Exhibit 1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
FINGERHUT COMPANIES, INC.
FEDERATED DEPARTMENT STORES, INC.
AND
BENGAL SUBSIDIARY CORP.
DATED AS OF FEBRUARY 10, 1999
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TABLE OF CONTENTS
Page
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I. THE TENDER OFFER..............................................................................................2
1.1. The Offer.....................................................................................2
1.2. Offer Documents...............................................................................3
1.3. Company Actions...............................................................................4
1.4. Directors.....................................................................................5
II. THE MERGER...............................................................................................6
2.1. The Merger....................................................................................6
2.2. The Closing...................................................................................7
2.3. Effective Time................................................................................7
2.4. Articles of Incorporation and Bylaws of Surviving
Corporation...................................................................................7
2.5. Directors and Officers of Surviving Corporation...............................................8
2.6. Conversion of Securities......................................................................8
2.7. Dissenting Shares.............................................................................9
2.8. Surrender of Shares; Stock Transfer Books.....................................................9
2.9. Stock Plans..................................................................................11
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................................................12
3.1. Existence; Good Standing; Corporate Authority................................................12
3.2. Authorization, Validity and Effect of Agreement..............................................13
3.3. Capitalization...............................................................................13
3.4. Subsidiaries.................................................................................14
3.5. Other Interests..............................................................................15
3.6. No Conflict; Required Filings and Consents...................................................15
3.7. Compliance with Laws.........................................................................16
3.8. SEC Documents................................................................................16
3.9. Litigation...................................................................................17
3.10. Absence of Certain Changes...................................................................18
3.11. Taxes........................................................................................18
3.12. Property.....................................................................................20
3.13. Millennium Compliance........................................................................22
3.14. Contracts....................................................................................22
3.15. Environmental Matters........................................................................23
3.16. Employee Benefit Plans.......................................................................24
3.17. State Takeover Statutes......................................................................25
3.18. Voting Requirements..........................................................................25
3.19. No Brokers...................................................................................25
3.20. Opinion of SSB...............................................................................25
3.21. Offer Documents; Proxy Statement.............................................................26
IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER......................................................26
4.1. Existence; Good Standing; Corporate Authority................................................26
4.2. Authorization, Validity and Effect of Agreement..............................................27
4.3. No Conflict; Required Filings and Consents...................................................27
4.4. No Brokers...................................................................................28
4.5. Offer Documents; Proxy Statement.............................................................28
4.6. Financing....................................................................................29
4.7. Litigation...................................................................................29
4.8. Ownership of Shares..........................................................................29
V. COVENANTS.....................................................................................................29
5.1. Conduct of Business..........................................................................29
5.2. No Solicitation..............................................................................33
5.3. Filings, Reasonable Efforts..................................................................35
5.4. Inspection of Records........................................................................35
5.5. Publicity....................................................................................36
5.6. Proxy Statement..............................................................................36
5.7. Further Actions..............................................................................37
5.8. Insurance; Indemnity.........................................................................37
5.9. Employee Benefits............................................................................38
5.10. Conveyance Taxes.............................................................................39
VI. CONDITIONS PRECEDENT........................................................................................39
6.1. Conditions to Each Party's Obligation To Effect
the Merger...................................................................................39
6.2. Conditions to Obligation of Parent and Purchaser
to Effect the Merger.........................................................................39
VII. TERMINATION.................................................................................................40
7.1. Termination by Mutual Consent................................................................40
7.2. Termination by Either Parent or Company......................................................40
7.3. Termination by Company.......................................................................40
7.4. Termination by Parent........................................................................40
7.5. Effect of Termination and Abandonment; Termination
Fee..........................................................................................41
VIII. GENERAL PROVISIONS.........................................................................................43
8.1. Nonsurvival of Representations, Warranties and
Agreements...................................................................................43
8.2. Notices......................................................................................44
8.3. Assignment; Binding Effect...................................................................45
8.4. Entire Agreement.............................................................................45
8.5. Amendment....................................................................................45
8.6. Governing Law................................................................................46
8.7. Counterparts.................................................................................46
8.8. Headings.....................................................................................46
8.10. Waivers......................................................................................47
8.11. Incorporation of Annex A.....................................................................47
8.12. Severability.................................................................................47
8.13. Enforcement of Agreement.....................................................................47
8.14. Expenses.....................................................................................48
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of February
10, 1999, by and among Fingerhut Companies, Inc., a Minnesota corporation (the
"COMPANY"), Federated Department Stores, Inc., a Delaware corporation
("PARENT"), and Bengal Subsidiary Corp., a Minnesota corporation and a wholly
owned subsidiary of Parent ("PURCHASER") (the Company and Purchaser being
sometimes hereinafter referred to as the "CONSTITUENT CORPORATIONS").
RECITALS
A. Each of the Boards of Directors of the Company, Parent and Purchaser
has determined that it is in the best interests of its respective shareholders
for Purchaser to acquire the Company on the terms and subject to the conditions
set forth herein (the "ACQUISITION");
B. As a first step in the Acquisition, the Company, Parent and
Purchaser each desire that Parent cause Purchaser to commence a cash tender
offer (the "OFFER") to purchase all of the Company's issued and outstanding
shares, par value $0.01 per share (the "SHARES") for $25.00 per Share, or such
higher price as may be paid in the Offer (the "PER SHARE AMOUNT"), on the terms
and subject to the conditions set forth in this Agreement;
C. To complete the Acquisition, each of the Boards of Directors of the
Company, Parent, on its behalf and as sole shareholder of Purchaser, and
Purchaser have approved this Agreement and the merger of Purchaser with and into
the Company (the "MERGER"), wherein any issued and outstanding Shares not
tendered and purchased by Purchaser pursuant to the Offer (other than Dissenting
Shares and Shares described in Section 2.6(b)) will be converted into the right
to receive the Per Share Amount, on the terms and subject to the conditions of
this Agreement and in accordance with the Minnesota Business Corporation Act
(the "MBCA");
D. The Board of Directors of the Company (the "COMPANY BOARD") has
unanimously (with one director being absent) resolved to recommend that holders
of Shares ("SHAREHOLDERS") accept the Offer and approve this Agreement and the
Merger and has determined that the Offer and the Merger are fair to and in the
best interests of the Company and the Shareholders; and
E. The parties desire to make certain representations, warranties and
covenants in connection with the Offer and the Merger and also to prescribe
various conditions to the Offer and the Merger.
I. THE TENDER OFFER
1.1. THE OFFER. (a) Subject to the last sentence of this Section
1.1(a), as promptly as practicable (but in any event not later than five
business days after the public announcement of the execution and delivery of
this Agreement), Parent will cause Purchaser to commence (within the meaning of
Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT")), the Offer whereby Purchaser will offer to purchase for cash all of the
Shares at the Per Share Amount, net to the seller in cash (subject to reduction
for any stock transfer taxes payable by the seller, if payment is to be made to
a Person other than the Person in whose name the certificate for such Shares is
registered, or any applicable federal back-up withholding), provided, however,
that Parent may designate another direct or indirect subsidiary of Parent as the
bidder thereunder (within the meaning of Rule 14d-1(e) under the Exchange Act),
in which event references herein to Purchaser will be deemed to apply to such
subsidiary, as applicable. Notwithstanding the foregoing, if between the date of
this Agreement and the Effective Time the outstanding Shares shall have been
changed into a different number of shares or a different class, by reason of any
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Per Share Amount will be correspondingly
adjusted on a per-share basis to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
The obligation of Parent to cause Purchaser to commence the Offer, to consummate
the Offer and to accept for payment and to pay for Shares validly tendered in
the Offer and not withdrawn in accordance therewith will be subject to, and only
to, those conditions set forth in Annex A hereto (the "OFFER CONDITIONS").
(b) Without the prior written consent of the Company, Purchaser will
not, and Parent will cause Purchaser not to, (i) decrease or change the form of
the Per Share Amount, (ii) decrease the number of Shares sought in the Offer,
(iii) amend or waive the Minimum Condition (as defined in Annex A hereto) or
impose conditions other than the Offer Conditions on the Offer, (iv) extend the
expiration date of the Offer (the "EXPIRATION DATE") (which will initially be 20
business days following the commencement of the Offer) except (A) as required by
Law, (B) that, in the event that any condition to the Offer is not satisfied or
waived at the time that the Expiration Date would otherwise occur, (1) Purchaser
must extend the Expiration Date for an aggregate of 10 additional business days
to the extent necessary to permit such condition to be satisfied and (2)
Purchaser may, in its sole discretion, extend the Expiration Date for such
additional period as it may determine to be appropriate (but not beyond June 30,
1999) to permit such condition to be satisfied, and (C) that, in the event that
the OCC Condition (as defined in Annex A hereto) is not satisfied, and all other
Offer Conditions have been satisfied or waived at the time that the Expiration
Date (as extended pursuant to Section 1.1(b)(iv)(A) or (B)), would have
otherwise occurred, Purchaser must either
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irrevocably waive the OCC Condition or extend the Expiration Date (but not
beyond the date that is 60 calendar days from the date of the filing with the
Office of the Comptroller of the Currency (the "OCC") in respect of the OCC
Condition) to the extent necessary to permit the OCC Condition to be satisfied,
or (v) amend any term of the Offer in any manner materially adverse to
Shareholders (including without limitation to result in any extension which
would be inconsistent with the preceding provisions of this sentence), provided,
however, that (1) subject to applicable legal requirements, Parent may cause
Purchaser to waive any Offer Condition, other than the Minimum Condition, in
Parent's sole discretion and (2) the Offer may be extended in connection with an
increase in the consideration to be paid pursuant to the Offer so as to comply
with applicable rules and regulations of the Securities and Exchange Commission
(the "SEC"). Except as set forth above and subject to applicable legal
requirements, Purchaser may amend the Offer or waive any Offer Condition in its
sole discretion. Assuming the prior satisfaction or waiver of the Offer
Conditions, Parent will cause Purchaser to accept for payment, and pay for, in
accordance with the terms of the Offer, all Shares validly tendered and not
withdrawn pursuant to the Offer as soon as practicable after the Expiration Date
or any extension thereof.
1.2. OFFER DOCUMENTS. (a) As soon as practicable on the date of
commencement of the Offer, Parent and Purchaser will file or cause to be filed
with the SEC a tender offer statement on Schedule 14D-1 (the "SCHEDULE 14D-1")
which will contain an offer to purchase and related letter of transmittal and
other ancillary Offer documents and instruments pursuant to which the Offer will
be made (collectively with any supplements or amendments thereto, the "OFFER
DOCUMENTS") and which Parent and Purchaser represent, warrant and covenant will
comply in all material respects with the Exchange Act and other applicable Laws
and will contain (or will be amended in a timely manner so as to contain) all
information which is required to be included therein in accordance with the
Exchange Act and the rules and regulations thereunder and other applicable Laws,
provided, however, that (i) no representation, warranty or covenant hereby is
made or will be made by Parent or Purchaser with respect to information supplied
by the Company in writing expressly for inclusion in, or information extracted
from the Company's public SEC filings which is incorporated by reference or
included in, the Offer Documents ("COMPANY SEC INFORMATION") and (ii) no
representation, warranty or covenant is made or will be made herein by the
Company with respect to information contained in the Offer Documents other than
the Company SEC Information.
(b) Parent, Purchaser and the Company will each promptly correct any
information provided by them for use in the Offer Documents if and to the extent
that it becomes false or misleading in any material respect and Parent and
Purchaser will jointly and severally take all lawful action necessary to cause
the Offer Documents as so corrected to be filed promptly with the SEC and to be
disseminated to the Shareholders, in each case as
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and to the extent required by applicable Law. In conducting the Offer, Parent
and Purchaser will comply in all material respects with the provisions of the
Exchange Act and other applicable Laws. Parent and Purchaser will afford the
Company and its counsel a reasonable opportunity to review and comment on the
Offer Documents and any amendments thereto prior to the filing thereof with the
SEC and will not mail the Offer Documents to the Shareholders if the Company
reasonably asserts that the Company SEC Information is inaccurate.
(c) Parent and Purchaser will file with the Commissioner of Commerce of
the State of Minnesota any registration statement relating to the Offer required
to be filed pursuant to Chapter 80B of the Minnesota Statutes.
1.3. COMPANY ACTIONS. The Company hereby consents to the Offer and
represents that (a) the Company Board and a special committee of the Company
Board formed in accordance with Section 302A.673 of the MBCA (the "SPECIAL
COMMITTEE") (each at a meeting duly called and held) have (i) determined that
this Agreement, the Offer and the Merger are fair to and in the best interests
of the Company and the Shareholders, (ii) approved this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, and,
assuming the accuracy of Parent's and Purchaser's representation in Section 4.8,
such approval is sufficient to render Sections 302A.671, 302A.673 and 302A.675
of the MBCA inapplicable to this Agreement and the transactions contemplated
hereby, including the Offer and the Merger, and (iii) resolved to recommend
acceptance of the Offer and approval of this Agreement by the Shareholders and
(b) Xxxxxxx Xxxxx Xxxxxx Inc. ("SSB") has delivered to the Company Board the
opinion described in Section 3.20. The Company hereby consents to the inclusion
in the Offer Documents of the recommendation referred to in this Section 1.3,
provided, however, that the Company Board may withdraw, modify or change such
recommendation to the extent, and only to the extent and on the conditions,
specified in Section 5.2(b). The Company will file with the SEC simultaneously
with the filing by Parent and Purchaser of the Schedule 14D-1, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, "SCHEDULE 14D-9") containing such
recommendations of the Company Board in favor of the Offer and the Merger,
subject to the rights of the Company Board set forth in Section 5.2(b). The
Company represents, warrants and covenants that the Schedule 14D- 9 will comply
in all material respects with the Exchange Act and any other applicable Laws and
will contain (or will be amended in a timely manner so as to contain) all
information which is required to be included therein in accordance with the
Exchange Act and the rules and regulations thereunder and other applicable Laws,
provided, however, (i) that no representation, warranty or covenant is made or
will be made herein by the Company with respect to information supplied by
Parent or Purchaser expressly for inclusion in, or information extracted from
Parent's public SEC filings which is incorporated or included in, the Schedule
14D-9 (the "PARENT SEC INFORMATION"), and (ii) no representation,
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warranty or covenant is made or will be made herein by Parent or Purchaser with
respect to information contained in the Schedule 14D-9 other than the Parent SEC
Information (which Parent SEC Information will include the information furnished
by Parent as contemplated by the next sentence). The Company will include in the
Schedule 14D-9 information furnished by Parent in writing concerning Parent's
Designees as required by Section 14(f) of the Exchange Act and Rule 14f-1
thereunder and will use its reasonable best efforts to have the Schedule 14D-9
available for inclusion in the initial mailing (and any subsequent mailing) of
the Offer Documents to the Shareholders. Each of the Company and Parent will
promptly correct any information provided by them for use in the Schedule 14D-9
if and to the extent that it becomes false or misleading in any material respect
and the Company will further take all lawful action necessary to cause the
Schedule 14D-9 as so corrected to be filed promptly with the SEC and
disseminated to the Shareholders, in each case as and to the extent required by
applicable Law. Parent and its counsel will be given a reasonable opportunity to
review the Schedule 14D-9 and any amendments thereto prior to the filing thereof
with the SEC. In connection with the Offer, the Company will promptly furnish
Parent with mailing labels, security position listings and all available
listings or computer files containing the names and addresses of the record
Shareholders as of the latest practicable date and will furnish Parent such
information and assistance (including updated lists of the Shareholders, mailing
labels and lists of security positions) as Parent or its agents may reasonably
request in communicating the Offer to the record and beneficial Shareholders.
Subject to the requirements of applicable Law, and except for such actions as
are necessary to disseminate the Offer Documents and any other documents
necessary to consummate the Offer and the Merger, Parent and Purchaser will, and
will instruct each of their respective Affiliates, associates, partners,
employees, agents and advisors to, hold in confidence the information contained
in such labels, lists and files, will use such information only in connection
with the Offer and the Merger, and, if this Agreement is terminated in
accordance with its terms, will deliver promptly to the Company all copies of
such information (and any copies, compilations or extracts thereof or based
thereon) then in their possession or under their control.
1.4. DIRECTORS. (a) Promptly upon the purchase of Shares by Purchaser
pursuant to the Offer (provided that the Minimum Condition has been satisfied),
and from time to time thereafter, (i) Parent will be entitled to designate such
number of directors ("PARENT'S DESIGNEES"), rounded down to the next whole
number, as will give Parent, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Company Board equal to the product of (A)
the number of directors on the Company Board (giving effect to any increase in
the number of directors pursuant to this Section 1.4) and (B) the percentage
that such number of Shares so purchased bears to the aggregate number of Shares
outstanding (such number being, the "BOARD PERCENTAGE"), provided, however, that
the Board Percentage will in all events
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be a majority of the members of the Company Board, and (ii) the Company will,
upon request by Parent, promptly satisfy the Board Percentage by (A) increasing
the size of the Company Board or (B) using its reasonable best efforts to secure
the resignations of such number of directors as is necessary to enable Parent's
Designees to be elected to the Company Board or both and will use its reasonable
best efforts to cause Parent's Designees promptly to be so elected, subject in
all instances to compliance with Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. At the request of Parent, the Company will take
all lawful action necessary to effect any such election. Parent will supply to
the Company in writing and be solely responsible for any information with
respect to itself, Parent's Designees and Parent's officers, directors and
Affiliates required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder to be included in the Schedule 14D-9. Notwithstanding the
foregoing, at all times prior to the Effective Time, the Company Board will
include at least three Continuing Directors.
(b) Notwithstanding any other provision hereof, of the articles of
incorporation or bylaws of the Company or of applicable Law to the contrary,
following the election or appointment of Parent's Designees pursuant to this
Section 1.4 and prior to the Effective Time or, if the Effective Time has not
then occurred, the Drop-Dead Date, any amendment or termination of this
Agreement or amendment of the articles of incorporation or bylaws of the Company
by the Company, extension by the Company for the performance or waiver of the
obligations or other acts of Parent or Purchaser hereunder or waiver by the
Company of any of the Company's rights hereunder will require the affirmative
vote of the majority of members of a committee comprised solely of Continuing
Directors. For purposes of this Agreement, the term the "CONTINUING DIRECTORS"
means at any time (i) those directors of the Company who are Disinterested
directors of the Company on the date hereof and who voted to approve this
Agreement and (ii) such additional directors of the Company who are
Disinterested and who are designated as "Continuing Directors" for purposes of
this Agreement by a majority of the Continuing Directors in office at the time
of such designation, provided, however, that if there are no such Continuing
Directors, the individuals who are appointed to the Company Board who are both
Disinterested and "independent" within the meaning given such term in the New
York Stock Exchange Listed Company Guide will constitute the Continuing
Directors. For purposes of this Agreement, the term "DISINTERESTED" has the
meaning assigned to it in Section 302A.673, Subd.1(d)of the MBCA.
II. THE MERGER
2.1. THE MERGER. (a) On the terms and subject to the conditions of this
Agreement, at the Effective Time, Purchaser will be merged with and into the
Company in accordance with the applicable provisions of the MBCA, and the
separate corporate existence of Purchaser will thereupon cease. The Company will
be
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the surviving corporation in the Merger (as such, the "SURVIVING CORPORATION")
in accordance with the MBCA.
(b) The Merger will have the effects specified in Section 302A.641 of
the MBCA.
2.2. THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") will take place at the offices of Xxxxx, Day, Xxxxxx &
Xxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, at 10:00 a.m., local time, on
the second business day after the date on which the last of the conditions
(excluding conditions that by their terms cannot be satisfied until the Closing
Date) set forth in Article VI is satisfied or waived in accordance herewith, or
at such other place, time or date as the parties may agree. The date on which
the Closing occurs is hereinafter referred to as the "CLOSING DATE."
2.3. EFFECTIVE TIME. On the Closing Date or as soon as practicable
following the date on which the last of the conditions set forth in Article VI
is satisfied or waived in accordance herewith, Purchaser and the Company will
cause articles of merger to be filed with the Secretary of State of the State of
Minnesota as provided in the MBCA. Upon completion of such filing, the Merger
will become effective in accordance with the MBCA. The time and date on which
the Merger becomes effective is herein referred to as the "EFFECTIVE TIME."
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers, immunities and
franchises of the Company and Purchaser will vest in the Surviving Corporation,
and all debts, liabilities, obligations and duties of the Company and Purchaser
will become the debts, liabilities, obligations and duties of the Surviving
Corporation.
2.4. ARTICLES OF INCORPORATION AND BYLAWS OF SURVIVING CORPORATION. (a)
The articles of incorporation of the Surviving Corporation to be in effect from
and after the Effective Time until amended in accordance with its terms and the
MBCA will be the articles of incorporation of Purchaser immediately prior to the
Effective Time (in the form attached hereto as Exhibit A), provided, however
that, at the Effective Time, by virtue of the Merger and this Agreement and
without any further action by the Constituent Corporations, Article 1 of the
Articles of Incorporation will be amended to read as follows: "The name of the
Corporation is Fingerhut Companies, Inc."
(b) The bylaws of the Surviving Corporation to be in effect from and
after the Effective Time until amended in accordance with their terms, the
articles of incorporation of the Surviving Corporation and the MBCA will be the
bylaws of Purchaser immediately prior to the Effective Time.
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2.5. DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. (a) The members
of the initial Board of Directors of the Surviving Corporation will be the
members of the Board of Directors of Purchaser immediately prior to the
Effective Time. All of the members of the Board of Directors of the Surviving
Corporation will serve until their successors are duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the articles of incorporation and the bylaws of the Surviving Corporation.
(b) The officers of the Surviving Corporation will consist of the
officers of the Company immediately prior to the Effective Time. Such Persons
will continue as officers of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the articles of incorporation and the
bylaws of the Surviving Corporation.
2.6. CONVERSION OF SECURITIES. The manner and basis of converting the
shares of stock of each of the Constituent Corporations is hereinafter set forth
in this Section 2.6. At the Effective Time, by virtue of the Merger and without
any action on the part of Parent, Purchaser, the Company or the holder of any of
the following securities:
(a) CONVERSION OF SHARES. Each Share issued and outstanding immediately
prior to the Effective Time (other than any Shares to be canceled pursuant to
Section 2.6(b) and any Dissenting Shares) and any Shares issuable upon exercise
of any option, conversion or other right to acquire Shares existing immediately
prior to the Effective Time (collectively, "RIGHTS") will be converted into the
right to receive the Per Share Amount in cash payable to the holder thereof,
without interest (the "MERGER CONSIDERATION"), prorated for fractional shares,
in accordance with Section 2.8. All such Shares, when so converted, will no
longer be outstanding and will automatically be canceled and will cease to
exist, and each holder of a certificate formerly representing any such Share
will cease to have any rights with respect thereto, except the right to receive
the Merger Consideration therefor upon the surrender of such certificate in
accordance with Section 2.8. Any payment made pursuant to this Section 2.6(a)
and Section 2.8 will be made net of applicable withholding taxes to the extent
such withholding is required by Law. Notwithstanding the foregoing, if between
the date of this Agreement and the Effective Time the outstanding Shares shall
have been changed into a different number of shares or a different class, by
reason of any stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, the Merger Consideration will be
correspondingly adjusted on a per-share basis to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares.
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(b) CANCELLATION PARENT-OWNED SHARES. Each Share owned by Parent,
Purchaser or any other direct or indirect wholly owned subsidiary of Parent
immediately before the Effective Time (other than shares in trust accounts,
managed accounts, custodial accounts and the like that are beneficially owned by
third parties) will be automatically canceled and will cease to exist and no
payment or other consideration will be made with respect thereto.
(c) COMMON STOCK OF PURCHASER. Each share of common stock, no par
value, of Purchaser issued and outstanding immediately before the Effective Time
will be converted into and become one validly issued, fully paid and
nonassessable share of common stock, no par value, of the Surviving Corporation,
which, in accordance with this Agreement, will constitute all of the issued and
outstanding shares of capital stock of the Surviving Corporation immediately
after the Effective Time.
2.7. DISSENTING SHARES. (a) Notwithstanding any provision of this
Agreement to the contrary, any Shares held by a holder who has not voted such
Shares in favor of this Agreement and who has properly exercised dissenters'
rights with respect to such Shares in accordance with the MBCA (including
Sections 302A.471 and 302A.473 thereof) and as of the Effective Time has neither
effectively withdrawn nor lost its right to exercise such dissenters' rights
("DISSENTING SHARES"), will not be converted into or represent a right to
receive the Merger Consideration pursuant to Section 2.6(a), but the holder
thereof will be entitled to only such rights as are granted by the MBCA.
(b) Notwithstanding the provisions of Section 2.7(a), if any
Shareholder who demands dissenters' rights with respect to its Shares under the
MBCA effectively withdraws or loses (through failure to perfect or otherwise)
its dissenters' rights, then as of the Effective Time or the occurrence of such
event, whichever later occurs, such holder's Shares will automatically be
converted into and represent only the right to receive the Merger Consideration
as provided in Section 2.6(a), without interest thereon, upon surrender of the
certificate or certificates formerly representing such Shares.
(c) The Company will give Parent (i) prompt notice of any written
intent to demand payment of the fair value of any Shares, withdrawals of such
demands and any other instruments served pursuant to the MBCA received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to dissenters' rights under the MBCA. The Company may not voluntarily
make any payment with respect to any exercise of dissenters' rights and may not,
except with the prior written consent of Parent, settle or offer to settle any
such dissenters' rights.
2.8. SURRENDER OF SHARES; STOCK TRANSFER BOOKS. (a) Prior to the
Effective Time, Purchaser will designate a bank or trust company selected by
it to act as agent for the Shareholders
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in connection with the Merger (the "EXCHANGE AGENT") to receive the funds
necessary to make the payments contemplated by Section 2.6 which bank or trust
company will be located in the United States and have capital surplus and
undivided profits exceeding $500,000,000. When and as needed, Parent will make
available to the Exchange Agent for the benefit of the Shareholders the
aggregate consideration to which the Shareholders will be entitled at the
Effective Time pursuant to Section 2.6(a).
(b) Each holder of a certificate or certificates representing any
Shares canceled upon the Merger pursuant to Section 2.6(a) (the "CERTIFICATES")
may thereafter surrender such Certificate or Certificates to the Exchange Agent,
as agent for such holder, to effect the surrender of such Certificate or
Certificates on such holder's behalf for a period ending one year after the
Effective Time. Parent agrees that promptly after the Effective Time it will
cause the distribution to the Shareholders as of the Effective Time of
appropriate materials to facilitate such surrender. Upon the surrender of
Certificates for cancellation, together with such materials, Parent will cause
the Exchange Agent to promptly pay the holder of such Certificates in exchange
therefor cash in an amount equal to the Merger Consideration multiplied by the
number of Shares represented by such Certificate. Until so surrendered, each
such Certificate (other than certificates representing Dissenting Shares and
certificates representing Shares to be canceled pursuant to Section 2.6(b)) will
represent solely the right to receive the aggregate Merger Consideration
relating thereto.
(c) If payment of cash in respect of canceled Shares is to be made to a
Person other than the Person in whose name a surrendered Certificate or
instrument is registered, it will be a condition to such payment that the
Certificate or instrument so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer and that the Person requesting such
payment shall have paid any transfer and other taxes required by reason of such
payment in a name other than that of the registered holder of the Certificate or
instrument surrendered or shall have established to the satisfaction of the
Surviving Corporation or the Exchange Agent that such tax either has been paid
or is not payable.
(d) At the Effective Time, the stock transfer books of the Company will
be closed and there will not be any further registration of transfers of Shares
outstanding prior to the Effective Time or otherwise issuable pursuant to Rights
on the records of the Company. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they will be canceled and exchanged for
cash as provided in Section 2.6(a), except as provided in Sections 2.6(b) and
2.7. No interest will accrue or be paid on any cash payable upon the surrender
of a Certificate or Certificates which represented Shares outstanding prior to
the Effective Time or otherwise issuable pursuant to Rights.
10
(e) Promptly following the date which is one year after the Effective
Time, the Exchange Agent will deliver to the Surviving Corporation all cash,
certificates and other documents in its possession relating to the transactions
contemplated hereby, and the Exchange Agent's duties will terminate. Thereafter,
each holder of a Certificate (other than Certificates representing Dissenting
Shares and Certificates representing Shares held by Parent, Purchaser or any
other direct or indirect wholly owned subsidiary of Parent) may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in consideration thereof, and Parent
will and will cause the Surviving Corporation to promptly pay, the aggregate
Merger Consideration relating thereto without any interest or dividends thereon.
(f) The Merger Consideration will be net to the holder of Shares in
cash, subject to reduction only for any applicable federal back-up withholding
or, as set forth in Section 2.8(c), stock transfer taxes payable by such holder.
(g) In the event any Certificate has been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof as determined in accordance with Section 2.6,
provided that the Person to whom the Merger Consideration is paid shall, as a
condition precedent to the payment thereof, give the Surviving Corporation a
written indemnity agreement in form and substance reasonably satisfactory to the
Surviving Corporation and, if reasonably deemed advisable by the Surviving
Corporation, a bond in such sum as the Surviving Corporation may reasonably
direct to indemnify the Surviving Corporation in a manner reasonably
satisfactory to it against any claim that may be made against the Surviving
Corporation with respect to the Certificate claimed to have been lost, stolen or
destroyed.
2.9. STOCK PLANS. (a) Without limiting the generality or effect of
Sections 2.6 or 2.8 and notwithstanding the provisions hereof applicable to the
Rights, the Company will use its reasonable best efforts (which include
satisfying the requirements of Rule 16b-3(e) promulgated under Section 16 of the
Exchange Act, without incurring any liability in connection therewith) to
provide that, at the Effective Time, each holder of a then-outstanding option to
purchase Shares under the Company's stock option plans set forth or required to
be set forth in Section 2.9 of the Company Disclosure Letter (collectively, the
"STOCK OPTION PLANS") (true and correct copies of which have been delivered or
made available by Company to Parent), whether or not then exercisable (the
"OPTIONS"), will, in settlement thereof, receive from the Company for each Share
subject to such Option an amount (subject to any applicable withholding tax) in
cash equal to the difference between the Merger Consideration and the per Share
exercise price of such Option to the extent such difference is a positive number
(such amount being hereinafter referred to
11
as, the "OPTION CONSIDERATION"). Notwithstanding anything herein stated, no
Option Consideration will be paid with respect to any Option unless, at or prior
to the time of such payment, such Option is canceled and the holder of such
Option has executed and delivered a release of any and all rights the holder had
or may have had in respect of such Option.
(b) Without limiting the generality or effect of Sections 2.6 or
2.8 and notwithstanding the provisions hereof applicable to the Rights, prior to
the Effective Time, Company will use its reasonable best efforts to obtain all
necessary consents or releases from holders of Options under the Stock Option
Plans and take all such other lawful action as may be necessary to give effect
to the transactions contemplated by this Section 2.9. Except as otherwise agreed
to by the parties, (i) the Stock Option Plans will terminate as of the Effective
Time and the provisions in any other plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the capital stock of
Company or any Subsidiary thereof, including the Directors' Retainer Stock
Deferral Plan, will be canceled as of the Effective Time and (ii) the Company
will use its reasonable best efforts to assure that following the Effective Time
no participant in the Stock Option Plans or such other plans, programs or
arrangements will have any right thereunder to acquire any equity securities of
the Company, the Surviving Corporation or any Subsidiary thereof and to
terminate all such plans and any Options or other Rights thereunder.
Notwithstanding the foregoing, as requested by Parent, the Company will use its
reasonable best efforts to assure that following the date of this Agreement, no
participant in the 1994 Employee Stock Purchase Plan will have any right to
change any election or increase his contribution thereunder, and the Company
will take all such actions as may be available to it to cause such plan to be
suspended in respect of equity securities of the Company or the Surviving
Corporation(other than as to Shares payment for which was deducted from
employees' payroll at or prior to the date hereof).
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and
Purchaser, except as set forth in the letter, dated the date hereof, from the
Company to Parent initialed by those parties (the "COMPANY DISCLOSURE LETTER"),
as follows:
3.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Minnesota. The Company is duly licensed or qualified to do business as a
foreign corporation and is in good standing under the laws of any other state of
the United States in which the character of the properties owned or leased by it
or in which the transaction of its business makes such qualification necessary,
except where the failure to be so qualified or to be in good standing could not
12
reasonably be expected to have a Company Material Adverse Effect. The Company
has all requisite corporate power and authority to own, operate and lease its
properties and carry on its business as now conducted. Each of the Company's
Subsidiaries is a corporation, partnership or national bank duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the corporate or partnership power and
authority to own its properties and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its property or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing could not reasonably be
expected to have a Company Material Adverse Effect. The copies of the Company's
articles of incorporation and bylaws previously made available to Parent are
true and correct. As used in this Agreement, (a) the term "COMPANY MATERIAL
ADVERSE EFFECT" means any change, effect, event or condition that has had or
could reasonably be expected to (i) have a material adverse effect on the
business, results of operations or financial condition of the Company and its
Subsidiaries, taken as a whole (other than any change, effect, event or
condition generally applicable to the industry in which the Company and its
Subsidiaries operate or changes in general economic conditions, except to the
extent such changes, effects, events or conditions disproportionately affect the
Company and its Subsidiaries, taken as a whole), or (ii) prevent or materially
delay the Company's ability to consummate the transactions contemplated hereby
and (b) the term "SUBSIDIARY" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated, of
which such party directly or indirectly owns or controls at least a majority of
the securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions.
3.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENT. The Company has
the requisite corporate power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby to be executed
and delivered by it. Subject only to the approval of this Agreement, the Merger
and the transactions contemplated hereby by the holders of a majority of the
outstanding Shares, this Agreement, the Offer, the Merger and the consummation
by the Company of the transactions contemplated hereby have been duly authorized
by all requisite corporate action. This Agreement constitutes, and all
agreements and documents contemplated hereby to be executed and delivered by the
Company (when executed and delivered pursuant hereto) will constitute, the valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms.
3.3. CAPITALIZATION. The authorized capital stock of the Company
consists of 100,000,000 shares of common stock, par value $0.01 per share,
and 5,000,000 shares of preferred stock, par
13
value $0.01 per share. As of the close of business on February 8, 1999 (the
"MEASUREMENT DATE"),(a) 49,644,364 Shares were issued and outstanding, each of
which was duly authorized, validly issued, fully paid and nonassessable, (b) no
shares of preferred stock of the Company had been designated or issued, (c) no
Shares were held in treasury of the Company, (d) 10,847,549 Shares were reserved
for issuance under the Stock Option Plans, the Directors' Retainer Stock
Deferral Plan and the 1994 Employee Stock Purchase Plan, (e) Options had been
granted and remain outstanding under the Stock Option Plans to purchase
9,622,746 Shares in the aggregate as more particularly described in Section 3.3
of the Company Disclosure Letter at the exercise prices set forth therein, and
(f) except for the Options and rights to the issuance of 7,391.85 Shares in the
aggregate under the Directors' Retainer Stock Deferral Plan and the 1994
Employee Stock Purchase Plan, there are no outstanding Rights. Since the
Measurement Date, no additional shares of capital stock of the Company have been
issued, except pursuant to the exercise of options listed in Section 3.3 of the
Company Disclosure Letter, the Directors' Retainer Stock Deferral Plan and the
1994 Employee Stock Purchase Plan, and no Rights have been granted. Except as
described in the preceding sentence or as set forth in Section 3.3 of the
Company Disclosure Letter, the Company has no outstanding bonds, debentures,
notes or other securities or obligations the holders of which have the right to
vote or which are convertible into or exercisable for securities having the
right to vote on any matter on which any Shareholder of the Company has a right
to vote. All issued and outstanding Shares are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. There are not at the
date of this Agreement any existing options, warrants, calls, subscriptions,
convertible securities or other Rights which obligate the Company or any of its
Subsidiaries to issue, exchange, transfer or sell any shares of capital stock of
the Company or any of its Subsidiaries other than Shares issuable under the
Stock Option Plans, the Directors' Retainer Stock Deferral Plan and the 1994
Employee Stock Purchase Plan, or awards granted pursuant thereto. As of the
Measurement Date, there were no outstanding contractual obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock of the Company or any of its Subsidiaries. As of the
Measurement Date, there were no outstanding contractual obligations of the
Company to vote or to dispose of any shares of the capital stock of any of its
Subsidiaries.
3.4. SUBSIDIARIES. Section 3.4 of the Company Disclosure Letter lists
all of the Subsidiaries of the Company. The Company owns, directly or
indirectly, all of the outstanding shares of capital stock (or other ownership
interests having by their terms ordinary voting power to elect a majority of
directors or others performing similar functions with respect to such
Subsidiary) of each of the Company's Subsidiaries free and clear of all liens,
pledges, security interests, claims or other encumbrances (collectively,
"LIENS"). Each of the outstanding shares of capital stock (or such other
ownership interests) of each of the
14
Company's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable. The following information for each Subsidiary of the Company has
been previously made available to Parent, if applicable: (i) its jurisdiction of
incorporation or organization; (ii) its authorized capital stock or share
capital; and (iii) the number of issued and outstanding shares of capital stock,
share capital or other equity interests.
3.5. OTHER INTERESTS. Except for interests in the Company's
Subsidiaries and except as disclosed in Section 3.5 of the Company Disclosure
Letter, neither the Company nor any of the Company's Subsidiaries owns, directly
or indirectly, any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or entity (other than
(a) non-controlling investments in the ordinary course of business and corporate
partnering, development, cooperative marketing and similar undertakings and
arrangements entered into in the ordinary course of business and (b) other
investments of less than $1.0 million in the aggregate).
3.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and
delivery of this Agreement by the Company do not, and the consummation by the
Company of the transactions contemplated hereby will not, (i) conflict with or
violate the articles of incorporation or bylaws or equivalent organizational
documents of the Company or any of its Subsidiaries, (ii) subject to making the
filings and obtaining the approvals identified in Section 3.6(b), conflict with
or violate any statute, rule, regulation or other legal requirement ("LAW") or
temporary, preliminary or permanent order, judgment or decree ("ORDER") or any
memorandum of understanding with any Governmental Entity ("MOU") applicable to
the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected, or (iii) subject to
making the filings, obtaining the approvals and effecting any other matters
identified in Section 3.6 of the Company Disclosure Letter, result in any breach
of or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, result in the loss of a material benefit
under, or give to others any right of purchase or sale, or any right of
termination, amendment, acceleration, increased payments or cancellation of, or
result in the creation of a Lien on any property or asset of the Company or any
of its Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any property or asset of the Company or
any of its Subsidiaries is bound or affected, except, in the case of clauses
(ii) and (iii) for any such conflicts, violations, breaches, defaults, events,
losses, rights, payments, cancellations, encumbrances or other occurrences that
could not either (i) result in a default or event of default or accelerate or
require that the Company or any of its Subsidiaries pay prior to the scheduled
maturity date or repurchase or offer to repurchase indebtedness owed to any
Person
15
that is in excess of $5.0 million or indebtedness in excess of $20.0 million in
the aggregate or (ii) with respect to any other obligation, document or
instrument, individually or in the aggregate, be reasonably expected to have a
Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement and the consummation by the Company
of the transactions contemplated hereby will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign (each a "GOVERNMENTAL ENTITY"),
except (i) for (A) applicable requirements, if any, of the Exchange Act, (B) the
pre-merger notification requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR ACT"), (C) Chapter 80B of the Minnesota Statutes and similar Laws of
other states, (D) the requirements of the Change in Bank Control Act, as
amended, and the rules and regulations thereunder (the "CIBC ACT"), and (E) the
filing of articles of merger pursuant to the MBCA or (ii) where the failure to
obtain any such consents, approvals, authorizations or permits, or to make such
filings or notifications, could not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
3.7. COMPLIANCE WITH LAWS. Neither the Company nor any of its
Subsidiaries is in conflict with, or in default or violation of, any Law, Order
or MOU applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or affected
except for such conflicts, defaults or violations that could not, individually
or in the aggregate, reasonably be expected to have a Company Material Adverse
Effect. The Company and its Subsidiaries have obtained all licenses, permits and
other authorizations and have taken all actions required by applicable Law or
government regulations in connection with their business as now conducted,
except where the failure to obtain any such item or to take any such action
could not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
3.8. SEC DOCUMENTS. (a) The Company has filed all forms, reports and
documents required to be filed by it with the SEC since January 1, 1996
(collectively, the "COMPANY REPORTS"). As of their respective dates, the Company
Reports and any such reports, forms and other documents filed by the Company
with the SEC after the date of this Agreement (i) complied, or will comply, in
all material respects with the applicable requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT"), the Exchange Act and the rules and
regulations thereunder and (ii) did not, or will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. The representation
in clause (ii) of the preceding
16
sentence does not apply to any misstatement or omission in any Company Report
filed prior to the date of this Agreement which was superseded by a subsequent
Company Report filed prior to the date of this Agreement. Except as disclosed in
Section 3.8 of the Company Disclosure Letter, no Subsidiary of the Company is
required to file any report, form or other document with the SEC.
(b) Each of the financial statements included in or incorporated by
reference into the Company Reports (including the related notes and schedules)
presents fairly, in all material respects, the consolidated financial position
of the Company and its Subsidiaries as of its date or, if applicable, the
consolidated results of operations, retained earnings or cash flows, as the case
may be, of the Company and its Subsidiaries for the periods set forth therein,
in each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may be noted therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments, none of which is material in kind or amount except as noted therein
and except to the extent that generally accepted accounting principles do not
require footnote disclosure in unaudited financial statements).
(c) Neither the Company nor any of its Subsidiaries has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on, or reserved against in, a
consolidated balance sheet of the Company or described or referred to in the
notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied based upon facts known to the Company as at the
date of this Agreement, except for (i) liabilities or obligations that were so
reserved on, or reflected in (including the notes to), the consolidated balance
sheet of the Company as of September 25, 1998 or any Company Filed Report or
disclosed in Section 3.8 of the Company Disclosure Letter, (ii) liabilities or
obligations arising in the ordinary course of business (including trade
indebtedness) since September 25, 1998, and (iii) liabilities or obligations
which could not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect.
(d) Set forth in Section 3.8 of the Company Disclosure Letter is a
listing of all of the Company's indebtedness for borrowed money outstanding as
of the Measurement Date setting forth in each case the principal amount thereof.
No payment defaults have occurred and are continuing under the agreements and
instruments governing the terms of such indebtedness.
3.9. LITIGATION. Except as described in Section 3.9 of the Company
Disclosure Letter, there are no actions, suits or proceedings pending or, to the
Knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries and there are no Orders of any Governmental Entity or
arbitrator outstanding against the Company or any of its Subsidiaries, except
actions, suits, proceedings or Orders that,
17
individually or in the aggregate, are not reasonably likely to have a Company
Material Adverse Effect.
3.10. ABSENCE OF CERTAIN CHANGES. Except as described in the Company
Reports or other reports filed by the Company with the SEC and publicly
available prior to the date hereof (the "COMPANY FILED REPORTS") or disclosed in
Section 3.10 of the Company Disclosure Letter, from January 1, 1998 to the date
of this Agreement, there has not been (a) any Company Material Adverse Effect,
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock other than customary quarterly
cash dividends paid through August, 1998, (c) any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of any of the
Company's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for any shares
of the Company's capital stock, (d) any granting of any increase in compensation
by the Company or any of its Subsidiaries to any director, executive officer or
any other key employee of the Company, other than in the ordinary course of
business or in connection with a promotion, (e) any granting by the Company or
any of its Subsidiaries to any such director, executive officer or key employee
of any increase in severance or termination pay, except as was required under
any employment, severance or termination agreements in effect as of the date of
the most recent financial statements included in the Company Filed Reports or
referred to in Section 3.10 of the Company Disclosure Letter, (f) any entry by
the Company or any of its Subsidiaries into any employment, severance or
termination agreement with any such director, executive officer or key employee,
or (g) except insofar as may be required by a change in generally accepted
accounting principles, any change in accounting methods, principles or practices
by the Company. For purposes of this Agreement, "KEY EMPLOYEE" means any
employee whose current salary and targeted bonus exceeds $200,000 per annum.
Section 3.10 of the Company Disclosure Letter contains a true and complete list
of all agreements or plans providing for termination or severance pay to any
officer, director or key employee of the Company.
3.11. TAXES. (a) Except as could not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect, (i) the
Company has timely filed with the appropriate governmental authorities all Tax
Returns required to be filed by or with respect to the Company, (ii) all Taxes
shown to be due on such Tax Returns, all Taxes required to be paid on an
estimated or installment basis, and all Taxes required to be withheld with
respect to the Company have been timely paid or, if applicable, withheld and
paid, to the appropriate taxing authority in the manner provided by Law, (iii)
the reserve for Taxes set forth on the consolidated balance sheet of the Company
and its Subsidiaries as of September 25, 1998 is adequate for the payment of all
Taxes through the date thereof and no Taxes have been incurred after September
25, 1998 which were not incurred in the ordinary course of business, (iv) no
Federal, state, local or
18
foreign audits, administrative proceedings or court proceedings are pending with
regard to any Taxes or Tax Returns of the Company and there are no outstanding
deficiencies or assessments asserted or proposed, and (v) there are no
outstanding agreements, consents or waivers extending the statutory period of
limitations applicable to the assessment of any Taxes or deficiencies against
the Company except as disclosed in Section 3.11 of the Company Disclosure
Letter, and the Company is not a party to any agreement providing for the
allocation or sharing of Taxes.
(b) The Company has not filed a consent to the application of Section
341(f) of the Internal Revenue Code of 1986, as amended (the "CODE").
(c) The Company is not and has not been a United States real property
holding company (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(ii) of the Code.
(d) No indebtedness of the Company is "corporate acquisition
indebtedness" within the meaning of Section 279(b) of the Code.
(e) Since January 1, 1993, the Company has not been a member of an
affiliated group filing consolidated Tax Returns other than a federal income tax
group the common parent of which is the Company.
(f) For purposes of this Agreement, "TAXES" means all taxes, charges,
fees, levies or other assessments imposed by any United States Federal, state,
or local taxing authority or by any non-U.S. taxing authority, including but not
limited to, income, gross receipts, excise, property, sales, use, transfer,
payroll, license, ad valorem, value added, withholding, social security,
national insurance (or other similar contributions or payments), franchise,
estimated, severance, stamp and other taxes (including any interest, fines,
penalties or additions attributable to or imposed on or with respect to any such
taxes, charges, fees, levies or other assessments).
(g) For purposes of this Agreement, "TAX RETURN" means any return,
report, information return or other document (including any related or
supporting information and, where applicable, profit and loss accounts and
balance sheets) with respect to Taxes.
(h) Purchaser and the Company will cooperate in the preparation,
execution and filing of all returns, applications or other documents regarding
any real property, transfer, stamp, recording, documentary (including any New
York State Real Estate Transfer Tax) and any other similar fees and taxes which
become payable in connection with the Offer or the Merger (collectively,
"TRANSFER TAXES"). From and after the Effective Time, except as contemplated by
Section 1.1, 2.8(c) and 2.8(f), the Surviving
19
Corporation will pay or cause to be paid, without deduction or withholding from
any amounts payable to the holders of Shares, all Transfer Taxes.
(i) The Company received a private letter ruling (the "RULING") from
the Internal Revenue Service ("IRS"), dated August 17, 1998 (Reference
CC:DOM:CORP:2, PLR-119863-97), a copy of which has been provided to Parent, as
to United States federal income tax consequences of the spinoff of Metris
Companies Inc. ("METRIS") and the certain transactions related thereto (the
"SPINOFF"), and the Ruling has not been modified, supplemented or revoked. To
the Knowledge of the Company, there are no considerations on the part of the IRS
to modify, supplement or revoke the Ruling. The representations of the Company
in (j), (v) and (x) of the Ruling, were true, correct and complete from the date
submitted through and including the date of the Spinoff.
3.12. PROPERTY. (a) Section 3.12(a) of the Company Disclosure Letter
contains a true and complete list of all (i) patents and patent applications in
the name of the Company or any of its Subsidiaries, (ii) trademark and service
xxxx registrations and applications in the name of the Company or any of its
Subsidiaries, and (iii) all material licenses related to the foregoing.
(b) Except as set forth in Section 3.12(b) of the Company Disclosure
Letter, the Company or one of its Subsidiaries owns or has the valid right to
use all intellectual property used by it in connection with its business,
including without limitation (i) trademarks and service marks (registered or
unregistered) and trade names, and all goodwill associated therewith, (ii)
patents, patentable inventions, discoveries, improvements, ideas, know-how,
processes and Computer Software, (iii) trade secrets and the right to limit the
use or disclosure thereof, (iv) copyrights in all works, including software
programs and mask works, and (v) domain names (collectively, "INTELLECTUAL
PROPERTY"), except where the failure to own or have the valid right to use the
Intellectual Property could not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. For purposes of this
Agreement, the term "COMPUTER SOFTWARE" means (A) any and all computer programs
and applications consisting of sets of statements and instructions to be used
directly or indirectly in computer software or firmware whether in source code
or object code form, (B) databases and compilations, including without
limitation any and all data and collections of data, whether machine readable or
otherwise, (C) all versions of the foregoing including, without limitation, all
screen displays and designs thereof, and all component modules of source code or
object code or natural language code therefor, and whether recorded on papers,
magnetic media or other electronic or non-electronic device, (D) all
descriptions, flowcharts and other work product used to design, plan, organize
and develop any of the foregoing, and (E) all documentation, including without
limitation all technical and user manuals and training materials, relating to
the foregoing. Except as could not, individually or
20
in the aggregate, be reasonably expected to have a Company Material Adverse
Effect, (1) all grants, registrations and applications for Intellectual Property
that are used in and are material to the conduct of the businesses of the
Company as currently conducted (x) are valid, subsisting, in proper form and
have been duly maintained, including the submission of all necessary filings and
fees in accordance with the legal and administrative requirements of the
appropriate jurisdictions and (y) have not lapsed, expired or been abandoned,
(2) to the Knowledge of the Company, (x) there are no conflicts with or
infringements of any Intellectual Property by any third party and (y) the
conduct of the businesses of the Company as currently conducted does not
conflict with or infringe any proprietary right of any third party, (3) there is
no claim, suit, action or proceeding pending or, to the Knowledge of the
Company, threatened against the Company (x) alleging any such conflict or
infringement with any third party's proprietary rights or (y) challenging the
ownership, use, validity or enforceability of the Intellectual Property, (4) all
consents, filings and authorizations by or with third parties necessary with
respect to the consummation of the transactions contemplated hereby as they may
affect the Intellectual Property have been obtained, (5) the Company is not, nor
will it be as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, in breach of any license,
sublicense or other agreement relating to the Intellectual Property, and (6) no
former or present employees, officers or directors of the Company hold any
right, title or interest directly or indirectly, in whole or in part, in or to
any Intellectual Property.
(c) Section 3.12(c) of the Company Disclosure Letter sets forth all of
the real property owned in fee by the Company or any of its Subsidiaries (the
"OWNED REAL PROPERTY"). The Company or one of its Subsidiaries has good and
valid title to each parcel of Owned Real Property (other than as disclosed in
the Company Filed Reports) free and clear of all Liens except (i) those
specified in Section 3.12(c) of the Company Disclosure Letter or reflected or
reserved against in the latest balance sheet of the Company included in the
Company Filed Reports, (ii) taxes and general and special assessments not in
default and payable without penalty and interest, (iii) inchoate mechanics',
materialmen's, warehouse and similar Liens securing obligations that are
incurred in the ordinary course and are not delinquent, and (iv) other Liens
that could not, individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect (collectively, "PERMITTED LIENS").
(d) The Company has heretofore made available to Parent true, correct
and complete copies of all leases, subleases and other agreements (the "REAL
PROPERTY LEASES") under which the Company or any of its Subsidiaries uses or
occupies or has the right to use or occupy, now or in the future, any real
property or facility and base rent exceeds $1.0 million annually (the "LEASED
REAL PROPERTY"), including without limitation all modifications, amendments and
supplements thereto. Except in
21
each case where the failure could not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect, (i) the
Company or one of its Subsidiaries has a valid leasehold interest in each parcel
of Leased Real Property free and clear of all Liens except Permitted Liens and
each Real Property Lease is in full force and effect, (ii) all rent and other
sums and charges due and payable by the Company or its Subsidiaries as tenants
thereunder are current in all material respects, (iii) no termination event or
condition or uncured default of a material nature on the part of the Company or
any such Subsidiary or, to the Knowledge of the Company, the landlord, exists
under any Real Property Lease, and (iv) the Company or one of its Subsidiaries
is in actual possession of each Leased Real Property and is entitled to quiet
enjoyment thereof in accordance with the terms of the applicable Real Property
Lease.
3.13. MILLENNIUM COMPLIANCE. The Company has adopted and implemented a
plan to investigate and correct "year 2000 problems" associated with the
operation of the Company's and its Subsidiaries' businesses. The Company has
provided to Parent a complete and correct copy of such plan, an accurate written
explanation of the costs that the Company and its Subsidiaries have incurred to
investigate and correct the "year 2000 problem," as well as a written report of
its estimates of the costs to be incurred in the future to investigate and
correct the "year 2000 problem." Neither the Company nor any of its Subsidiaries
has received written notice from the OCC that any Subsidiary of the Company that
is a national bank fails to comply with the guidelines of the OCC with respect
to "year 2000 problems."
3.14. CONTRACTS. (a) There have been made available to Parent true,
correct and complete copies of all of the following contracts to which Company
or any of its Subsidiaries is a party or by which any of them is bound as of the
date of this Agreement (collectively, the "MATERIAL CONTRACTS"): (i) contracts
with any director of the Company, material contracts (other than those
terminable at will without penalty) with any current officer of the Company or
any of its Subsidiaries and employment, severance or termination agreements with
any executive officer of the Company or any of its Subsidiaries; (ii) contracts
(A) for the sale (other than completed sales) of material assets of the Company
or any of its Subsidiaries, other than contracts entered into in the ordinary
course of business or (B) for the grant to any person of any preferential rights
to purchase any of its assets; (iii) contracts which restrict the Company or any
of its Subsidiaries from competing in any line of business or with any person in
any geographical area, other than those the performance or breach of which could
not, individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect; and (iv) indentures, credit agreements, security
agreements, mortgages, guarantees, promissory notes and other contracts relating
to the borrowing of money, other than (A) any of the foregoing with respect to
indebtedness to any Person of less than $5.0 million, (B) intercompany loans or
guarantees between the
22
Company and any of its Subsidiaries or between any such Subsidiaries or for the
benefit of, or guaranteeing or securing obligations of, the Company or a
Subsidiary of the Company and (C) security agreements covering personal property
that are not individually or in the aggregate material to the Company and its
Subsidiaries, taken as a whole.
(b) Except as specified in Section 3.14 of the Company Disclosure
Letter, all of the Material Contracts are in full force and effect and are the
legal, valid and binding obligations of the Company and/or its Subsidiaries,
enforceable against them in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), except where the
failure of such Material Contracts to be in full force and effect or to be
legal, valid, binding or enforceable against the Company and/or its Subsidiaries
has not had and could not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. Except as specified in
Section 3.14 of the Company Disclosure Letter, neither the Company nor any of
its Subsidiaries is in breach or default in any material respect under any
Material Contract nor, to the Knowledge of the Company, is any other party to
any Material Contract in breach or default thereunder in any material respect,
except for such breaches or defaults that have not had and could not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
3.15. ENVIRONMENTAL MATTERS. (a) Except as disclosed in the Company
Filed Reports, as specified in Section 3.15 of the Company Disclosure Letter or
as could not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect: (i) neither the Company nor any of its
Subsidiaries has violated or is in violation of any Environmental Law; (ii) none
of the Owned Real Property or Leased Real Property (including without limitation
soils and surface and ground waters) are contaminated with any Hazardous
Substance in quantities which require investigation or remediation under
Environmental Laws; (iii) neither the Company nor any of its Subsidiaries is
liable for any off-site contamination; (iv) neither the Company nor any of its
Subsidiaries has any liability or remediation obligation under any Environmental
Law; (v) no assets of the Company or any of its Subsidiaries are subject to
pending or, to the Knowledge of the Company, threatened Liens under any
Environmental Law; (vi) the Company and its Subsidiaries have all Permits
required under any Environmental Law ("ENVIRONMENTAL PERMITS"); and (vii) the
Company and its Subsidiaries are in compliance with their respective
Environmental Permits.
(b) For purposes of this Agreement, the term (i) "ENVIRONMENTAL LAWS"
means any federal, state or local Law
23
relating to: (A) releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances; (B) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances; or (C) otherwise relating to
pollution of the environment or the protection of human health, and (ii)
"HAZARDOUS SUBSTANCES" means: (A) those materials, pollutants and/or substances
defined in or regulated under the following federal statutes and their state
counterparts, as each may be amended from time to time, and all regulations
thereunder: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Toxic Substance Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act and the Clean Air Act; (B) petroleum
and petroleum products including crude oil and any fractions thereof; (C)
natural gas, synthetic gas and any mixtures thereof; (D) radon; (E) any other
contaminant; and (F) any materials, pollutants and/or substance with respect to
which any Governmental Entity requires environmental investigation, monitoring,
reporting or remediation.
3.16. EMPLOYEE BENEFIT PLANS. Except as described in the Company Filed
Reports (and subsequent financial and actuarial statements and reports furnished
to Parent or its agents prior to the date hereof), as described in Section 3.16
of the Company Disclosure Letter or as could not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, (a)
all employee benefit plans or programs maintained for the benefit of the current
or former employees or directors of the Company or any of its Subsidiaries that
are sponsored, maintained or contributed to by the Company or any of its
Subsidiaries, or with respect to which the Company or any of its Subsidiaries
has any liability, including without limitation any such plan that is an
"employee benefit plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA")(the "COMPANY BENEFIT PLANS"), are in
compliance with all applicable requirements of Law, including ERISA and the
Code, (b) neither the Company nor any of its Subsidiaries has any liabilities or
obligations with respect to any such employee benefit plans or programs, whether
accrued, contingent or otherwise, other than the obligations arising in the
ordinary course of the operation or administration of such plans or routine
claims for benefits under such plans, nor to the Knowledge of the Company are
any such liabilities or obligations expected to be incurred, and (c) neither the
Company nor any of its Subsidiaries is a party to any contract or other
arrangement under which, after giving effect to the Offer or the Merger, Parent
or the Surviving Corporation would be obligated to make any "parachute" payment
within the meaning of the Code. Except as described in Section 3.16 of the
Company Disclosure Letter, the execution of, and performance of the transactions
contemplated by, this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) constitute
24
an event under any benefit plan, program, policy, arrangement or agreement or
any trust, loan or funding arrangement that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee. The Company has made available to Parent
true, complete and correct copies of the plan documents for the Company Benefit
Plans.
3.17. STATE TAKEOVER STATUTES. The Company Board and the Special
Committee have approved the Offer, the Merger, this Agreement and the
transactions contemplated hereby and, assuming the accuracy of Parent's and
Purchaser's representation in Section 4.8, such approval is sufficient to render
inapplicable to the Offer, the Merger, this Agreement and the transactions
contemplated hereby, the provisions of Sections 302A.671, 302A.673 and 302A.675
of the MBCA and the super-majority voting requirements of Article VII of the
Company's articles of incorporation. No other "fair price," "merger moratorium,"
"control share acquisition" or other anti-takeover statute or similar statute or
regulation (other than Chapter 80B of the Minnesota Statutes) applies or
purports to apply to the Merger, this Agreement, the Offer or any of the
transactions contemplated hereby or thereby.
3.18. VOTING REQUIREMENTS. The affirmative vote of the holders of a
majority of the issued and outstanding Shares, voting as a single class at the
Company Shareholders' Meeting to adopt this Agreement, is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve and adopt this Agreement and the transactions contemplated hereby.
3.19. NO BROKERS. The Company has not entered into any contract,
arrangement or understanding with any Person or firm which may result in the
obligation of the Company or Parent to pay any investment banker's or finder's
fees, brokerage or agent's commissions or other like payments in connection with
the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby, except that the Company has retained SSB as
its financial advisor and, in addition, has agreed to make a $500,000 payment,
in each case pursuant to arrangements which have been disclosed to Parent prior
to the date hereof. Other than the foregoing arrangements, to the Knowledge of
the Company, there is no claim for payment by the Company of any investment
banker's or finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby. The Company or, if the
Effective Time occurs, the Surviving Corporation, will pay all amounts owed
pursuant to the foregoing arrangements.
3.20. OPINION OF SSB. The Company Board has received the opinion of SSB
to the effect that, as of the date of this Agreement, the cash consideration to
be received by the
25
Shareholders (other than Parent and its Affiliates) in the Offer and the Merger
is fair to such Shareholders from a financial point of view.
3.21. OFFER DOCUMENTS; PROXY STATEMENT. (a) The proxy statement to be
sent to the Shareholders in connection with a meeting of the Shareholders to
consider the Merger (the "COMPANY SHAREHOLDERS' MEETING") or the information
statement to be sent to Shareholders, as appropriate (such proxy statement or
information statement, as amended or supplemented, is herein referred to as the
"PROXY STATEMENT"), at the date mailed to the Shareholders and at the time of
the Company Shareholders' Meeting (i) will comply in all material respects with
the applicable requirements of the Exchange Act and the rules and regulations
thereunder and (ii) will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Neither the Schedule 14D-9 nor any of the
information relating to the Company or its Affiliates provided by or on behalf
of the Company specifically for inclusion in the Schedule 14D-1 or the other
Offer Documents will, at the respective times the Schedule 14D-9, the Schedule
14D-1 and the other Offer Documents or any amendments or supplements thereto are
filed with the SEC and are first published, sent or given to the 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
made therein, in light of the circumstances under which they were made, not
misleading. No representation or warranty is made by the Company with respect to
any information supplied by Parent or Purchaser or their counsel or other
authorized representatives specifically for inclusion in the Proxy Statement or
the Schedule 14D-9.
IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Each of Parent and Purchaser represents and warrants to the Company,
except as set forth in the letter, dated the date hereof, from Parent to the
Company initialed by those parties (the "PARENT DISCLOSURE LETTER"), as follows:
4.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of Parent and
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of Delaware and Minnesota, respectively. Parent is duly
licensed or qualified to do business as a foreign corporation and is in good
standing under the laws of any other state of the United States in which the
character of the properties owned or leased by it or in which the transaction of
its business makes such qualification necessary, except where the failure to be
so qualified or to be in good standing could not reasonably be expected to
prevent or materially delay Parent's or Purchaser's ability to consummate the
transactions contemplated hereby (a "PARENT MATERIAL ADVERSE EFFECT"). Parent
has all requisite corporate power and authority
26
to own, operate and lease its properties and carry on its business as now
conducted. The copies of the certificate of incorporation and bylaws of Parent
and the articles of incorporation and bylaws of Purchaser previously made
available to the Company are true and correct.
4.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENT. Each of Parent
and Purchaser has the requisite corporate power and authority to execute and
deliver this Agreement, and all agreements and documents contemplated hereby to
be executed by it. This Agreement, the Offer, the Merger and the consummation by
Parent and Purchaser of the transactions contemplated hereby have been duly and
validly authorized by the respective Boards of Directors of Parent and Purchaser
and by Parent as sole shareholder of Purchaser, and no other corporate action on
the part of Parent and Purchaser is necessary to authorize this Agreement, the
Offer and the Merger or to consummate the transactions contemplated hereby. This
Agreement constitutes, and all agreements and documents contemplated hereby to
be executed and delivered by Parent or Purchaser (when executed and delivered
pursuant hereto) will constitute, the valid and binding obligations of Parent or
Purchaser, as the case may be, enforceable respectively against them in
accordance with their respective terms.
4.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and
delivery of this Agreement by Parent and Purchaser do not, and the consummation
by Parent and Purchaser of the transactions contemplated hereby will not, (i)
conflict with or violate the certificate of incorporation, articles of
incorporation or bylaws of Parent or Purchaser, (ii) subject to making the
filings and obtaining the approvals identified in Section 4.3(b), conflict with
or violate any Law, Order or MOU applicable to Parent or any of its Subsidiaries
or by which any property or asset of Parent or any of its Subsidiaries is bound
or affected, or (iii) subject to making the filings, obtaining the approvals and
effecting any other matters identified in Section 4.3 of the Parent Disclosure
Letter, result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, result in the
loss of a material benefit under, or give to others any right of termination,
amendment, acceleration, increased payments or cancellation of, or result in the
creation of a Lien on any property or asset of Parent or any of its Subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
any of its Subsidiaries is a party or by which Parent or any of its Subsidiaries
or any property or asset of Parent or any of its Subsidiaries is bound or
affected, except, in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults, events, losses, rights, payments, cancellations,
encumbrances or other occurrences that could not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect.
27
(b) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the performance of this Agreement and the consummation of
the transactions contemplated hereby by either of them will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for (A) applicable requirements, if any,
of the Exchange Act, (B) the pre-merger notification requirements of the HSR
Act, (C) under Chapter 80B of the Minnesota Statutes and similar laws of other
states, (D) the requirements of the CIBC Act, and (E) the filing of articles of
merger pursuant to the MBCA, or (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications
could not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect.
4.4. NO BROKERS. Except for arrangements with Credit Suisse First
Boston, neither Parent nor Purchaser has entered into any contract, arrangement
or understanding with any Person or firm which may result in the obligation of
the Company to pay any investment banker's or finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby. Parent will pay all amounts owed to Credit Suisse First Boston pursuant
to the foregoing arrangements.
4.5. OFFER DOCUMENTS; PROXY STATEMENT. None of the information supplied
by Parent, Purchaser or their respective officers, directors, representatives,
agents or employees, for inclusion in the Proxy Statement, or in any amendments
thereof or supplements thereto, will, on the date the Proxy Statement is first
mailed to Shareholders or at the time of the Company Shareholders' Meeting,
contain any statement which, at such time and in light of the circumstances
under which it will be made, will be false or misleading with respect to any
material fact, or will omit to state any material fact necessary in order to
make the statements therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Shareholders' Meeting which has become false or
misleading. Neither the Offer Documents nor any amendments thereof or
supplements thereto, nor any information supplied by Parent or Purchaser
specifically for inclusion in the Schedule 14D-9 nor any amendments thereof or
supplements thereto, will, at any time the Offer Documents or the Schedule 14D-9
or any such amendments or supplements are filed with the SEC or first published,
sent or given to the 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 were made, not misleading. Notwithstanding the foregoing,
Parent and Purchaser do not make any representation or warranty with respect to
any Company SEC Information. The Offer Documents and any amendments or
supplements thereto will comply as to form in all material
28
respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
4.6. FINANCING. Parent and Purchaser have, or will have, available all
of the funds or have the borrowing capacity necessary for the acquisition of the
outstanding Shares pursuant to the Offer and the Merger and to perform their
respective obligations under this Agreement.
4.7. LITIGATION. There are no actions, suits or proceedings pending or,
to the Knowledge of Parent, threatened against or affecting Parent or any of its
Subsidiaries as of the date of this Agreement and there are no Orders of any
Governmental Entity or arbitrator outstanding against Parent or any of its
Subsidiaries, that could, individually or in the aggregate, reasonably be likely
to have a Parent Material Adverse Effect.
4.8. OWNERSHIP OF SHARES. Except for Shares owned by employment benefit
plans maintained or contributed to by Parent or any of its Subsidiaries (the
"PARENT BENEFIT PLANS") or as set forth in the Parent Disclosure Letter, neither
Parent nor, to its Knowledge, any of its Affiliates or Associates, each as
defined in the Exchange Act (excluding for purposes hereof any outside director
of Parent, provided that such directors do not hold in the aggregate more than
1% of the Shares), (i) beneficially owns (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly or (ii) is party to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of capital stock of the Company.
V. COVENANTS
5.1. CONDUCT OF BUSINESS.
(a) CONDUCT OF BUSINESS BY THE COMPANY. During the period from the date
of this Agreement to the Effective Time, except as expressly provided by this
Agreement or Section 5.1 of the Company Disclosure Letter, the Company will, and
will cause its Subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent therewith, use their
reasonable efforts to preserve intact their current business organizations, use
their reasonable efforts to keep available the services of their current
officers and other key employees and preserve their relationships with those
Persons having business dealings with them to the end that their goodwill and
ongoing businesses will be unimpaired at the Effective Time. Without limiting
the generality or effect of the foregoing, except as expressly and specifically
described in Section 5.1 of the Company Disclosure Letter or as expressly
provided by this Agreement, during the period from the date of this Agreement to
the Effective Time, the Company will not, and will not permit any
29
of its Subsidiaries to, without the consent of Parent or Purchaser:
(i) other than dividends and distributions (including liquidating
distributions) by a direct or indirect wholly owned Subsidiary of the
Company to its parent, or by a Subsidiary that is partially owned by
the Company or any of its Subsidiaries, provided that the Company or
any such Subsidiary receives or is to receive its proportionate share
thereof, (A) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (B) split,
combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (C) purchase, redeem
or otherwise acquire any shares of capital stock of the Company or any
of its Subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities
provided that nothing herein stated will limit the Company's right to
cancel the Options in exchange for the Option Consideration;
(ii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
except for the issuance of Shares pursuant to the exercise of Options
that are outstanding on the Measurement Date, or pursuant to the
Directors' Retainer Stock Deferral Plan or the 1994 Employee Stock
Purchase Plan (to the extent Shares have been paid for with payroll
deductions at or prior to the date of this Agreement), provided that
nothing herein stated will limit the Company's right to cancel the
Options in exchange for the Option Consideration;
(iii) amend its articles of incorporation, bylaws or other
comparable organizational documents;
(iv) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any
business or any corporation, limited liability company, partnership,
joint venture, association or other business organization or division
thereof;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets, other than (x) in the ordinary course of business consistent
with past practice and (y) sales of assets which do not individually or
in the aggregate exceed $5.0 million;
(vi) (A) incur any indebtedness for borrowed money (other than
indebtedness of the Company to any Subsidiary
30
of the Company or of any Subsidiary of the Company to the Company or to
any other Subsidiary of the Company) or guarantee any such indebtedness
of another Person other than the Company or a Subsidiary of the
Company, issue or sell any debt securities or warrants or other rights
to acquire any debt securities of the Company or any of its
Subsidiaries, guarantee any debt securities of another Person other
than the Company or a Subsidiary of the Company, enter into any "keep
well" or other agreement to maintain any financial statement condition
of another Person other than the Company or a Subsidiary of the Company
or enter into any arrangement having the economic effect of any of the
foregoing, except for short-term borrowings incurred in the ordinary
course of business consistent with past practice, or (B) make any
loans, advances or capital contributions to, or investments in, any
other Person, other than to the Company or any Subsidiary of the
Company or to officers and employees of the Company or any of its
Subsidiaries for travel, business or relocation expenses in the
ordinary course of business;
(vii) make or agree to make any capital expenditure or capital
expenditures other than capital expenditures set forth in the operating
budget of the Company previously furnished to Parent and additional
capital expenditures not to exceed $5.0 million in the aggregate;
(viii) any change to its accounting methods, principles or
practices, except as may be required by generally accepted accounting
principles;
(ix) except as required by Law or contemplated hereby, enter
into, adopt or amend in any material respect or terminate any Company
Stock Plan or any other agreement, plan or policy involving the Company
or any of its Subsidiaries and one or more of their directors, officers
or employees, or materially change any actuarial or other assumption
used to calculate funding obligations with respect to any Company
pension plans, or change the manner in which contributions to any
Company pension plans are made or the basis on which such contributions
are determined;
(x) increase the compensation of any director, executive officer
or, except in the ordinary course of business, any other key employee
of the Company or pay any benefit or amount not required by a plan or
arrangement as in effect on the date of this Agreement to any such
Person;
(xi) enter into or amend in any material respect any Material
Contract or enter into any contract or agreement, written or oral, with
any Affiliate, associate or relative of the Company (other than the
Company or any Subsidiary of the Company) or make any payment to or for
the benefit of, directly or indirectly, any of the foregoing other than
31
payments to directors and officers in the ordinary course of business
or pursuant to agreements or arrangements in effect prior to the date
of this Agreement that are disclosed in Section 5.1 of the Company
Disclosure Letter; or
(xii) authorize, or commit or agree to take, any of the foregoing
actions.
(b) OTHER ACTIONS. Except as required by Law, neither the Company, on
the one hand, nor Parent or Purchaser, on the other hand, will, and will not
permit any of their respective Subsidiaries to, voluntarily take any action that
would, or that could reasonably be expected to, result in (i) any of the
conditions to the Merger set forth in Article VI not being satisfied or (ii)
prior to the completion of the Offer, the condition set forth in subparagraph
(iii) of Annex A not being satisfied.
(c) ADVICE OF CHANGES. Each of the Company and Parent will use
reasonable efforts to promptly advise the other party orally and in writing if
it obtains Knowledge and, to its Knowledge, the other party does not also have
Knowledge of (i) any representation or warranty set forth in this Agreement
becoming untrue or inaccurate in any respect that could reasonably be expected
to have a Company Material Adverse Effect or a Parent Material Adverse Effect,
as the case may be, or (ii) a failure by it to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement which failure to comply or satisfy could reasonably be expected
to have a Company Material Adverse Effect or a Parent Material Adverse Effect,
as the case may be.
(d) MEETING OF SHAREHOLDERS. (i) The Company will take all action
necessary in accordance with applicable Law and its articles of incorporation
and bylaws to convene a meeting of the Shareholders as promptly as practicable
after the Offer Completion Date to consider and vote upon the approval of this
Agreement. The Company Board will recommend such approval and the Company will
take all lawful action to solicit such approval, including without limitation
timely mailing any Proxy Statement, provided, however, that such recommendation
or solicitation (but not such actions to convene the Company Shareholders'
Meeting) is subject to any action, including any withdrawal or change of its
recommendation, taken by, or upon authority of, the Company Board, as the case
may be, in the exercise of its good faith judgment and in conformity with the
advice of outside counsel (notice of which will be promptly given to Parent and
Purchaser) that such action is required in order to satisfy the fiduciary duties
of the members of the Company Board to Shareholders imposed by Law. Without
limiting the generality or effect of any other provision hereof, the Company's
obligations pursuant to the first sentence of this Section 5.1(d) will not be
affected by the commencement, public proposal, public disclosure or
communication to the Company of any Company Takeover Proposal.
32
(ii) Notwithstanding Section 5.1(d)(i) hereof, in the event that
Parent, Purchaser or any other Subsidiary of Parent acquires at least 90% of the
outstanding Shares pursuant to the Offer or otherwise, the parties hereto will
take all necessary and appropriate action to cause the Merger to become
effective in accordance with Section 302A.621 of the MBCA without a meeting of
the Shareholders as soon as practicable after the acceptance for payment and
purchase of Shares by Purchaser pursuant to the Offer.
5.2. NO SOLICITATION. (a) The Company, its affiliates and their
respective officers, directors, employees, representatives and agents will
immediately cease any existing discussions or negotiations, if any, with any
parties conducted heretofore with respect to any Company Takeover Proposal. The
Company will not, nor will it permit any of its Subsidiaries to, nor will it
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to, directly or
indirectly, (i) solicit or initiate (including without limitation by way of
furnishing information), or take any other action (other than as required by
Law) designed or reasonably likely to facilitate, any inquiries or the making of
any proposal which constitutes or reasonably may give rise to any Company
Takeover Proposal or (ii) participate in any discussions or negotiations
regarding any Company Takeover Proposal, provided, however, that if, at any time
prior to the date on which Purchaser purchases Shares in the Offer (the "OFFER
COMPLETION DATE"), the Company Board determines in good faith and in conformity
with the advice of outside counsel, that failure to do so would result in a
breach of its fiduciary duties to the Shareholders under applicable Law, the
Company may, in response to a Company Takeover Proposal which was not solicited
by it and did not otherwise result from a breach of any provision of this
Agreement, (A) furnish information with respect to the Company and each of its
Subsidiaries and access to the Company and its Subsidiaries and their personnel
to any Person pursuant to a customary confidentiality agreement not more
favorable to the recipient of such information than the Confidentiality
Agreement and (B) participate in discussions and negotiations regarding such
Company Takeover Proposal. For purposes of this Agreement, "COMPANY TAKEOVER
PROPOSAL" means any inquiry, proposal or offer from any Person relating to any
direct or indirect acquisition or purchase of 20% or more of the assets of the
Company and its Subsidiaries, taken as a whole, or 20% or more of any class of
equity securities of the Company or any of its Subsidiaries, any tender offer or
exchange offer for Shares of any class of equity securities of the Company or
any of its Subsidiaries, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its Subsidiaries, other than the transactions contemplated by
this Agreement, or any other transaction that is intended or could reasonably be
expected to prevent the completion of the transactions contemplated hereby.
33
(b) Except as expressly permitted by this Section 5.2(b), neither the
Company Board nor any committee thereof may (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent or Purchaser, the
approval or recommendation by the Company Board or such committee of the Offer,
the Merger or this Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any Company Takeover Proposal, or (iii) cause or authorize
the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Company Takeover
Proposal (each, a "COMPANY ACQUISITION AGREEMENT"). Notwithstanding the
foregoing, in the event that prior to the Offer Completion Date, the Company
Board determines in good faith, after the Company has received a Superior
Proposal and in conformity with the advice of outside counsel, that failure to
do so would result in a breach of its fiduciary duties to the Shareholders under
applicable Law, the Company Board may upon not less than three business days
notice to Parent of its intention to do so withdraw or modify or propose
publicly to withdraw or modify its approval or recommendation of the Offer, the
Merger or this Agreement, or approve or recommend, or propose publicly to
approve or recommend a Superior Proposal or, subject to Section 7.5, enter into
a Company Acquisition Agreement, provided, however, that in connection
therewith, the Company simultaneously terminates this Agreement pursuant to
Section 7.3(c). For purposes of this Agreement, "SUPERIOR PROPOSAL" means a
Company Takeover Proposal that (x) involves the direct or indirect acquisition
or purchase of 50% or more of the assets of the Company and its Subsidiaries or
50% or more of any class of equity securities of the Company or any of its
Subsidiaries, (y) involves payment of consideration to the Shareholders and
other terms and conditions that, taken as a whole, are superior to the Offer and
the Merger, and (z) is made by a Person reasonably capable of completing such
Company Takeover Proposal, taking into account the legal, financial, regulatory
and other aspects of such Company Takeover Proposal and the Person making such
Company Takeover Proposal.
(c) In addition to the obligations of the Company set forth in Section
5.2(a) and (b), the Company will (i) immediately advise Parent orally and in
writing of any request for information or of any Company Takeover Proposal and
the material terms and conditions of such request or Company Takeover Proposal
and (ii) keep Parent reasonably informed of the status and details (including
amendments or proposed amendments) of any such request or Company Takeover
Proposal.
(d) Nothing contained in this Section 5.2 will prohibit the Company
from taking and disclosing to the Shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Shareholders if the Company Board determines in good faith in conformity with
the advice of outside counsel that failure to do so would result in a breach of
its fiduciary duties to Shareholders under applicable Law, provided, however,
that neither the Company nor the Company
34
Board nor any committee thereof may, except as expressly permitted by Section
5.2 or required by Rule 14e-2(a) promulgated under the Exchange Act, withdraw or
modify, or propose publicly to withdraw or modify, its position with respect to
the Offer, this Agreement or the Merger or approve or recommend, or propose
publicly to approve or recommend, a Company Takeover Proposal.
5.3. FILINGS, REASONABLE EFFORTS. (a) Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties will use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things, necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including all reasonable efforts to (i) obtain
all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and make all necessary registrations and filings
(including filings with Governmental Entities) and take all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) obtain all necessary material
consents, approvals or waivers from third parties, (iii) defend any lawsuits or
other legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated hereby, including
seeking to have any adverse Order entered by any court or other Governmental
Entity vacated or reversed, and (iv) execute and deliver any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. Nothing set forth in this
Section 5.3 will limit or affect actions permitted to be taken pursuant to
Section 5.2.
(b) In connection with, and without limiting the foregoing, the Company
and Parent will, and Parent will cause Purchaser to, (i) take all action
necessary to ensure that no state takeover statute or similar statute or
regulation (other than Chapter 80B of the Minnesota Statutes) is or becomes
applicable to the Offer, the Merger or any of the other transactions
contemplated hereby and (ii) if any state takeover statute or similar statute or
regulation becomes applicable thereto, take all action necessary to ensure that
the Offer and the Merger and such other transactions may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise to
minimize the effect of such statute or regulation thereon.
(c) Notwithstanding any other provision hereof, in no event will Parent
be required to agree to any divestiture, hold- separate or other requirement in
connection with this Agreement or any of the transactions contemplated thereby.
5.4. INSPECTION OF RECORDS. (a) From the date hereof to the
Effective Time, upon reasonable notice, the Company will (i) allow all
designated officers, attorneys, accountants and other
35
representatives of Parent reasonable access at all reasonable times to the
offices, records and files, correspondence, audits and properties, as well as to
all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs, of the parties
and their respective Subsidiaries, as the case may be and (ii) furnish to Parent
and its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
Persons may reasonably request. Parent and Purchaser will make all reasonable
efforts to minimize any disruption to the business of the Company and its
Subsidiaries that may result from such access and from the requests for data and
information hereunder.
(b) Subject to the requirements of applicable Law, and except for such
actions as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer and the Merger, the parties will,
and will instruct each of their respective Affiliates, associates, partners,
employees, agents and advisors to, hold in confidence all such information as is
confidential or proprietary, will use such information only in connection with
the Offer and the Merger and, if this Agreement is terminated in accordance with
its terms, will deliver promptly to the other all copies of such information
(and any copies, compilations or extracts thereof or based thereon) then in
their possession or under their control.
5.5. PUBLICITY. The initial press release relating to this Agreement
will be a joint press release and thereafter the Company and Parent will,
subject to their respective legal obligations (including requirements of stock
exchanges and other similar regulatory bodies), consult with each other, and use
reasonable efforts to agree upon the text of any press release, before issuing
any such press release or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any Governmental
Entity or with any national securities exchange with respect thereto.
5.6. PROXY STATEMENT. If required by applicable Law, Parent and the
Company will cooperate and promptly prepare, and Parent will file with the SEC
as soon as practicable after the Offer Completion Date, the Proxy Statement, and
as promptly as practicable thereafter as permitted by applicable Law, will mail
the Proxy Statement to the Shareholders. The Proxy Statement will contain the
recommendation of the Company Board that the Shareholders approve and adopt this
Agreement and approve the Merger and the other transactions contemplated hereby.
The Company agrees not to mail the Proxy Statement to the Shareholders until
Parent confirms that the information provided by Parent and Purchaser continues
to be accurate. If at any time prior to the Company Shareholders' Meeting any
event or circumstance relating to the Company or any of its Subsidiaries or
Affiliates, or its or their respective officers or directors, should be
discovered by the Company that is required to be set forth in a supplement to
any Proxy Statement, the Company will
36
promptly inform Parent and Purchaser to supplement such Proxy Statement and mail
such supplement to the Shareholders.
5.7. FURTHER ACTIONS. (a) Each party hereto will, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the Merger.
(b) If, at any time after the Effective Time, the Surviving Corporation
considers or is advised that any deeds, bills of sale, assignments, assurances
or any other actions or things are necessary or desirable to vest, perfect or
confirm of record or otherwise in the Surviving Corporation its right, title or
interest in, to or under any of the rights, properties or assets of Purchaser or
the Company or otherwise to carry out this Agreement, the officers and directors
of the Surviving Corporation will be authorized to execute and deliver, in the
name and on behalf of Purchaser or the Company, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
Purchaser or the Company, all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties or assets in the Surviving Corporation
or otherwise to carry out this Agreement.
5.8. INSURANCE; INDEMNITY. (a) All rights to indemnification and
exculpation from liabilities for acts or omissions occurring at or prior to the
Effective Time existing in favor of the current or former directors or officers
of the Company or each of its Subsidiaries as provided in their respective
articles of incorporation or bylaws (or comparable organizational documents)
will be assumed by Parent and Parent will be directly responsible for such
indemnification, without further action, as of the Effective Time and will
continue in full force and effect in accordance with their respective terms. In
addition, from and after the Effective Time, directors and officers of the
Company who become or remain directors or officers of Parent or the Surviving
Corporation will be entitled to the same indemnity rights and protections
(including those provided by directors' and officers' liability insurance) of
Parent. Notwithstanding any other provision hereof, the provisions of this
Section 5.8 (i) are intended to be for the benefit of, and will be enforceable
by, each indemnified party, his or her heirs and his or her representatives and
(ii) are in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such Person may have by contract or
otherwise.
(b) Parent will, and will cause the Surviving Corporation to, maintain
in effect for not less than six years after the Effective Time policies of
directors' and officers' liability insurance equivalent in all material respects
to those maintained by or on behalf of the Company and its Subsidiaries on the
date hereof (and having at least the same coverage and containing
37
terms and conditions which are no less advantageous to the Persons currently
covered by such policies as insured) with respect to matters existing or
occurring at or prior to the Effective Time, provided, however, that if the
aggregate annual premiums for such insurance at any time during such period
exceed 200% of the per annum rate of premium currently paid by the Company and
its Subsidiaries for such insurance on the date of this Agreement, then Parent
will cause the Surviving Corporation to, and the Surviving Corporation will,
provide the maximum coverage that is then available at an annual premium equal
to 200% of such rate.
5.9. EMPLOYEE BENEFITS. Notwithstanding anything to the contrary
contained herein, from and after the Effective Time, the Surviving Corporation
will have sole discretion over the hiring, promotion, retention, firing and
(except for employee benefit plans to the extent set forth below) other terms
and conditions of the employment of employees of the Surviving Corporation.
Subject to the immediately preceding sentence, Parent will provide, or will
cause the Surviving Corporation or its Subsidiaries to provide, for the benefit
of employees of the Surviving Corporation or its Subsidiaries, as the case may
be, who were employees of the Company or its Subsidiaries immediately prior to
the Effective Time, recognizing all prior service for eligibility and vesting
purposes (including for purposes of determining entitlement to vacation,
severance and other benefits) of the officers, directors or employees with the
Company and any of its Subsidiaries as service thereunder, the existing
qualified pension plans of the Company or its Subsidiaries listed in Section 5.9
of the Company Disclosure Letter until the expiration of two years after the
Effective Time, and, in addition, will provide for such two-year period other
"employee benefit plans," within the meaning of Section 3(3) of ERISA, that,
together with such existing qualified pension plans, are in the aggregate at
least substantially comparable to the "employee benefit plans," within the
meaning of Section 3(3) of ERISA, provided to such individuals by the Company or
its Subsidiaries on the date of this Agreement, provided, however, that
notwithstanding the foregoing (i) nothing herein will be deemed to require
Parent to modify the benefit formulas under any pension plan of the Company or
any of its Subsidiaries in a manner that increases the aggregate expenses
thereof as of the date hereof in order to comply with the requirements of ERISA,
the Code or the Tax Reform Act of 1986, (ii) employee stock ownership, stock
option and similar equity- based plans, programs and arrangements of the Company
or any of its Subsidiaries are not encompassed within the meaning of the term
"employee benefit plans" hereunder, (iii) nothing herein will obligate Parent or
the Surviving Corporation to continue any particular employee benefit plan,
other than the existing qualified pension plans, for any period after the
Effective Time, and (iv) without limiting the generality or effect of Section
8.3, no employee of the Company or any Subsidiary of the Company will have any
claim or right by reason of this Section 5.9. Parent will cause the Surviving
Corporation to
38
honor (subject to any withholdings under applicable Law) all employment,
consulting and severance agreements or arrangements to which the Company or any
of its Subsidiaries is presently a party, which are specifically disclosed in
the Company Disclosure Letter except to the extent such agreement or arrangement
is superseded or amended by any subsequent arrangements or agreements agreed to
by the parties thereto in writing.
5.10. CONVEYANCE TAXES. The Company and Parent will cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording
or registration and other fees and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time and each party
will pay any such tax or fee which becomes payable by it on or before the
Effective Time.
VI. CONDITIONS PRECEDENT
6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger will be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) Purchaser shall have made, or caused to be made, the Offer and
shall have purchased, or caused to be purchased, the Shares validly tendered and
not withdrawn pursuant to the Offer, provided, that this condition shall be
deemed to have been satisfied with respect to the obligation of Parent and
Purchaser to effect the Merger if Purchaser fails to accept for payment or pay
for Shares pursuant to the Offer in violation of the terms of the Offer or of
this Agreement;
(b) If so required by Law, this Agreement and the transactions
contemplated hereby shall have been approved in the manner required by
applicable Law by the holders of the issued and outstanding shares of capital
stock of the Company; and
(c) No Order or Law enacted, entered, promulgated, enforced or issued
by any court of competent jurisdiction or other Governmental Entity or other
legal restraint or prohibition (collectively, "RESTRAINTS") preventing the
consummation of the Merger shall be in effect.
6.2. CONDITIONS TO OBLIGATION OF PARENT AND PURCHASER TO EFFECT THE
MERGER. The obligation of Parent and Purchaser to effect the Merger will be
subject to the fulfillment at or prior to the Closing Date (or such other date
as may be specified below) of the additional condition that the Company shall
have performed in all material respects its covenants contained in Section
1.4(a) of this Agreement required to be performed on or prior to the Closing
Date.
39
VII. TERMINATION
7.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated
and the Merger and other transactions contemplated by this Agreement may be
abandoned at any time prior to the Effective Time, before or after the approval
of this Agreement by the Shareholders, by mutual consent of Parent and the
Company.
7.2. TERMINATION BY EITHER PARENT OR COMPANY. This Agreement may be
terminated and the Merger and other transactions contemplated by this Agreement
may be abandoned, by action of the Board of Directors of either Parent or the
Company, if (a) the Offer Completion Date shall not have occurred by June 30,
1999 (the "OUTSIDE DATE") or if the Offer Completion Date occurs but the
Effective Time shall not have occurred by February 10, 2000 (the "DROP-DEAD
DATE"), provided, that no party may terminate this Agreement pursuant to this
Section 7.2(a) if such party's failure to fulfill any of its obligations under
this Agreement shall have been the reason that the Offer Completion Date or the
Effective Time, as the case may be, shall not have occurred on or before the
applicable date, (b) any Governmental Entity shall have issued a Restraint or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the consummation of the Offer, the Merger or any of the other
transactions contemplated by this Agreement and such Restraint or other action
shall have become final and nonappealable, or (c) the Offer expires or is
terminated or withdrawn pursuant to its terms without any Shares being purchased
thereunder by Purchaser as a result of the failure of any of the Offer
Conditions to be satisfied or waived prior to the Expiration Date or any
extension thereof.
7.3. TERMINATION BY COMPANY. This Agreement may be terminated and the
Merger and other transactions contemplated by this Agreement may be abandoned at
any time prior to the Offer Completion Date, by action of the Company Board, if
(a) there has been a material breach by Parent or Purchaser of any
representation or warranty contained in this Agreement which is not curable or,
if curable, is not cured by the Outside Date and such breach had or could
reasonably be likely to have a Parent Material Adverse Effect, (b) there has
been a material breach of any of the covenants set forth in this Agreement on
the part of Parent or Purchaser, which breach is not curable or, if curable, is
not cured within 15 calendar days after written notice of such breach is given
by the Company to Parent, or (c) in accordance with the proviso to the
penultimate sentence of Section 5.2(b).
7.4. TERMINATION BY PARENT. This Agreement may be terminated and the
Merger and other transactions contemplated by this Agreement may be abandoned at
any time prior to the Offer Completion Date, by Parent, if (a) the Company Board
shall have (i) withdrawn or modified in a manner adverse to Parent or Purchaser
its approval or recommendation of this Agreement, the Offer or the Merger, (ii)
approved or recommended, or proposed publicly to approve or recommend, a
third-party Company Takeover
40
Proposal, (iii) caused or authorized the Company or any of its Subsidiaries to
enter into a Company Acquisition Agreement, (iv) approved the breach of the
Company's obligation under Section 5.2(b), or (v) resolved or publicly disclosed
any intention to take any of the foregoing actions, (b) there has been a
material breach by the Company of any representation or warranty contained in
this Agreement which is not curable or, if curable, is not cured by the Outside
Date and such breach had or could reasonably be likely to have a Company
Material Adverse Effect, or (c) there has been a material breach of any of the
covenants set forth in this Agreement on the part of the Company, which breach
is not curable or, if curable, is not cured within 15 days after written notice
of such breach is given by Parent to the Company.
7.5. EFFECT OF TERMINATION AND ABANDONMENT; TERMINATION FEE. (a) In the
event of termination of this Agreement and the abandonment of the Merger and the
other transactions contemplated by this Agreement pursuant to this Article VII,
all obligations of the parties hereto will terminate, except the obligations of
the parties pursuant to this Section 7.5, the last sentence of Section 1.3, and
Sections 5.4(b), 8.4 and 8.14. Notwithstanding the foregoing or any other
provision of this Agreement, in the event of termination of this Agreement
pursuant to this Article VII, nothing herein will prejudice the ability of the
non- breaching party to seek damages from any other party for any prior willful
and material breach of this Agreement, including without limitation attorneys'
fees and the right to pursue any remedy at law or in equity, and such
termination will not affect the parties' rights and obligations under the
Confidentiality Agreement, as amended.
(b) (i) The Company will pay to Purchaser an amount equal to $40.0
million (the "TERMINATION FEE") in any of the following circumstances:
(A) This Agreement is terminated at such time that this
Agreement is terminable pursuant to Sections 7.3(c) or 7.4(a);
(B) This Agreement is terminated by either Parent or the
Company pursuant to Section 7.2(a), and
(1) at the time of such termination the Minimum
Condition shall not have been satisfied,
(2) at the time of such termination the Company shall
not have the right to terminate this Agreement pursuant to
Sections 7.3(a) or 7.3(b),
(3) prior to such termination, a Company Takeover
Proposal involving at least 50% of the assets of the Company and
its Subsidiaries, taken as a whole, or 50% of any class of equity
securities of the Company (any such Company Takeover Proposal, a
"COMPETING PROPOSAL"), is (x) publicly disclosed or has been made
directly to
41
Shareholders generally or (y) any Person (including without
limitation the Company or any of its Subsidiaries) publicly
announces an intention (whether or not conditional) to make such
a Competing Proposal, and
(4) prior to the termination of this Agreement or
within 12 months after the termination of this Agreement, the
Company or a Subsidiary thereof enters into a Company Acquisition
Agreement providing for a Competing Proposal (any such agreement,
a "COMPETING PROPOSAL AGREEMENT");
(C) This Agreement is terminated by either Parent or the
Company pursuant to Section 7.2(c), and
(1) at the time of such termination the Minimum
Condition shall not have been satisfied,
(2) at the time of such termination the Company shall
not have the right to terminate this Agreement pursuant to
Sections 7.3(a) or 7.3(b),
(3) prior to such termination an event referred to in
Section 7.5(b)(i)(B)(3)(a "TAKEOVER PROPOSAL EVENT") shall have
occurred, and
(4) prior to the termination of this Agreement or
within 12 months after the termination of this Agreement, the
Company or a Subsidiary thereof enters into a Competing Proposal
Agreement; or
(D) This Agreement is terminated by Parent pursuant to
Sections 7.4(b) or 7.4(c), and
(1) prior to such termination a Takeover Proposal
Event shall have occurred, and
(2) prior to the termination of this Agreement or
within 12 months after the termination of this Agreement, the
Company or a Subsidiary thereof enters into a Competing Proposal
Agreement.
(ii) If this Agreement is terminated in circumstances where a
Termination Fee is then payable, then in any such case the Company will
promptly, but in no event later than two business days after submission of a
request therefor, pay Parent up to $4.0 million of Parent's documented Expenses.
(iii) If a Termination Fee is payable pursuant to Section 7.5(b)(i)(B),
7.5(b)(i)(C) or 7.5(b)(i)(D), then the Company will pay the Termination Fee to
Parent upon the signing of a Competing Proposal Agreement or, if no Competing
Proposal Agreement is signed, then at the closing (and as a condition to the
closing) of a Competing Proposal. Notwithstanding any other provision hereof,
(A) in no event may the Company enter into a Competing
42
Proposal Agreement unless, prior thereto, the Company has paid any amount due
under Section 7.5(b) or which will become due under Section 7.5(b), (B) the
Company may not terminate this Agreement under Sections 5.2(b) or 7.3(c) unless
prior thereto it has paid all amounts due under Section 7.5(b) to Parent, (C)
all amounts due in the event that this Agreement is terminated under Section
7.3(c) or 7.4(a) and in circumstances in which the Company has not entered into
a Competing Proposal Agreement will be payable promptly, but in no event more
than two business days after request therefor is made, and (D) all amounts due
under this Section 7.5(b) will be paid on the date due in immediately available
funds wire transferred to the account designated by the Person entitled to such
payment.
(iv) This Section 7.5 will survive any termination of this Agreement.
For purposes of this Agreement, the term "EXPENSES" means all actual
out-of-pocket fees, costs and other expenses incurred or assumed by Parent or
Purchaser or incurred on their behalf in connection with this Agreement or any
of the transactions contemplated hereby, including but not limited to in
connection with the negotiation, preparation, execution and performance of this
Agreement, the structuring and financing of the Merger and the other
transactions contemplated hereby, or any commitments or agreements relating to
such financing, including without limitation fees and expenses payable to all
banks, investment banking firms, other financial institutions and other Persons
and their respective agents and counsel for arranging, committing to provide or
providing any financing for the Merger and any other transactions contemplated
hereby or structuring, negotiating or advising with respect to such transactions
or financing, and all fees and expenses of counsel, accountants, experts and
computer, environmental, actuarial, insurance and other consultants to Parent or
Purchaser.
(v) The Company acknowledges that the agreements contained in this
Section 7.5(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent and Purchaser would not
enter into this Agreement; accordingly, if the Company fails promptly to pay the
amount due pursuant to this Section 7.5(b), and, in order to obtain such
payment, Parent or Purchaser commences a suit which results in a judgment
against the Company for a fee set forth in this Section 7.5(b), the Company will
pay to Parent and Purchaser their documented Expenses (including attorneys' fees
and expenses) in connection with such suit, together with interest on the amount
of the fee at the prime rate of Citibank N.A. in effect on the date such payment
was required to be made.
VIII. GENERAL PROVISIONS
8.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement will terminate at the Effective
Time or the termination of this Agreement pursuant to Article VII, as the case
may be,
43
except that the covenants set forth in Article II and Sections 5.3, 5.8, 5.9 and
5.10 will survive the Effective Time indefinitely or, if applicable, for the
period therein specified and those set forth in the last sentence of Section 1.3
and in Sections 5.4(b), 7.5 and 8.14 will survive termination indefinitely or,
if applicable, for the period therein specified.
8.2. NOTICES. Any notice or other communication required to be given
hereunder will be sufficient if in writing, and sent by facsimile transmission
and by courier service (with proof of service), hand delivery or certified or
registered mail (return receipt requested and first-class postage prepaid),
addressed as follows:
If to Parent or Purchaser:
Federated Department Stores, Inc.
0 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
Fax No.: 000-000-0000
With copies to:
Xxxxx, Day, Xxxxxx & Xxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Fax No.: 000-000-0000
If to the Company:
Fingerhut Companies, Inc.
0000 Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Fax No.: 000-000-0000
With copies to:
Faegre & Xxxxxx LLP
0000 Xxxxxxx Xxxxxx
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Fax No.: 000-000-0000
or to such other address as any party will specify by written notice so given,
and such notice will be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
44
8.3. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder will be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon and will inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Section 5.8, nothing in this Agreement, expressed or implied, is intended to
confer on any Person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
8.4. ENTIRE AGREEMENT. This Agreement, Annex A, the Company Disclosure
Letter and the Parent Disclosure Letter, together with the Confidentiality
Agreement, dated November 11, 1998, among Parent, Purchaser and the Company (the
"CONFIDENTIALITY AGREEMENT"), which will survive the execution and delivery of
this Agreement, constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement will be binding upon any party
hereto unless made in writing and signed by all parties hereto. Notwithstanding
the foregoing, the eighth paragraph of the Confidentiality Agreement is hereby
amended so as to permit Parent, Purchaser or any of the respective Affiliates or
Representatives (as defined thereby) to (a) effect any transaction permitted
hereby or (b) to take any action otherwise prohibited thereby involving a
transaction pursuant to which Parent offers to acquire all of the Shares at not
less than the Per Share Amount, in the event that (i) the Company terminates
this Agreement pursuant to Section 7.3(c) or takes any action referred to in
Section 5.2(b) that would have constituted a breach of Section 5.2(b) but for
the exceptions therein in respect of fiduciary duties of the Company Board, (ii)
except following a termination of this Agreement by the Company pursuant to
Section 7.3(a) or 7.3(b), the Company enters into a Competing Proposal
Agreement, or (iii) following any termination of this Agreement, if prior to or
after such termination (other than a termination of this Agreement by the
Company pursuant to Section 7.3(a) or 7.3(b)) another Person publicly announces
a Company Takeover Proposal or Takeover Proposal Event.
8.5. AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by
Shareholders but after any such Shareholder approval, no amendment will be made
which by Law requires the further approval of Shareholders without obtaining
such further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
45
8.6. GOVERNING LAW. Except to the extent that the laws of Minnesota are
mandatorily applicable to the Merger, this Agreement will be governed by and
construed in accordance with the laws of the State of Delaware without regard to
its conflict of laws principles.
8.7. COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered will be
an original, but all such counterparts will together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
8.8. HEADINGS. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and will be given no substantive or
interpretive effect whatsoever.
8.9. CERTAIN DEFINITIONS/INTERPRETATIONS. (a) For purposes of this
Agreement:
(i) An "AFFILIATE" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first Person;
(ii) "PERSON" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity; and
(iii) "KNOWLEDGE" of any Person which is not an individual means
the actual knowledge of any of such Person's executive officers.
(b) When a reference is made in this Agreement to an Article, Section
or Annex, such reference will be to an Article or Section of, or Annex to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and will 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 will be
deemed to be followed by the words "without limitation." The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
will refer to this Agreement as a whole and not to any particular provision of
this Agreement. All terms used herein with initial capital letters have the
meanings ascribed to them herein and all terms defined in this Agreement will
have such defined meanings when used in any certificate or other document made
or delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute
46
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a Person are also to its
permitted successors and assigns. Matters reflected in the Company Disclosure
Letter are not necessarily limited to matters required by this Agreement to be
reflected in the Company Disclosure Letter. Such additional matters are set
forth for informational purposes and do not necessarily include other matters of
a similar nature. Except for Sections 2.9, 5.1 and 5.9 of the Company Disclosure
Letter, which relate only to the corresponding Sections of this Agreement,
matters disclosed by the Company pursuant to any Section of this Agreement or
the Company Disclosure Letter will be deemed to be disclosed with respect to all
Sections of this Agreement and the Company Disclosure Letter to the extent this
Agreement requires such disclosure provided that the relevance of such matters
to other Sections in the Company Disclosure Letter is reasonably apparent on the
face thereof.
8.10. WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including without limitation any investigation by or
on behalf of any party, will be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder will not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
8.11. INCORPORATION OF ANNEX A. Annex A attached hereto is hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
8.12. SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction will, 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 will be interpreted
to be only so broad as is enforceable.
8.13. ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties will be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in
47
addition to any other remedy to which they are entitled at law or
in equity.
8.14. EXPENSES. Except as set forth in Section 7.5, all fees and
expenses (including SEC filing fees) incurred in connection with the Offer, the
Merger, this Agreement and the transactions contemplated thereby will be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated, except that each of Parent and the Company will bear and pay
one-half of the costs and expenses incurred in connection with the printing and
mailing of the Offer Documents, the Schedule 14D-9 and Proxy Statement.
48
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
FINGERHUT COMPANIES, INC.
By:
--------------------------
Xxxxxxxx Xxxxxx
Chief Executive Officer
FEDERATED DEPARTMENT STORES, INC.
By:
--------------------------
Xxxxxx X. Xxxxx
Vice Chairman, Finance and
Real Estate
BENGAL SUBSIDIARY CORP.
By:
--------------------------
Xxxxxx X. Xxxxxxxxx
President
49
ANNEX A
CONDITIONS TO COMPLETION OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser will not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
expiration or termination of the Offer), to pay for any Shares, and (subject to
any such rules or regulations) may postpone the acceptance for payment or
payment for any Shares tendered, and may amend or terminate (if, when and as
permitted by this Agreement) the Offer (whether or not any Shares have
theretofore been purchased or paid for pursuant to the Offer), (a) unless the
following conditions have been satisfied: (1) there have been validly tendered
and not withdrawn prior to the Expiration Date a number of Shares which
represents at least a majority of the total voting power of the outstanding
securities of the Company entitled to vote in the election of directors or in a
merger ("VOTING SECURITIES"), calculated on a fully diluted basis, on the date
of purchase (the "MINIMUM CONDITION") ("on a fully diluted basis" having the
following meaning, as of any date: the number of Shares outstanding, together
with the number of Shares the Company is then required to issue pursuant to
obligations outstanding at that date under employee stock option or other
benefit plans or otherwise), (2) any applicable waiting periods under the HSR
Act shall have expired or been terminated prior to the expiration of the Offer,
and (3) the OCC shall have consented in writing to, or stated in writing that it
would not disapprove of, the Offer and the Merger or all applicable filing,
approval or waiting periods or extensions thereof under the CIBC Act shall have
expired without the OCC providing notice of objection to the Offer or the Merger
(the "OCC CONDITION") or (b) if at any time on or after the date of this
Agreement and before the Expiration Date (whether or not any Shares have
theretofore been accepted for payment or paid for pursuant to the Offer), any of
the following shall have occurred:
(i) any governmental entity or authority or any court shall have
enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, temporary or preliminary
injunction that shall not have been lifted prior to the Expiration Date
or permanent injunction or other order which is in effect and which (a)
restricts, prevents or prohibits consummation of the transactions
contemplated by this Agreement, including the Offer or the Merger, (b)
prohibits, limits or otherwise adversely affects the ownership or
operation by Parent or any of its Subsidiaries of all or any material
portion of the business or assets of the Company and its Subsidiaries
or compels the Company, Parent or any of their Subsidiaries to dispose
of or hold separate all or any portion of the business or assets of the
Company and its Subsidiaries as a result of the completion of the Offer
or the Merger, or (c) imposes limitations on the ability of Parent,
Purchaser or any other subsidiary of Parent to exercise effectively
full rights of ownership of any Shares, including without limitation
the right
50
to vote any Shares acquired by Purchaser pursuant to the Offer or
otherwise on all matters properly presented to the Shareholders,
including without limitation the approval and adoption of this
Agreement and the transactions contemplated thereby;
(ii) there shall be instituted or pending any action or
proceeding before any United States or foreign court or governmental
entity or authority by any United States or foreign governmental entity
or authority seeking any order, decree or injunction having any effect
set forth in paragraph (i) above;
(iii) the representations and warranties of the Company contained
in this Agreement (without giving effect to the materiality, material
adverse effect or knowledge limitations contained therein) shall not be
true and correct as of the Expiration Date (as the same may be extended
from time to time) as though made anew on and as of such date (except
for representations and warranties made as of a specified date, unless
they shall not be true and correct as of the specified date), except
for any breach or breaches of any representations or warranties in
Section 3.1 (except the first sentence) and Sections 3.4 through 3.20
of this Agreement which, individually or in the aggregate, could not be
reasonably expected to have a Company Material Adverse Effect;
(iv) the Company shall not have performed or complied in all
material respects with its covenants under this Agreement to which it
is a party and such failure continues until the later of (a) 15
calendar days after actual receipt by it of written notice from Parent
setting forth in reasonable detail the nature of such failure or (b)
the Expiration Date;
(v) there shall have occurred any material adverse change, or any
development that is reasonably likely to result in a material adverse
change, in the business, financial condition or results of operations
of the Company and its Subsidiaries, taken as a whole;
(vi) this Agreement shall have been terminated in accordance with
its terms;
(vii) the Company Board shall have (a) withdrawn or materially
modified or changed (including by amendment of the Schedule 14D-9) its
recommendation of the Offer, the Merger or this Agreement in a manner
adverse to Purchaser or Parent, (b) taken a position inconsistent with
its recommendation of the Offer, the Merger of this Agreement in a
manner adverse to Purchaser or Parent, (c) approved or recommended any
Company Takeover Proposal, (d) taken any action referred to in Section
5.2(b) of this Agreement that is prohibited thereby or would be so
prohibited but for the exceptions thereto, or (e) resolved or publicly
disclosed any intention to do any of the foregoing; or
51
(viii) the U.S. Federal Reserve Board or any other federal
governmental authority shall have declared a general banking moratorium
or general suspension or material limitation on the extension of credit
or in respect of payments in respect of credit by banks or other
lending institutions in the United States.
The foregoing conditions are for the sole benefit of Purchaser and its
affiliates and may be asserted by Purchaser, or Parent on behalf of Purchaser,
regardless of the circumstances (including without limitation any action or
inaction by Purchaser or any of its affiliates other than a material breach by
Purchaser or Parent of the Agreement) giving rise to any such condition or may
be waived by Purchaser, in whole or in part, from time to time in its sole
discretion, except as otherwise provided in the Agreement. The failure by
Purchaser at any time to exercise any of the foregoing rights will not be deemed
a waiver of any such right and each such right will be deemed an ongoing right
and may be asserted at any time and from time to time.
52
TABLE OF DEFINED TERMS
PAGE
----
Acquisition......................................................................................................1
Affiliate.......................................................................................................46
Agreement........................................................................................................1
Board Percentage.................................................................................................5
Certificates....................................................................................................10
CIBC Act........................................................................................................16
Closing..........................................................................................................7
Closing Date.....................................................................................................7
Code............................................................................................................19
Company..........................................................................................................1
Company Acquisition Agreement...................................................................................34
Company Benefit Plans...........................................................................................24
Company Board....................................................................................................1
Company Disclosure Letter.......................................................................................12
Company Filed Reports...........................................................................................18
Company Material Adverse Effect.................................................................................13
Company Reports.................................................................................................16
Company SEC Information..........................................................................................3
Company Shareholders' Meeting...................................................................................26
Company Takeover Proposal.......................................................................................33
Competing Proposal..............................................................................................41
Competing Proposal Agreement....................................................................................42
Computer Software...............................................................................................20
Confidentiality Agreement.......................................................................................45
Constituent Corporations.........................................................................................1
Continuing Directors.............................................................................................6
Disinterested....................................................................................................6
Dissenting Shares................................................................................................9
Drop-Dead Date..................................................................................................40
Effective Time...................................................................................................7
Environmental Laws..............................................................................................23
Environmental Permits...........................................................................................23
ERISA...........................................................................................................24
Exchange Act.....................................................................................................2
Exchange Agent..................................................................................................10
Expenses........................................................................................................43
Expiration Date..................................................................................................2
Governmental Entity.............................................................................................16
Hazardous Substances............................................................................................24
HSR Act.........................................................................................................16
Intellectual Property...........................................................................................20
IRS.............................................................................................................20
key employee....................................................................................................18
Knowledge.......................................................................................................46
Law.............................................................................................................15
Leased Real Property............................................................................................21
Liens...........................................................................................................14
Material Contracts..............................................................................................22
MBCA.............................................................................................................1
Measurement Date................................................................................................14
Merger...........................................................................................................1
53
Merger Consideration.............................................................................................8
Metris..........................................................................................................20
Minimum Condition...............................................................................................50
MOU.............................................................................................................15
OCC..............................................................................................................3
OCC Condition...................................................................................................50
Offer............................................................................................................1
Offer Completion Date...........................................................................................33
Offer Conditions.................................................................................................2
Offer Documents..................................................................................................3
Option Consideration............................................................................................12
Options.........................................................................................................11
Order...........................................................................................................15
Outside Date....................................................................................................40
Owned Real Property.............................................................................................21
Parent...........................................................................................................1
Parent Benefit Plans............................................................................................29
Parent Disclosure Letter........................................................................................26
Parent Material Adverse Effect..................................................................................26
Parent SEC Information...........................................................................................4
Parent's Designees...............................................................................................5
Per Share Amount.................................................................................................1
Permitted Liens.................................................................................................21
Person..........................................................................................................46
Proxy Statement.................................................................................................26
Purchaser........................................................................................................1
Real Property Leases............................................................................................21
Restraints......................................................................................................39
Rights...........................................................................................................8
Ruling..........................................................................................................20
Schedule 14D-1...................................................................................................3
Schedule 14D-9...................................................................................................4
SEC..............................................................................................................3
Securities Act..................................................................................................16
Shareholders.....................................................................................................1
Shares...........................................................................................................1
Special Committee................................................................................................4
Spinoff.........................................................................................................20
SSB..............................................................................................................4
Stock Option Plans..............................................................................................11
Subsidiary......................................................................................................13
Superior Proposal...............................................................................................34
Surviving Corporation............................................................................................7
Takeover Proposal Event.........................................................................................42
Tax Return......................................................................................................19
Taxes...........................................................................................................19
Termination Fee.................................................................................................41
Transfer Taxes..................................................................................................19
Voting Securities...............................................................................................50
54
