of the Exchange Agent that such tax has been paid or
is not payable.
(d) After the Effective Time, there shall be no transfers on
the stock transfer books of UST of the shares of UST Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Common Certificates representing such shares are presented for
transfer to the Exchange Agent, they shall be cancelled and exchanged for
certificates representing shares of SCHWAB Common Stock as provided in this
Article II.
(e) Notwithstanding anything to the contrary contained
herein, no certificates or scrip representing fractional shares of SCHWAB Common
Stock shall be issued upon the surrender for exchange of Common Certificates, no
dividend or distribution with respect to SCHWAB Common Stock shall be payable on
or with respect to any fractional share, and such fractional share interests
shall not entitle the owner thereof to vote or to any other rights of a
shareholder of UST. In lieu of the issuance of any such fractional share, SCHWAB
shall pay to each former shareholder of UST who otherwise would be entitled to
receive such fractional share an amount in cash, rounded to the nearest whole
cent, determined by multiplying (i) the closing-sale price of SCHWAB Common
Stock on the NYSE as reported by The Wall Street Journal on the last trading day
prior to the Effective Time (the "Applicable Market Value Per Share of SCHWAB
Common Stock") by (ii) the fraction of a share (rounded to the nearest
thousandth of a share) of SCHWAB Common Stock which such holder would otherwise
be entitled to receive pursuant to Section 1.4.
(f) Any portion of the Exchange Fund that remains unclaimed
by the shareholders of UST for 12 months after the Effective Time shall be paid
to SCHWAB. Any shareholders of UST who have not theretofore complied with this
Article II shall thereafter look only to SCHWAB for payment of the shares of
SCHWAB
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Common Stock or cash in lieu of any fractional shares and any unpaid dividends
and distributions on the SCHWAB Common Stock deliverable in respect of each
share of UST Common Stock such shareholder holds as determined pursuant to this
Agreement without any interest thereon. Notwithstanding the foregoing, none of
UST, SCHWAB, the Exchange Agent or any other person shall be liable to any
former holder of shares of UST Common Stock for any amount delivered in good
faith to a public official pursuant to applicable abandoned property, escheat or
similar laws.
(g) In the event any Common Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Common Certificate to be lost, stolen or destroyed and, if
reasonably required by SCHWAB, the posting by such person of a bond in such
amount as SCHWAB may determine is reasonably necessary as indemnity against any
claim that may be made against it with respect to such Common Certificate, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed Common
Certificate the shares of SCHWAB Common Stock, any cash in lieu of fractional
shares deliverable in respect thereof pursuant to this Agreement and any cash
dividends or disbursements which such holder has a right to receive pursuant to
Section 2.2(b).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF UST
Except as set forth in the disclosure schedule, dated the date
hereof, delivered by UST to SCHWAB, with reference to the specific section of
the Agreement to which each disclosure relates (the "UST Disclosure Schedule")
or as set forth in UST Reports (as defined in Section 3.12) filed since January
1, 1997, UST hereby represents and warrants to SCHWAB as follows:
3.1 Corporate Organization.
(a) UST is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York. UST has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have a UST
Material Adverse Effect. As used in this Agreement, the term "UST Material
Adverse Effect" means, with respect to UST, any effect that (i) is, or would be
reasonably likely to be, material and adverse to the business, operations,
financial condition or results of operations of UST and its subsidiaries taken
as a whole or (ii) does, or would be reasonably likely to, prevent UST from
consummating the Merger and the other transactions contemplated hereby
(including the UST Option Agreement and the transactions contemplated thereby),
other than (i) any effect resulting from
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events, facts or circumstances relating to the economy in general, including
market fluctuations and changes in interest rates, or to UST's industry in
general and not specifically relating to UST or any UST Subsidiary and (ii) the
loss of customer business, in whole or in part, resulting from the announcement
or consummation of this Agreement or the transactions contemplated hereby. As
used in this Agreement, the word "Subsidiary" when used with respect to any
party means any bank, corporation, partnership, limited liability company or
other organization, whether an incorporated or unincorporated organization (a
"Corporate Entity"), which is consolidated with such party for financial
reporting purposes or which otherwise would be deemed to be a subsidiary of such
party within the meaning of the Bank Holding Company Act of 1956, as amended
(the "BHCA"). UST is duly registered as a bank holding company under the BHCA.
True and complete copies of the Certificate of Incorporation and Bylaws of UST,
as in effect as of the date of this Agreement, have previously been delivered by
UST to SCHWAB.
(b) Section 3.1(b) of the UST Disclosure Schedule sets forth
a complete and correct list of all of UST's Subsidiaries (each a "UST
Subsidiary" and collectively the "UST Subsidiaries"); such list identifies those
UST Subsidiaries that have as their primary Federal bank regulatory agency the
Federal Reserve Board and those UST Subsidiaries that are not so regulated.
Section 3.1(b) of the UST Disclosure Schedule also sets forth a list identifying
the number (other than wholly-owned Subsidiaries) and owner of all outstanding
capital stock or other equity securities of each such Subsidiary, options,
warrants, stock appreciation rights, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, shares of any capital stock or other equity securities of such
Subsidiary, or contracts, commitments, understandings or arrangements by which
such Subsidiary may become bound to issue additional shares of its capital stock
or other equity securities, or options, warrants, scrip, rights to subscribe,
calls or commitments for any shares of its capital stock or other equity
securities and the identity of the parties to any such agreements or
arrangements. All of the outstanding shares of capital stock or other securities
evidencing ownership of the UST Subsidiaries are validly issued, fully paid and
nonassessable and such shares or other securities are owned by UST or another of
its Subsidiaries free and clear of any lien, claim, charge, option, encumbrance,
mortgage, pledge or security interest (a "Lien") with respect thereto. Each UST
Subsidiary (i) is a duly organized and validly existing corporation, partnership
or limited liability company or other legal entity under the laws of its
jurisdiction of organization, (ii) is duly qualified to do business and is in
good standing in all jurisdictions (whether federal, state, local or foreign)
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified (except for jurisdictions in which the failure to
be so qualified would not be reasonably likely to have a UST Material Adverse
Effect) and (iii) has all requisite corporate power and authority to own or
lease its properties and assets and to carry on its business as now conducted.
Except for its interests in the UST Subsidiaries, UST does not as of the date of
this Agreement own, directly or indirectly, any capital stock, membership
interest, partnership interest, joint venture interest or other equity interest
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with a fair market value as of the date of this Agreement in excess of $10
million in any person.
3.2 Capitalization. The authorized capital stock of UST consists of
70,000,000 shares of UST Common Stock, of which, as of January 6, 2000,
18,660,600 shares were issued and outstanding, and 4,000,000 shares of Series A
Participating Cumulative Preferred Shares, par value $1.00 per share (the "UST
Preferred Stock"), of which, as of January 6, 2000, none were issued and
outstanding. As of January 6, 2000, there were 22,118,743 shares of UST Common
Stock on a fully diluted basis determined in the manner described in Section 3.2
of the UST Disclosure Schedule. Except for 1,427,180 shares of UST Common Stock
that were held in treasury as of January 6, 2000, no shares of UST Common Stock
were held by UST or any of its Subsidiaries (except for Trust Account Shares) as
of January 6, 2000. All of the issued and outstanding shares of UST Common Stock
have been duly authorized and validly issued and are fully paid, non-assessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof. Except for the UST Option Agreement and rights ("UST
Preferred Rights") to purchase UST Preferred Stock issued pursuant to the Rights
Agreement (the "UST Rights Agreement") dated as of September 1, 1995, between
UST and First Chicago Trust Company of New York, as Rights Agent, and except as
provided below, UST does not have and is not bound by any UST Rights. UST has
previously provided SCHWAB with a list dated the date of this Agreement of all
holders, as of January 6, 2000, of UST Rights, including the names of holders of
such rights, the date of the grant or issuance of such rights, the number of
shares subject to such rights, the expiration date of such rights, the vesting
schedule of such rights and whether such vesting schedule shall be accelerated
as a result of UST's entry into this Agreement or consummation of the
transactions contemplated hereby, and the price at which each such right may be
exercised. Since December 31, 1999, UST has not (i) issued any shares of its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock, other than shares of UST Common Stock issued upon the
exercise or conversion of such UST Rights outstanding as of December 31, 1999,
as described in the immediately preceding sentence and UST Preferred Rights
associated with shares of UST Common Stock or (ii) taken any actions which would
cause an antidilution adjustment under any outstanding UST Rights. Except as
permitted under Section 5.2, there are, and there will be, no outstanding
contractual obligations of UST or any of its Subsidiaries to repurchase, redeem
or otherwise acquire, or to register for sale, any shares of capital stock of
UST or any of its Subsidiaries. There are no outstanding contractual obligations
of UST or any of its Subsidiaries to vote or to dispose of any shares of the
capital stock of UST or any of its Subsidiaries. There are no shareholder
agreements, voting trusts or similar agreements relating to the UST Common Stock
to which UST is a party.
3.3 Authority; No Violation.
(a) UST has full corporate power and authority to execute and
deliver this Agreement and subject to receipt of UST Shareholder Approval (as
defined below) to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the UST Option Agreement and the consummation
of the
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transactions contemplated hereby and thereby have been duly and validly approved
by the Board of Directors of UST. The Board of Directors of UST has directed
that this Agreement and the transactions contemplated hereby be submitted to
UST's shareholders for approval at a meeting of such shareholders and, except
for the adoption of this Agreement by the affirmative vote of the holders of
two-thirds of the votes of the outstanding shares of UST Common Stock entitled
to vote thereon (the "UST Shareholder Approval"), no other corporate proceedings
on the part of UST and no other shareholder votes are necessary to approve this
Agreement and the UST Option Agreement and to consummate the transactions
contemplated hereby and thereby. This Agreement and the UST Option Agreement
have been duly and validly executed and delivered by UST. Assuming due
authorization, execution and delivery by SCHWAB and MERGER SUB, this Agreement
and the UST Option Agreement constitute valid and binding obligations of UST,
enforceable against UST in accordance with their terms, subject, in the case of
this Agreement, to the receipt of the UST Shareholder Approval.
(b) Neither the execution and delivery of this Agreement and
the UST Option Agreement by UST nor the consummation by UST of the transactions
contemplated hereby and thereby, nor compliance by UST with any of the terms or
provisions hereof and thereof, will (i) violate any provision of the
Certificates of Incorporation or Bylaws of UST or any of its Subsidiaries or
(ii) assuming that the consents and approvals referred to in Section 3.4 are
duly obtained, (x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to UST or any of its
Subsidiaries or any of their respective properties or assets or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by or
rights or obligations under, or result in the creation of any Lien upon any of
the respective properties or assets of UST or any of its Subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement, contract, or other instrument or
obligation to which UST or any of its Subsidiaries is a party, or by which they
or any of their respective properties, assets or business activities may be
bound or affected, except (in the case of clause (ii) above) for such
violations, conflicts, breaches, defaults or the loss of benefits which, either
individually or in the aggregate, would not be reasonably likely to result in a
UST Material Adverse Effect.
3.4 Consents and Approvals. Except for (i) the requisite filings
with, notices to and approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the BHCA and the Federal Reserve Act,
as amended, (ii) the filing of any required applications or notices with the
Federal Reserve Bank of New York, the Office of the Comptroller of the Currency,
the Department of Justice, the Federal Trade Commission, the New York State
Banking Department, the Department of Banking of the State of Connecticut, the
Florida Department of Banking and Finance, the New Jersey Department of Banking
and Insurance, the North Carolina Commissioner of
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Banks, the Office of Thrift Supervision, the Federal Deposit Insurance
Corporation, the Pennsylvania Department of Banking, the Delaware State Banks
Commissioner, the District of Columbia Office of Banking and Financial
Institutions, the Cayman Islands Banking Commission, the National Association of
Securities Dealers and other applicable federal, state or foreign governmental
agencies or authorities as set forth in Schedule 3.4 of the UST Disclosure
Schedule and approval of such applications and notices, (iii) the filing with
the SEC of a proxy statement in definitive form relating to the meeting of UST's
shareholders to be held in connection with this Agreement and the transactions
contemplated hereby (the "Proxy Statement") which shall be included in the
SCHWAB registration statement on Form S-4 (the "S-4") and any other filings
required to be made with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (iv) the filing of the New York Certificate of
Merger with the New York Department pursuant to the NYBCL, (v) any consent,
authorizations, approvals, filings or exemptions in connection with compliance
with the applicable provisions of federal, state and foreign laws relating to
the regulation of broker-dealers, investment advisers (including the Investment
Advisers Act of 1940, as amended (the "Advisers Act")) and insurance agencies
and the rules of any domestic or foreign securities, broker-dealer, investment
adviser and insurance industry self-regulatory organization ("SRO") with
jurisdiction over UST or any of its Subsidiaries, (vi) the consents, approvals
and notices required or contemplated under the Investment Company Act of 1940,
as amended (the "1940 Act"), (vii) the UST Shareholder Approval and (viii) such
additional consents and approvals, the failure of which to make or obtain would
not be reasonably likely to have a UST Material Adverse Effect, no consents or
approvals of or filings or registrations with any court, administrative agency
or commission or other governmental or regulatory authority or instrumentality
(each a "Governmental Entity") or of or with any third party are necessary in
connection with (A) the execution and delivery by UST of this Agreement and the
UST Option Agreement and (B) the consummation by UST of the Merger and the other
transactions contemplated hereby. UST has no reason to believe that any
Requisite Regulatory Approvals (as defined in Section 7.1(c)) will not be
obtained.
3.5 Reports. UST and each of its Subsidiaries have filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since January 1,
1997 with (i) the SEC, (ii) any SRO, (iii) the Federal Reserve Board, (iv) the
Federal Deposit Insurance Corporation, (v) the Office of the Comptroller of the
Currency and (vi) any other federal, state or foreign governmental or regulatory
agency or authority (the agencies and authorities identified in clauses (i)
through (vi), inclusive, are, collectively, the "Regulatory Agencies"), and all
other reports and statements required to be filed by them since January 1, 1997,
including any report or statement required to be filed pursuant to the laws,
rules or regulations of the United States, any state, or any Regulatory Agency
and have paid all fees and assessments due and payable in connection therewith,
except where the failure to file such report, registration or statement or to
pay such fees and assessments, either individually or in the aggregate, would
not be reasonably likely to result in a UST Material Adverse Effect. Except for
normal examinations conducted by a
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Regulatory Agency in the regular course of the business of UST and its
Subsidiaries, no Regulatory Agency has initiated any proceeding or, to the best
knowledge of UST, investigation into the business or operations of UST or any of
its Subsidiaries since January 1, 1997, except where any such proceedings or
investigations are not, individually or in the aggregate, reasonably likely to
result in a UST Material Adverse Effect. There are no unresolved violations,
criticisms, or exceptions by any Regulatory Agency with respect to any report or
statement relating to any examinations of UST or any of its Subsidiaries, except
where any such violations, criticisms or exceptions are not, individually or in
the aggregate, reasonably likely to result in a UST Material Adverse Effect.
3.6 Financial Statements. UST has previously made available to
SCHWAB copies of (a) the consolidated balance sheets of UST and its Subsidiaries
as of December 31, for the fiscal years 1997 and 1998, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the fiscal years 1996 through 1998, inclusive, as reported in UST's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (the "UST
1998 Form 10-K") filed with the SEC under the Exchange Act, in each case
accompanied by the audit report of PricewaterhouseCoopers, LLP, independent
public accountants, and (b) the unaudited consolidated balance sheet of UST and
its Subsidiaries as of September 30, 1999, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
nine months ended September 30, 1999, as reported in UST's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999 ("UST Form 10-Q"), filed with
the SEC under the Exchange Act. The financial statements referred to in this
Section 3.6 do, and any financial statements filed by UST with the SEC under the
Exchange Act after the date of this Agreement (including the related notes,
where applicable) will, fairly present in all material respects (including the
related notes, where applicable) the consolidated financial position and results
of operations and changes in stockholders' equity and cash flows of UST and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the related notes, where
applicable) comply or will comply with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto; and
each of such statements (including the related notes, where applicable) has been
and will be prepared in accordance with generally accepted accounting principles
("GAAP"), consistently applied during the periods involved, except for the
absence of certain footnotes and schedules in the case of unaudited financial
statements. The books and records of UST and its Subsidiaries have been, and are
being, maintained in accordance with applicable legal and accounting
requirements in all material respects.
3.7 Broker's Fees. Except for Credit Suisse First Boston Corporation
("CSFB"), neither UST nor any UST Subsidiary has employed any broker or finder
or incurred any liability for any broker's fees, commissions or finder's fees in
connection with the Merger or related transactions contemplated by this
Agreement.
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3.8 Absence of Certain Changes or Events.
(a) Since September 30, 1999, (i) no event has occurred and
no fact or circumstance shall have come to exist or come to be known which,
directly or indirectly, individually or taken together with all other facts,
circumstances and events, has had, or is reasonably likely to have, a UST
Material Adverse Effect, (ii) UST and its Subsidiaries have, in all material
respects, carried on their respective businesses in the ordinary and usual
course consistent with their past practices and (iii) there has not been (w) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of UST's Common Stock,
(x) any split, combination or reclassification of any of UST's Common Stock or
the authorization of any issuance of other securities in respect of, in lieu of
or in substitution for shares of UST's Common Stock, (y) any change in
accounting methods, principles or practices by UST materially affecting its
assets, liabilities or businesses, except insofar as have been required by a
change in GAAP or (z) any Tax election that individually or in the aggregate
would be reasonably likely to have a UST Material Adverse Effect or any
settlement or compromise of any material Tax liability.
(b) Except as permitted by this Agreement, since December 31,
1998, neither UST nor any of its Subsidiaries has (i) except for such actions as
are in the ordinary course of business consistent with past practice or as
required by applicable law (x) increased the wages, salaries, compensation,
pension, or other fringe benefits or perquisites payable to any executive
officer or director from the amount thereof in effect as of December 31, 1998,
(y) granted any severance or termination pay, entered into any contract to make
or grant any severance or termination pay, or paid any bonus other than
customary year-end bonuses for fiscal 1998 or fiscal 1999 or (z) granted any
stock appreciation rights or rights to acquire any shares of its capital stock
to any officer, director or employee, other than grants made in the ordinary
course of business pursuant to the Stock Option Plans or (ii) suffered any
strike, work stoppage, slowdown, or other material labor disturbance.
3.9 Legal Proceedings.
(a) Neither UST nor any of its Subsidiaries is a party to
any, and there are no pending or, to the best knowledge of UST, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against UST or any of
its Subsidiaries which are reasonably likely, individually or in the aggregate,
to result in a UST Material Adverse Effect, nor, to the best knowledge of UST,
is there any basis for any proceeding, claim or any action against UST or any of
its Subsidiaries that would be reasonably likely, individually or in the
aggregate, to result in a UST Material Adverse Effect; provided that, any
litigation challenging the validity or propriety of the transactions
contemplated by this Agreement or the UST Option Agreement shall not be deemed a
UST Material Adverse Effect for purposes of this Agreement.
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(b) There is no injunction, order, judgment or decree imposed
upon UST, any of its Subsidiaries or the assets of UST or any of its
Subsidiaries which has resulted in, or is reasonably likely to result in, a UST
Material Adverse Effect.
3.10 Taxes and Tax Returns.
(a) UST and each of its Subsidiaries has duly filed or caused
to be filed all federal, state, foreign and, to the best knowledge of UST, local
Tax returns and reports required to be filed by it on or prior to the date of
this Agreement (all such returns and reports being accurate and complete in all
material respects) and has duly paid or caused to be paid on their behalf all
Taxes that are due and payable other than Taxes which are being contested in
good faith and are adequately reserved against or provided for (in accordance
with GAAP) on the applicable financial statements for such company. Through the
date hereof, UST and its Subsidiaries do not have any liability for Taxes in
excess of the amount reserved or provided for on their financial statements (but
excluding, for this purpose only, any liability reflected thereon for deferred
taxes to reflect timing differences between tax and financial accounting
methods).
(b) The consolidated federal income tax returns of UST and
its Subsidiaries for each taxable year through December 31, 1993, have been
examined by the Internal Revenue Service (the "IRS"). Section 3.10(b) of the UST
Disclosure Schedule identifies all pending audits or examinations with respect
to any Tax Returns of UST and its Subsidiaries.
(c) There are no disputes pending with respect to, or claims
or assessments asserted in writing for any material amount of Taxes upon UST or
any of its Subsidiaries, nor has UST or any of its Subsidiaries given or been
requested in writing to give any currently effective waivers extending the
statutory period of limitation applicable to any Tax return for any period.
(d) Proper and accurate amounts have been withheld by UST and
its Subsidiaries from their employees, independent contractors, creditors,
stockholders or other third parties for all periods in compliance with the tax
withholding provisions of any applicable law.
(e) Since December 31, 1997, neither UST nor any of its
Subsidiaries has been required to include in income any material adjustment
pursuant to Section 481 of the Code by reason of a voluntary change in
accounting method initiated by UST or any of its Subsidiaries, and the IRS has
not initiated or proposed any such material adjustment or change in accounting
method (including any method for determining reserves for bad debts maintained
by UST or any Subsidiary).
(f) Neither UST nor any of its Subsidiaries (i) is a party to
a Tax allocation or Tax sharing agreement (other than an agreement solely among
members of a group the common parent of which is UST) or (ii) has any liability
for the Taxes of any person (other than any of UST or its Subsidiaries) under
Treasury Regulation Section
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1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise.
(g) UST is not aware of any fact or circumstance that could
reasonably be expected to prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code.
(h) The corporate spin-off transaction consummated by UST in
1995 (the "1995 Spin-Off") was consummated in accordance with the private letter
ruling issued by the Internal Revenue Service on August 31, 1995, and all
representations made to the IRS in connection with such ruling and any related
ruling requests were true, complete and accurate in all material respects. Since
consummation of the 1995 Spin-Off, UST has not taken any action, and is not
aware of the occurrence of any other event or action, that would cause UST to
lose the ability to rely on the IRS private letter ruling. Other than the ruling
identified above related to the 1995 Spin-Off, UST has not sought any other
rulings from the Internal Revenue Service regarding Taxes since January 1, 1995.
(i) Other than its Common Stock, there exists no other
outstanding security (including, but not limited to, the UST Capital A
$50,000,000 8.414% Capital Securities) or instrument of any type (whether
issued, sponsored or guaranteed by UST or any Subsidiary of UST) that could be
treated as an equity interest in UST for any income tax purposes.
(j) None of UST and its Subsidiaries is a party to any
contract, agreement, plan or arrangement covering any person that is reasonably
likely to give rise to the payment of any amount (except for any amount that
will become payable solely as a result of the transactions contemplated by this
Agreement) that would not be deductible by reason of Section 162(m) of the Code.
(k) As used in this Agreement, the term "Tax" or "Taxes"
means all federal, state, local, and foreign income, excise, gross receipts,
gross income, ad valorem, profits, gains, property, capital, sales, transfer,
use, value-added, stamp, documentation, payroll, employment, severance,
withholding, duties, intangibles, franchise, backup withholding, and other
taxes, charges, levies or like assessments together with all penalties and
additions to tax and interest thereon.
3.11 Employees.
(a) Section 3.11(a) of the UST Disclosure Schedule sets forth
a true and complete list as of the date hereof of each employee benefit plan,
arrangement or agreement that is maintained as of the date of this Agreement,
including all such plans, arrangements or agreements relating to directors,
executive officers, key employees and material consultants of UST and its
Subsidiaries (the "UST Benefit Plans"), by UST or any of its Subsidiaries or by
any trade or business, whether or not incorporated (a "UST ERISA Affiliate"),
all of which together with UST would be deemed a "single employer"
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within the meaning of Section 4001 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
(b) UST has heretofore delivered to SCHWAB true and complete
copies of each of the UST Benefit Plans and certain related documents, including
(i) the actuarial report for each such UST Benefit Plan (if applicable) for each
of the last two years ended December 31, 1998 and (ii) the most recent
determination letter from the IRS (if applicable) for each such Plan.
(c) (i) Each of the UST Benefit Plans has been operated and
administered in accordance with applicable laws, including ERISA and the Code,
except where such operation or administration is not, individually or in the
aggregate, reasonably likely to result in a UST Material Adverse Effect, (ii)
each of the UST Benefit Plans intended to be "qualified" within the meaning of
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service, and UST is not aware of any circumstances that are
reasonably likely to result in the revocation of such favorable determination
letter, (iii) no UST Benefit Plan provides benefits, including death or medical
benefits (whether or not insured), with respect to current or former employees
of UST, its Subsidiaries or any UST ERISA Affiliate beyond their retirement or
other termination of service, other than (w) coverage mandated by applicable
law, (x) death benefits or retirement benefits under any "employee pension plan"
(as such term is defined in Section 3(2) of ERISA), (y) deferred compensation
benefits accrued as liabilities on the books of UST, its Subsidiaries or the UST
ERISA Affiliates or (z) benefits the full cost of which is borne by the current
or former employee (or his beneficiary) and other than benefits that would not
be reasonably likely to have a UST Material Adverse Effect, (iv) no liability
under Title IV of ERISA has been incurred by UST, its Subsidiaries or any UST
ERISA Affiliate that has not been satisfied in full, and, to the best knowledge
of UST, no condition exists that presents a risk to UST, its Subsidiaries or any
UST ERISA Affiliate of incurring a material liability thereunder other than
liabilities that would not be reasonably likely to have a UST Material Adverse
Effect, (v) no UST Benefit Plan is a "multiemployer pension plan" (as such term
is defined in Section 3(37) of ERISA), (vi) all contributions or other amounts
payable by UST or its Subsidiaries as of the Effective Time with respect to each
UST Benefit Plan in respect of current or prior plan years have been paid or
accrued in accordance with GAAP and Section 412 of the Code except for such
contributions and other amounts that would not be reasonably likely to have a
UST Material Adverse Effect, (vii) neither UST, its Subsidiaries nor any UST
ERISA Affiliate has engaged in a transaction in connection with which UST, its
Subsidiaries or any UST ERISA Affiliate reasonably could be expected to become
subject to either a material civil penalty assessed pursuant to Section 409 or
502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of
the Code except for such penalties and Taxes as would not be reasonably likely
to have a UST Material Adverse Effect and (viii) there are no pending, or, to
the best knowledge of UST, threatened or anticipated claims (other than routine
claims for benefits) by, on behalf of or against any of the UST Benefit Plans or
any trusts related thereto which are reasonably likely to result in a UST
Material Adverse Effect.
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(d) Except as set forth in a schedule previously delivered by
UST to SCHWAB, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute,
forgiveness of indebtedness or otherwise) becoming due to any director or any
key employee of UST or any of its affiliates from UST or any of its affiliates
under any UST Benefit Plan or otherwise, (ii) materially increase any benefits
otherwise payable under any UST Benefit Plan or (iii) result in any acceleration
of the time of payment or vesting of any such benefits to any material extent.
(e) UST has amended those UST Benefit Plans which would have
otherwise provided for a cash payment or cash settlement at the Effective Time
in lieu of UST Common Stock, to provide for conversion into SCHWAB Common Stock
at the Effective Time in the manner described in Section 1.7 of this Agreement.
(f) The Board of Directors (or appropriate committee thereof)
of UST and its Subsidiaries, as applicable, has adopted resolutions and/or has
taken such other action as is necessary to ensure that no benefit under any UST
Benefit Plan (other than the 1989 Stock Compensation Plan and Predecessor Plans,
the 1995 Stock Option Plan, the Deferred Restricted Unit Plan, the equity
portions of the Executive Incentive Plan relating to Awards for Plan Year 1999
and prior years, and the equity portion of the Benefit Equalization Plan) shall
accelerate payment as a result of the Merger or the transactions contemplated
hereby, including, without limitation, the adoption of resolutions that the
Merger and the transactions contemplated hereby do not constitute a "change in
control" or "change of control," as such terms are used in such UST Benefit
Plans.
3.12 SEC Reports. UST has previously made available to SCHWAB an
accurate and complete copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1997, by
UST with the SEC pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act (the "UST Reports") and (b) communication
mailed by UST to its shareholders since January 1, 1997. As of the date of
filing or mailing, as the case may be, no such registration statement,
prospectus, report, schedule, proxy statement or communication contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading
(except to the extent corrected in a subsequent filed registration statement,
prospectus, report, schedule, proxy statement or communication). Since January
1, 1997, UST and each UST Subsidiary has timely filed all reports and other
documents required to be filed by them under the Securities Act and the Exchange
Act, and, as of their respective dates, all such reports complied in all
material respects with the published rules and regulations of the SEC with
respect thereto.
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3.13 Compliance with Applicable Law.
(a) UST and each of its Subsidiaries and each of their
employees hold all licenses, registrations, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
and are in compliance with, and are not in violation of, under any applicable
law, statute, order, rule, regulation, policy and/or guideline of any
Governmental Entity relating to UST or any of its Subsidiaries, except in each
case where the failure to hold such license, registration, franchise, permit or
authorization or such noncompliance or violation is not, individually or in the
aggregate, reasonably likely to result in a UST Material Adverse Effect, and
neither UST nor any of its Subsidiaries knows of, or has received notice of, any
violations of any of the above, except for such violations which are not,
individually or in the aggregate, reasonably likely to result in a UST Material
Adverse Effect. The use by UST of the words "United States" as part of the
business or firm name does not violate 18 U.S.C. Section 709.
(b) Except as would not be reasonably likely to have a UST
Material Adverse Effect, UST and each UST Subsidiary have properly administered
all accounts for which UST or any UST Subsidiary acts as a fiduciary, including
accounts for which UST or any UST Subsidiary serves as a trustee, agent,
custodian, personal representative, guardian, conservator or investment adviser,
in accordance with the terms of the governing documents, applicable state and
federal law and regulation and common law. None of UST or any UST Subsidiary, or
any director, officer or employee of UST or any UST Subsidiary, has committed
any breach of trust with respect to any such fiduciary account that would be
reasonably likely to have a UST Material Adverse Effect, and the accountings for
each such fiduciary account are true and correct in all material respects and
accurately reflect in all material respects the assets of such fiduciary
account.
(c) Each insured depository institution Subsidiary of UST is
"well-capitalized" (as that term is defined at 12 C.F.R. 208.43(b)(1) or the
relevant regulation of the institution's primary federal bank regulator), and
"well managed" (as that term is defined at 12 C.F.R. 225.2(s)), and the
institution's Community Reinvestment Act of 1997 rating is no less than
"satisfactory." Neither UST nor any UST Subsidiary has been informed that its
status as "well-capitalized," "well managed" or "satisfactory" for CRA purposes
will change within one year.
3.14 Certain Contracts. Neither UST 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, (ii)
which as of the date hereof is a "material contract" (as such term is defined in
Item 601(b)(10) of Regulation S-K of the SEC) that has not been filed or
incorporated by reference in the UST 1998 Form 10-K or UST Form 10-Q, (iii)
which contains any non-compete or exclusivity provisions with respect to any
business or geographic area in which business is conducted with respect to UST
or any of its Subsidiaries or which restricts the conduct of any business by UST
or any of its Subsidiaries or any geographic area in which UST or any of its
Subsidiaries may conduct business or requires exclusive referrals of any
business, in each case in any
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material respect, (iv) with or to a labor union or guild (including any
collective bargaining agreement) or (v) the loss of which would be reasonably
likely to have a UST Material Adverse Effect. UST has previously delivered to
SCHWAB true and correct copies of all written employment and deferred
compensation agreements with executive officers to which UST or any of its
Subsidiaries is a party. Each contract, arrangement, commitment or understanding
of the type described in this Section 3.14, whether or not set forth in Section
3.14 of the UST Disclosure Schedule (and including any material contract that
has been filed or incorporated by reference in the UST 1999 Form 10-K or UST
Form 10-Q), is referred to herein as a "UST Contract." Neither UST nor any of
its Subsidiaries is, or as a result of this Agreement will be, in violation of
any UST Contract, nor has there occurred any event which with the giving of
notice or passage of time will result in any such violation and neither UST nor
any of its Subsidiaries knows of, or has received notice of, any violation of
the above by any of the other parties thereto (except in any of such cases for
violations which, individually or in the aggregate, are not reasonably likely to
result in a UST Material Adverse Effect).
3.15 Agreements with Regulatory Agencies. Neither UST nor any of its
Subsidiaries is subject to any cease-and-desist or other order or enforcement
action issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or has been
ordered to pay any civil penalty by, or is a recipient of any supervisory letter
from, or has adopted any board resolutions at the request or suggestion of any
Regulatory Agency or other Governmental Entity that restricts the conduct of its
business or that relates to its capital adequacy, its ability to pay dividends,
its credit or risk management policies, its management or its business (each,
whether or not set forth in the UST Disclosure Schedule, a "UST Regulatory
Agreement"), nor has UST or any of its Subsidiaries been advised since January
1, 1997 by any Regulatory Agency or other Governmental Entity that it is
considering issuing or requesting any such UST Regulatory Agreement nor does UST
or any of its Subsidiaries have knowledge of any pending or threatened
regulatory investigation. Neither UST nor any of its affiliated persons, as
defined in Section 2(a)(3) of the 1940 Act, has been convicted within the past
10 years of any felony or misdemeanor described in Section 9(a)(1) of the 1940
Act, or is, by reason of any misconduct, permanently or temporarily enjoined
from acting in the capacities, or engaging in the activities, described in
Section 9(a)(2) of the 1940 Act.
3.16 Investment Securities. Each of UST and its Subsidiaries has
good and marketable title to all securities held by it (except securities sold
under repurchase agreements or held in any fiduciary or agency capacity free and
clear of any Lien, except to the extent such securities are pledged in the
ordinary course of business consistent with prudent business practices to secure
obligations of UST or any of its Subsidiaries and except for such defects in
title or Liens that would not be reasonably likely to have a UST Material
Adverse Effect. Such securities are valued on the books of UST in accordance
with GAAP. Since September 30, 1999 to the date hereof, neither UST nor any
Subsidiary has incurred any material and unusual or extraordinary losses in its
investment
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portfolio, and, except for matters of general application to the banking
industry (including changes in laws or regulations or GAAP) or for events
relating to the business environment in general, including market fluctuations
and changes in interest rates, UST is not aware of any events which are
reasonably certain to occur in the future and which would be reasonably likely
to result in any material adverse change in the quality or performance of UST's
and its Subsidiaries' investment portfolio on a consolidated basis.
3.17 Derivative Instruments. Any and all swaps, caps, floors,
futures, forward contracts, option agreements and other derivative financial
instruments, contracts or arrangements, whether entered into for the account of
UST or one of its Subsidiaries or for the account of a customer of UST or one of
its Subsidiaries, were entered into in the ordinary course of business and, to
UST's best knowledge, in accordance with prudent business practice and
applicable laws, rules, regulations and policies of all applicable Regulatory
Agencies and with counterparties believed to be financially responsible at the
time. UST and each of its Subsidiaries have duly performed in all respects all
of their obligations thereunder to the extent that such obligations to perform
have accrued, and, to UST's best knowledge, there are no breaches, violations or
defaults or allegations or assertions of such by any party thereunder, except
as, individually or in the aggregate, otherwise would not be reasonably likely
to have a UST Material Adverse Effect.
3.18 Loan Losses. Since September 30, 1999, UST and its Subsidiaries
have not incurred any loan losses which are material to UST and its Subsidiaries
on a consolidated basis; to the best knowledge of UST and in light of its
historical loan loss experience and its management's analysis of the quality and
performance of its loan portfolio, as of September 30, 1999, its reserve for
loan losses was, in the opinion of UST, adequate to absorb inherent loan losses
determined on the basis of management's continuing review and evaluation of the
loan portfolio and its judgment as to the impact of economic conditions on the
portfolio.
3.19 Undisclosed Liabilities. Except for those liabilities that are
fully reflected or reserved against on the consolidated balance sheet of UST
included in the UST Form 10-Q (or disclosed in the notes thereto), and for
liabilities incurred in the ordinary course of business consistent with past
practice, since September 30, 1999, neither UST nor any of its Subsidiaries has
incurred any liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or to become due) except for liabilities
which, individually or in the aggregate, have not resulted in and are not
reasonably likely to result in a UST Material Adverse Effect.
3.20 Environmental Liability. There are no legal, administrative,
arbitral or other proceedings, claims or actions or any private environmental
investigations or remediation activities or governmental investigations of any
nature that would be reasonably likely to result in the imposition, on UST or
any of its Subsidiaries, of any liability or obligation arising under common law
or under any local, state or federal environmental statute, regulation or
ordinance, including the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA"), pending or threatened against UST
or any of its Subsidiaries, which
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liability or obligation is reasonably likely to result in a UST Material Adverse
Effect. To the best knowledge of UST, there is no reasonable basis for any such
proceeding, claim, action or investigation that would impose any liability or
obligation that is reasonably likely to result in a UST Material Adverse Effect.
UST is not subject to any agreement, order, judgment or decree by or with any
court, governmental authority, regulatory agency or third party imposing any
liability or obligation with respect to the foregoing that is reasonably likely
to have, either individually or in the aggregate, a UST Material Adverse Effect.
3.21 State Takeover Laws; UST Rights Plan.
(a) The Board of Directors of UST has approved the
transactions contemplated by this Agreement and the UST Option Agreement as
required under Section 912 of the NYBCL in a manner such that Section 912 of the
NYBCL will not apply to this Agreement or the UST Option Agreement or any of the
transactions contemplated hereby or thereby. To UST's best knowledge, no other
state takeover statute or similar statute or regulation applies or purports to
apply to UST with respect to this Agreement and the UST Option Agreement, the
Merger or any other transaction contemplated hereby or thereby.
(b) UST has taken all action necessary or appropriate so that
the entering into of this Agreement and the UST Option Agreement, and the
consummation of the transactions contemplated hereby and thereby, do not and
will not result in the ability of any person to exercise any rights under the
UST Rights Agreement or enable or require the rights provided under the UST
Rights Agreement to separate from the shares of UST Common Stock to which they
were attached or to be triggered or to become exercisable. No "Distribution
Date," as such term is defined in the UST Rights Agreement, has occurred by
reason of the entry into this Agreement, nor will the consummation of the
transactions contemplated hereby cause a Distribution Date to occur. UST will
take all necessary action with respect to all the outstanding UST Preferred
Rights so that, as of the Effective Time, (i) neither UST nor SCHWAB will have
any obligations under the UST Preferred Rights or the UST Rights Agreement and
(ii) the holders of the UST Preferred Rights will have no rights under the UST
Preferred Rights or the Patriot Rights Agreement.
3.22 Insurance. UST has in full force and effect the insurance
coverage with respect to its business set forth in Section 3.22 of the
Disclosure Schedule.
3.23 Pooling of Interests. Neither UST nor, to UST's best knowledge,
any of its affiliates has taken or agreed to take any action that would prevent
SCHWAB from accounting for the transactions to be effected pursuant to this
Agreement as a "pooling of interests" in accordance with GAAP and applicable SEC
regulations. As of the date of this Agreement, UST has no reason to believe that
the Merger will not qualify as a "pooling of interests" for accounting purposes.
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3.24 Title to Properties.
(a) Each of UST and its Subsidiaries has good and marketable
title to, or valid leasehold interests in, all its properties and assets except
for such as are no longer used or useful in the conduct of its businesses or as
have been disposed of in the ordinary course of business and except for defects
in title, easements, restrictive covenants and similar encumbrances that
individually or in the aggregate would not be reasonably likely to have a UST
Material Adverse Effect. All such assets and properties, other than assets and
properties in which UST or any of its Subsidiaries has a leasehold interest, are
free and clear of all Liens (other than Liens for current Taxes not yet due and
payable), except for Liens that individually or in the aggregate would not be
reasonably likely to have a UST Material Adverse Effect.
(b) Each of UST and its Subsidiaries has complied in all
material respects with the terms of all leases to which it is a party, and all
such leases are in full force and effect, except for such noncompliance or
failure to be in full force and effect that individually or in the aggregate is
not reasonably likely to have a UST Material Adverse Effect. Each of UST and its
Subsidiaries enjoys peaceful and undisturbed possession under all such leases,
except for failures to do so that individually or in the aggregate are not
reasonably likely to have a UST Material Adverse Effect.
3.25 Intellectual Property.
(a) UST and its Subsidiaries own or validly license all
trademarks, service marks and trade names (collectively, the "UST Intellectual
Property") currently used in or necessary to carry on their businesses
substantially as currently conducted, except for such UST Intellectual Property
the failure of which to own or validly license individually or in the aggregate
would not be reasonably likely to have a UST Material Adverse Effect. Section
3.25(a) of the UST Disclosure Schedule lists, as of the date hereof, all
registered UST Intellectual Property. Neither UST nor any of its Subsidiaries
has received any express or implied notice of infringement of or conflict with,
and to UST's best knowledge, there are no infringements of or conflicts with,
the rights of others with respect to the use of any UST Intellectual Property
that individually or in the aggregate, in either such case, would be reasonably
likely to have a UST Material Adverse Effect.
(b) The consummation of the Merger and the other transactions
contemplated by this Agreement will not result in the loss by UST of any rights
to use computer and telecommunications software, including source and object
code and documentation and any other media (including manuals, journals and
reference books) necessary to carry on its business substantially as currently
conducted and the loss of which, individually or in the aggregate, would be
reasonably likely to have a UST Material Adverse Effect.
3.26 Year 2000. The systems and facilities operated by or on behalf
of UST and/or its Subsidiaries in the conduct of their respective businesses are
capable of
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providing uninterrupted and error-free recordation, storage, processing, output
and presentation of data, including calendar dates falling before, on or after
January 1, 2000, except as would not be reasonably likely to have a UST Material
Adverse Effect and/or its Subsidiaries, respectively. None of UST or any of its
Subsidiaries has received, or reasonably expects to receive, a "Year 2000
Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulation Letter No. SR 98-3 (SUP), dated March 4,
1998). Any subsidiary of UST that is registered as a broker-dealer under the
Exchange Act has filed form BD-Y2K and any amendments required by Rule 17a-5
under the Exchange Act, and any subsidiary of UST that is registered as an
investment adviser under the Advisers Act has filed Form ADV-Y2K and any
amendments required by Rule 204-5 under the Advisers Act.
3.27 No Excess Parachute Payments. Except as previously set forth in
a letter dated the date hereof and delivered to SCHWAB by UST, (i) no amount
that will be received by (whether in cash or property or the vesting of
property), or benefit provided to, any officer, director or employee of UST or
any of its Affiliates who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or Benefit
Plan currently in effect will be an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code) solely as a result of the
transactions contemplated by this Agreement and (ii) no such Person is entitled
to receive any additional payment from UST, SCHWAB, the Surviving Corporation or
any of their Subsidiaries (a "Parachute Gross Up Payment") in the event that the
excise tax of Section 4999(a) of the Code is imposed on such Person. Since
December 31, 1998, the Board of Directors of UST has not granted to any officer,
director or employee of UST or any of its Subsidiaries any right to receive any
Parachute Gross Up Payment.
3.28 Opinion. Prior to the execution of this Agreement, UST has
received an opinion from CSFB to the effect that as of the date thereof and
based upon and subject to the matters set forth therein, the Exchange Ratio is
fair to the shareholders of UST from a financial point of view. Such opinion has
not been amended or rescinded as of the date hereof.
3.29 UST Information. None of the information to be supplied by UST
for inclusion or incorporation by reference in (i) the registration statement on
Form S-4 to be filed with the SEC by SCHWAB in connection with the issuance of
SCHWAB Common Stock in the Merger (the "Form S-4") will, at the time the Form
S-4 becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, (ii) the Proxy Statement will, at the date
it is first mailed to UST's shareholders and at the time of the meeting of UST
shareholders, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading or (iii) any other document filed with any other regulatory
agency in connection herewith will, at the time such document is filed, contain
any untrue statement
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of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by UST with respect to statements made or
incorporated by reference therein based on information supplied by SCHWAB or
MERGER SUB for inclusion or incorporation by reference in the Proxy Statement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SCHWAB AND MERGER SUB
Except as set forth in the disclosure schedule, dated the date
hereof, delivered by SCHWAB to UST with reference to the specific section of the
Agreement to which each disclosure relates (the "SCHWAB Disclosure Schedule") or
as set forth in the SCHWAB Reports (as defined in Section 4.9) filed since
January 1, 1997, SCHWAB and, with respect to Sections 4.1(b) and 4.3, MERGER
SUB, hereby represent and warrant to UST as follows:
4.1 Corporate Organization.
(a) SCHWAB is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. SCHWAB has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have a SCHWAB
Material Adverse Effect. As used in this Agreement, the term "SCHWAB Material
Adverse Effect" means, with respect to SCHWAB, any effect that (i) is, or would
be reasonably likely to be, material and adverse to the business, operations,
financial condition or results of operations of SCHWAB and its Subsidiaries
taken as a whole or (ii) does, or would be reasonably likely to, prevent SCHWAB
from consummating the Merger and the other transactions contemplated hereby
(including the UST Option Agreement and the transactions contemplated thereby),
other than (i) any effect resulting from events, facts or circumstances relating
to the economy in general, including market fluctuations and changes in interest
rates, or to XXXXXX'x industry in general and not specifically relating to, as
applicable, SCHWAB or any SCHWAB Subsidiary and (ii) the loss of customer
business, in whole or in part, resulting from the announcement of the Agreement
or consummation of the transactions contemplated hereby. True and complete
copies of the Certificate of Incorporation and Bylaws of SCHWAB and MERGER SUB,
as in effect as of the date of this Agreement, have previously been delivered by
SCHWAB to UST.
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(b) Each SCHWAB Subsidiary (i) is a duly organized and
validly existing corporation, partnership or limited liability company or other
legal entity under the laws of its jurisdiction of organization, (ii) is duly
qualified to do business and is in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of property or
the conduct of its business requires it to be so qualified (except for
jurisdictions in which the failure to be so qualified would not be reasonably
likely to have a SCHWAB Material Adverse Effect) and (iii) has all requisite
corporate power and authority to own or lease its properties and assets and to
carry on its business as now conducted.
4.2 Capitalization. The authorized capital stock of SCHWAB consists
of 2,000,000,000 shares of SCHWAB Common Stock, $.01 par value per share, of
which, as of January 6, 2000, 822,308,635 shares were issued and outstanding and
9,940,000 shares of Preferred Stock, $.01 par value per share (the "SCHWAB
Preferred Stock"), of which, as of January 6, 2000, none were issued and
outstanding. On January 6, 2000, no shares of SCHWAB Common Stock or SCHWAB
Preferred Stock were reserved for issuance, except for up to 75,000,000 shares
of SCHWAB Common Stock reserved for issuance in connection with XXXXXX'x
Executive Officer Stock Option Plan, 1987 Stock Option Plan, Profit Sharing and
Employee Stock Ownership Plan and 1992 Stock Incentive Plan (the "SCHWAB Stock
Plans"). All of the issued and outstanding shares of SCHWAB Common Stock have
been duly authorized and validly issued and are fully paid, non-assessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. At the Effective Time, the shares of SCHWAB Common Stock to be issued
in the Merger will be duly authorized, fully paid, non-assessable, validly
issued and free of preemptive rights, with no personal liability attaching to
ownership thereof. There are no outstanding contractual obligations of SCHWAB or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of SCHWAB or any of its Subsidiaries. There are no outstanding
contractual obligations of SCHWAB or any of its Subsidiaries to vote or to
dispose of any shares of the capital stock of SCHWAB or any of its Subsidiaries.
4.3 Authority; No Violation.
(a) Each of SCHWAB and MERGER SUB has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Boards of Directors of SCHWAB and MERGER SUB. No other
corporate proceedings (including any approvals of SCHWAB stockholders) on the
part of SCHWAB or MERGER SUB are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by SCHWAB and MERGER SUB and (assuming due
authorization, execution and delivery by UST) constitutes a valid and binding
obligation of SCHWAB and MERGER SUB, enforceable against SCHWAB and MERGER SUB
in accordance with its terms.
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(b) Neither the execution and delivery of this Agreement by
SCHWAB nor MERGER SUB, nor the consummation by SCHWAB or MERGER SUB of the
transactions contemplated hereby, nor compliance by SCHWAB or MERGER SUB with
any of the terms or provisions hereof, will (i) violate any provision of the
Certificate of Incorporation or Bylaws of SCHWAB or MERGER SUB or (ii) assuming
that the consents and approvals referred to in Section 4.4 are duly obtained,
(x) violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to SCHWAB or any of its Subsidiaries or
any of their respective properties or assets or (y) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by or
rights or obligations under, or result in the creation of any Lien upon any of
the respective properties or assets of SCHWAB or any of its Subsidiaries under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement, contract, or other
instrument or obligation to which SCHWAB or any of its Subsidiaries is a party,
or by which they or any of their respective properties, assets or business
activities may be bound or affected, except (in the case of clause (ii) above)
for such violations, conflicts, breaches, defaults or the loss of benefits
which, either individually or in the aggregate, would not be reasonably likely
to result in a SCHWAB Material Adverse Effect.
4.4 Consents and Approvals. Except for (i) the Requisite Regulatory
Approvals, (ii) the filing with the SEC of the S-4 and any filings required to
be made with the SEC under the Exchange Act, (iii) the filing of the New York
Certificate of Merger with the New York Department pursuant to the NYBCL and
(iv) such additional consents and approvals, the failure of which to make or
obtain would not be reasonably likely to have a SCHWAB Material Adverse Effect,
no consents or approvals of or filings or registrations with any Governmental
Entity or, of or with any third party, are necessary in connection with (A) the
execution and delivery by SCHWAB of this Agreement and (B) the consummation by
SCHWAB of the Merger and the other transactions contemplated hereby. SCHWAB has
no reason to believe that any Requisite Regulatory Approvals (as defined in
Section 7.1(c)) will not be obtained.
4.5 Broker's Fees. Except for Xxxxxxx, Sachs & Co. ("Xxxxxxx,
Xxxxx"), neither SCHWAB nor any of its Subsidiaries has employed any broker or
finder or incurred any liability for any broker's fees, commissions or finder's
fees in connection with the Merger or related transactions contemplated by this
Agreement.
4.6 Absence of Certain Changes or Events. Since September 30, 1999,
(i) no event has occurred and no fact or circumstance shall have come to exist
or come to be known which, directly or indirectly, individually or taken
together with all other facts, circumstances and events, has had, or is
reasonably likely to have, a SCHWAB Material Adverse Effect and (ii) there has
not been (y) any change in accounting methods, principles or practices by SCHWAB
materially affecting its assets, liabilities or business, except insofar as have
been required by a change in GAAP or (z) any Tax election that
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individually or in the aggregate would be reasonably likely to have a SCHWAB
Material Adverse Effect or any settlement or compromise of any material Tax
liability.
4.7 Legal Proceedings.
(a) Neither SCHWAB nor any of its Subsidiaries is a party to
any, and there are no pending or, to the best knowledge of SCHWAB, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against SCHWAB or any of
its Subsidiaries which are reasonably likely, individually or in the aggregate,
to result in a SCHWAB Material Adverse Effect, nor, to the best knowledge of
SCHWAB, is there any basis for any proceeding, claim or any action against
SCHWAB or any of its Subsidiaries that would be reasonably likely, individually
or in the aggregate, to result in a SCHWAB Material Adverse Effect; provided
that, any litigation challenging the validity or propriety of the transactions
contemplated by this Agreement or the UST Option Agreement shall not be deemed a
SCHWAB Material Adverse Effect for purposes of this Agreement.
(b) There is no injunction, order, judgment or decree imposed
upon SCHWAB, any of its Subsidiaries or the assets of SCHWAB or any of its
Subsidiaries which has resulted in, or is reasonably likely to result in, a
SCHWAB Material Adverse Effect.
4.8 Taxes and Tax Returns.
(a) SCHWAB and each of its Subsidiaries has duly filed or
caused to be filed all federal, state, foreign and, to the best knowledge of
SCHWAB, local Tax returns and reports required to be filed by it on or prior to
the date of this Agreement (all such returns and reports being accurate and
complete in all material respects) and has duly paid or caused to be paid on
their behalf all Taxes that are due and payable, other than Taxes which are
being contested in good faith and are adequately reserved against or provided
for (in accordance with GAAP) on the applicable financial statements for such
company. Through the date hereof, SCHWAB and its Subsidiaries do not have any
liability for Taxes in excess of the amount reserved or provided for on their
financial statements (but excluding, for this purpose only, any liability
reflected thereon for deferred taxes to reflect timing differences between tax
and financial accounting methods).
(b) There are no Tax liens upon any property or assets of
SCHWAB or its Subsidiaries except liens for current taxes not yet due and
payable.
(c) SCHWAB is not aware of any fact or circumstance that
could reasonably be expected to prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code.
4.9 SEC Reports. SCHWAB has previously made available to UST
accurate and complete copies of the SCHWAB Annual Reports on Form 10-K for the
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fiscal years ended December 31, 1997 and December 31, 1998 (the "SCHWAB Form
10-K's") filed with the SEC under the Exchange Act and the SCHWAB Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999 ("SCHWAB Form
10-Q"), filed with the SEC under the Exchange Act (collectively, the "SCHWAB
Reports"). Since January 1, 1997, SCHWAB and each SCHWAB Subsidiary has timely
filed all reports and other documents required to be filed by them under the
Securities Act and the Exchange Act, and, as of their respective dates, all such
reports complied in all material respects with the published rules and
regulations of the SEC with respect thereto. The consolidated balance sheets of
SCHWAB and its Subsidiaries as of December 31, 1997 and December 31, 1998,
inclusive, as reported in the Form 10-K's, accompanied by the audit report of
Deloitte & Touche LLP, independent public accountants with respect to SCHWAB,
and the unaudited consolidated balance sheet of SCHWAB and its Subsidiaries as
of September 30, 1999, and the related unaudited consolidated statements of
income, changes in stockholders' equity and cash flows for the nine months ended
September 30, 1999, as reported in the SCHWAB Form 10-Q do, and any financial
statements filed by SCHWAB with the SEC under the Exchange Act after the date of
this Agreement (including the related notes, where applicable) will, fairly
present in all material respects (including the related notes, where applicable)
the consolidated financial position and results of operations and changes in
stockholders' equity and cash flows of SCHWAB and its Subsidiaries for the
respective fiscal periods or as of the respective dates therein set forth; each
of such statements (including the related notes, where applicable) comply or
will comply with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto; and each of such statements
(including the related notes, where applicable) has been and will be prepared in
accordance with GAAP consistently applied during the periods involved, except in
the case of unaudited financial statements for the absence of certain footnotes
and schedules. The books and records of SCHWAB and its Subsidiaries have been,
and are being, maintained in accordance with applicable legal and accounting
requirements in all material respects. As of the date of filing or mailing, as
the case may be, no SCHWAB Report contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading (except to the extent corrected in a
subsequent filed registration statement, prospectus, report, schedule, proxy
statement or communication).
4.10 Compliance with Applicable Law. SCHWAB and each of its
Subsidiaries hold all licenses, franchises, permits and authorizations necessary
for the lawful conduct of their respective businesses, and have complied with
and are not in default, under any applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to
SCHWAB or any of its Subsidiaries, except in each case where the failure to hold
such license, franchise, permit or authorization or such noncompliance or
default is not, individually or in the aggregate, reasonably likely to result in
a SCHWAB Material Adverse Effect, and neither SCHWAB nor any of its Subsidiaries
knows of, or has received notice of, any violations of any of the above,
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except for such violations which are not, individually or in the aggregate,
reasonably likely to result in a SCHWAB Material Adverse Effect.
4.11 Agreements with Regulatory Agencies. Neither SCHWAB nor any of
its Subsidiaries is subject to any cease-and-desist or other order or
enforcement action issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or is subject to any order or directive by, or
has been ordered to pay any civil penalty by, or is a recipient of any
supervisory letter from, or has adopted any board resolutions at the request or
suggestion of any Regulatory Agency or other Governmental Entity that materially
restricts the conduct of its business or that in any material manner relates to
its capital adequacy, its ability to pay dividends, its credit or risk
management policies, its management or its business (each, whether or not set
forth in the SCHWAB Disclosure Schedule, a "SCHWAB Regulatory Agreement"), nor
has SCHWAB or any of its Subsidiaries been advised since January 1, 1997 by any
Regulatory Agency or other Governmental Entity that it is considering issuing or
requesting any such SCHWAB Regulatory Agreement nor does SCHWAB or any of its
Subsidiaries have knowledge of any pending or threatened regulatory
investigation.
4.12 Undisclosed Liabilities. Except for those liabilities that are
fully reflected or reserved against on the consolidated balance sheet of SCHWAB
included in the SCHWAB Form 10-Q (or disclosed in the notes thereto), and for
liabilities incurred in the ordinary course of business consistent with past
practice, since September 30, 1999, neither SCHWAB nor any of its Subsidiaries
has incurred any liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or to become due) except for liabilities
which, individually or in the aggregate, have not resulted in and are not
reasonably likely to result in a SCHWAB Material Adverse Effect
4.13 Pooling of Interests. Neither SCHWAB nor, to XXXXXX'x best
knowledge, any of its affiliates has taken or agreed to take any action that
would prevent SCHWAB from accounting for the transactions to be effected
pursuant to this Agreement as a "pooling of interests" in accordance with GAAP
and applicable SEC regulations. As of the date of this Agreement, SCHWAB has no
reason to believe that the Merger will not qualify as a "pooling of interests"
for accounting purposes.
4.14 Year 2000. The systems and facilities operated by or on behalf
of SCHWAB and/or its Subsidiaries in the conduct of their respective businesses
are capable of providing uninterrupted and error-free recordation, storage,
processing, output and presentation of data, including calendar dates falling
before, on or after January 1, 2000, except as would not be reasonably likely to
have a SCHWAB Material Adverse Effect. Any subsidiary of SCHWAB that is
registered as a broker-dealer under the Exchange Act has filed form BD-Y2K and
any amendments required by Rule 17a-5 under the Exchange Act, and any subsidiary
of SCHWAB that is registered as an investment adviser under the Advisers Act has
filed Form ADV-Y2K and any amendments required by Rule 204-5 under the Advisers
Act.
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4.15 Opinion. Prior to the execution of this Agreement, SCHWAB has
received an opinion from Xxxxxxx, Sachs to the effect that as of the date
thereof and based upon and subject to the matters set forth therein, the
Exchange Ratio is fair to SCHWAB from a financial point of view. Such opinion
has not been amended or rescinded as of the date hereof.
4.16 SCHWAB Information. None of the information to be supplied by
SCHWAB for inclusion or incorporation by reference in (i) the S-4 will, at the
time the S-4 becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, (ii) the Proxy
Statement will, at the date it is first mailed to UST's shareholders and at the
time of the UST Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading or (iii) any other document filed with
any other regulatory agency in connection herewith will, at the time such other
document is filed, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading, except that no representation or warranty is made by SCHWAB or
MERGER SUB with respect to statements made or incorporated by reference therein
based on information supplied by UST for inclusion or incorporation by reference
in the Proxy Statement or S-4.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of UST Business Prior to the Effective Time. During the
period from the date of this Agreement to the Effective Time, except as
expressly contemplated or permitted by this Agreement, UST shall, and shall
cause each of its Subsidiaries to, (a) conduct its business in the usual,
regular and ordinary course consistent with past practice, (b) use commercially
reasonable efforts to maintain and preserve intact its business organization,
employees and advantageous business relationships and retain the services of its
key officers and key employees and (c) take no action which would adversely
affect or delay in any material respect the ability of either SCHWAB or UST to
obtain any necessary approvals of any Regulatory Agency or other governmental
authority required for the transactions contemplated hereby or to perform its
covenants and agreements under this Agreement or the UST Option Agreement.
5.2 Forbearances of UST. During the period from the date of this
Agreement to the Effective Time, except as set forth in Section 5.2 of the UST
Disclosure Schedule or as expressly permitted by this Agreement or the UST
Option Agreement, UST shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of SCHWAB:
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(a) other than in the ordinary course of business consistent
with past practice, (i) incur any indebtedness for borrowed money (other than
short-term indebtedness incurred to refinance existing indebtedness, and
indebtedness of UST or any of its Subsidiaries to UST or any of its
Subsidiaries, and indebtedness under existing lines of credit), assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity, or make any
loan or advance (except to the extent committed to prior to the date hereof) in
an aggregate amount in excess of $10 million or (ii) incur any capital
expenditures (other than capital expenditures incurred pursuant to contracts or
commitments in force on the date of this Agreement) in an aggregate amount in
excess of $50 million;
(b) (i) adjust, split, combine or reclassify any capital
stock, (ii) make, declare or pay any dividend or distribution (except, (A) for
regular quarterly cash dividends or distributions at a rate not in excess of
$0.22 per share of UST Common Stock and (B) for dividends paid in the ordinary
course of business by any Subsidiary (whether or not wholly-owned) of UST) or
make any other distribution on any shares of its capital stock or redeem,
purchase or otherwise acquire any securities or obligations convertible into or
exchangeable for any shares of its capital stock, (iii) grant any stock
appreciation rights or grant to any individual, corporation or other entity any
right to acquire any shares of its capital stock, other than the issuance of UST
Preferred Rights associated with the issuance of additional UST Common Stock
permitted pursuant to clause (iv) below, (iv) issue any additional shares of
capital stock, other than with respect to exercise of stock options granted
prior to January 1, 2000 pursuant to the Stock Option Plans and the issuance of
UST Preferred Stock upon the exercise of UST Preferred Rights or (v) enter into
any agreement, understanding or arrangement with respect to the sale or voting
of its capital stock;
(c) sell, transfer, mortgage, encumber or otherwise dispose
of any of its properties or assets, including capital stock in any Subsidiaries
of UST, to any individual, corporation or other entity other than a direct or
indirect wholly-owned Subsidiary, or cancel, release or assign any indebtedness
to any such person or any claims held by any such person, except in the ordinary
course of business consistent with past practice, pursuant to contracts or
agreements in force at the date of this Agreement or otherwise with respect to
properties, assets and indebtedness with an aggregate fair market value not in
excess of $10 million;
(d) (i) acquire any business entity, whether by stock
purchase, merger, consolidation or otherwise, or (ii) make any other investment
either by purchase of stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any other individual,
corporation, limited partnership or other entity other than a wholly-owned
Subsidiary of UST, other than, in the case of clause (ii), for investments in
the ordinary course of business consistent with past practice or for
consideration with an aggregate fair market value not in excess of $10 million;
(e) except as required under applicable law, the terms of any
existing agreement to which UST is a party, the terms of the Employment
Agreements or
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under Section 6.14, and except for increases in the ordinary course of business
consistent with past practice and except as contemplated by Section 1.7,
increase in any manner the compensation or fringe benefits of any of its
employees or pay any pension or retirement allowance not required by any
existing plan or agreement to any such employees or, except as contemplated in
Section 6.14, become a party to, amend or commit itself to any stock option plan
or other stock-based compensation plan, pension, retirement, profit-sharing or
welfare benefit plan or agreement or employment agreement with or for the
benefit of any employee or accelerate the vesting of any stock options or other
stock-based compensation;
(f) settle any material claim, action or proceeding involving
money damages or waive or release any material rights or claims, except in the
ordinary course of business consistent with past practice;
(g) change its methods of accounting in effect at December
31, 1999 in a manner materially affecting its assets, liabilities or businesses,
except as required by changes in GAAP as concurred in by PricewaterhouseCoopers,
LLP, its independent auditors, or change in any material manner any of its
methods of reporting income and deductions for Federal income tax purposes from
those employed in the preparation of the Federal income tax returns of UST for
the taxable years ending December 31, 1998 and 1997, or make, change, amend or
revoke any material election for tax purposes, other than in the ordinary course
of business consistent with past practice, except as required by changes in law
or regulation;
(h) adopt or implement any amendment to its Certificate of
Incorporation or any changes to its Bylaws;
(i) other than after prior consultation with SCHWAB (but not
its prior approval), materially restructure or materially change its investment
securities portfolio, through purchases, sales or otherwise, or the manner in
which the portfolio is classified or reported or materially alter the credit or
risk concentrations associated with its underwriting and other investment
banking businesses;
(j) take any action that is intended or would be reasonably
likely to result in any of the conditions to the Merger set forth in Article VII
not being satisfied, except, in every case, as may be required by applicable
law; or
(k) agree to, or make any commitment to, take any of the
actions prohibited by this Section 5.2.
5.3 Forbearances of SCHWAB. During the period from the date of this
Agreement to the Effective Time, except as set forth in Section 5.3 of the
SCHWAB Disclosure Schedule or as expressly permitted by this Agreement, SCHWAB
shall not, and shall not permit any of its Subsidiaries to, without the prior
written consent of UST:
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(a) make, declare or pay any dividend (except, (A) for
regular quarterly cash dividends at a rate that does not represent an increase
over the current quarterly dividend that is inconsistent with prior increases in
XXXXXX'x dividend rate, (B) for dividends paid in the ordinary course of
business by any Subsidiary (whether or not wholly-owned) of SCHWAB and (C) stock
dividends) or make any other distributions on any shares of its capital stock or
directly or indirectly redeem, purchase or otherwise acquire any shares of its
capital stock or securities or obligations convertible into or exchangeable for
any shares of its capital stock;
(b) change its method of accounting in effect on December 31,
1999 in a manner materially affecting its assets, liabilities or businesses,
except as required by changes in GAAP as concurred in by Deloitte & Touche, LLP,
its independent auditors;
(c) take any action that is intended or would be reasonably
likely to result in any of the conditions to the Merger set forth in Article VII
not being satisfied, except, in every case, as may be required by applicable
law;
(d) acquire any business entity, whether by stock purchase,
merger, consolidation or otherwise, if SCHWAB in good faith believes such
acquisition would unreasonably delay the consummation of the transactions
contemplated by this Agreement; or
(e) agree to, or make any commitment to, take any of the
actions prohibited by this Section 5.3.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters.
(a) UST shall promptly prepare and file with the SEC the
Proxy Statement and SCHWAB shall promptly prepare and file with the SEC the S-4,
in which the Proxy Statement will be included as a prospectus. Each of SCHWAB
and UST shall use commercially reasonable efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such filing,
and UST shall thereafter mail or deliver the Proxy Statement to its
shareholders. SCHWAB shall, not later than 45 days after the date of this
Agreement, promptly prepare and file all requisite notices and applications with
respect to the Merger with the Federal Reserve Board, including its application
to become a bank holding company under the BHCA.
(b) Each of SCHWAB and UST shall, and shall cause its
Subsidiaries to, (i) take, or cause to be taken, all actions necessary, proper
or advisable to comply promptly with all legal requirements which may be imposed
on such party or its
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Subsidiaries with respect to the Merger, including, without limitation,
obtaining any third party consent which may be required to be obtained in
connection with the Merger and the other transactions contemplated by this
Agreement, and, subject to the conditions set forth in Article VII hereof, to
consummate the Merger and the other transactions contemplated by this Agreement
and (ii) obtain (and cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity which is required to be obtained by UST or SCHWAB, respectively, or any
of their respective Subsidiaries in connection with the Merger and the other
transactions contemplated by this Agreement. The parties hereto shall cooperate
with each other and promptly prepare and file all necessary documentation, and
to effect all applications, notices, petitions and filings (including, to the
extent necessary, any notification required by the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended ("HSR Act")), to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable to consummate
the Merger and the other transactions contemplated by this Agreement. UST shall
obtain all necessary consents and approvals under the 1940 Act and the Advisers
Act prior to the Effective Time. SCHWAB and UST shall have the right to review
in advance and, to the extent practicable, each will consult the other on, in
each case subject to applicable laws relating to the exchange of information,
all the information relating to UST or SCHWAB, as the case may be, and any of
their respective Subsidiaries, which appear in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in connection
with the transactions contemplated by this Agreement. In exercising the
foregoing right, each of the parties hereto shall act reasonably and as promptly
as practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein. Each of SCHWAB and UST shall
resolve any objections that may be asserted by any Governmental Entity with
respect to this Agreement, the Merger or the other transactions contemplated by
this Agreement. For purposes of this Section 6.1(b), in taking each of the
foregoing actions each party shall be required only to use commercially
reasonable efforts; provided that with respect to obtaining the approval of the
Federal Reserve Board and the approvals of all other relevant Federal and state
bank and thrift regulators to the Merger and the transactions contemplated by
this Agreement, each party shall be required to use best efforts. However, and
notwithstanding anything to the contrary in this Agreement, SCHWAB shall not be
required to take any action or refrain from taking any action to the extent that
doing so or refraining from doing so would be reasonably likely, individually or
in the aggregate, to have a SCHWAB Material Adverse Effect.
(c) SCHWAB and UST shall, upon request, furnish each other
with all information concerning themselves, their Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement, the S-4 or any other
statement, filing, notice or
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application made by or on behalf of SCHWAB, UST or any of their respective
Subsidiaries to any Governmental Entity in connection with the Merger and the
other transactions contemplated by this Agreement.
(d) SCHWAB and UST shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any Requisite Regulatory Approval (as defined in Section 7.1(c))
will not be obtained or that the receipt of any such approval will be materially
delayed.
6.2 Access to Information.
(a) Subject to the Confidentiality Agreement dated as of
March 17, 1999, between SCHWAB and UST (as it may be amended from time to time,
the "Confidentiality Agreement"), UST and the UST Subsidiaries shall afford
SCHWAB, and XXXXXX'x officers, employees, accountants, counsel, financial
advisors and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time or the termination of this
Agreement to all its properties, books, contracts, commitments, personnel and
records and, during such period, UST shall furnish promptly to SCHWAB (a) a copy
of each report, schedule, registration statement and other document filed by UST
or its Subsidiaries during such period pursuant to the requirements of United
States Federal or state banking or securities laws and (b) all other information
concerning UST's or its Subsidiaries' business, properties and personnel as
SCHWAB may reasonably request. Except as required by law, SCHWAB will hold, and
will cause its officers, employees, accountants, counsel, financial advisors and
other representatives and affiliates to hold, any nonpublic information received
from UST, directly or indirectly, in accordance with the Confidentiality
Agreement.
(b) Subject to the Confidentiality Agreement, SCHWAB agrees
to provide to UST, from time to time prior to the Effective Time or termination
of this Agreement, such information as UST shall reasonably request with respect
to SCHWAB and its business, financial condition and operations. Except as
provided by law, UST will hold, and will cause its officers, employees,
accountants, counsel, financial advisors and other representatives to hold, any
nonpublic information received from SCHWAB, directly or indirectly, in
accordance with the Confidentiality Agreement.
(c) Neither SCHWAB nor UST nor any of their respective
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of SCHWAB
or UST, as the case may be, customers, jeopardize the attorney-client privilege
of the institution in possession or control of such information or contravene
any law, rule, regulation, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. The parties hereto
will make appropriate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply.
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(d) No investigation by either of the parties or their
respective representatives shall affect the representations and warranties of
the other set forth herein.
6.3 Shareholder Approval.
(a) UST, in consultation with SCHWAB, will take all actions
necessary to call and hold an annual or a special meeting of UST shareholders as
soon as practicable after the S-4 has been declared effective by the SEC and
under all applicable state securities laws for the purpose of approving the
Merger and adopting the plan of merger (within the meaning of Section 902 of the
NYBCL) contained in this Agreement (and any other documents or actions necessary
to the consummation of the Merger). The Board of Directors of UST shall at all
times recommend to UST's shareholders that such shareholders vote in favor of
the Merger and neither the Board of Directors of UST, nor any committee thereof
shall withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to SCHWAB or MERGER SUB, the approval or recommendation by such Board of
Directors or any such committee of this Agreement or the Merger, except in the
case of a termination of this Agreement by UST that is in compliance with
Section 8.5 hereof. Without limiting the generality of the foregoing, the
obligations of UST under this Section shall not be altered by the commencement,
public proposal, public disclosure or communication to UST or its shareholders
of any Takeover Proposal (as defined below). The Board of Directors of UST shall
at all times recommend to UST's shareholders that they reject any Takeover
Proposal, except in the case of a termination of this Agreement by UST that is
in compliance with Section 8.5 hereof.
(b) Nothing contained in this Agreement shall prohibit UST
from taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
UST's shareholders if, in the good faith judgment of the Board of Directors of
UST, after consultation with outside counsel, failure so to disclose would be a
violation of its obligations under applicable law. Any such disclosure by the
Board of Directors of UST in accordance with this Section 6.3(b) shall not be
deemed to be a withdrawal or modification of the approval or recommendation of
the Merger and this Agreement by the Board of Directors of UST for the purposes
of this Agreement, except as provided in Section 8.1(f). Subject to the
immediately preceding two sentences, neither UST not its Board of Directors nor
any committee thereof shall withdraw or modify, or propose publicly to withdraw
or modify, its recommendation in favor of the Merger or approve or recommend, or
propose publicly to approve or recommend, a Takeover Proposal other than by
reason of termination of this Agreement in compliance with Section 8.5 hereof.
6.4 No Solicitation.
(a) UST shall not, nor shall it permit any UST Subsidiary to,
nor shall it permit or authorize any officer, director, agent, affiliate or
employee of, or any investment banker, attorney or other advisor of UST or any
of its Subsidiaries to, directly or indirectly, solicit or encourage inquiries
or proposals with respect to, or engage in any
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negotiations concerning, or provide any confidential information in response or
relating to, or have any discussions with any person relating to, any Takeover
Proposal (as defined below), or waive any provision of or amend the terms of the
UST Rights Agreement in respect of a Takeover Proposal. UST shall immediately
cease and cause to be terminated any activities, discussions or negotiations
conducted prior to the date of this Agreement with any persons other than SCHWAB
with respect to any of the foregoing and shall enforce any confidentiality or
similar agreement relating to a Takeover Proposal. UST shall, and shall cause
its Subsidiaries to, promptly (within 24 hours) advise SCHWAB following the
receipt by any of them of any Takeover Proposal and the substance thereof
(including the identity of the person making such Takeover Proposal), and shall
keep SCHWAB reasonably informed of the status and details with respect to such
Takeover Proposal promptly upon the occurrence thereof.
(b) Notwithstanding Section 6.4(a), prior to receipt of the
UST Shareholder Approval, UST may, in response to a Takeover Proposal that did
not result from a breach of Section 6.4(a), and that in the good faith judgment
of the UST Board of Directors after consultation with outside counsel,
constitutes, or is reasonably likely to be, a Superior Proposal (as defined
below) (x) furnish information with respect to UST to the person making such
proposal and its representatives pursuant to a confidentiality agreement not
less restrictive of the other party than the Confidentiality Agreement and (y)
participate in discussions or negotiations with such person and its
representatives regarding such proposal.
(c) For purposes of this Agreement, "Takeover Proposal" means
any bona fide inquiry, proposal, offer or indication of interest from any Person
(whether or not conditional) relating to any direct or indirect (i) acquisition,
purchase or lease of a business or assets that constitute 20% or more of the
consolidated net revenues, net income or assets of UST and its Subsidiaries or
(ii) acquisition or purchase of 20% or more of any class of common stock or
voting securities of UST or any of its Subsidiaries or (iii) tender offer or
exchange offer that if consummated would result in any Person beneficially
owning 20% or more of any class of common stock or voting securities of UST or
any of its Subsidiaries, other than the transactions contemplated by this
Agreement.
(d) For purposes of this Agreement, "Superior Proposal" means
any proposal made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, liquidation, dissolution, sale of assets or
otherwise, for consideration consisting of cash and/or securities, more than 50%
of the combined voting power of UST's capital stock then outstanding or all or
substantially all of UST's assets (i) on terms which the UST Board of Directors
determines in its good faith judgment to be more favorable from a financial
point of view to the holders of UST Common Stock than the Merger after
consultation with an investment banking firm having national recognition and
(ii) that the UST Board of Directors determines in its good faith judgment to be
reasonably capable of being completed, taking into account all financial,
regulatory, legal and other aspects of such proposal.
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6.5 Continuity of Business Enterprise SCHWAB, the Surviving
Corporation or any other member of the qualified group (as defined in Treasury
Regulation Section 1.368-1(d)) shall, for the foreseeable future, continue at
least one significant historic business line of UST or use at least a
significant portion of UST's historic business assets in a business, in each
case within the meaning of Treasury Regulation Section 1.368-1(d).
6.6 Tax Free Treatment. SCHWAB and UST intend the Merger to qualify
as a reorganization under Section 368(a) of the Code, and this Agreement to
constitute a "plan of reorganization" for purposes of Sections 354 and 361 of
the Code. Each of UST and SCHWAB shall use commercially reasonable efforts to
cause the Merger to so qualify and to obtain the opinion referred to in Section
7.3(c). For purposes of the tax opinion described in Section 7.3(c), UST and
SCHWAB each shall provide customary representation letters, each dated on or
about the date that is two business days prior to the date the Proxy Statement
is mailed to the shareholders of UST and reissued as of the Closing Date. Each
of SCHWAB, MERGER SUB and UST and each of their respective affiliates shall not
take any action and shall not fail to take any action or suffer to exist any
condition which action or failure to act or condition would prevent, or would be
reasonably likely to prevent, the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
6.7 Pooling Treatment. SCHWAB and UST intend the Merger to qualify
as a "pooling of interests" for accounting purposes. Each of SCHWAB and UST and
their respective affiliates shall use commercially reasonable efforts to cause
the Merger to so qualify and to obtain the letters referred to in Section
7.1(f). Each of SCHWAB, MERGER SUB and UST and each of their respective
affiliates shall not take any action and shall not fail to take any action or
suffer to exist any condition which action or failure to act or condition would
prevent, or would be reasonably likely to prevent, the Merger from qualifying as
a "pooling of interests" for accounting purposes.
6.8 Affiliates; Publication of Combined Financial Results. Each of
SCHWAB and UST shall use commercially reasonable efforts to cause each director,
executive officer and other person who is an "affiliate" (for purposes of Rule
145 under the Securities Act and for purposes of qualifying the Merger for
"pooling of interests" accounting treatment) of such party to deliver to the
other party hereto, as soon as practicable after the date of this Agreement, and
not less than 30 days in advance of the Effective Time, a written agreement, in
the form of Exhibit 6.8(a)(1) or (2), as applicable, hereto. As soon as
reasonably practicable after the Effective Time, SCHWAB shall publish financial
results covering at least 30 days of combined operations of SCHWAB and UST.
6.9 Stock Exchange Listing. SCHWAB shall use commercially reasonable
efforts to cause the shares of SCHWAB Common Stock to be issued in the Merger to
be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Effective Time.
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6.10 Employee Benefits.
(a) Prior to the Effective Time, UST and SCHWAB shall take
all corporate action necessary for the assumption of all UST Rights outstanding
immediately prior to the Effective Time, as adjusted pursuant to Section 1.7(a)
of this Agreement and this Section. In addition, UST and SCHWAB shall take all
necessary action so that, at the Effective Time, each account balance under the
UST 1989 Stock Compensation Plan, the UST Employee Stock Ownership Plan, the UST
Stock Plan for Non-Officer Directors or the UST Employee Stock Purchase Plan
(the "UST Stock Plans") that is invested or deemed invested in UST Common Stock
or UST Common Stock equivalents, as applicable, shall, unless otherwise vested,
exercised, paid or distributed at or prior to the Effective Time in accordance
with the terms of the applicable UST Stock Plans and Section 1.7 of this
Agreement, be adjusted and converted into an account balance which will be
denominated in SCHWAB Common Stock and which will entitle the holder thereof to
receive, and will represent an obligation of SCHWAB to deliver to such holder,
upon the same terms and conditions as those applicable to such accounts
immediately prior to the Effective Time, a number of shares of SCHWAB Common
Stock equal to the product of (x) the number of shares of UST Common Stock
attributable to such account immediately prior to the Effective Time and (y) the
Exchange Ratio, with any fraction rounded down to the nearest whole share. The
obligations of SCHWAB hereunder shall include the reservation, issuance and
listing on the NYSE of SCHWAB Common Stock in a number of shares at least equal
to the number of shares of SCHWAB Common Stock subject to such options under the
UST Stock Option Plans, and account balances under the UST Compensation Plan and
the UST Stock Plans, in each case as adjusted as contemplated by this Agreement.
No later than the Effective Time, SCHWAB shall prepare and file with the SEC a
registration statement on Form S-8 (or any successor or other appropriate form)
registering a number of shares of SCHWAB Common Stock determined in accordance
with the preceding sentence and shall use its commercially reasonable efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus and prospectuses
contained therein) for so long as any such options remain outstanding or any
such account balance remains unpaid.
(b) UST and SCHWAB agree that participants' interests under
the plans and trusts of UST and its Subsidiaries listed on Section 6.10(b) of
the UST Disclosure Schedule that are deemed invested in investment vehicles
other than UST Common Stock shall not be paid to participants thereunder as a
result of the transactions contemplated hereby, and UST has taken, or shall take
prior to the Effective Time, all actions necessary to amend such plans to so
provide; provided, however, that participants' interests thereunder will become
vested, to the extent not already vested, as a result of the consummation of the
Merger.
(c) For purposes of their participation in the SCHWAB Benefit
Plans, SCHWAB shall credit each UST employee with full credit for all service
credited under the UST Benefit Plans (including service with UST prior to the
Effective Time and, where applicable, service with prior or predecessor
employers to the extent credit is
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given for such service under the UST Benefit Plans) for purposes of eligibility
to participate and receive benefits for purposes of vesting and for purposes of
benefit accruals (except where it would result in a duplication of benefits).
With respect to SCHWAB welfare benefit plans, SCHWAB shall use commercially
reasonable efforts to cause any such plan to waive any pre-existing condition
exclusions and actively-at-work requirements thereunder with respect to the UST
employees and their eligible dependents (to the extent waived under the
applicable UST welfare benefit plan) and ensure that any covered expenses
incurred on or before the Effective Time shall be taken into account for
purposes of satisfying applicable deductible, coinsurance and maximum
out-of-pocket provisions after the Effective Time to the extent that such
expenses are taken into account for the benefit of similarly situated employees
of SCHWAB.
(d) For the period ending on December 31, 2001, SCHWAB shall
maintain, or cause to be maintained, each of the UST Benefit Plans, provided
that SCHWAB may substitute another plan or arrangement for any UST Benefit Plan
provided that such substituted plan or arrangement offers each participant in
that UST Benefit Plan equal or better benefit opportunities taken as a whole.
(e) SCHWAB shall cause UST to honor all written contractual
obligations of UST and its affiliates to their respective current and former
employees, directors and independent contractors, including, but not limited to,
all obligations under employment, severance and consulting plans and
arrangements and under all other UST Benefit Plans.
(f) As promptly as practicable after the Effective Time,
SCHWAB shall xxxxx stock options to acquire SCHWAB Common Stock to the employees
of UST and in the amounts set forth in Section 6.10(f) of the UST Disclosure
Schedule. The grant of stock options under this Section 6.10(f) shall be in
addition to any stock options which shall be granted under the Retention Program
(as defined in Section 6.14).
(g) Except as otherwise provided in this Agreement, nothing
in this Section 6.10 shall be interpreted as preventing the Surviving
Corporation from amending, modifying or terminating any SCHWAB Benefit Plans,
UST Benefit Plans, or other employee benefit plans, contracts, arrangements,
commitments or understandings, in accordance with their terms and applicable
law.
6.11 Indemnification; Directors' and Officers' Insurance.
(a) The Certificate of Incorporation and Bylaws of the
Surviving Corporation shall, with respect to indemnification of officers,
directors, employees and agents, not be amended, repealed or otherwise modified
after the Effective Time in any manner that would adversely affect the rights
thereunder of the persons who at any time prior to the Effective Time were
identified as prospective indemnitees under the Certificate of Incorporation or
Bylaws of UST in respect of actions or omissions occurring at or prior to the
Effective Time (including the transactions contemplated hereby), unless such
modification is required by law.
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(b) SCHWAB shall cause the Surviving Corporation to
indemnify, defend and hold harmless, the present and former officers, directors,
employees and agents of UST or any of UST's Subsidiaries in their capacities as
such (each an "Indemnified Party") in accordance with the Certificate of
Incorporation and Bylaws, or other charter documents, of UST and the respective
UST Subsidiaries and any agreements or plans maintained by UST and the
respective UST Subsidiary, to the fullest extent permitted by law after the
Effective Time against all losses, expenses, claims, damages and liabilities
arising out of actions or omissions occurring on or prior to the Effective Time.
(c) SCHWAB shall use commercially reasonable efforts to cause
the persons serving as officers and directors of UST immediately prior to the
Effective Time to be covered for a period of six years from the Effective Time
by the directors' and officers' liability insurance policy maintained by UST
(provided that SCHWAB may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are not less
advantageous than such policy) with respect to acts or omissions occurring prior
to the Effective Time which were committed by such officers and directors in
their capacity as such; provided, however, that in no event shall SCHWAB be
required to expend more than 200% of the current amount expended by UST (the
"Insurance Amount") to maintain or procure insurance coverage pursuant hereto
and further provided, that if SCHWAB is unable to maintain or obtain the
insurance called for by this Section 6.8(c), SCHWAB shall use commercially
reasonable efforts to obtain as much comparable insurance as available for the
Insurance Amount.
(d) In the event SCHWAB or any of its successors or assigns
or 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 SCHWAB or the
Surviving Corporation, as applicable, assume the obligations set forth in this
section.
(e) The provisions of this Section 6.11 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party and his
or her heirs and representatives.
6.12 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 (including the Merger and any other merger between a Subsidiary
of UST and a Subsidiary of SCHWAB) or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises of any of the parties to the Merger, the proper officers and
directors of each party to this Agreement and their respective Subsidiaries
shall take all such necessary action as may be reasonably requested by, and at
the sole expense of, SCHWAB.
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6.13 Advice of Changes. SCHWAB and UST shall promptly advise the
other party of any change or event having a SCHWAB Material Adverse Effect or a
UST Material Adverse Effect, as applicable, or which it believes would or would
be reasonably likely to cause or constitute a breach of any of its
representations, warranties, covenants or agreements contained herein.
6.14 Employee Retention Plan. Prior to the Effective Time, SCHWAB
and UST agree to establish a key employee retention program in accordance with
the general terms outlined in Section 6.14 of the UST Disclosure Schedule to
provide retention incentives for the categories of employees identified in
Section 6.14 of the UST Disclosure Schedule (collectively, the "Retention
Program").
6.15 State Takeover Statutes. Each party will take all steps
necessary to exempt (or continue the exemption of) the Merger and the
transactions contemplated by this Agreement and the UST Option Agreement from
any applicable state takeover law, as now or hereafter in effect.
6.16 Section 15 of the 1940 Act.
(a) UST will use its commercially reasonable efforts to
facilitate, prior to the Effective Time, in accordance with the provisions of
Section 15 of the 1940 Act applicable thereto, (i) the due consideration and the
due approval by the board of directors or trustees of each of the Excelsior
Mutual Funds (collectively, the "Funds") of a new Investment Company Adviser
Agreement for such Fund identical in all material respects to that in effect
immediately prior to the Closing, except that such new Investment Adviser
Agreement shall be effective immediately after the Closing and shall have an
initial term of two years and (ii) to the extent that such board of directors or
trustees approvals are obtained, the consideration and due approval by such
Funds security holders of such new Investment Company Adviser Agreements.
(b) UST shall use its commercially reasonable efforts to
assure, prior to the Effective Time, the satisfaction of the conditions set
forth in Section 15(f) of the 1940 Act with respect to each Fund.
(c) SCHWAB agrees, insofar as within the control of it or its
affiliates, to use its commercially reasonable efforts to assure compliance with
the conditions of Section 15(f) of the 1940 Act with respect to the Funds.
Without limiting the foregoing, SCHWAB agrees that (i) for a period of not less
than three years after the Effective Time, SCHWAB shall assure that no more than
25% of the members of the Board of Directors of any Fund shall be "interested
persons" (as defined in the 0000 Xxx) of SCHWAB (or such other entity which acts
as adviser or subadviser to the Funds) or of the predecessor investment adviser
of the Funds and (ii) neither SCHWAB nor any affiliate (including any parent
company of SCHWAB) of SCHWAB (or any entity which will act as adviser to the
Funds), for a period of not less than two years after the Effective Time, shall
have any express or implied understanding, arrangement or intention to
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impose an "unfair burden" (as such term is used in Section 15(f) of the 0000
Xxx) on any of the Funds as a result of the transactions contemplated hereby.
Article VII
CONDITIONS PRECEDENT
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 at or prior to the Effective Time of the following conditions:
(a) Shareholder Approval. The UST Shareholder Approval shall
have been obtained.
(b) Stock Exchange Listing. The shares of SCHWAB Common
Stock, which shall be issued to the shareholders of UST upon consummation of the
Merger, shall have been authorized for listing on the NYSE, subject to official
notice of issuance.
(c) Regulatory Approvals. The approvals of the Federal
Reserve Board and all other relevant Federal and state bank and thrift
regulators for SCHWAB to acquire UST and bank or trust company UST Subsidiaries
shall have been obtained and shall remain in full force and effect. The
applicable waiting period and any extensions thereof under the HSR Act shall
have expired or been terminated. All other regulatory approvals required to
consummate the Merger and the other transactions contemplated hereby, and all
other statutory waiting periods, the failure of any of which to be obtained or
observed would be reasonably likely to have a SCHWAB Material Adverse Effect or
UST Material Adverse Effect, shall have been obtained and shall remain in full
force and effect or, in the case of waiting periods, shall have expired or been
terminated (the approvals referred to in the first sentence of this Section
7.1(c), all such other approvals and the expiration or termination of all such
waiting periods, including under the HSR Act, being referred to herein as the
"Requisite Regulatory Approvals").
(d) S-4. The S-4 shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the S-4 shall
have been issued and no proceedings for that purpose shall have been initiated
or threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order,
injunction, decree or judgment issued by any court or governmental body or
agency of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger or any of the other
material transactions contemplated by this Agreement shall be in effect. No
statute, rule, regulation, order, injunction or decree shall have been enacted,
entered, promulgated or enforced by any Governmental Entity which prohibits or
makes illegal consummation of the Merger.
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(f) Pooling of Interests. UST and SCHWAB shall have received
letters from PricewaterhouseCoopers, LLP and Deloitte & Touche, LLP,
respectively, dated as of the Closing Date, to the effect that the Merger will
qualify for "pooling of interests" accounting treatment.
7.2 Conditions to Obligations of SCHWAB. The obligation of SCHWAB to
effect the Merger is also subject to the satisfaction or waiver by SCHWAB at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of UST set forth in Section 3.2 shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date,
in each case except to the extent such representations and warranties are
expressly made only as of an earlier date, in which case as of such earlier
date; provided, however, and notwithstanding anything to the contrary herein,
the condition stated in this sentence shall be deemed not to be satisfied if the
number of shares of UST Common Stock on a fully diluted basis referred to in the
second sentence of Section 3.2 understates the aggregate amount of UST Common
Stock on a fully diluted basis as of such date by more than 75,000 shares. The
representations and warranties of UST set forth in Section 3.13(c) shall be true
and correct as of the date of this Agreement and as of the Closing Date as
though made on such Closing Date. The other representations and warranties of
UST set forth in this Agreement shall be true and correct, in each case as of
the date of this Agreement and as of the Closing Date as though made on such
Closing Date, except to the extent such representations and warranties are
expressly made only as of an earlier date, in which case as of such earlier
date; provided that, if any of such other representations and warranties shall
not be true and correct (for this purpose disregarding any qualification or
limitation as to materiality or UST Material Adverse Effect), then the condition
stated in this second sentence of this Section 7.2(a) shall be deemed satisfied
if and only if the cumulative effect of all inaccuracies of such other
representations and warranties (for this purpose disregarding any qualification
or limitation as to materiality or UST Material Adverse Effect) shall not be or
have a UST Material Adverse Effect. SCHWAB shall have received a certificate
signed on behalf of UST by its Chief Executive Officer and Chief Financial
Officer to the foregoing effect.
(b) Performance of Obligations of UST. UST 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 SCHWAB shall have
received a certificate signed on behalf of UST by its Chief Executive Officer
and Chief Financial Officer to such effect.
(c) Regulatory Conditions. No Governmental Entity shall have
imposed, in connection with obtaining any Requisite Regulatory Approval, any
conditions, restrictions or requirements on SCHWAB, UST or the Surviving
Corporation which have or would be reasonably likely to have a SCHWAB Material
Adverse Effect, including, without limitation, any requirement for SCHWAB or any
of its Subsidiaries to divest or hold separate, or curtail, or accept any
restriction on or cease to operate any
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portion of the business or assets of SCHWAB, UST or the Surviving Corporation
that would be reasonably likely to have a SCHWAB Material Adverse Effect.
(d) Financial Holding Company Status. At the Effective Time,
UST and each of its Subsidiaries shall meet (i) the criteria set forth at 12
U.S.C. Section 1843(l) as in effect as of the Effective Time and (ii) any other
criteria of the Federal Reserve Board necessary for SCHWAB to qualify as a
"Financial Holding Company" as that term is used in 12 U.S.C. Section 1841(p).
7.3 Conditions to Obligations of UST. The obligation of UST to
effect the Merger is also subject to the satisfaction or waiver by UST at or
prior to the Effective Time of the following conditions:.
(a) Representations and Warranties. The representations and
warranties of SCHWAB set forth in Section 4.2 shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Closing Date as though made on such Closing Date, except to the extent such
representations and warranties are expressly made only as of an earlier date, in
which case as of such earlier date. The other representations and warranties of
SCHWAB set forth in this Agreement shall be true and correct, in each case as of
the date of this Agreement and as of the Closing Date as though made on such
Closing Date, except to the extent such representations and warranties are
expressly made only as of an earlier date, in which case as of such earlier
date; provided that, if any such other representations and warranties shall not
be true and correct (for this purpose disregarding any qualification or
limitation as to materiality or SCHWAB Material Adverse Effect), then the
condition stated in this second sentence of this Section 7.3(a) shall be deemed
satisfied if and only if the cumulative effect of all inaccuracies of such other
representations and warranties (for this purpose disregarding any qualification
or limitation as to materiality or SCHWAB Material Adverse Effect) shall not be
or have a SCHWAB Material Adverse Effect. UST shall have received a certificate
signed on behalf of SCHWAB by XXXXXX'x Chairman, President or a Vice-Chairman
and by XXXXXX'x Chief Financial Officer to the foregoing effect.
(b) Performance of Obligations of SCHWAB. SCHWAB 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 UST shall have
received a certificate signed on behalf of SCHWAB and MERGER SUB by XXXXXX'x
Chairman, President or a Vice-Chairman and by XXXXXX'x Chief Financial Officer
to such effect.
(c) Tax Opinion. UST shall have received a written opinion,
dated as of the Closing Date, from Cravath, Swaine & Xxxxx, counsel to UST, to
the effect that the Merger will be treated for U.S. Federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code, and that
SCHWAB, MERGER SUB and UST will each be a party to that reorganization within
the meaning of Section 368(b) of the Code; it being understood that in rendering
such opinion, such tax counsel shall be
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entitled to rely upon customary representations provided by UST and SCHWAB, as
described in Section 6.6.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval by the shareholders of
UST of the matters presented in connection with the Merger:
(a) by the mutual written consent of SCHWAB and UST;
(b) by either SCHWAB or UST (provided that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if there shall have been a material breach
of any of the covenants or agreements or any of the representations or
warranties set forth in this Agreement on the part of the other party, which
breach, either individually or in the aggregate with all other breaches, would
constitute, if occurring or continuing on the Closing Date, the failure of one
or more of the conditions set forth in Section 7.2(a) or (b) or Section 7.3(a)
or (b), as the case may be, and which (i) is not cured within 45 days following
written notice to the party committing such breach or (ii) by its nature or
timing, cannot be cured prior to the Closing;
(c) by either SCHWAB or UST if the Merger shall not have been
consummated on or before December 31, 2000, unless the failure of the Closing
(as defined in Section 9.1) to occur by such date shall be due to the failure of
the party seeking to terminate this Agreement to perform or observe the
covenants and agreements of such party set forth herein;
(d) by either SCHWAB or UST if (i) any Requisite Regulatory
Approval required to be obtained pursuant to Section 7.1(c) has been denied by
the relevant Governmental Entity and such denial has become final and
nonappealable or any Governmental Entity of competent jurisdiction shall have
issued a final nonappealable injunction permanently enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this Agreement
or (ii) the UST Shareholder Approval is not obtained at the UST shareholder
meeting duly convened therefor or at any adjournment or postponement thereof;
(e) By UST prior to receipt of the UST Shareholder Approval,
in accordance with Section 8.5; provided, however, that in order for this
paragraph (e) to be effective, UST shall have complied with all provisions of
Section 8.5, including the notice provisions therein; or
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(f) By SCHWAB if the UST Board of Directors (i) withdraws or
modifies or proposes publicly to withdraw or modify, in a manner adverse to
SCHWAB, its approval or recommendation of this Agreement or the Merger or
approves or recommends, or proposes publicly to approve or recommend, a Takeover
Proposal or (ii) takes any action in accordance with Section 6.3(b) that would
have been deemed a withdrawal or modification of its approval or recommendation
of the Merger and this Agreement were it not for the second sentence of Section
6.3(b); provided that, for the purposes of Section 8.2 of this Agreement, any
express withdrawal or modification of, or proposal to expressly withdraw or
modify, its approval or recommendation of this Agreement or the Merger, by the
UST Board of Directors (as contrasted with action that is deemed to be such
under Section 6.3(b)), or any approval, recommendation or proposal to approve or
recommend a Takeover Proposal by the UST Board of Directors, shall be covered by
subparagraph (i) and not subparagraph (ii) of this Section 8.2(f).
8.2 Effect of Termination.
(a) In the event of termination of this Agreement pursuant to
this Article VIII, no party to this Agreement shall have any liability or
further obligation hereunder to the other party hereto, except that (i) the last
sentences of Sections 6.2(a) and (b), and Sections 8.2, 9.2 and 9.3 shall
survive any termination of this Agreement and (ii) notwithstanding anything to
the contrary in this Agreement, termination will not relieve a breaching party
from liability for any willful and material breach of any provision of this
Agreement.
(b) UST shall pay to SCHWAB a fee of $100,000,000 (the
"Termination Fee") in the event that:
(i) this Agreement is terminated by SCHWAB pursuant
to Section 8.1(b), for a willful and material breach, under Section 8.1(c)
without a UST shareholder meeting having occurred at which UST Shareholder
Approval is sought, under Section 8.2(d)(ii) or under Section 8.1(f)(ii), but in
any such case only if (x) a Takeover Proposal Event has occurred prior to the
date of termination and (y) within 12 months of such termination UST enters into
a definitive agreement to consummate a Takeover Proposal or a Takeover Proposal
is consummated directly with the shareholders of UST;
(ii) this Agreement is terminated pursuant to
Section 8.1(e) and Section 8.5; or
(iii) this Agreement is terminated pursuant to
Section 8.1(f)(i).
(c) Any Termination Fee that becomes payable pursuant to
Section 8.2(b) shall be paid promptly, via wire transfer to the designated
account of SCHWAB; provided that, to the extent that UST is prohibited under
applicable law or regulation from paying the Termination Fee in full, UST shall
immediately so notify SCHWAB and
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thereafter promptly pay or cause to be paid, from time to time, to SCHWAB the
portion of the Termination Fee that UST is no longer prohibited from paying;
and, provided further, that UST shall use its best efforts immediately to obtain
all required regulatory and legal approvals and to file any required notices as
promptly as practicable so that it is no longer prohibited from paying any
outstanding portion of the Termination Fee.
(d) For purposes of Section 8.2(b)(i)(y), a "Takeover
Proposal" shall have the meaning assigned to such term in Section 6.4(c), except
that references to "20%" in such definition shall be deemed to be references to
35%. For purposes of this Agreement, a "Takeover Proposal Event" shall be deemed
to occur if a Takeover Proposal shall have been made known to UST or any of its
Subsidiaries or has been made directly to UST's shareholders generally or any
person shall have publicly announced an intention (whether or not conditional)
to make a Takeover Proposal. SCHWAB and UST agree that the agreements contained
in this Section 8.2 are an integral part of the transactions contemplated by
this Agreement, and that without such agreements SCHWAB would not have entered
into this Agreement; accordingly, if UST fails to pay the amount due under this
Section 8.2 and SCHWAB commences a suit which results in a judgment against UST
for the Termination Fee, UST shall pay to SCHWAB its costs and expenses
(including reasonable attorneys fees and expenses) in connection with such suit,
together with interest on the amount of the Termination Fee at the prime rate in
effect on the date such payment was required to be made as stated in The Wall
Street Journal.
8.3 Amendment. Subject to compliance with applicable law, 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 shareholders of UST;
provided, however, that after any approval of the transactions contemplated by
this Agreement by the shareholders of UST, there may not be, without further
approval of such shareholders, any amendment of this Agreement which changes the
amount or the form of the consideration to be delivered to the holders of UST
Common Stock hereunder other than as contemplated by this Agreement. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
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, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein; provided, however,
that after any approval of the transactions contemplated by this Agreement by
the shareholders of UST, there may not be, without further approval of such
shareholders, any extension or waiver of this Agreement or any portion thereof
which reduces the amount or changes the form of the consideration to be
delivered to the holders of UST Common Stock hereunder other than as
contemplated by this Agreement. 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, but such
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extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
8.5 Superior Proposal Termination. UST may terminate this Agreement
pursuant to Section 8.1(e) only if (i) the UST Board of Directors has received a
Superior Proposal, (ii) UST has notified SCHWAB in writing of the determination
of the UST Board of Directors to accept the Superior Proposal, with such notice
to include a summary of all material terms and conditions of the Superior
Proposal, (iii) at least ten business days following receipt by SCHWAB of the
notice referred to in clause (ii) above, and taking into account any revised
proposal made by SCHWAB since receipt of the notice referred to in clause (ii)
above, such Superior Proposal remains a Superior Proposal, (iv) UST is in
compliance with Section 6.4, (v) the UST Board of Directors concurrently
approves, and UST concurrently enters into, a definitive agreement providing for
the implementation of such Superior Proposal and (vi) UST pays the Termination
Fee.
ARTICLE IX
GENERAL PROVISIONS
9.1 Closing. Subject to the terms and conditions of this Agreement
and the UST Option Agreement, the closing of the Merger (the "Closing") will
take place at 10:00 a.m. local time on a date and at a place to be specified by
the parties, which shall be no later than three business days after the
satisfaction or waiver (subject to applicable law) of the latest to occur of the
conditions set forth in Article VII hereof, unless extended by mutual agreement
of the parties (the "Closing Date").
9.2 Nonsurvival 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 (other than pursuant
to the UST Option Agreement, which shall terminate in accordance with its terms)
shall survive the Effective Time, except for those covenants and agreements
contained herein and therein which by their terms apply in whole or in part
after the Effective Time.
9.3 Expenses. Subject to Section 8.2, 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, and all
filing and other fees paid to the SEC in connection with the Merger, shall be
borne equally by SCHWAB and UST.
9.4 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express
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courier (with confirmation) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to SCHWAB, to:
000 Xxxxxxxxxx Xxxxxx
Mail Stop: SF 000 XXX-00
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxx
Chief Financial Officer
with a copy to:
000 Xxxxxxxxxx Xxxxxx
Mail Stop: SF 000 XXX-00-000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Executive Vice President Corporate
and to:
Howard, Rice, Nemerovski, Canady, Xxxx & Rabkin
A Professional Corporation
Three Xxxxxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxxx X. Xxxxxx
Fax: (000) 000-0000
and
(b) if to UST, to:
U.S. Trust Corporation
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
President and Chief Operating Officer
with a copy to:
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Cravath, Swaine & Xxxxx
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: X. Xxxxxxx Xxxxxxxxx
Fax: (000) 000-0000
9.5 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."
9.6 Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
9.7 Entire Agreement. This Agreement (including the Disclosure
Schedules and other documents and the instruments referred to herein)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof other than the UST Option Agreement and the
Confidentiality Agreement.
9.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to any
applicable conflicts of law.
9.9 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 without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting 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.
9.10 Publicity. Except as otherwise required by applicable law or
the rules of the NYSE, neither SCHWAB nor UST shall, nor shall either permit any
of its Subsidiaries to, issue or cause the publication of any press release or
other public announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this Agreement without
the consent of the other party, which consent shall not be unreasonably withheld
or delayed.
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9.11 Assignment; Third Party Beneficiaries. Neither this Agreement
nor any of the rights, interests or obligations shall be assigned by either of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party. 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 assigns. Except for (i) Section
1.7 which is for the benefit of the holders of UST Rights and (ii) Section 6.11
which is for the benefit of the persons specified in Section 6.11(e), this
Agreement (including the documents and instruments referred to herein) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, The Xxxxxxx Xxxxxx Corporation, Patriot Merger
Corporation and U.S. Trust Corporation have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the date first
above written.
THE XXXXXXX XXXXXX CORPORATION U.S. TRUST CORPORATION
By:/s/ XXXXX X. XXXXXXXX By: /s/ H. XXXXXXXX XXXXXXX
------------------------------- -------------------------------
Name: Xxxxx X. Xxxxxxxx Name: H. Xxxxxxxx Xxxxxxx
Title: President and Title: Chairman and
Co-Chief Executive Officer Chief Executive Officer
PATRIOT MERGER CORPORATION
By: /s/ XXXXX X. XXXXXXXX
------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President
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EXHIBIT 6.8(a)(1)
FORM OF AFFILIATE LETTER ADDRESSED TO UST
Xx. Xxxxxxx X. Xxxxxx
President and Chief Operating Officer
U.S. Trust Corporation
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Dear Xx. Xxxxxx:
I have been advised that as of the date hereof I may be deemed to be
an "affiliate" of The Xxxxxxx Xxxxxx Corporation, a Delaware corporation
("SCHWAB"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the Rules and Regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act") and/or (ii) used in and for
purposes of Accounting Series, Releases 130 and 135, as amended, of the
Commission. I have been further advised that pursuant to the terms of the
Agreement and Plan of Merger dated as of January 12, 1999 (the "Merger
Agreement") among U.S. Trust Corporation, a New York corporation ("UST"), SCHWAB
and Patriot Merger Corporation, a wholly-owned subsidiary of SCHWAB ("Merger
Sub"), Merger Sub will be merged with and into UST (the "Merger").
I represent, warrant and covenant to UST that from the date that is
at least 30 days prior to the Effective Time (as defined in the Agreement) I
will not sell, transfer or otherwise dispose of shares, including entering into
any hedging transaction with respect to, of SCHWAB Common Stock (as defined in
the Merger Agreement) held by me and that I will not sell, transfer or otherwise
dispose of, including entering into any hedging transaction with respect to, any
shares of SCHWAB Common Stock (as defined in the Merger Agreement) until after
such time as results covering at least 30 days of combined operations of SCHWAB
and UST have been published by SCHWAB, in the form of a quarterly earnings
report, an effective registration statement filed with the Commission, a report
to the Commission on Form 10-K, 10-Q, or 8-K, or any other public filing or
announcement which includes the results of at least 30 days of combined
operations; provided, however, that this paragraph shall not prevent me from
selling, transferring or disposing of such number of shares of UST Common Stock
or SCHWAB Common Stock as will not, in the reasonable judgment of accountants to
SCHWAB, interfere with or prevent the Merger being accounted for as a
57
"pooling of interests," taking into account the nature, extent and timing of
such sale, transfer or disposition and of similar sales, transfers or
dispositions by all other affiliates of UST and all affiliates of SCHWAB.
Very truly yours,
By:________________________________
Name:______________________________
Accepted this ____ day of __________, 1999 by
U.S. TRUST CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
58
EXHIBIT 6.8(a)(2)
FORM OF AFFILIATE LETTER ADDRESSED TO SCHWAB
Xx. Xxxxxxxxxxx X. Xxxxx
Chief Financial Officer
The Xxxxxxx Xxxxxx Corporation
000 Xxxxxxxxxx Xxxxxx
Mail Stop: SF 000 XXX-00
Xxx Xxxxxxxxx, XX 00000
Dear Xx. Xxxxx:
I have been advised that as of the date hereof I may be deemed to be
an "affiliate" of U.S. Trust Corporation, a New York corporation ("UST"), as the
term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of Rule
145 of the Rules and Regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"), and/or (ii) used in and for purposes of Accounting Series,
Releases 130 and 135, as amended, of the Commission. I have been further advised
that pursuant to the terms of the Agreement and Plan of Merger dated as of
January 12, 1999 (the "Merger Agreement") among The Xxxxxxx Xxxxxx Corporation,
a Delaware corporation ("SCHWAB"), UST and Patriot Merger Corporation, a
wholly-owned subsidiary of SCHWAB ("Merger Sub"), Merger Sub will be merged with
and into UST (the "Merger") and that as a result of the Merger, I may receive
shares of SCHWAB Common Stock (as defined in the Merger Agreement), in exchange
for shares of UST Common Stock (as defined in the Merger Agreement), owned by
me.
I represent, warrant and covenant to SCHWAB that in the event I
receive any SCHWAB Common Stock as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
SCHWAB Common Stock in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed
its requirements and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of SCHWAB Common Stock to the extent I believed
necessary with my counsel or counsel for UST.
C. I have been advised that the issuance of SCHWAB Common Stock to
me pursuant to the Merger will be registered with the Commission under the Act
on a Registration Statement on Form S-4. However, I have also been advised that,
since at the time the Merger will be submitted for a vote of the shareholders of
SCHWAB, I may be deemed to have been an affiliate of UST and the distribution by
me of the SCHWAB Common Stock has not been registered under the Act, and that I
may not sell, transfer or otherwise dispose of SCHWAB Common Stock issued to me
in the Merger unless
59
(i) such sale, transfer or other disposition has been registered under the Act,
(ii) such sale, transfer or other disposition is made in conformity with the
volume and other limitations of Rule 145 promulgated by the Commission under the
Act or (iii) in the opinion of counsel reasonably acceptable to SCHWAB, such
sale, transfer or other disposition is otherwise exempt from registration under
the Act.
D. I understand that SCHWAB is under no obligation to register the
sale, transfer or other disposition of the SCHWAB Common Stock by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
E. I also understand that stop transfer instructions will be given
to SCHWAB transfer agents with respect to the SCHWAB Common Stock and that there
will be placed on the certificates for the SCHWAB Common Stock issued to me, or
any substitutions therefor, a legend stating in substance:
"The securities represented by this certificate have been issued in
a transaction to which Rule 145 promulgated under the Securities Act
of 1933 applies and may only be sold or otherwise transferred in
compliance with the requirements of Rule 145 or pursuant to a
registration statement under said act or an exemption from such
registration."
F. I also understand that unless the transfer by me of my SCHWAB
Common Capital Stock has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, SCHWAB reserves the right to put the
following legend on the certificates issued to my transferee:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and were acquired from a person who
received such shares in a transaction to which Rule 145 promulgated
under the Securities Act of 1933 applies. The shares have been
acquired by the holder not with a view to, or for resale in
connection with, any distribution thereof within the meaning of
Securities Act of 1933 and may not be sold, pledged or otherwise
transferred except in accordance with an exemption from the
registration requirements of the Securities Act of 1933."
It is understood and agreed that the legends set forth in paragraphs
E and F above shall be removed by delivery of substitute certificates without
such legend if the undersigned shall have delivered to SCHWAB a copy of a letter
from the staff of the Commission, or an opinion of counsel in form and substance
reasonably satisfactory to SCHWAB, to the effect that such legend is not
required for purposes of the Act.
I further represent to and covenant with SCHWAB that from the date
that is 30 days prior to the Effective Time (as defined in the Merger Agreement)
I will not sell,
60
transfer or otherwise dispose of, including entering into any hedging
transaction with respect to, shares of UST Common Stock held by me and that I
will not sell, transfer or otherwise dispose of, including entering into any
hedging transaction with respect to, any shares of SCHWAB Common Stock received
by me in the Merger or other shares of SCHWAB Common Stock until after such time
as results covering at least 30 days of combined operations of SCHWAB and UST
have been published by SCHWAB, in the form of a quarterly earnings report, an
effective registration statement filed with the Commission, a report to the
Commission on Form 10-K, 10-Q, or 8-K, or any other public filing or
announcement which includes the results of at least 30 days of combined
operations; provided, however, that this paragraph shall not prevent me from
selling, transferring or disposing of such number of shares of UST Common Stock
or SCHWAB Common Stock as will not, in the reasonable judgment of accountants to
SCHWAB, interfere with or prevent the Merger being accounted for as a "pooling
of interests," taking into account the nature, extent and timing of such sale,
transfer or disposition and of similar sales, transfers or dispositions by all
other affiliates of UST and all affiliates of SCHWAB.
I understand that pursuant to the Merger Agreement, no certificate
for SCHWAB Common Stock shall be delivered to me in exchange for certificates
representing UST Common Stock until I have executed and delivered this
agreement.
Very truly yours,
By:_________________________________
Name:_______________________________
Accepted this ____ day of __________, 1999 by
THE XXXXXXX XXXXXX CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
61
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER........................................................... 1
1.1 The Merger........................................................... 1
1.2 Effective Time....................................................... 2
1.3 Effects of the Merger................................................ 2
1.4 Conversion of UST Common Stock....................................... 2
1.5 MERGER SUB Common Stock.............................................. 3
1.6 SCHWAB Common Stock.................................................. 3
1.7 Options and Contingent Issuances..................................... 3
1.8 Certificate of Incorporation......................................... 4
1.9 Bylaws............................................................... 5
1.10 Directors and Officers of Surviving Corporation and Subsidiaries..... 5
1.11 Representation on SCHWAB Board of Directors and Management Committee. 5
ARTICLE II EXCHANGE OF SHARES................................................... 6
2.1 SCHWAB to Make Shares Available...................................... 6
2.2 Exchange of Shares................................................... 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF UST................................ 8
3.1 Corporate Organization............................................... 8
3.2 Capitalization....................................................... 10
3.3 Authority; No Violation.............................................. 10
3.4 Consents and Approvals............................................... 11
3.5 Reports.............................................................. 12
3.6 Financial Statements................................................. 13
3.7 Broker's Fees........................................................ 13
3.8 Absence of Certain Changes or Events................................. 14
3.9 Legal Proceedings.................................................... 14
3.10 Taxes and Tax Returns................................................ 15
3.11 Employees............................................................ 16
3.12 SEC Reports.......................................................... 18
3.13 Compliance with Applicable Law....................................... 19
3.14 Certain Contracts.................................................... 19
3.15 Agreements with Regulatory Agencies.................................. 20
3.16 Investment Securities................................................ 20
3.17 Derivative Instruments............................................... 21
3.18 Loan Losses.......................................................... 21
3.19 Undisclosed Liabilities.............................................. 21
3.20 Environmental Liability.............................................. 21
3.21 State Takeover Laws; UST Rights Plan................................. 22
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TABLE OF CONTENTS
Page
3.22 Insurance........................................................... 22
3.23 Pooling of Interests................................................ 22
3.24 Title to Properties................................................. 23
3.25 Intellectual Property............................................... 23
3.26 Year 2000........................................................... 23
3.27 No Excess Parachute Payments........................................ 24
3.28 Opinion............................................................. 24
3.29 UST Information..................................................... 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SCHWAB AND MERGER SUB............. 25
4.1 Corporate Organization.............................................. 25
4.2 Capitalization...................................................... 26
4.3 Authority; No Violation............................................. 26
4.4 Consents and Approvals.............................................. 27
4.5 Broker's Fees....................................................... 27
4.6 Absence of Certain Changes or Events................................ 27
4.7 Legal Proceedings................................................... 28
4.8 Taxes and Tax Returns............................................... 28
4.9 SEC Reports......................................................... 28
4.10 Compliance with Applicable Law...................................... 29
4.11 Agreements with Regulatory Agencies................................. 30
4.12 Undisclosed Liabilities............................................. 30
4.13 Pooling of Interests................................................ 30
4.14 Year 2000........................................................... 30
4.15 Opinion............................................................. 31
4.16 SCHWAB Information.................................................. 31
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS........................... 31
5.1 Conduct of UST Business Prior to the Effective Time................. 31
5.2 Forbearances of UST................................................. 31
5.3 Forbearances of SCHWAB.............................................. 33
ARTICLE VI ADDITIONAL AGREEMENTS............................................... 34
6.1 Regulatory Matters.................................................. 34
6.2 Access to Information............................................... 36
6.3 Shareholder Approval................................................ 37
6.4 No Solicitation..................................................... 37
6.5 Continuity of Business Enterprise................................... 39
6.6 Tax Free Treatment.................................................. 39
6.7 Pooling Treatment................................................... 39
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TABLE OF CONTENTS
Page
6.8 Affiliates; Publication of Combined Financial Results............... 39
6.9 Stock Exchange Listing.............................................. 39
6.10 Employee Benefits................................................... 40
6.11 Indemnification; Directors' and Officers' Insurance................. 41
6.12 Additional Agreements............................................... 42
6.13 Advice of Changes................................................... 43
6.14 Employee Retention Plan............................................. 43
6.15 State Takeover Statutes............................................. 43
6.16 Section 15 of the 1940 Act.......................................... 43
ARTICLE VII CONDITIONS PRECEDENT................................................ 44
7.1 Conditions to Each Party's Obligation To Effect the Merger.......... 44
(a) Shareholder Approval.......................................... 44
(b) Stock Exchange Listing........................................ 44
(c) Regulatory Approvals.......................................... 44
(d) S-4........................................................... 44
(e) No Injunctions or Restraints; Illegality...................... 44
(f) Pooling of Interests.......................................... 45
7.2 Conditions to Obligations of SCHWAB................................. 45
(a) Representations and Warranties................................ 45
(b) Performance of Obligations of UST............................. 45
(c) Regulatory Conditions......................................... 45
(d) Financial Holding Company Status.............................. 46
7.3 Conditions to Obligations of UST.................................... 46
(a) Representations and Warranties................................ 46
(b) Performance of Obligations of SCHWAB.......................... 46
(c) Tax Opinion................................................... 46
ARTICLE VIII TERMINATION AND AMENDMENT........................................... 47
8.1 Termination......................................................... 47
8.2 Effect of Termination............................................... 48
8.3 Amendment........................................................... 49
8.4 Extension; Waiver................................................... 49
8.5 Superior Proposal Termination....................................... 50
ARTICLE IX GENERAL PROVISIONS.................................................. 50
9.1 Closing............................................................. 50
9.2 Nonsurvival of Representations, Warranties and Agreements........... 50
9.3 Expenses............................................................ 50
9.4 Notices............................................................. 50
9.5 Interpretation...................................................... 52
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TABLE OF CONTENTS
Page
9.6 Counterparts........................................................52
9.7 Entire Agreement....................................................52
9.8 Governing Law.......................................................52
9.9 Severability........................................................52
9.10 Publicity...........................................................52
9.11 Assignment; Third Party Beneficiaries...............................53
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65
EXHIBIT A
FORM OF
RESTATED CERTIFICATE OF INCORPORATION
OF
U.S. TRUST CORPORATION
----------------------------------------------
Under Section 807 of the Business
Corporation Law of the State of New York
----------------------------------------------
1. The name of the corporation shall be U.S. Trust Corporation (hereinafter
sometimes called the "Corporation").
2. The purposes for which it is formed are to engage in any lawful act or
activity for which corporations may be organized under the Business Corporation
Law provided that the corporation is not formed to engage in any act or
activity which requires the consent or approval of any state official,
department, board, agency or other body, without such consent or approval first
being obtained.
It is hereby expressly provided that the foregoing shall not be held to
limit or restrict in any manner the powers of this Corporation; and that this
Corporation may do all and everything necessary, suitable and appropriate for
the exercise of any of its general powers.
3. The office of the Corporation in the State of New York shall be located in
the County of New York.
4. The aggregate number of shares which the Corporation shall have authority to
issue is one thousand (1,000) shares of Common Stock, each share having a par
value of one xxxxx ($.01). The holders of the Common Stock shall have no
preemptive rights to subscribe for any shares of any class of stock of the
Corporation whether now or hereafter authorized.
5. The Secretary of State of the State of New York is hereby designated as the
agent of the Corporation upon whom any process may in
66
any action or proceeding against it be served. The post office address to which
the Secretary of State shall mail a copy of any process in any action or
proceeding against the Corporation which may be served upon it is: 000 Xxxxxx
Xxxxxx, Xxx Xxxx, X.X. 00000; Attention: CT Corporation System.
6. The corporation designated CT Corporation System, 000 Xxxxxx Xxxxxx,
Xxx Xxxx, X.X. 00000 as its registered agent upon whom process against it may
be served within the State of New York.
7. The following provisions are inserted for the management of the business and
the conduct of the affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the Corporation and of its directors
and stockholders:
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add or repeal the By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as from time to
time fixed by, or in the manner provided in, the By-Laws of the Corporation.
Election of directors need not be by written ballot unless the By-Laws so
provide.
(4) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done
by the Corporation, subject, nevertheless, to the provisions of the Business
Corporation Law, this Certificate of Incorporation, and any By-Laws adopted
by the stockholders; provided, however, that no By-Laws hereafter adopted by
the stockholders shall invalidate any prior act of the directors which would
have been valid if such By-Laws had not been adopted.
(5) Any member of the Board of Directors may be removed, with or without
cause, at any time prior to the expiration of his term by a majority vote of
the outstanding shares.
67
8. The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the provisions of paragraph (b)
of Section 402 of the Business Corporation Law of the State of New York, as the
same may be amended and supplemented.
