Exhibit 2.1
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and among
ASSOCIATES FIRST CAPITAL CORPORATION,
AFCC NEWCO, INC.
and
ARCADIA FINANCIAL LTD.
Dated as of November 12, 1999
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
ARTICLE I
The Merger
1.1 The Merger..........................................................................................1
1.2 Closing.............................................................................................2
1.3 Effective Time......................................................................................2
1.4 Effects of the Merger...............................................................................2
1.5 Conversion of Company Common Stock..................................................................2
1.6 Options and Restricted Stock........................................................................3
1.7 Articles of Incorporation...........................................................................5
1.8 Bylaws..............................................................................................5
1.9 Directors and Officers of Surviving Corporation.....................................................5
ARTICLE II
Exchange of Shares
2.1 Establishment of Exchange Fund......................................................................5
2.2 Exchange of Shares..................................................................................5
ARTICLE III
Representations and Warranties of Company
3.1 Corporate Organization..............................................................................7
3.2 Capitalization.....................................................................................10
3.3 Authority; No Violation............................................................................12
3.4 Consents and Approvals.............................................................................13
3.5 Regulatory Reports.................................................................................13
3.6 Broker's Fees; Opinion of Company Financial Advisor................................................14
3.7 Absence of Certain Changes or Events...............................................................14
3.8 Legal Proceedings..................................................................................15
3.9 Taxes and Tax Returns..............................................................................15
3.10 Employees.........................................................................................17
3.11 SEC Reports.......................................................................................20
3.12 Financial Statements..............................................................................20
3.13 Licenses; Compliance with Applicable Law..........................................................20
3.14 Certain Contracts.................................................................................21
3.15 Agreements with Regulatory Agencies...............................................................22
3.16 Investment Securities.............................................................................23
3.17 Interest Rate Risk Management Instruments.........................................................23
3.18 Undisclosed Liabilities...........................................................................23
3.19 Environmental Liability...........................................................................23
3.20 Information Supplied..............................................................................24
3.21 Insurance.........................................................................................24
3.22 Year 2000 Compliance..............................................................................24
3.23 Intellectual Property.............................................................................25
3.24 Rights Agreement..................................................................................25
3.25 State Anti-Takeover Statutes......................................................................25
3.26 Properties........................................................................................25
3.27 Receivables.......................................................................................26
ARTICLE IV
-i-
Representations and Warranties
of Parent and Sub
4.1 Corporate Organization.............................................................................27
4.2 Authority; No Violation............................................................................28
4.3 Consents and Approvals.............................................................................29
4.4 Broker's Fees......................................................................................29
4.5 Funds..............................................................................................29
ARTICLE V
Covenants Relating to Conduct of Business
5.1 Conduct of Company Businesses Prior to the Effective Time..........................................30
5.2 Forbearances of Company............................................................................30
5.3 Transition.........................................................................................35
5.4 Notification of Tax Proceedings....................................................................35
5.5 Transfer Taxes.....................................................................................36
ARTICLE VI
Additional Agreements
6.1 Company Shareholders Meeting; Preparation of Proxy Statement.......................................36
6.2 Reasonable Best Efforts............................................................................37
6.3 Access to Information..............................................................................38
6.4 Employee Benefits..................................................................................39
6.5 Indemnification; Directors' and Officers' Insurance................................................40
6.6 Additional Agreements..............................................................................41
6.7 Advice of Changes..................................................................................41
6.8 No Solicitation....................................................................................42
6.9 Publicity..........................................................................................44
6.10 Stockholder Litigation............................................................................44
6.11 Anti-Takeover Provisions..........................................................................44
6.12 Stop Transfer.....................................................................................45
6.13 [Intentionally Omitted]............................................................................45
6.14 Agreed Upon Procedures............................................................................45
6.15 [Intentionally Omitted]...........................................................................45
6.16 Tax Schedules.....................................................................................45
6.17 Listing...........................................................................................45
6.18 Employee Retention................................................................................45
ARTICLE VII
Conditions Precedent
7.1 Conditions to Each Party's Obligation To Effect the Merger.........................................46
7.2 Conditions to Company's Obligations to Effect the Merger...........................................46
7.3 Conditions to Parent's and Sub's Obligations to Effect the Merger..................................47
ARTICLE VIII
Termination and Amendment
8.1 Termination........................................................................................48
8.2 Effect of Termination..............................................................................50
8.3 Amendment..........................................................................................51
-ii-
8.4 Extension; Waiver..................................................................................52
ARTICLE IX
General Provisions
9.1 Nonsurvival of Representations, Warranties and Agreements..........................................52
9.2 Expenses...........................................................................................52
9.3 Notices............................................................................................53
9.4 Interpretation.....................................................................................54
9.5 Counterparts; Facsimile............................................................................54
9.6 Entire Agreement...................................................................................54
9.7 Governing Law......................................................................................55
9.8 Severability.......................................................................................55
9.9 Assignment; Third Party Beneficiaries..............................................................55
9.10 Enforcement.......................................................................................55
9.11 Schedules.........................................................................................55
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 12, 1999
(this "AGREEMENT"), by and among ASSOCIATES FIRST CAPITAL CORPORATION, a
Delaware corporation ("PARENT"), AFCC NEWCO, INC., a Minnesota corporation and a
wholly-owned subsidiary of Parent ("SUB"), and ARCADIA FINANCIAL LTD., a
Minnesota corporation ("COMPANY").
WHEREAS, the respective Boards of Directors of Parent, Sub and
Company have determined that the merger of Sub with and into Company (the
"MERGER"), with Company as the surviving corporation of the Merger (the
"SURVIVING CORPORATION"), each upon the terms and subject to the conditions set
forth in this Agreement, are advisable and fair to and in the best interests of
their respective stockholders;
WHEREAS, as an inducement and condition to Parent and Sub
entering into this Agreement, and concurrently with the execution of this
Agreement, certain affiliates of Company are executing and delivering to Parent
a Voting Agreement (the "SUPPORT AGREEMENT") dated as of the date hereof; and
WHEREAS, simultaneously with the execution of this Agreement,
an affiliate of Parent and Company entered into a Continuous Asset Purchase
Agreement (the "PURCHASE AGREEMENT") and a Master Servicing Agreement (together
with the Purchase Agreement, the "RECEIVABLES AGREEMENTS");
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions therefor.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this
Agreement and in accordance with the Minnesota Business Corporation Act (the
"MBCA"), at the Effective Time (as defined in Section 1.3), Sub shall merge
with and into Company. Company shall be the Surviving Corporation in the
Merger and shall continue its corporate existence under the laws of the State
of Minnesota. Upon consummation of the Merger, the separate corporate
existence of Sub shall terminate.
1.2 CLOSING. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 8.1, the closing of the Merger (the "CLOSING") shall take
place at 10:00 a.m., New York City time, on the second business day after
satisfaction or waiver of the conditions (excluding conditions that, by their
terms, cannot be satisfied until the Closing Date (as defined in this Section
1.2), but subject to satisfaction or waiver of such conditions on the Closing
Date) set forth in Article VII (the "CLOSING DATE"), at the offices of
Xxxxxxx Xxxxxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
unless another date, time or place is agreed to in writing by the parties
hereto.
2
1.3 EFFECTIVE TIME. Upon the Closing, the parties shall
file articles of merger (the "ARTICLES OF MERGER") with the Secretary of
State of the State of Minnesota and shall make all other filings or
recordings required under the MBCA. The Merger shall become effective at such
time as the Articles of Merger shall have been duly filed with the Secretary
of State of the State of Minnesota, or at such later time as is agreed by
Parent and Company and specified in the Articles of Merger (the time the
Merger becomes effective being the "EFFECTIVE TIME").
1.4 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects set forth in Section 302A.641 of the MBCA.
1.5 CONVERSION OF COMPANY COMMON STOCK. At the Effective
Time by virtue of the Merger and without any action on the part of Parent,
Sub, Company or the holder of any of the following securities:
(a) Each share of common stock, par value $0.01 per share, of Company (the
"COMPANY COMMON STOCK"), together with the associated preferred stock purchase
rights (the "COMPANY RIGHTS") under the Company Rights Agreement (as defined in
Section 3.24) issued and outstanding immediately prior to the Effective Time
(other than shares of Company Common Stock canceled pursuant to Section 1.5(c)
and Dissenting Shares (as defined in Section 1.5(d))) shall be converted into
the right to receive (i) $4.90 in cash payable to the holder thereof, without
interest thereon (the "CASH CONSIDERATION") and (ii) one residual value
obligation (each, a "RVO") having the principal terms described in Exhibit A
hereto (the "RVO CONSIDERATION", and, together with the Cash Consideration, the
"MERGER CONSIDERATION").
(b) All of the shares of Company Common Stock and Company Rights issued
and outstanding immediately prior to the Effective Time shall no longer be
outstanding and shall automatically be canceled and shall cease to exist as of
the Effective Time, and each certificate (each a "COMMON CERTIFICATE")
previously representing any such shares of Company Common Stock and Company
Rights (other than shares canceled pursuant to Section 1.5(c) and Dissenting
Shares) shall thereafter represent solely the right to receive the Merger
Consideration into which the shares of Company Common Stock and Company Rights
represented by such Common Certificate have been converted pursuant to this
Section 1.5.
(c) At the Effective Time, all shares of Company Common Stock that are
held by Company as treasury stock, if any, or by Parent or any of Parent's
wholly-owned Subsidiaries (as defined in Section 3.1) shall automatically be
canceled and shall cease to exist, and no cash, stock of Parent or other
consideration shall be delivered in exchange therefor.
(d) Notwithstanding anything in this Agreement to the contrary, shares of
Company Common Stock issued and outstanding immediately prior to the Effective
Time held by holders (if any) who have not voted in favor of this Agreement or
consented thereto in writing and who have demanded dissenters' rights with
respect thereto in accordance with Sections 302A.471 and 302A.473 of the MBCA
and, as of the Effective Time, have not failed to perfect or have not
effectively withdrawn or lost their dissenters' rights under Sections 302A.471
and 302A.473 of the MBCA ("DISSENTING SHARES") shall not be converted into the
right to receive the Merger Consideration as described in Section 1.5(a), but
3
holders of such shares shall be entitled to receive payment of the fair value of
such Dissenting Shares in accordance with the provisions of Sections 302A.471
and 302A.473 of the MBCA (but only after the amount thereof shall be agreed upon
or finally determined pursuant to the provisions of the MBCA), except that any
Dissenting Shares held by a holder who shall have failed to perfect or shall
have effectively withdrawn or lost its dissenter's rights under Sections
302A.471 and 302A.473 of the MBCA shall thereupon be deemed to have been
converted into the right to receive the Merger Consideration and shall no longer
be considered Dissenting Shares. Company shall give Parent (i) prompt notice of
any written demands for dissenter's rights, attempted withdrawals of such
demands and any other instruments served pursuant to the MBCA received by
Company relating to dissenting shareholders' rights and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for fair value
under the MBCA. Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for fair value
for capital stock of Company, offer to settle or settle any such demands or
approve any withdrawal of any such demands.
(e) Each share of capital stock of Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one identical share of the
capital stock of the Surviving Corporation and shall constitute the only issued
and outstanding capital stock of the Surviving Corporation following the
Effective Time.
1.6 OPTIONS AND RESTRICTED STOCK. (a) Immediately prior to
the Effective Time, each employee, consultant and director stock option to
purchase shares of Company Common Stock (each, a "COMPANY OPTION") which is
then outstanding and unexercised, whether or not then exercisable, shall be
(or, if not previously vested and exercisable, shall become) vested and
exercisable (provided that any exercise of a Company Option as to which the
per share exercise price exceeds the Cash Consideration shall be for cash)
and such Company Options immediately thereafter shall be canceled by Company
pursuant to this Section 1.6, and each holder of a canceled Company Option
shall be entitled to receive at the Effective Time or as soon as practicable
thereafter from Company in consideration for the cancellation of such Company
Option (i) an amount in cash equal to the product of (A) the number of shares
of Company Common Stock previously subject to such Company Option and (B) the
excess, if any, of the Cash Consideration over the exercise price per share
of Company Common Stock previously subject to such Company Option, less any
applicable withholding taxes and (ii) one RVO for each share of Company
Common Stock previously subject to such Company Option; provided, that a
holder of a cancelled Company Option shall not be entitled to receive any RVO
in respect of the cancellation thereof if the exercise price per share of
Company Common Stock previously subject to such Company Option exceeds the
Cash Consideration.
(b) Immediately prior to the Effective Time, each share of restricted
Company Common Stock held by an employee, consultant or director of the Company
or its Subsidiaries ("Company Restricted Stock"), which is then outstanding and
restricted, shall become vested and such Company Restricted Stock immediately
thereafter shall be converted into the right to receive Merger Consideration.
4
(c) Company shall (i) take all actions necessary and appropriate so that
all stock or other equity based plans maintained with respect to Company Common
Stock (the "COMPANY STOCK PLANS"), including, without limitation, the plans
listed in Section 3.10(a) of the Company Disclosure Schedule, shall terminate as
of the Effective Time and that any other Employee Plan (as hereinafter defined
in Section 3.10) (including the Company's employee stock purchase plan)
providing for the issuance, transfer or grant of any capital stock of Company or
any interest in respect of any capital stock of Company shall be amended to
provide that no further issuances, transfer or grants shall be permitted as of
the Effective Time and (ii) provide that, following the Effective Time, no
holder of a Company Option or Company Restricted Stock or any participant in any
Company Stock Plan shall have any right thereunder to acquire or receive any
capital stock of Company, Parent or the Surviving Corporation (except as
otherwise set forth in Sections 1.5 or 1.6(a) or (b) above). Prior to the
Effective Time, Company shall (x) obtain all necessary consents from, and
provide (in a form reasonably acceptable to Parent) any required notices to,
holders of Company Options and Company Restricted Stock and (y) amend the terms
of the applicable Company Stock Option, Company Restricted Stock, Company Stock
Plan and the Company's employee stock purchase plan, in each case, as is
necessary to give effect to the provisions of this Section 1.6.
1.7 ARTICLES OF INCORPORATION. Subject to the terms and
conditions of this Agreement, at the Effective Time, the articles of
incorporation of Company, as in effect immediately prior to the Effective
Time, shall be the articles of incorporation of the Surviving Corporation
until thereafter amended as provided therein and by the MBCA.
1.8 BYLAWS. Subject to the terms and conditions of this
Agreement, at the Effective Time, the bylaws of Company, as in effect
immediately prior to the Effective Time, shall, subject to the provisions of
Section 6.5, be the bylaws of the Surviving Corporation until thereafter
amended as provided therein and by the MBCA.
1.9 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. At the
Effective Time, the directors and officers of Sub immediately prior to the
Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation following the Merger, to hold office in accordance with
the Surviving Corporation's bylaws and applicable law.
5
ARTICLE II
EXCHANGE OF SHARES
2.1 ESTABLISHMENT OF EXCHANGE FUND. Prior to the Effective
Time, Parent shall designate First Chicago Trust Company of New York or such
other bank or trust company reasonably acceptable to Company, to act as
exchange agent (the "EXCHANGE AGENT") for the payment of the Merger
Consideration. At or prior to the Effective Time, Parent shall deposit, or
shall cause to be deposited, with the Exchange Agent, for the benefit of the
holders of Common Certificates, for exchange in accordance with this Article
II, cash and certificates representing the RVOs (such cash and certificates
being hereinafter referred to as the "EXCHANGE FUND") to be paid pursuant to
Section 2.2(a) in exchange for outstanding shares of Company Common Stock.
2.2 EXCHANGE OF SHARES. (a) As soon as practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record as
of the Effective Time of one or more Common Certificates (other than with
respect to shares of Company Common Stock canceled pursuant to Section
1.5(c)) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Common Certificates shall pass,
only upon delivery of the Common Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Common Certificates in
exchange for the Merger Consideration. Upon proper surrender of a Common
Certificate for exchange and cancellation to the Exchange Agent, together
with such properly completed letter of transmittal, duly executed, covering
such Common Certificate, the holder of such Common Certificate shall be
entitled to receive in exchange therefor a check representing the amount of
the Cash Consideration and a certificate representing the RVO Consideration,
and the Common Certificate so surrendered shall forthwith be canceled. No
interest will be paid or accrued on the Merger Consideration payable to
holders of Common Certificates.
(b) If the payment of the Merger Consideration is to be made to a person
other than the registered holder of the Common Certificate surrendered in
exchange therefor, it shall be a condition to the payment thereof that the
Common Certificate so surrendered shall be properly endorsed (or accompanied by
an appropriate instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the
Exchange Agent in advance any transfer or other taxes required by reason
of the issuance, delivery or payment of such Merger Consideration to any
person other than the registered holder of the Common Certificate surrendered,
or required for any other reason, or shall establish to the satisfaction of
the Exchange Agent that such tax has been paid or is not payable.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of Company of the shares of Company Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Common Certificates representing such shares are presented for
transfer to the Exchange Agent, they shall be canceled and exchanged for the
applicable Merger Consideration as provided in this Article II.
(d) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of Company for 6 months after the Effective Time shall be paid to
6
Parent. Any shareholders of Company who have not theretofore complied with this
Article II shall thereafter look only to Parent for payment of the Merger
Consideration, without any interest thereon. Notwithstanding the foregoing, none
of the Surviving Corporation, Parent, the Exchange Agent or any other person
shall be liable to any former holder of shares of Company Common Stock for any
Merger Consideration delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(e) In the event any Common Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Common Certificate to be lost, stolen or destroyed and, if reasonably
required by Parent, the posting by such person of a bond in such amount as
Parent may determine is reasonably necessary as indemnity against any claim that
may be made against it with respect to such Common Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Common
Certificate the Merger Consideration.
(f) All cash and RVOs paid upon the surrender of the Common Certificates
in accordance with the terms of Articles I and II shall be deemed to have been
paid in full satisfaction of all rights pertaining to the shares of the Company
Common Stock and Company Rights theretofore represented by such Common
Certificates; SUBJECT, HOWEVER, to the Surviving Corporation's obligation, with
respect to shares of Company Common Stock outstanding immediately prior to the
Effective Time, to pay any dividends or make any other distributions with a
record date prior to the Effective Time which may have been declared or made by
Company on such shares of Company Common Stock in accordance with the terms of
this Agreement or prior to the date of this Agreement and which remain unpaid at
the Effective Time.
(g) The Exchange Agent shall invest any funds in the Exchange Fund as
directed by Parent. Any interest and other income resulting from such
investments shall be paid to Parent.
(h) No distributions or other payments declared or made with respect to
RVOs after the Effective Time shall be paid to the holder of any unsurrendered
Common Certificate with respect to the RVOs that such holder would be entitled
to receive upon surrender of such Common Certificate until such holder shall
surrender such Common Certificate in accordance with Section 2.2(a). Subject to
the effect of applicable laws, following surrender of any such Common
Certificate, there shall be paid to such holder of RVOs issuable in exchange
therefor, without interest, (i) the amount of distributions or other payments
declared after the Effective Time theretofore paid with respect to such RVOs and
(ii) at the appropriate payment date, the amount of distributions or other
payments declared but not paid or with a record date after the Effective Time
but prior to such surrender with a payment date subsequent to such surrender
payable with respect to such RVOs.
7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Parent and Sub as
follows:
3.1 CORPORATE ORGANIZATION. (a) Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Minnesota. Company has all requisite corporate power and authority
to own or lease all of its properties and assets and to carry on its business
as it is now being conducted, and is duly licensed or qualified to do
business and in good standing in each jurisdiction (whether federal, state,
local or foreign) in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it
makes such licensing or qualification necessary other than in such
jurisdictions where the failure so to qualify would not have, individually or
in the aggregate, a Material Adverse Effect on the Company. As used in this
Agreement, (i) the term "MATERIAL ADVERSE EFFECT" means, with respect to
Company, a material adverse effect on the business, assets (tangible or
intangible), liabilities, operations, condition (financial or otherwise) or
results of operations of Company and its Subsidiaries either individually or
taken as a whole, or on the ability of Company to perform its obligations
under and to consummate the transactions contemplated by this Agreement on a
timely basis, excluding any material adverse effect that arises from or is
attributable to (A) general economic conditions, (B) conditions (political,
economic, regulatory, competitive or otherwise) that adversely affect the
industry in which Company operates, (C) actions taken by lenders, rating
agencies or others as a direct result of the announcement of the execution of
this agreement (but not excluding the effect of such actions on the business,
assets (tangible or intangible), liabilities, operations, condition
(financial or otherwise), results of operations or prospects of Company and
its Subsidiaries either individually or taken as a whole, or on the ability
of Company to perform its obligations under and to consummate the
transactions contemplated by this Agreement on a timely basis) or (D)
impairment of Company's ability to finance its operations, including as a
result of a lowering of Company's credit ratings, a reduction or elimination
of a warehouse line of credit or actions taken by lenders or guarantors (but
not excluding the effect of any such impairment on the business, assets
(tangible or intangible), liabilities, operations, condition (financial or
otherwise), results of operations or prospects of Company and its
Subsidiaries either individually or taken as a whole, or on the ability of
Company to perform its obligations under and to consummate the transactions
contemplated by this Agreement on a timely basis); and (ii) the term
"SUBSIDIARY" when used with respect to any party means any corporation or
other organization, whether incorporated or unincorporated, (x) of which such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party
or any Subsidiary of such party do not have a majority of the voting
interests in such partnership), or (y) a majority of the securities or other
interests of which having by their terms ordinary voting power to elect a
majority of the board of directors or other body performing similar functions
with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries and (iii)
the term "KNOWLEDGE" means, when used with respect to Company, the actual
knowledge, after due inquiry, of any executive officer listed on Section
3.1(a) of the Company Disclosure Schedule (as defined below). Section 3.1(a)
of the Company disclosure schedule delivered to Parent concurrently herewith
(the "COMPANY DISCLOSURE SCHEDULE") contains true and complete copies of the
articles of incorporation and bylaws of Company, as in effect as of the date
of this Agreement. Such organizational documents are in full force and effect
8
and no other organizational documents are applicable to or binding upon Company.
Company is not in violation of any of the provisions of its articles of
incorporation or bylaws.
(b) Part I of Section 3.1(b) of the Company Disclosure Schedule sets forth
a complete and correct list of all of Company's Subsidiaries (each a "COMPANY
SUBSIDIARY" and collectively the "COMPANY SUBSIDIARIES") and indicates, as to
each such Subsidiary, the number and type of outstanding shares of capital stock
or other equity securities of each such Subsidiary, any issued and outstanding
options, warrants, stock appreciation rights, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, shares of any capital stock or other equity securities
of such Subsidiary, and any contracts, commitments, understandings or
arrangements by which such Subsidiary may become bound to issue additional
shares of its capital stock or other equity securities, or options, warrants,
scrip on rights to purchase, acquire, subscribe to, calls on or commitments for
any shares of its capital stock or other equity securities and the identity of
the parties to any such agreements or arrangements. All of the outstanding
shares of capital stock or other securities evidencing ownership of the Company
Subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable with no personal liability attaching to the ownership thereof and
such shares or other securities are owned by Company or its wholly-owned
Subsidiaries free and, except as set forth on Section 3.1(b) of the Company
Disclosure Schedule, clear of any lien, claim, charge, option, encumbrance,
mortgage, pledge or security interest (a "LIEN") with respect thereto. Each
Company Subsidiary (i) is a duly organized and validly existing corporation,
partnership or limited liability company or other legal entity under the laws of
its jurisdiction of organization, (ii) is duly licensed or qualified to do
business and in good standing in all jurisdictions (whether federal, state,
local or foreign) where its ownership or leasing of property or the conduct of
its business requires it to be so qualified other than in such jurisdictions
where the failure so to qualify would not have, individually or in the
aggregate, a Material Adverse Effect on the Company and (iii) has all requisite
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as now conducted. Except for (i) the ownership
interests set forth in Part II of Section 3.1(b) of the Company Disclosure
Schedule and (ii) the ownership interests in its Subsidiaries disclosed in Part
I of Section 3.1(b) of the Company Disclosure Schedule, Company does not own,
directly or indirectly, any capital stock or other ownership interest, and does
not have any option or similar right to acquire any equity or other ownership
interest. Part III of Section 3.1(b) of the Company Disclosure Schedule provides
a complete and accurate description of all partnership, joint venture and
similar investments held by Company or any Company Subsidiary, including,
without limitation, all such investments in which any Company employee or
affiliate serves as a director. Company has provided or made available to Parent
a complete and accurate copy of all such partnership, joint venture or similar
agreements to which Company or any Company Subsidiary is a party. Except as set
forth on Section 3.1(b) of the Company Disclosure Schedule, neither Company nor
any Company Subsidiary is subject to any obligation or requirement to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any entity.
9
(c) Company has made available to Parent the minute books of Company, which
accurately reflect in all material respects all corporate meetings and actions
held or taken since January 1, 1996 by its shareholders and Board of Directors
(including committees of the Board of Directors of Company).
3.2 CAPITALIZATION. The authorized capital stock of Company
consists of 55,000,000 shares of Company Common Stock, 90,000 shares of Class
A Preferred Stock, par value $0.01 per share ("CLASS A PREFERRED STOCK"), and
44,010,000 undesignated shares, par value $0.01 per share ("UNDESIGNATED
STOCK"). As of September 30, 1999, (i) 39,443,693 shares of Company Common
Stock were issued and outstanding, (ii) no shares of Company Common Stock
were held in treasury, (iii) no shares of Class A Preferred were issued or
outstanding, (iv) 90,000 shares of Class A Preferred Stock were reserved for
issuance upon the exercise of the Company Rights and (v) 2,052,000 shares of
Company Common Stock were reserved for issuance upon the exercise of warrants
to purchase 2,052,000 shares of Company Common Stock ("Company Warrants").
All of the issued and outstanding shares of Company Common Stock have been
duly authorized and validly issued and are fully paid, non-assessable and
free of preemptive rights, with no personal liability attaching to the
ownership thereof. The shares of Company Common Stock which are issuable upon
exercise of Company Options or Company Warrants have been duly authorized and
reserved for issuance and, if and when issued pursuant to the terms thereof,
will be validly issued, fully paid and non-assessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. As of
the Effective Time, each Company Warrant shall become exercisable for the
amount of cash and number of RVOs which the holder of such Company Warrant
would have owned immediately after the Effective Time if such holder had
exercised such Company Warrant immediately prior to the Effective Time. Part
I of Section 3.2 of the Company Disclosure Schedule sets forth, in each case
as of September 30, 1999, (i) the number of shares of Company Common Stock
that were reserved for issuance upon the exercise of authorized but unissued
stock options pursuant to the Company Stock Plans, (ii) the number of shares
of Company Common Stock issuable upon the exercise of outstanding Company
Options pursuant to the Company Stock Plans and (iii) the number of shares of
Company Common Stock that were reserved for issuance under Company's
restricted stock election plans and Employee Stock Purchase Plan or
otherwise. Part III of Section 3.2 of the Company Disclosure Schedule sets
forth a list, as of September 30, 1999, of the holders of record of the
Company Warrants the number of shares subject to each such Company Warrant,
the expiration date of each such Company Warrant and the price at which each
such Company Warrant may be exercised. Except as set forth above in this
Section 3.2 or in Part I or Part II of Section 3.2 of the Company Disclosure
Schedule, no other shares of Company Common Stock, capital stock or other
equity or voting securities of Company were outstanding or reserved for
issuance. Part II of Section 3.2 of the Company Disclosure Schedule sets
forth a list, as of September 30, 1999, of the holders of Company Options,
the date of grant of each Company Option granted and outstanding, the number
of shares subject to each such option, the expiration date of each such
option, the vesting schedule of each such option and the price at which each
such option may be exercised under the applicable Company Stock Plan or
otherwise. Except as set forth in Part IV of Section 3.2 of the Company
Disclosure Schedule, since September 30, 1999, Company has not (i) issued any
shares of its capital stock or other equity or voting securities or any
securities convertible into or exercisable or exchangeable for any shares of
its capital stock or other equity or voting securities,
10
other than shares of Company Common Stock issued upon the exercise or conversion
of Company Options outstanding as of September 30, 1999 as described in the
immediately preceding sentence or (ii) taken any action which would cause an
antidilution adjustment under any outstanding options or warrants. There are no
outstanding bonds, debentures, notes or other indebtedness or other securities
(other than the Company Options and the Company Warrants) of Company having the
right to vote (or convertible into, or exchangeable or exercisable for,
securities having the right to vote) on any matters on which shareholders of
Company may vote. Except as set forth above in this Section 3.2 and as set forth
in Section 3.2 of the Company's Disclosure Schedule, there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Company or any of its
Subsidiaries is a party or by which any of them is bound obligating Company or
any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other equity or voting
securities of Company or of any of its Subsidiaries or obligating Company or any
of its Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
There are no outstanding contractual obligations, commitments, understandings or
arrangements of Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Company or any of its
Subsidiaries. Except as set forth in Part VI of Section 3.2 of the Company's
Disclosure Schedule, there are no agreements or arrangements pursuant to which
Company is or could be required to register shares of Company Common Stock or
other securities under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), or other agreements or arrangements with or among any securityholders of
Company with respect to securities of Company. Except as set forth in Part VII
of Section 3.2 of the Company Disclosure Schedule, there are no voting, sale,
transfer or other similar agreements to which Company or any of its Subsidiaries
is a party with respect to the capital stock of Company or its Subsidiaries or
any other securities of Company or its Subsidiaries which are convertible or
exchangeable into or exercisable for shares of the capital stock of Company or
its Subsidiaries. None of the shares of Company Common Stock are held, directly
or indirectly, by any of the Company Subsidiaries.
3.3 AUTHORITY; NO VIOLATION. (a) Company has full corporate
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The Board of Directors of Company, at a
meeting duly called and held, has unanimously (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are
advisable and fair to and in the best interests of the holders of shares of
Company Common Stock, (ii) duly approved and adopted a resolution containing
this Agreement and approved the execution and delivery of this Agreement and
the transactions contemplated hereby, including the Merger, and approved the
execution and performance of the Support Agreement and the Receivables
Agreements and (iii) resolved to recommend that the holders of shares of
Company Common Stock vote to approve and adopt this Agreement (the "COMPANY
BOARD RECOMMENDATION"). A committee of the Board of Directors of Company
consisting of all of Company's disinterested (as such term is defined in
Subdivision 1(d)(3) of Section 302A.673 of the MBCA) directors of Company,
formed in accordance with Subdivision 1(d) of Section 302A.673 of the MBCA,
duly approved the execution and performance of this Agreement, the Support
Agreement and the Receivables Agreements and the transactions contemplated
11
hereby and thereby. The Board of Directors of Company has directed that this
Agreement be submitted to Company's shareholders for approval at a meeting of
such shareholders and, except for the adoption of this Agreement by the
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock entitled to vote thereon in connection with the Merger (the
"COMPANY SHAREHOLDER APPROVAL"), no other corporate proceedings on the part of
Company or the Board of Directors of the Company and no other votes or consents
of any holders of Company securities are necessary to approve this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Company and (assuming due authorization,
execution and delivery by Parent and Sub) constitutes the valid and binding
obligation of Company, enforceable against Company in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, and general equitable principles (whether
considered in a proceeding in equity or at law).
(b) Except as set forth in Section 3.3(b) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement or the
Receivables Agreements by Company nor the consummation by Company of the
transactions contemplated hereby or thereby, nor compliance by Company
with any of the terms or provisions hereof or thereof, will (i) violate
any provision of the articles of incorporation or bylaws (or other
constituent documents) of Company or any Company Subsidiary or (ii)
assuming that the consents and approvals referred to in Section 3.4
are duly obtained, violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Company or
any of its Subsidiaries or any of their respective properties or assets, or
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by or rights or obligations under, or result in the creation of any
Lien upon any of the respective properties or assets of Company or any of its
Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, permit, concession, franchise,
license, lease, agreement, contract, pooling and servicing agreement or other
Securitization Agreement (as defined in Section 3.14) or other instrument or
obligation to which Company or any of its Subsidiaries is a party, or by which
they or any of their respective properties or assets are bound, except as to
(ii), for any such violations, conflicts, breaches, losses, terminations,
cancellations, accelerations or Liens that could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company.
3.4 CONSENTS AND APPROVALS. Except for (i) the filing of
any required applications or notices with governmental agencies or
authorities as set forth in Schedule 3.4 of the Company Disclosure Schedule
and approval of such applications and notices (the "REGULATORY APPROVALS"),
(ii) the filing with
12
the SEC of the Form S-4 (as defined in Section 6.1(a)) containing the Proxy
Statement/Prospectus (as defined in Section 6.1(a)), (iii) the filing of the
Articles of Merger with the Secretary of State of the State of Minnesota
pursuant to the MBCA, (iv) the expiration of any applicable waiting period under
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), (v) the Company Shareholder Approval, (vi) the filing with the SEC of
such reports under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), as may be required in connection with the execution and
delivery of this Agreement and the transactions contemplated hereby and (vii)
such other consents, approvals, filings and registrations the failure to obtain
which would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on Company, no consents or approvals of or
filings or registrations with any court, administrative agency or commission or
other governmental or regulatory authority or instrumentality (each a
"GOVERNMENTAL ENTITY"), are necessary in connection with the execution and
delivery by Company of this Agreement or the Receivables Agreements or the
consummation by Company of the transactions contemplated hereby or thereby.
Company has no reason to believe that any regulatory approvals or consents
required to consummate the transactions contemplated by this Agreement (the
"REQUISITE REGULATORY APPROVALS") will not be obtained on a timely basis.
3.5 REGULATORY REPORTS. Company and each of its
Subsidiaries have timely filed all regulatory reports, schedules, forms,
registrations and other documents, together with any amendments required to
be made with respect thereto, that they were required to file since January
1, 1996 with (i) the Securities and Exchange Commission (the "SEC"), (ii) any
domestic or foreign industry self-regulatory organization ("SRO") and (iii)
any other federal, state or foreign governmental or regulatory agency or
authority (collectively with the SEC and all SROs, "REGULATORY AGENCIES"),
and have timely paid all taxes, fees and assessments due and payable in
connection therewith, except as to (ii) and (iii), for such filings and
payments that the failure to make, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on Company.
Except as disclosed in Section 3.5 of the Company Disclosure Schedule and for
normal examinations conducted by a Regulatory Agency in the regular course of
the business of Company and its Subsidiaries, no Regulatory Agency has
initiated any proceeding or, to the knowledge of Company, investigation into
the business or operations of Company or any of its Subsidiaries since
January 1, 1996. Except as set forth in Section 3.5 of the Company Disclosure
Schedule, there is no material unresolved violation or exception by any
Regulatory Agency with respect to any report or statement relating to any
examinations of Company or any of its Subsidiaries.
3.6 BROKER'S FEES; OPINION OF COMPANY FINANCIAL ADVISOR.
(a) No broker, finder or investment banker (other than X.X. Xxxxxx & Co. (the
"COMPANY FINANCIAL ADVISOR")) is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement. Company has attached as Section 3.6 of the Company Disclosure
Schedule a complete and correct copy of all agreements between Company and
the Company Financial Advisor pursuant to which such firm would be entitled
to any payment relating to the transactions contemplated hereby.
(b) Company has received the oral opinion of the Company
Financial Advisor as of the date of this Agreement, to the effect that the
Merger Consideration is fair to the holders of the Company Common Stock from a
financial point of view, a signed copy of which opinion will be delivered to
Parent.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. (a) Except as set
forth on Section 3.7 of the Company Disclosure Schedule, since September 30,
1999, no
13
event, change or circumstance has occurred which has had, or would reasonably be
expected to result in, individually or in the aggregate, a Material Adverse
Effect on Company.
(b) Except as set forth on Section 3.7 of the Company Disclosure Schedule,
since September 30, 1999, Company and its Subsidiaries have, in all material
respects, carried on their respective businesses only in the ordinary and usual
course consistent with their past practices.
(c) Except as disclosed in Section 3.7(c) of the Company Disclosure
Schedule, since September 30, 1999, there has not occurred any event which,
if it had taken place following the execution of this Agreement, would not
have been permitted by Section 5.2 without the prior consent of Parent.
3.8 LEGAL PROCEEDINGS. Except as set forth in Section 3.8
of the Company Disclosure Schedule, there are no suits, actions,
counterclaims, proceedings (whether judicial, arbitral, administrative or
other) or governmental, or regulatory investigations pending or, to the
knowledge of Company, threatened against or affecting Company or any of its
Subsidiaries that could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Company. There is not any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Company or any of its Subsidiaries having, or
which individually or in the aggregate would reasonably be expected to have,
a Material Adverse Effect on Company.
3.9 TAXES AND TAX RETURNS. Except as set forth in Section
3.9 of the Company Disclosure Schedule:
(a) Company and each of its Subsidiaries, and any consolidated, combined,
unitary or aggregate group for tax purposes of which Company or any of its
Subsidiaries is or has been a member, has filed or will file all material Tax
Returns (as defined below) required to be filed by it in the manner provided by
law. If not yet filed, such Tax Returns will be filed within the time prescribed
by law (including extensions of time permitted by the appropriate Taxing
Authority, as defined below). All such Tax Returns are true, correct and
complete in all material respects. Company and each of its Subsidiaries has paid
or will pay on a timely basis all material Taxes (as defined below) whether or
not shown thereon to be due other than Taxes which (i) are being contested in
good faith, (ii) have not been finally determined and (iii) for which an
adequate reserve has been provided in accordance with GAAP. None of Company or
any of its Subsidiaries is aware of any investigation pending or threatened by
any Taxing Authority for any jurisdiction where the Company and its Subsidiaries
do not file Tax Returns with respect to a given Tax that may lead to an
assertion by such Taxing Authority that Company or any Subsidiary is or may be
subject to such Tax in such jurisdiction.
(b) There are no examinations, audits, actions, proceedings, investigations
or disputes pending, or claims asserted, for material Taxes upon Company or any
of its Subsidiaries. No closing agreements, private letter rulings, technical
advice memoranda or similar agreements or rulings have been entered into or
issued by any Taxing Authority with respect to Company or any of its
Subsidiaries that have an impact on any material Taxes for any taxable period
ending after the Closing Date.
14
(c) Proper and accurate amounts for all material Taxes have been withheld
by Company and its Subsidiaries in connection with amounts paid or owing to any
employee, officer, creditor, shareholder, independent contractor or other person
in compliance with the Tax withholding provisions of applicable federal, state
and local laws and have either been paid, remitted or deposited to or with the
appropriate Taxing Authorities, or, if not yet due, set aside in accounts for
such purposes and accrued on the books of Company or any Subsidiary as
applicable.
(d) There are no Tax liens upon any property or assets of Company or any
of its Subsidiaries except liens for Taxes not yet due and payable.
(e) None of Company and its Subsidiaries has filed a consent under section
341(f) of the Code (as defined below) concerning collapsible corporations. None
of Company and its Subsidiaries (i) has received approval to make or agreed to a
change in accounting method that would materially affect any taxable period of
Company or any of its Subsidiaries ending after the Closing Date, or (ii) has
any application pending with any Taxing Authority requesting permission for any
change in accounting method. None of Company and its Subsidiaries has been
required to include in income any adjustment pursuant to section 481 of the Code
(or any similar provision of state, local or foreign tax law) by reason of a
voluntary change in accounting method initiated by Company or any of its
Subsidiaries, and the IRS has not initiated or proposed any such adjustment or
change in accounting method.
(f) Neither Company nor any of its Subsidiaries (i) has been a member of
an affiliated group filing consolidated federal income tax return (other than a
group the common parent of which was Company), (ii) is a party to a Tax
allocation or Tax sharing agreement (other than an agreement solely among
members of a group the common parent of which is Company), or (iii) has any
liability for the Taxes of any person (other than any of Company or its
Subsidiaries) under Treasury Regulation section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.
(g) For the 1998 Tax year, the Company and its Subsidiaries reported a net
operating loss of $200, 162,111 on its U.S. federal income Tax Return. As of the
date hereof, and subject to matters raised as of the date hereof in any audits
disclosed in Section 3.9 of the Company Disclosure Schedule, the net operating
losses of the Company and its subsidiaries for U.S. federal income tax purposes
are not less than $180 million. Except as set forth in Section 3.9 of the
Company Disclosure Schedule, prior to the Closing Date, there has not been, and
there will not be, any change of ownership of Company or any of its Subsidiaries
within the meaning of Section 382 of the Code and the Treasury Regulations
thereunder or any limitation on the utilization of such net operating losses
under Treasury Regulation 1.1502-21 or Temporary Treasury Regulation 1.1502-21T.
To the extent such a change of ownership or such limitation on the utilization
of such net operating losses has or will occur prior to the Closing Date,
Section 3.9 of the Company Disclosure Schedule accurately describes in
reasonable detail the event(s) constituting such change in ownership and such
limitation on the utilization of such net operating losses. As of September 30,
1999 the net deferred tax liability of
15
Company and the Subsidiaries (excluding any net operating loss carryforwards)
was not greater than $200,000,000.
For purposes of this Agreement, "CODE" shall mean the U.S.
Internal Revenue Code of 1986, as amended, or any successor law. For purposes of
this Agreement, "TAX" or "TAXES" shall mean any taxes of any kind, including but
not limited to those on or measured by or referred to as income, gross receipts,
capital, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, value added,
property or windfall profits taxes, customs, duties or similar fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority,
domestic or foreign. For purposes of this Agreement, "TAXING AUTHORITY" shall
mean, with respect to any Tax, the government entity or political subdivision
thereof that imposes such Tax and the agency (if any) charged with the
collection of such Tax for such entity or subdivision. For purposes of this
Agreement, "TAX RETURN" shall mean any return, report or statement required to
be filed with any governmental authority with respect to Taxes, including any
schedule or attachment thereto or amendment thereof. For purposes of this
Agreement, "TREASURY REGULATIONS" shall mean the Treasury Regulations
promulgated under the Code.
3.10 EMPLOYEES. (a) Section 3.10(a) of the Company
Disclosure Schedule identifies each "employee benefit plan" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder ("ERISA")) and
each employment, severance or similar contract or arrangement (whether or not
written) and each plan, policy, fund, program, contract or arrangement
(whether or not written) providing for compensation, bonus, profit-sharing,
stock options, other stock related rights, other forms of incentive or
deferred compensation, vacation benefits, insurance coverage (including any
self-insured arrangements), health or medical benefits, disability benefits,
workers' compensation, supplemental unemployment benefits, severance
benefits, or post-employment or retirement benefits (i) for or pursuant to
which the Company, any of its Subsidiaries, or any entity which, together
with Company or any of its Subsidiaries, would be treated as a single
employer under Section 414 of the Code (each such entity, an "ERISA
AFFILIATE") has any current or contingent liability and (ii) that covers any
current or former employee, consultant, independent contractor or director of
or with respect to Company or any of its Subsidiaries (each, an "EMPLOYEE
PLAN"). Company has furnished or made available to Parent accurate and
complete copies of the Employee Plans (or, to the extent no copy exists, an
accurate description thereof) (and, if applicable, related trust agreements),
all amendments thereto, all written interpretations thereof, as well as, with
respect to each Employee Plan (if applicable), (i) the two most recent annual
reports (Form 5500 and attached schedules), (ii) audited financial statements
for the two most recent years, (iii) actuarial valuation reports for the two
most recent years, (iv) nondiscrimination testing results for the two most
recent years, (v) contracts with third party administrators, and (vi) any
summary plan description and other written communications (or a description
of any material oral communications) by Company or its Subsidiaries to their
employees concerning the extent of the benefits provided under an Employee
Plan.
16
(b) None of Company, any of its Subsidiaries or any ERISA Affiliate has at
any time (i) maintained or contributed to any plan subject to Title IV of ERISA
or Section 412 of the Code, (ii) been required to contribute to any multi-
employer plan (as defined in Section 3(37) of ERISA), or (iii) incurred any
current or projected liability or made promises or guarantees in respect of
the payment or funding of post-employment or post-retirement health, medical
or life insurance benefits for current, former or retired employees of Company
or any of its Subsidiaries, except, in the case of this clause (iii), (x) as
required to avoid an excise tax under Section 4980B of the Code, (y) except
as required by any other applicable federal state or local law or (z) as
set forth in Section 3.10(b) of the Company Disclosure Schedule.
(c) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service to be
so qualified; each trust created under any such Employee Plan has been
determined by the Internal Revenue Service to be exempt from tax under
Section 501(a) of the Code and no event has occurred, either by reason of any
action or failure to act, which could reasonably be expected to adversely
affect the qualified status of any such Employee Plan or trust. Company has
provided Parent with the most recent determination letter or application for
determination letter from the Internal Revenue Service relating to each such
Employee Plan. Each Employee Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
applicable statutes, orders, rules and regulations, including but not limited
to ERISA and the Code and has been maintained in good standing with
applicable regulatory authorities. No event has occurred and no condition
exists that would subject the Company or its Subsidiaries, either directly or
by reason of their affiliation with an ERISA Affiliate, to any material tax,
fine, lien, penalty or other liability imposed by ERISA, the Code or other
applicable laws, rules and regulations. No "prohibited transaction" (as such
term is defined in ERISA section 406 and Code section 4975) has occurred with
respect to any Employee Plan. The Company and its Subsidiaries have timely
made all contributions and timely paid all premiums with respect to each
Employee Plan as required by such Employee Plan, applicable law, collective
bargaining agreement or any other binding obligation.
(d) Except as set forth in Section 3.10(d) of the Company Disclosure
Schedule, there has been no amendment to, written interpretation of or
announcement (whether or not written) by Company or any of its Subsidiaries
or ERISA Affiliates relating to, or any change in employee participation or
coverage under, any Employee Plan that would increase materially the expense of
maintaining such Employee Plan above the level of the expense incurred in
respect thereof for the most recent fiscal year ended prior to the date hereof.
(e) Except as set forth in Section 3.10(e) of the Company Disclosure
Schedule, there is no contract, plan or arrangement (written or otherwise)
covering any employee or former employee of Company or any of its Subsidiaries
that, individually or collectively, obligates Company to make a payment of any
amount or provision of any benefit that would not be deductible pursuant to the
terms of Section 162 or 280G of the Code.
(f) No Employee Plan is maintained outside the jurisdiction of the
United States, or covers any employee residing or working outside the United
States.
17
(g) Section 3.10(g) of the Company Disclosure Schedule specifies, on a
plan by plan basis, the unfunded liabilities, (for the purposes of GAAP) as
of the date of this Agreement, of each of the Employee Plans providing
deferred compensation.
(h) Neither Company nor any of its Subsidiaries is a party to any
collective bargaining or other labor union contracts or is the subject of any
proceeding asserting that it or any subsidiary has committed an unfair labor
practice. There is no pending or, to the knowledge of Company, threatened
labor dispute (other than an individual employee grievance), strike or work
stoppage against Company or any of its Subsidiaries which would interfere
with the respective business activities of Company or its Subsidiaries. There
is no action, suit, complaint, charge, arbitration, inquiry, proceeding,
grievance or investigation by or before any court, government agency,
administrative agency or commission brought by or on behalf of any employee,
prospective employee, former employee, retiree or other representative of
Company's employees pending or, to the knowledge of Company, threatened
against Company or any of its Subsidiaries other than any which would not,
individually or in the aggregate, have a Material Adverse Effect on Company.
Neither Company nor any of its Subsidiaries is a party to or otherwise bound
by, any consent, decree, or citation by any government entity relating to
employees or employment practices.
(i) Company and its Subsidiaries are in compliance with their
obligations pursuant to the Worker Adjustment and Retraining Notification Act
of 0000 (xxx "XXXX XXX"). Except as set forth in Section 3.10(i) of the
Company Disclosure Schedule, the Subsidiaries have not effectuated a "mass
layoff" or "plant closing" (as defined under the WARN Act) affecting in whole
or in part any site of employment, facility, operating unit or employees of
either Company or any of its Subsidiaries.
3.11 SEC REPORTS. Company has made available to Parent an
accurate and complete copy of each (a) final registration statement,
prospectus, report, schedule, form and definitive proxy statement filed since
January 1, 1996 by Company with the SEC pursuant to the Securities Act or the
Exchange Act (collectively, and in each case including all exhibits and
schedules thereto and documents incorporated by reference therein, the
"COMPANY REPORTS") and (b) communication mailed by Company to its
shareholders since January 1, 1996. As of their respective dates of filing or
mailing, as the case may be, each Company Report and each such communication
complied in all material respects with the requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such Company Report or
communication, and as of such dates no such Company Report or communication
(including any and all financial statements included therein) contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not
misleading. Section 3.11 of the Company Disclosure Schedule sets forth true
and correct copies of all communications (excluding Company Reports) between
Company, or any person on behalf of Company, on the one hand, and the SEC on
the other hand, in each case since January 1, 1996.
18
3.12 FINANCIAL STATEMENTS. Each of the consolidated
financial statements (including the notes thereto) included in the Company
Reports complied as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles
("GAAP"), including, without limitation, SFAS No. 125 (except, in the case of
unaudited consolidated quarterly statements, as permitted by Form 10-Q of the
SEC), applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present the consolidated
financial position of Company and its Subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for the
periods then ended, except as otherwise noted therein (subject, in the case
of unaudited statements, to normal and recurring immaterial year-end
adjustments). The books and records of Company and its Subsidiaries have
been, and are being, maintained in all material respects in accordance with
GAAP and any other applicable legal and accounting requirements. Company has
made available to Parent true and correct copies of, or excerpts from, the
books and records of the Company from which the amount of finance income
receivable, and the cash flows related thereto, as set forth in the Company
Reports was calculated.
3.13 LICENSES; COMPLIANCE WITH APPLICABLE LAW. (a) Except
as set forth in Section 3.13 of the Company Disclosure Schedule, Company and
its Subsidiaries hold, and are in compliance with, all permits, licenses,
variances, exemptions, authorizations, orders and approvals ("PERMITS") of
all Governmental Entities necessary for the operation of their respective
businesses, except to the extent that the failure to so hold or comply with
such Permits would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Company, and there are no
proceedings pending or, to the knowledge of Company, threatened or
contemplated by any Governmental Entity seeking to terminate, revoke or
materially limit any such permit, license, exemption, order or approval. To
the extent Company or any of its Subsidiaries has not been in compliance with
all Permits of all Governmental Entities necessary for the operation of its
business, such failure to be in compliance, alone or together with all such
other failures, could not reasonably be expected to have a Material Adverse
Affect on Company.
(b) Neither Company nor any of its Subsidiaries nor the
conduct of any of their respective businesses is in conflict with, or in default
or violation of, any statutes, laws, regulations, ordinances, Permits, rules,
judgments, decrees or arbitration awards of any Governmental Entity applicable
to Company or any of its Subsidiaries or by which its or any of their respective
properties are bound or affected, except for such conflicts, defaults or
violations that could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on Company.
3.14 CERTAIN CONTRACTS. Section 3.14 of the Company
Disclosure Schedule includes a list of each (i) contract, arrangement,
commitment or understanding with respect to the employment of any directors,
executive officers or key employees, or with any consultants (for purposes of
this clause (i), other than consultants for computer and information systems)
involving the payment of $100,000 or more per annum, (ii) contract,
arrangement, commitment or understanding which is a "material contract" (as
19
such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) that has
not been filed as an exhibit to a Company Report, (iii) contract, arrangement,
commitment or understanding which limits in any way the ability of Company or
any of its Subsidiaries to compete in any line of business, in any geographic
area or with any person, or which requires referrals of any business, (iv)
contract, arrangement, commitment or understanding with or to a labor union or
guild (including any collective bargaining agreement), (v) contract,
arrangement, commitment or understanding (including, without limitation, any
Company Employee Plan but excluding options, warrants and other securities
identified in Section 3.2 or in Section 3.2 of the Company Disclosure Schedule)
any of the benefits of which will be paid or increased, or the vesting of the
benefits of which will be accelerated, by the delivery of this Agreement or the
occurrence of any of the transactions contemplated by this Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement, (vi) contract, arrangement,
commitment or understanding which would prohibit or materially delay the
consummation of any of the transactions contemplated by this Agreement, (vii)
loan agreement, indenture, mortgage, pledge, conditional sale or title retention
agreement, security agreement, guaranty, standby letter of credit (to which
Company or any of its Subsidiaries is the responsible party), material equipment
lease or lease purchase agreement to which the Company or any of its
Subsidiaries is a party or by which any of them is bound, (viii) contract,
arrangement, commitment or understanding to which Company or any of its
Subsidiaries is a party or by which any of them or any of their respective
properties or assets are bound or effected entered into in connection with the
securitization by Company or any of its Subsidiaries of receivables (including,
without limitation, (A) contracts, arrangements, commitments or understandings
regarding credit support provided by Financial Security Assurance Inc. ("FSA")
and any modification agreement, waiver or consent related thereto and (B) sale
and servicing agreements) ("SECURITIZATION AGREEMENTS"), (ix) contract,
agreement, arrangement or understanding between any affiliate of Company (other
than any wholly-owned Subsidiary of Company), on the one hand, and Company or
any Subsidiary of Company, on the other hand, and (x) any other contract,
arrangement, commitment or understanding that is material to the business,
assets, liabilities, financial condition or results of operations of Company and
its Subsidiaries, taken as a whole (PROVIDED, that for purposes of this clause
(ix) any contract, arrangement, commitment or understanding involving payments
or receipts by Company or any of its Subsidiaries in excess of $250,000 over the
term thereof shall be deemed to be material). Company has previously made
available to Parent complete and accurate copies of all Company Contracts (as
defined below). Each contract, arrangement, commitment or understanding of the
type described in this Section 3.14, whether or not set forth in Section 3.14 of
the Company Disclosure Schedule, is referred to herein as a "COMPANY CONTRACT".
None of Company or any of its Subsidiaries is in material breach of or default
in the performance of its obligations under any Company Contract, and no
material breach or default, alleged breach or default or event which would (with
the passage of time, notice or both) constitute a material breach or default
thereunder by Company or any of its Subsidiaries (or, to the knowledge of
Company, any other party or obligor with respect thereto) has occurred, or as a
result of its performance will occur. To the extent that Company or any of its
Subsidiaries has been, since January 1, 1996, in material breach of or default
in performance of its obligations under any Company Contract, such breach or
default, together with all such other
20
breaches or defaults, could not reasonably be expected to have a Material
Adverse Effect on Company. To the knowledge of Company, each Company Contract is
in full force and effect.
3.15 AGREEMENTS WITH REGULATORY AGENCIES. Neither Company
nor any of its Subsidiaries is subject to any cease-and-desist or other order
issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive issued by, or
is a recipient of any supervisory letter from or has adopted any board
resolutions at the request of, any Regulatory Agency or other Governmental
Entity that restricts the conduct of its business or that in any manner
relates to its capital adequacy, its credit policies, its management or its
business (each, whether or not set forth in the Company Disclosure Schedule,
a "COMPANY REGULATORY AGREEMENT"), nor has Company or any of its Subsidiaries
been advised since January 1, 1996 by any Regulatory Agency or other
Governmental Entity that it is considering issuing or requesting any such
Company Regulatory Agreement.
3.16 INVESTMENT SECURITIES. Each of Company and its
Subsidiaries has good and marketable title to all investment securities held
by it, free and clear of any Lien, except to the extent such securities are
pledged in the ordinary course of business to secure obligations of Company
or any of its Subsidiaries. Such investment securities are valued on the
books of Company in accordance with GAAP.
3.17 INTEREST RATE RISK MANAGEMENT INSTRUMENTS. Section
3.17 of the Company Disclosure Schedule sets forth the notional amount and
fair value of each interest rate swap, cap, floor and option agreement and
other interest rate risk management arrangement, and such instruments,
whether entered into for the account of Company or one of its Subsidiaries,
were entered into in the ordinary course of business and with counterparties
reasonably believed by Company to be financially responsible at the time and
are legal, valid and binding obligations of Company or one of its
Subsidiaries enforceable in accordance with their terms (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies), and are in full force and effect. Company and each of its
Subsidiaries have duly performed in all material respects all of their
material obligations thereunder to the extent that such obligations to
perform have accrued, and, to Company's knowledge, there are no material
breaches, violations or defaults or allegations or assertions of such by any
party thereunder.
3.18 UNDISCLOSED LIABILITIES. Except for (i) those
liabilities that are fully reflected or reserved for in the consolidated
balance sheet of Company included in its Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999, as filed with the SEC, (ii) liabilities
disclosed in Section 3.18 of the Company Disclosure Schedule and (iii)
liabilities incurred (A) in the ordinary course of business consistent with
past practice, and (B) outside the ordinary course not in excess, in the
aggregate, of $50,000, at September 30, 1999, neither Company nor any of its
Subsidiaries had, and since such date none of them has incurred, any
liabilities or obligations of any nature whatsoever (whether accrued,
absolute, contingent or otherwise and
21
whether or not required to be reflected in Company's financial statements in
accordance with GAAP).
3.19 ENVIRONMENTAL LIABILITY. There are no legal,
administrative, arbitral or other proceedings, claims, actions, causes of
action, private environmental investigations or remediation activities or
governmental investigations of any nature seeking to impose, or that could
reasonably result in the imposition, on Company or any of its Subsidiaries of
any material liability or obligation arising under common law or under any
local, state or federal environmental statute, regulation or ordinance
relating to the protection of the environment or human health including,
without limitation, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("Environmental Laws"), pending or, to
Company's knowledge, threatened against Company or any of its Subsidiaries.
To the knowledge of Company, there is no reasonable basis for any such
proceeding, claim, action or governmental investigation that would impose any
material liability or obligation. Company is, and has been, in compliance
with applicable Environmental Laws in all material respects. Wastes or other
materials regulated under, or that could result in material liability under,
Environmental Laws, including without limitation petroleum and petroleum
products, asbestos, and polychlorinated biphenyls, have not been generated,
transported, treated, stored, disposed of, arranged to be disposed of,
released or threatened to be released at, on, from or under any of the
properties or facilities currently or formerly owned, leased or otherwise
used by the Company in violation of, or in a manner or to a location that
could reasonably be expected to give rise to material liability to Company
under or relating to, any Environmental Laws.
3.20 INFORMATION SUPPLIED. None of the information supplied
by Company for inclusion or incorporation by reference in the Form S-4,
containing the Proxy Statement/Prospectus to be sent to the shareholders of
Company in connection with the Company Shareholders Meeting (as defined in
Section 6.1(a)), will, at the date it is first mailed to Company's
shareholders or at the time of the Company Shareholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading except that no representation is made by Company with respect to
statements made or incorporated by reference therein based on information
supplied by Parent or Sub in writing for inclusion in such document. The Form
S-4 and Proxy Statement/Prospectus will comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act and
the rules and regulations of the SEC thereunder. Company shall promptly
inform Parent of the discovery of any information which should be set forth
in a supplement to the Form S-4, containing the Proxy Statement/Prospectus.
3.21 INSURANCE. Company and its Subsidiaries maintain
insurance policies and performance bonds on their respective properties and
assets, and with respect to their employees and operations, with reputable
insurance carriers, and such insurance policies and bonds are identified in
Section 3.21 of the Company Disclosure Schedule. Company and its Subsidiaries
are not in material default under any of their insurance policies and have
paid all premiums owed thereunder, and no material claims for coverage
thereunder have been denied.
22
3.22 YEAR 2000 COMPLIANCE. Except as would not,
individually or the aggregate, have a Material Adverse Effect on Company, all
computer hardware, software, databases, systems and other computer equipment
(collectively, "SOFTWARE") owned, held and/or used by Company or any Company
Subsidiary can be used prior to, during and after the calendar year 2000, and
will operate during each such time period, either on a stand-alone basis, or
by interacting or interoperating with year 2000 compliant third-party
Software without error relating to the processing, calculating, comparing,
sequencing or other use of correctly inputted data.
3.23 INTELLECTUAL PROPERTY. Company and its Subsidiaries
own or have a valid license to use all trademarks, trade names, service
marks, copyrights, patents, trade secrets and other intellectual property
(collectively, "INTELLECTUAL PROPERTY") that are material to the conduct of
their business. All applications, registrations and patents for such
Intellectual Property owned, used or licensed by the Company are identified
in Section 3.23 of the Company Disclosure Schedule. Except as set forth in
Section 3.23 of the Company Disclosure Schedule, neither Company nor any of
its Subsidiaries is bound by or subject to any license or other agreement
with respect to any such Intellectual Property (including, without
limitation, the rights to the name "Arcadia" and any variations thereof).
Neither Company nor any of its Subsidiaries has received any notice or other
communication alleging that its usage of such Intellectual Property violates
the intellectual property rights of any other person.
3.24 RIGHTS AGREEMENT. The Board of Directors of Company
has approved an amendment to the Rights Agreement, dated as of November 1,
1996, as amended (the "COMPANY RIGHTS AGREEMENT"), between Company and
Norwest Bank Minnesota, N.A., to the effect that neither Parent, Sub nor any
of their affiliates shall become an "Acquiring Person", that no "Stock
Acquisition Date", "Distribution Date", or "Triggering Event" (as such terms
are defined in the Company Rights Agreement) will occur pursuant to the
Company Rights Agreement by reason of, and the Rights Agreement shall not be
applicable to, the approval, execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby, and will cause the
trustee under the Company Rights Agreement to execute such amendment as of
the date hereof.
3.25 STATE ANTI-TAKEOVER STATUTES. The restrictions
contained in Sections 302A.671, 302A.673 and 302A.675 of the MBCA are
inapplicable to this Agreement, the Support Agreement, the Receivables
Agreements and the transactions contemplated hereby and thereby. No provision
of Company's articles of incorporation, bylaws or other governing instruments
of Company or any of its Subsidiaries would restrict or impair the ability of
Parent to vote, or otherwise exercise the rights of a shareholder with
respect to, shares of Company or any of its Subsidiaries.
3.26 PROPERTIES. (a) (i) None of Company or its Subsidiaries
owns any real property.
(b) Pursuant to the leases and subleases (the "REAL PROPERTY LEASES") of
Company and its Subsidiaries with respect to all material real property which
is leased or subleased by Company or its Subsidiaries (the "LEASED REAL
PROPERTY"), Company and its Subsidiaries hold good and valid leasehold title
23
to the Leased Real Property, in each case in accordance with the provisions of
the applicable Real Property Lease and free of all Liens, in each case except,
individually or in the aggregate, as would not have a Material Adverse Effect on
Company. Each of the Real Property Leases is enforceable against Company or its
Subsidiary, as the case may be, and, to the knowledge of Company, against the
other party thereto, in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, and
general equitable principles (whether considered in a proceeding in equity or at
law) and except for such failures to be enforceable as would not, individually
or in the aggregate, have a Material Adverse Effect on Company.
3.27 RECEIVABLES. Except as would not, individually or in
the aggregate, have a Material Adverse Effect on Company, (a) Company or any
trust to which Company has transferred title of any Receivables has good
title and original documents evidencing the Receivables, free and clear of
any Liens; no person, firm, corporation or association has any claim
whatsoever to any such Receivables. For purposes of this Section 3.27,
"RECEIVABLE" means any receivable owned by Company or any of its Subsidiaries
or securitized pursuant to any securitization transaction entered into by, or
for the benefit of, Company or any of its Subsidiaries.
(b) There exists a file pertaining to each Receivable, and such file
contains (i) a fully executed original of the Receivable, (ii) a certificate of
insurance, application form for insurance signed by the obligor under such
Receivable (the "OBLIGOR"), or a signed representation letter from the Obligor
named in the Receivable pursuant to which the Obligor has agreed to obtain
physical damage insurance for the related financial vehicle, or copies thereof,
(iii) the original certificate of title, lien card or application therefor and
(iv) a credit application signed by the Obligor, or a copy thereof. The records
of Company maintained in electronic format and provided to Parent relating to
the Receivables of Company as of September 30, 1999 accurately reflect the
information purported to be reflected therein.
(c) Company is not a party to and there is no pending or, to Company's
knowledge, threatened litigation, legal or administrative proceeding, or
otherwise.
(d) Each Receivable is genuine, valid and complete in all respects and is
enforceable in accordance with its terms, except as its enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting the
rights of creditors.
(e) As of the closing date of each securitization transaction entered into
by, or for the benefit of, Company or any of its Subsidiaries, each motor
vehicle that is security for a Receivable was covered by a comprehensive and
collision insurance policy (i) in an amount at least equal to the lesser of (A)
its maximum insurable value or (B) the principal amount due from the Obligor
under the related Receivable, (ii) naming Company as loss payee and (iii)
insuring against loss and damage due to fire, transportation, collision and
other risks generally covered by comprehensive and collision coverage.
Each Receivable requires the Obligor to maintain physical loss and damage
insurance naming Company and its successors and assigns as additional insured
24
parties, and each Receivable permits the holder thereof to obtain physical loss
and damage insurance at the expense of the Obligor if the Obligor fails to do
so. No such motor vehicle was or had previously been insured under a policy of
force-placed insurance on any such closing date.
(f) The collateral for each of the Receivables that is secured is the
collateral described in the applicable security agreement or other security
document. Each security interest in titled personal property collateral
constitutes a valid, enforceable and perfected purchase money first lien
on the collateral described in the Receivable file.
(g) Each Receivable was originated, has been serviced and currently
complies in all material respects with all applicable state, federal and
local laws and regulations, including but not limited to all consumer
protection and insurance laws, the Truth-In-Lending Act, ECOA, RESPA
and the FCRA.
(h) Company has paid or caused to be paid any and all licenses, franchise,
business privilege use, intangible stamp or other Taxes or fees due and owing,
if any, arising from the acquisition, origination, collection or holding of each
Receivable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Parent and, with respect to Sections 4.1 and 4.2, Sub hereby represent
and warrant to Company as follows:
4.1 CORPORATE ORGANIZATION. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota. Each of Parent and
Sub has all requisite corporate power and authority to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business and in good
standing in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets owned or
leased by it makes such licensing or qualification necessary, except where
the failure to be so licensed or qualified (individually or in the aggregate)
would not reasonably be expected to have a material adverse effect on the
ability of Parent or Sub to perform its obligations under and to consummate
the transactions contemplated by this Agreement on a timely basis.
4.2 AUTHORITY; NO VIOLATION. (a) Each of Parent and Sub has
full corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Parent and Sub and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of each of Parent and Sub and by Parent in its capacity as
sole shareholder of Sub. No other corporate proceedings on the part of Parent
or Sub and no other votes or consents of any holders of Parent securities are
necessary on the part of Parent or Sub to approve this Agreement and to
25
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of Parent and Sub and (assuming due
authorization, execution and delivery by Company) constitutes the valid and
binding obligations of Parent and Sub, enforceable against each of them in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, and general equitable
principles (whether considered in a proceeding in equity or at law).
(b) Neither the execution and delivery of this Agreement by Parent or Sub
nor the consummation by Parent or Sub of the transactions contemplated hereby,
nor compliance by Parent or Sub with any of the terms or provisions hereof, nor
the execution and delivery of the Receivables Agreements by the affiliate of
Company party thereto, nor the consummation by such affiliate of the
transactions contemplated thereby, nor compliance by such affiliate
with any of the terms or provisions thereof, will (i) violate any
provision of the certificate or articles of incorporation or bylaws
of Parent or Sub, as applicable, or (ii) assuming that the consents
and approvals referred to in Section 4.3 are duly
obtained, violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Parent or any of its material
Subsidiaries or any of their respective properties or assets, or violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by or
rights or obligations under, or result in the creation of any Lien upon any of
the respective properties or assets of Parent or any of its material
Subsidiaries under, any of the terms, conditions or provisions of any material
note, bond, mortgage, indenture, deed of trust, permit, concession, franchise,
license, lease, agreement, contract, or other instrument or obligation to which
Parent or any of its material Subsidiaries is a party, or by which they or any
of their respective properties, assets or business activities may be bound or
affected, except (in the case of clause (ii) above) for such violations,
conflicts, breaches or defaults which, either individually or in the aggregate,
would not reasonably be expected to result in a material adverse effect on the
ability of Parent or Sub to perform its obligations under and to consummate the
transactions contemplated by this Agreement on a timely basis.
4.3 CONSENTS AND APPROVALS. Except for (i) the Regulatory
Approvals, (ii) the filing with the SEC of the Form S-4 containing the Proxy
Statement/Prospectus, (iii) the filing of the Articles of Merger with the
Secretary of State of the State of Minnesota pursuant to the MBCA, (iv) the
expiration of any applicable waiting period under the HSR Act, (v) the
Company Shareholder Approval, (vi) the filing with the SEC of such reports
under the Exchange Act as may be required in connection with the execution
and delivery of this Agreement and the transactions contemplated hereby and
(vii) such other consents, approvals and registrations the failure to obtain
which would not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on the ability of Parent or Sub to perform its
obligations under and to consummate the transactions contemplated by this
Agreement on a timely basis, no consents or approvals of or filings or
registrations with any Governmental Entity, or of or with any third party,
are necessary in connection with the execution and delivery by Parent of this
26
Agreement or the consummation by Parent of the transactions contemplated by this
Agreement or in connection with the execution and delivery by the affiliate of
Parent party thereto of the Receivables Agreements or the consummation by such
affiliate of the transactions contemplated thereby. Parent has no reason to
believe that any Requisite Regulatory Approvals will not be obtained on a timely
basis.
4.4 BROKER'S FEES. Parent has not engaged any broker,
finder or investment banker (other than Xxxxxxx, Xxxxx & Co., whose fee shall
be paid by Parent) that would be entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement.
4.5 FUNDS. Either Parent or Sub has, or will have prior to
the consummation of the Merger, sufficient funds available to satisfy the
obligation to pay the Cash Consideration in the Merger.
4.6 INFORMATION SUPPLIED. None of the information supplied
by Parent for inclusion or incorporation by reference in the Form S-4
containing the Proxy Statement/Prospectus to be sent to the shareholders of
Company in connection with the Company Shareholders Meeting, will not, at the
date it is first mailed to Company's shareholders or at the time of the
Company Shareholders Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading except that no representation is made by
Parent with respect to statements made or incorporated by reference therein
based on information supplied by Company for inclusion or incorporation by
reference in such document. The Form S-4 and the Proxy Statement/Prospectus
will comply as to form in all material respects with the requirements of the
Exchange Act and the Securities Act and the rules and regulations of the SEC
thereunder.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 CONDUCT OF COMPANY BUSINESSES PRIOR TO THE EFFECTIVE
TIME. During the period from the date of this Agreement to the Effective
Time, except as expressly required or permitted by this Agreement, Company
shall, and shall cause each of its Subsidiaries to, (a) conduct its business
in the usual, regular and ordinary course consistent with past practice and
in compliance in all respects with applicable laws, (b) use reasonable
efforts to maintain and preserve intact its business organization, employees
and business relationships and retain the services of its key officers and
key employees and (c) take no action which would adversely affect or delay in
any respect the ability of either Parent or Company to obtain any necessary
approvals of any Regulatory Agency or other Governmental Entity required for
the transactions contemplated hereby or to perform its covenants and
agreements under this Agreement.
5.2 FORBEARANCES OF COMPANY. During the period from the
date of this Agreement to the Effective Time, except as set forth in Section
5.2 of the Company Disclosure Schedule and except as expressly required or
permitted by this Agreement, Company shall not, and shall not permit any of
its
27
Subsidiaries to, without the prior written consent of Parent (which consent, in
the case of clause (h) below, shall not be unreasonably withheld):
(a) (i) incur any indebtedness for borrowed money (other than (A) short-
term indebtedness incurred (x) to refinance existing short-term indebtedness
or (y) pursuant to lines of credit and credit facilities existing on the date
of this agreement and (B) indebtedness of Company or any of its Subsidiaries
owed to Company or any of its other wholly-owned Subsidiaries and (C)
indebtedness in the aggregate not in excess of $20,000,000 incurred pursuant
to that Indenture, dated as of July 1, 1994, as amended and restated by a
First Amendment and Restatement, dated as of April 28, 1995, between Company
and Norwest Bank Minnesota, N.A., as trustee, as amended, provided that any
indebtedness incurred pursuant to this clause (C) shall be prepayable without
premium on at least 30 but not more than 60 days' notice to the holders
thereof), assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or other
entity, or make any loan, advance or capital contribution (other than to
Company or any of its wholly-owned Subsidiaries) or (ii) make or commit to
make any capital expenditures in excess of $50,000 for any single or related
group of capital expenditures, or $500,000 in the aggregate for all capital
expenditures;
(b) (i) adjust, split, combine or reclassify any of its capital stock;
(ii) make, declare, set aside or pay any dividend (except for dividends paid
in the ordinary course of business by any wholly-owned Subsidiaries of
Company to Company or to any other of its wholly-owned Subsidiaries) or make
any other distribution on, or directly or indirectly redeem, purchase or
otherwise acquire, any shares of its capital stock or any securities or
obligations convertible into or exchangeable for any shares of its capital
stock; (iii) grant any individual, corporation or other entity any right to
acquire any shares of its capital stock or any stock appreciation or similar
rights except as permitted by Section 5.2(i); (iv) issue or authorize the
issuance of, deliver, sell, transfer, pledge or otherwise encumber any
additional shares of capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital stock, other
than the issuance of Company Common Stock pursuant to the exercise of stock
options or warrants disclosed in Section 3.2 of the Company Disclosure
Schedule as being outstanding on the date of this Agreement and granted
pursuant to the Company Stock Plans; or (v) enter into any agreement,
understanding or arrangement with respect to the sale or voting of its
capital stock;
(c) (i) sell, transfer, mortgage, encumber or otherwise dispose of any
of its properties or assets, including, without limitation, capital stock in
any Company Subsidiary, to any individual, corporation or other entity other
than a direct or indirect wholly-owned Subsidiary, or cancel, release or
assign any indebtedness to any such person or any claims held by any such
person, except in the ordinary course of business consistent with past
practice or pursuant to contractual requirements under contracts existing on
the date of this Agreement and identified in Section 3.14 of the Company
Disclosure Schedule; or (ii) securitize or otherwise dispose of any
receivables owned by, or loans owed to, Company or any of its Subsidiaries,
except for sales or other dispositions of receivables or any such loans to
Parent or any of its Subsidiaries; provided, however, that Company may
securitize receivables owned by, or loans owed to, Company or any of its
Subsidiaries under the following
28
conditions: (i) if Parent is in material default of its obligations under the
Receivables Agreements, Company may securitize up to a maximum of $150 million a
month in amount (as reflected on the books and records of the Company) of
receivables owned by, or loans owed to, Company or any of its Subsidiaries and
(ii) for so long as Company is not in default under the Purchase Agreement in
any material respect, Company may securitize or otherwise dispose of receivables
owned by, or loans owed to, Company or any of its Subsidiaries in the amount of
the principal amount of Retail Installment Sales Contracts (as defined in the
Purchase Agreement) which Seller has available for sale, and which Buyer has the
right to purchase, under the Purchase Agreement and which up to a maximum of
$150 million a month in amount (as reflected on the books and records of the
Company) of Buyer has elected not to purchase.
(d) make any material investment either by purchase of stock or
securities, contributions to capital, property transfers, or purchase of any
property or assets of any other individual, corporation, limited partnership
or other entity, other than an investment in a wholly-owned Subsidiary of
Company;
(e) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the stock or assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof;
(f) acquire or agree to acquire voting or non-voting equity securities
or similar ownership interests in any person (other than a Subsidiary);
(g) commence, undertake or engage in any new line of business;
(h) enter into any contract, arrangement, commitment or understanding of
the types described in clause (iii), (v) or (vi) of Section 3.14; make any
change in or terminate any of its existing contracts, arrangements,
commitments or understandings disclosed pursuant to Section 3.14; or enter
into any contract, agreement, arrangement or understanding involving payments
or receipts by Company or any of its Subsidiaries in excess of $100,000 over
the term thereof;
(i) (i) increase or accelerate the compensation or benefits of any
present or former director, officer, consultant, independent contractor or
employee of Company or its Subsidiaries (except for increases in salary or
wages in the ordinary course of business consistent with past practice for
persons other than those subject to an employment agreement with Company);
provided, however, that (A) Company may accelerate the vesting of previously
granted restricted shares attributable to fiscal 1999 to Company officers and
employees pursuant to Company's 1998-2000 Restricted Stock Election Plan as
in effect on the date of this Agreement; (B) Company may commit to pay cash
bonuses to the persons and in the amounts set forth in Part I of Section
5.2(i) of the Company Disclosure Schedule, provided, in the case of any such
person, such person (x) is employed by Company on the 60th day following the
Effective Time, (y) is, following the Effective Time and prior to such 60th
day, terminated without cause (as defined below) or (z) following the
Effective Time and prior to such 60th day terminates his or her employment
for good reason (as defined below); (C) Company may pay the bonuses to the
persons and in the amounts set forth in Part II of Section 5.2(i) of the
Company Disclosure and (D) Company may pay bonuses to persons other than
those
29
identified in Part II of Section 5.2(i) of the Company Disclosure Schedule in an
aggregate amount not to exceed $7 million pursuant to Company's bonus and
incentive policies in effect on the date hereof, (ii) grant any severance or
termination pay to any present or former director, officer, consultant,
independent contractor or employee of Company or its Subsidiaries other than as
provided under an Employee Plan in existence as of the date of this Agreement
and identified in Section 3.10(a) or 3.14, as the case may be, of the Company
Disclosure Schedule, (iii) loan or advance any money or other property to any
present or former director, officer, consultant, independent contractor or
employee of Company or its Subsidiaries (iv) establish, adopt, enter into, amend
or terminate any Employee Plan or any plan, agreement, program, policy, trust,
fund or other arrangement that would be an Employee Plan if it were in existence
as of the date of this Agreement or (v) amend any term of a Company Option,
except in accordance with Section 1.6 hereof. For purposes of Section
5.2(i)(A)(Y), a person may be terminated for "CAUSE" upon his or her (i)
substantial failure to perform duties, which failure is not cured within 10
business days following written notice, (ii) commission of a (x) felony or (y)
crime involving moral turpitude, (iii) malfeasance or misconduct which is
injurious to the Surviving Corporation or (iv) breach of the material terms of
his or her employment, including without limitation any non-compete,
non-solicitation or confidentiality obligations; PROVIDED, HOWEVER, that if such
person is subject to an employment agreement with the Company, and such
agreement includes a definition of cause, such definition will supercede the
foregoing definition. For purposes of Section 5.2(i)(A)(Z), a person may
terminate employment for "GOOD REASON" upon (i) a failure of Parent to pay
compensation or benefits when due to such person, (ii) a reduction of such
person's base salary or a failure of Parent to provide employee benefits in
accordance with Section 6.4 hereof, (iii) a relocation of such person's
principal place of employment by more that 35 miles from his or her current
principal place of employment or (iv) a substantial change in such person's
duties, other than as a result of poor job performance; PROVIDED, HOWEVER, that
it shall only be good reason if, in each case, Parent does not cure such good
reason within 10 business days following the Parent's receipt of written notice
from such person of the acts or omissions alleged to be good reason; PROVIDED,
FURTHER, that if such person is subject to an employment agreement with the
Company, and such agreement includes a definition of good reason, such
definition will supercede the foregoing definition.
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), except
for the payment, discharge or satisfaction of (i) current liabilities or
obligations, in accordance with their terms, in the ordinary course of
business consistent with past practice and (ii) liabilities disclosed
pursuant to this agreement and the schedules hereto, to the extent required
by their terms, or waive, release, grant, or transfer any rights of value or
modify or change any existing license, lease, contract or other document in
any manner that would be material to Company and its Subsidiaries;
(k) settle or compromise any litigation (whether or not commenced prior
to the date of this Agreement), other than settlements or compromises of
litigation where the amount paid does not exceed $50,000 for any single
litigation matter or related group of litigation matters (provided such
30
settlement or compromise agreements do not involve any non-monetary obligations
on the part of Company or any of its Subsidiaries);
(l) (i) change any accounting principle used by it (including, without
limitation, any assumptions used for purposes of computing finance income
receivable), except for such changes as may be required to be implemented
following the date of this Agreement pursuant to generally accepted
accounting principles or rules and regulations of the SEC promulgated
following the date hereof, as concurred in by Company's independent auditors;
or (ii) materially change or amend Company's underwriting, servicing or
collection policies, procedures or standards;
(m) change any material Tax election, change any annual Tax accounting
period, change any material method of Tax accounting, file any amended Tax
Return, enter into any closing agreement relating to any material Tax, settle
any material Tax claim or assessment, surrender any right to claim a material
Tax refund or consent to any extension or waiver of the limitations period
applicable to any material Tax claim or assessment;
(n) adopt or implement any amendment to its articles of incorporation or
bylaws or other comparable organizational documents, or enter into any plan
of consolidation, merger or reorganization with any person other than a
wholly-owned Subsidiary of Company;
(o) materially restructure or materially change its investment
securities portfolio, its hedging strategy or its gap position, through
purchases, sales or otherwise, or the manner in which the portfolio is
classified or reported or materially alter the credit or risk concentrations
associated with its businesses; or repurchase any receivables disposed of by
Company or any of its Subsidiaries in connection with any Securitization
Transaction;
(p) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution,
restructuring, recapitalization or reorganization;
(q) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, or in any of the
conditions to the Merger set forth in Article VIII not being satisfied or in
a violation of any provision of this Agreement, except, in each case, as may
be required by applicable law; or
(r) agree to, or make any commitment to, take, or authorize, any of the
actions prohibited by this Section 5.2.
5.3 TRANSITION. In order to facilitate an orderly
transition of the management of the business of Company and its Subsidiaries
to Parent and in order to facilitate the integration of the operations of
Company and Parent and their Subsidiaries and to permit the coordination of
their related operations on a timely basis, and in an effort to accelerate to
the earliest time possible following the Effective Time the realization of
synergies, operating efficiencies and other benefits expected to be realized
by Parent and Company as a result of the Merger, on and after the earlier of
(i) the 45th day after the date of this Agreement and (ii) the day, if any,
on which
31
Parent waives its right to terminate this Agreement pursuant to Section
8.1(d)(vi) (the date of the earlier of such days, the "Access Date"), Company
shall and shall cause its Subsidiaries to consult with Parent on all strategic
and operational matters to the extent such consultation is not in violation of
applicable laws, including laws regarding the exchange of information and other
laws regarding competition. Without in any way limiting the provisions of
Section 6.3, Parent, its Subsidiaries, officers, employees, counsel, financial
advisors and other representatives shall on and after the Access Date, upon
reasonable notice to Company and subject to applicable laws relating to the
exchange of information, be entitled to review the operations and visit the
facilities of Company and its Subsidiaries at all times as may be deemed
reasonably necessary by Parent in order to accomplish the foregoing arrangements
(provided such access does not, in Company's reasonable opinion, unreasonably
interfere with Company's business options). Notwithstanding the foregoing,
nothing contained in this Agreement shall give Parent, directly or indirectly,
the right to control or direct Company's operations prior to the Effective Time.
Prior to the Effective Time, each of Company and Parent shall exercise,
consistent with the terms and conditions of this Agreement, complete control and
supervision over its and its Subsidiaries' respective operations.
5.4 NOTIFICATION OF TAX PROCEEDINGS. From the date of this
Agreement to the Effective Time, to the extent Company or any Subsidiary
becomes aware of the commencement or scheduling of any Tax audit, the
assessment of any material Tax, the issuance of any notice of material Tax
due or any xxxx for collection of any material Tax due or any material lien
for Taxes, or the commencement or scheduling of any other administrative or
judicial proceeding with respect to the determination, assessment, or
collection of any material Tax on Company or any Subsidiary, Company shall
provide prompt notice to Parent of such matter setting forth information (to
the extent known) describing any asserted Tax liability in reasonable detail
and including copies of any notice or other documentation received from the
applicable Tax Authority with respect of the matter.
5.5 TRANSFER TAXES. All Transfer Taxes imposed on Company
or Parent or any of their affiliates in connection with this Agreement shall
be paid by Parent. For this purpose, "Transfer Taxes" means any Stock
transfer taxes, real property transfer, transfer gains or similar taxes
(including without limitation, any New York State Real Estate Transfer Tax)
payable in connection with this Agreement.
32
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 COMPANY SHAREHOLDERS MEETING; PREPARATION OF PROXY
STATEMENT. Company shall cause a meeting of its shareholders (the "COMPANY
SHAREHOLDERS MEETING") to be duly called and held as soon as practicable
after the date hereof for the purpose of approving the adoption of this
Agreement. As promptly as practicable following the date hereof, Parent and
Company shall prepare and file with the SEC preliminary proxy materials which
shall constitute the Proxy Statement/Prospectus (such proxy
statement/prospectus, and any amendments thereto, the "PROXY
STATEMENT/PROSPECTUS") and Parent shall prepare and file with the SEC a
registration statement on Form S-4 with respect to the issuance of the RVOs
in the Merger (the "FORM S-4"). The Proxy Statement/Prospectus will be
included in the Form S-4 as Parent's prospectus. The Form S-4 and the Proxy
Statement/Prospectus shall comply as to form in all material respects with
the applicable provisions of the Securities Act and the Exchange Act and the
rules and regulations of the SEC thereunder. Each of Parent and Company shall
use its reasonable best efforts to have the Form S-4 declared effective under
the Securities Act as promptly as practicable after filing with the SEC and
to keep the Form S-4 effective as long as is necessary to consummate the
Merger. Parent and Company shall, as promptly as possible after receipt
thereof, provide copies of any written comments received from the SEC with
respect to the Proxy Statement/Prospectus to the other party and advise the
other party of any oral comments with respect to the Proxy
Statement/Prospectus received from the SEC. Company shall use its reasonable
best efforts to cause the Proxy Statement/Prospectus to be mailed to
Company's shareholders as promptly as practicable after the Form S-4 is
declared effective under the Securities Act. Each of Company and Parent will
inform the other party, promptly after it receives notice thereof, of any
request by the SEC for an amendment to the Form S-4 or the Proxy
Statement/Prospectus, as the case may be, or requests for additional
information. No amendment or supplement to the Form S-4 or the Proxy
Statement/Prospectus shall be filed without the approval of both parties,
which approvals shall not be unreasonably withheld or delayed. The Board of
Directors of Company shall (i) include in the Proxy Statement/Prospectus (x)
the Company Board Recommendation unless based on the advice of Company's
outside counsel, the Board of Directors of Company determines in good faith
that inclusion of such recommendation would constitute a breach by the Board
of Directors of Company of its fiduciary duties under applicable law and (y)
the opinion of the Company Financial Advisor referred to in Section 3.6(b)
and (ii) use its reasonable best efforts to obtain the necessary vote in
favor of the adoption of this Agreement by its shareholders. The Board of
Directors of Company shall not withdraw, amend, modify or materially qualify
in a manner adverse to Parent the Company Board Recommendation (or announce
publicly its intention to do so) unless based on the advice of Company's
outside counsel, the Board of Directors of Company determines in good faith
that failure to do so would constitute a breach by Board of Directors of
Company of its fiduciary duties under applicable law. Subject to its right to
terminate this Agreement in accordance with the terms hereof, Company shall
be required to satisfy all its obligations under this Agreement, including,
without limitation, its obligations under this Section 6.1(a), whether or not
the Board of Directors of Company shall have withdrawn, amended, modified or
qualified in a manner adverse to Parent the Company Board Recommendation or
announced publicly its intention to do so.
6.2 REASONABLE BEST EFFORTS. (a) Each of Parent and Company
shall, and shall cause their respective Subsidiaries to, use their reasonable
best
33
efforts to take, or cause to be taken, all actions necessary, proper or
advisable to comply promptly with all legal requirements which may be imposed on
such party or any of its Subsidiaries with respect to the Merger and, subject to
the conditions set forth in Article VII hereof, to consummate the transactions
contemplated by this Agreement.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
identify and obtain as promptly as practicable all permits, consents,
approvals and authorizations of all Governmental Entities and any other third
parties which are necessary or advisable to consummate the transactions
contemplated by this Agreement (including, without limitation, the Merger),
and to comply fully with the terms and conditions of all such permits,
consents, approvals and authorizations of all such Governmental Entities.
Without limiting the generality of the foregoing, within 20 days of the date
of this Agreement, Company shall deliver to Parent a schedule setting forth
in reasonable detail those third party consents, approvals and filings which
are necessary to consummate the transactions contemplated by this Agreement.
Parent and Company shall have the right to review in advance, and, to the
extent practicable, each will consult with the other on, in each case subject
to applicable laws relating to the exchange of information, all the
information relating to Company or Parent, as the case may be, and any of
their respective Subsidiaries, which appear in any filing made with, or
written materials submitted to, any Governmental Entity or any other third
party in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto shall act
reasonably and as promptly as practicable. The parties hereto agree that they
will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all Governmental Entities and other
third parties necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other apprised of
the status of matters relating to completion of the transactions contemplated
hereby. Without limiting the generality of the foregoing, Parent and Company
agree that if all of the conditions to Closing set forth in Article VII have
been satisfied or waived other than the condition set forth in Section 7.3(c)
and if, and to the extent that, it would result in the condition set forth in
Section 7.3(c) being satisfied, Parent and Company shall use reasonable
efforts to effect the sale by Company or one or more of its Subsidiaries to
Parent or one or more of its Subsidiaries of receivables owned by Company or
its Subsidiaries at a purchase price of 100% of the amount of the receivables
as reflected on the books and records of Parent or the applicable Subsidiary
of Parent. In the event that the actions contemplated by the immediately
preceding sentence would require more than reasonable efforts or would not
result in the satisfaction of the condition set forth in Section 7.3(c),
Parent and Company shall cooperate in good faith and use reasonable efforts
to cause the condition set forth in Section 7.3(c) to be satisfied.
(c) Parent and Company shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Form S-4 and the Proxy Statement/Prospectus
or any other statement, filing, notice or application made by or on behalf of
34
Parent, Company or any of their respective Subsidiaries to any Governmental
Entity in connection with the Merger and the other transactions contemplated by
this Agreement.
6.3 ACCESS TO INFORMATION. (a) On and after the Access
Date, upon reasonable notice and subject to applicable laws relating to the
exchange of information, Company shall, and shall cause its Subsidiaries to,
afford to the officers, employees, accountants, counsel and other
representatives of Parent, reasonable access, during normal business hours
during the period prior to the Effective Time, to all its personnel,
properties, books, contracts, commitments and records (provided that such
access does not, in the Company's reasonable opinion, unreasonably interfere
with the Company's business operations and that such access is coordinated
through Company's senior management) and, during such period, Company shall,
and shall cause its Subsidiaries to, make available to Parent and such other
parties (i) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the
requirements of federal securities laws or other federal or state laws (other
than reports or documents which Company is not permitted to disclose under
applicable law) and (ii) all other information concerning its business,
properties and personnel as Parent may reasonably request, in all cases so
that Parent may have full opportunity to make such reasonable investigations
as it desires of the affairs and assets of Company. Neither Company nor any
of its Subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of its customers, jeopardize the attorney-client privilege of Company
or any of its Subsidiaries or contravene any law, rule, regulation, order,
judgment, decree, or binding agreement entered into prior to the date of this
Agreement. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
(b) Company shall use its reasonable efforts to make available to the
officers, employees, accountants, counsel and other representatives of
Parent, during normal business hours during the period prior to the Effective
Time, representatives of Financial Security Assurance Inc. ("FSA") for the
purpose of discussing the impact of the transactions contemplated hereby on
the securitization transactions effected by Company and its Subsidiaries and
such other matters as shall be reasonably raised by Parent, provided, that
such access shall be coordinated through Company's senior management and that
representatives of Company shall be permitted to attend all meetings and
participate in all phone calls with representatives of FSA.
(c) Parent shall, and shall cause its representatives to, hold all
information furnished by or on behalf of Company or any of Company's
Subsidiaries or representatives pursuant to Section 6.3(a) in confidence to
the extent required by, and in accordance with, the provisions of the
confidentiality agreement, dated April 30, 1999 between Parent and Company
(the "CONFIDENTIALITY AGREEMENT").
(d) No investigation by Parent or its representatives shall affect the
representations and warranties of Company set forth herein.
6.4 EMPLOYEE BENEFITS. (a) For one year following the
Effective Time, employees of Company and its Subsidiaries who continue their
employment
35
with the Surviving Corporation, Parent or any of their respective Subsidiaries
("CONTINUED EMPLOYEES") will be provided employee benefits which, in the
aggregate, are no less favorable than the benefits provided under Company's
Employee Plans to the Continued Employees immediately prior to the Effective
Time; PROVIDED, HOWEVER, that nothing contained herein shall constitute a
commitment or obligation on the part of Parent, the Surviving Corporation or any
of their respective subsidiaries to adopt or continue any individual benefit
arrangement or term thereof and that nothing herein shall interfere with the
Surviving Corporation's right to take any action or refrain from taking any
action which Company or any of its Subsidiaries could take or refrain from
taking prior to the Effective Time.
(b) To the extent that Continuing Employees are eligible
participate in employee benefit plans of Parent, such Continuing Employee shall
be given credit for service with Company and its Subsidiaries, to the same
extent as such service was credited for such purpose by Company under comparable
Company Employee Plans, for purposes of eligibility and vesting. If Continuing
Employees become eligible to participate in a medical, dental or health plan of
Parent or its subsidiaries, Parent shall cause such plan to (i) waive any
preexisting condition limitations for conditions covered under the comparable
medical, health or dental plans which are Company Employee Plans and (ii) honor
any deductible and out of pocket expenses incurred and paid by the Continuing
Employees under the comparable medical, health or dental plans which are Company
Employee Plans during the portion of the calendar year prior to such
participation. Notwithstanding the foregoing, in no event shall any Continuing
Employee be entitled to any credit for service, deductibles or out of pocket
expenses to the extent that it would result in a duplication of benefits with
respect to the same period of service, deductible or out of pocket expenses.
6.5 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) The articles of incorporation and bylaws of the Surviving Corporation
shall contain, to the extent permitted by law, the provisions with respect to
indemnification set forth in the articles of incorporation and bylaws of
Company on the date hereof, which provisions shall not be amended, repealed
or otherwise modified for a period of six years after the Effective Time in
any manner that would adversely affect the rights thereunder of the persons
who at any time prior to the Effective Time were entitled to such
indemnification under the articles of incorporation or bylaws of Company in
respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated hereby), unless
such modification is required by law; PROVIDED, that the articles of
incorporation and bylaws of the Surviving Corporation shall not be required
to contain such provisions if Parent otherwise provides the same level of
indemnification for such individuals as contained in the articles of
incorporation and bylaws of the Surviving Corporation.
(b) The Surviving Corporation shall indemnify, defend and hold harmless
the present and former officers and directors of Company or any of Company's
Subsidiaries in their capacities as such (each an "INDEMNIFIED Party") after
the Effective Time against all losses, expenses, claims, damages or
liabilities arising out of actions or omissions occurring on or prior to the
Effective Time to the fullest extent that Company and its Subsidiaries would
36
have been permitted under Minnesota law and their respective articles of
incorporation or bylaws, to indemnify such Indemnified Parties.
(c) Parent shall use its reasonable best efforts to cause the persons
serving as officers and directors of Company immediately prior to the
Effective Time to be covered for a period of six years from the Effective
Time by the directors' and officers' liability insurance policy maintained by
Company (provided that Parent may substitute therefor policies of at least
the same coverage and amounts containing terms and conditions which are not
less advantageous than such policy) with respect to acts or omissions
occurring prior to the Effective Time which were committed by such officers
and directors in their capacity as such; PROVIDED, HOWEVER, that in no event
shall Parent be required to expend more than 200% of the current amount
expended by Company (the "INSURANCE AMOUNT") to maintain or procure insurance
coverage pursuant hereto and further PROVIDED, that if Parent is unable to
maintain or obtain the insurance called for by this Section 6.5(c), Parent
shall use its reasonable best efforts to obtain as much comparable insurance
as available for the Insurance Amount.
(d) In the event Parent, the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and in
each such case, to the extent necessary, proper provision shall be made so
that the successors and assigns of Parent or the Surviving Corporation, as
the case may be, assume the obligations set forth in this section. From and
after the Effective Time, Parent shall unconditionally guarantee the timely
payment of any funds owing by, and the timely performance of all other
obligations of, the Surviving Corporation under this Section 6.5.
(e) The provisions of this Section 6.5 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
6.6 ADDITIONAL AGREEMENTS. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement (including, without limitation, any other merger
between a Subsidiary of Company and a Subsidiary of Parent) or to vest the
Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of any of the parties to the Merger, the
proper officers and directors of each party to this Agreement and their
respective Subsidiaries shall take all such necessary action as may be
reasonably requested by Parent.
6.7 ADVICE OF CHANGES. Parent and Company shall promptly
advise the other party of any change or event that could reasonably be
expected to have a Material Adverse Effect on it or to delay or impede the
ability of Parent, Sub or Company, respectively, to perform their respective
obligations pursuant to this Agreement and to effect the consummation of the
transactions contemplated hereby; PROVIDED, HOWEVER, that the delivery of any
notice pursuant to this Section 6.7 shall not limit or otherwise affect the
remedies available hereunder to any party receiving such notice.
37
6.8 NO SOLICITATION. (a) Neither Company nor any of its
Subsidiaries shall (whether directly or indirectly through advisors, agents
or other intermediaries), nor shall Company or any of its Subsidiaries
authorize or permit any of its or their officers, directors, agents,
representatives or advisors to, (a) solicit, initiate, encourage (including
by way of furnishing information) or take any action knowingly to facilitate
the submission of any inquiries, proposals or offers (whether or not in
writing) from any person other than Parent that constitutes or may reasonably
be expected to lead to, (i) any acquisition or purchase of any assets of
Company or any of its Subsidiaries (including through the formation of a
joint venture) or of any equity securities of Company or any of its
Subsidiaries (except in the case of a transaction permitted by Section
5.2(c)(i)), (ii) any tender offer or exchange offer (including a self-tender
offer) for any class of equity securities of Company or any of its material
Subsidiaries, (iii) any merger, consolidation, business combination,
reorganization, recapitalization, liquidation, dissolution or similar
transaction involving Company or any of its material Subsidiaries or (iv) any
other transaction the consummation of which would or would reasonably be
expected to impede, interfere with, prevent or materially delay the Merger
(any of the foregoing, a "TRANSACTION PROPOSAL"), or accept, agree to,
approve or endorse any Transaction Proposal or (b) enter into or participate
in any discussions or negotiations regarding any of the foregoing, or
otherwise cooperate in any way with, or knowingly assist or participate in,
facilitate or encourage, any effort or attempt by any other person to do or
seek any of the foregoing; PROVIDED, that Company may, in response and with
respect to a bona fide unsolicited written proposal from a third party
submitted after the date of this Agreement which constitutes a Superior
Proposal (as defined below), engage in the activities specified in clause
(b), if (i) based on the advice of Company's outside counsel, the Board of
Directors of Company determines in good faith that failure to take such
action in response to such a proposal would constitute a breach by the Board
of Directors of Company of its fiduciary duties under applicable law, (ii)
Company has received from such third party an executed confidentiality
agreement with terms not materially less favorable to Company than those
contained in the Confidentiality Agreement and (iii) Company has complied in
all material respects with this Section 6.8. If Company receives a
Transaction Proposal, or a request for nonpublic information relating to
Company or any of its Subsidiaries or for access to the properties, books or
records of Company or any of its Subsidiaries by any Person who is
considering making or has made a Transaction Proposal, it shall immediately
inform Parent orally and shall as promptly as practicable (and in any event
within one day) inform Parent in writing of the terms and conditions of such
proposal and the identity of the person making it, forwarding a copy of any
written communications relating thereto. Company will keep Parent informed on
as prompt a basis as is practicable of the status and details of any such
Transaction Proposal or request and any related discussions or negotiations,
including by forwarding copies of any material written communications
relating thereto. Company will immediately cease and cause its Subsidiaries,
and its and their officers, directors, agents, representatives and advisors,
to cease any and all existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing, and
shall use its reasonable efforts to cause any such parties in possession of
confidential information about Company or its Subsidiaries that was furnished
by or on behalf of Company or its Subsidiaries in connection with any of the
foregoing to return or destroy all such information in the possession of any
such party
38
or in the possession of any agent or advisor of any such party. Company agrees
not to release any third party from, or waive any provisions of, any
confidentiality or standstill agreement to which it or its Subsidiaries is a
party. Company shall ensure that the officers, directors and employees of
Company and its Subsidiaries and any investment banker or other advisor or
representative retained by such party are aware of and instructed to comply with
the restrictions described in this Section 6.8. Nothing in this Section 6.8
shall prohibit Company or its Board of Directors from taking and disclosing to
Company's shareholders a position with respect to a Transaction Proposal by a
third party to the extent required under the Exchange Act, including Rules 14e-2
and 14d-9 thereunder, or from making such disclosure to Company's shareholders
which, based on the advice of Company's outside counsel, the Board of Directors
of Company determines in good faith, is required under applicable law; PROVIDED,
that nothing in this sentence shall affect the obligations of Company and its
Board of Directors under any other provision of this Agreement. For purposes of
this Agreement, a "SUPERIOR PROPOSAL" means a bona fide written Transaction
Proposal for at least a majority of the outstanding fully-diluted shares of
Company Common Stock or for all or substantially all of the consolidated assets
of Company made by a Third Party after the date hereof for which all necessary
financing is committed in full and which, if accepted, is reasonably likely to
be consummated and taking into account all legal, financial and regulatory
aspects of the proposal and the person making such proposal, including the
relative expected consummation date, is financially superior to the holders of
Company Common Stock as compared to the Merger.
(b) Unless this Agreement shall have been terminated in accordance with
Section 8.1 Company shall not amend, modify or waive any provision of the
Company Rights Agreement, and shall not take any action to redeem the Company
Rights or render the Company Rights inapplicable to any transaction other
than the transactions to be effected pursuant to this Agreement, which is
reasonably likely to reduce the likelihood of or delay the consummation of
the Merger, or result in any increase in the costs or decrease in the
benefits to Parent of the Merger, or affect the capitalization of Parent or
any of its affiliates after the Merger.
6.9 PUBLICITY. Company, on the one hand, and Parent and
Sub, on the other hand, will consult with each other before holding any press
conferences, analyst calls or other meetings or discussions and before
issuing any press releases or other public announcements or statements
regarding the transactions contemplated hereby or by the Support Agreement or
the Receivables Agreements. The parties will provide each other the
opportunity to review and comment upon any press release or other public
announcement or statement with respect to the transactions contemplated by
this Agreement, the Support Agreement or the Receivables Agreements,
including the Merger, and shall not issue any such press release or other
public announcement or statement prior to such consultation, except as may be
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange. The parties agree
that the initial press release or releases to be issued with respect to the
transactions contemplated by this Agreement shall be mutually agreed upon
prior to the issuance thereof. In addition, Company shall, and shall cause
its Subsidiaries to, (a) consult with Parent regarding communications with
shareholders and employees relating to the transactions contemplated hereby,
(b) provide Parent with shareholder
39
lists of Company and (c) allow and facilitate Parent contact with shareholders
of Company.
6.10 STOCKHOLDER LITIGATION. The parties to this Agreement
shall cooperate and consult with one another, to the fullest extent possible,
in connection with any stockholder litigation against any of them or any of
their respective directors or officers with respect to the transactions
contemplated by this Agreement, the Support Agreement or the Receivables
Agreements. In furtherance of and without in any way limiting the foregoing,
each of the parties shall use its respective reasonable best efforts to
prevail in such litigation so as to permit the consummation of the
transactions contemplated by this Agreement in the manner contemplated by
this Agreement. Notwithstanding the foregoing, Company agrees that it will
not compromise or settle any litigation commenced against it or its directors
or officers relating to this Agreement, the Support Agreement or the
Receivables Agreements or the transactions contemplated hereby or thereby
(including the Merger) without Parent's prior written consent, which shall
not be unreasonably withheld.
6.11 ANTI-TAKEOVER PROVISIONS. (a) Each party will take all
steps necessary to exempt (or continue the exemption of) the Merger and the
other transactions contemplated hereby and by the Support Agreement and the
Receivables Agreements from, and challenge the validity of the MBCA
(including Sections 302A.671, 302A.673 and 302A.675 thereof), as now or
hereafter in effect.
(b) The Board of Directors of Company shall take all further action (in
addition to that referred to in Section 3.24), if any, necessary in order to
render the Company Rights inapplicable to the Merger and the other
transactions contemplated by this Agreement.
6.12 STOP TRANSFER. Company acknowledges and agrees to be
bound by and comply with the provisions of Section 3(c) of the Support
Agreement as if a party thereto with respect to transfers of record ownership
of shares of Company Common Stock and agrees to notify the transfer agent for
any such shares and provide such documentation and do such other things as
may be necessary to effectuate the provisions of such agreement.
6.13 [Intentionally Omitted]
6.14 AGREED UPON PROCEDURES. Immediately after the date of
this Agreement, Parent shall engage Ernst & Young LLP ("E&Y"), at Parent's
expense, to conduct the procedures set forth in Exhibit B hereto and to
render to Parent in writing (with a copy to Company) a report with respect
thereto. Parent shall instruct E&Y to complete its report as promptly as
practicable, but in any event within 40 days of the date of this Agreement.
6.15 [Intentionally Omitted]
6.16 TAX SCHEDULES. Prior to the Closing Date, Company
shall use reasonable best efforts to cooperate with Parent and assist Parent
in preparing schedules reasonably acceptable to Parent that accurately set
forth as of the Effective Time (i) the tax basis of the assets held by
Company and its Subsidiaries; (ii) the amount of each item of deferred tax
liability and
40
deferred tax assets included on Company's audited financial statements for
fiscal 1998; and (iii) details of any accrual for contingent tax liabilities of
Company and its Subsidiaries. Parent shall engage, at Parent's expense, Ernst &
Young LLP or another accounting firm reasonably acceptable to Company to prepare
the Schedules described in this Section 6.16.
6.17 LISTING. Prior to the Effective Time, Parent shall
file a listing application with a national securities exchange with respect
to the RVOs issued or issuable in connection with the Merger and shall use
all reasonable efforts to have such RVOs approved for quotation on such
national securities exchange.
6.18 EMPLOYEE RETENTION. Prior to the Effective Time, at
Parent's request Company shall establish a key employee retention program
upon terms reasonably satisfactory to Parent and Company. Company shall
establish a liability in accordance with GAAP on its books and records in
connection with any such retention program.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) COMPANY SHAREHOLDER APPROVAL. The Company Shareholder Approval shall
have been obtained in accordance with applicable law.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No statute, rule,
regulation, order, injunction or decree shall have been enacted, entered,
promulgated, issued or enforced by any court of competent jurisdiction or
Governmental Entity which prohibits, prevents, materially restricts or makes
illegal the consummation of the Merger or the Receivables Agreements, which
has not been vacated, dismissed or withdrawn prior to the Effective Time.
Parent and Company shall use their reasonable best efforts to have any of the
foregoing, vacated, dismissed or withdrawn by the Effective Time.
(c) HSR ACT. The applicable waiting period under the HSR Act shall have
expired or been terminated.
(d) EFFECTIVENESS OF THE FORM S-4. The Form S-4 shall have been declared
effective by the SEC under the Securities Act. No stop order suspending the
effectiveness of the Form S-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated by the SEC and not
concluded or withdrawn.
7.2 CONDITIONS TO COMPANY'S OBLIGATIONS TO EFFECT THE
MERGER. The obligations of Company to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following additional
conditions:
41
(a) The representations of Parent and Sub contained in this
Agreement, shall have been true and correct (in all material respects, in the
case of representations and warranties not already qualified as to materiality
by their terms) when made and shall be true and correct (in all material
respects, in the case of representations and warranties not already qualified as
to materiality by their terms) at and as of the Effective Time as though made on
and as of such date (except (i) for changes specifically permitted by this
Agreement and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date), and Company shall have received a certificate of the Chief Executive
Officer or the President and Chief Operating Officer of Parent to the foregoing
effect.
(b) Parent and Sub shall have performed and complied with in
all material respects their obligations under this Agreement to be performed or
complied with on or prior to the Effective Time, and Company shall have received
a certificate of the Chief Executive Officer or the President and Chief
Operating Officer of Parent to the foregoing effect.
7.3 CONDITIONS TO PARENT'S AND SUB'S OBLIGATIONS TO EFFECT
THE MERGER. The obligations of Parent and Sub to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the
following additional conditions:
(a) The representations of Company contained in this Agreement shall
have been true and correct when made and shall be true and correct (in all
material respects, in the case of representations and warranties not already
qualified as to materiality by their terms) at and as of the Effective Time
as though made on and as of such date (except (i) for changes specifically
permitted by this Agreement and (ii) that those representations and
warranties which address matters only as of a particular date shall remain
true and correct as of such date), and Parent shall have received a
certificate of the Chief Executive Officer, the Senior Executive Vice
President and Chief Financial Officer or the Executive Vice President,
Controller and Chief Accounting Officer of Company to the foregoing effect.
(b) Company shall have performed and complied with in all material
respects its obligations under this Agreement to be performed or complied
with on or prior to the Effective Time, and Parent shall have received a
certificate of the Chief Executive Officer, the Senior Executive Vice
President and Chief Financial Officer or the Executive Vice President,
Controller and Chief Accounting Officer of Company to the foregoing effect.
(c) All Requisite Regulatory Approvals shall have been obtained and be
in effect at the Effective Time.
(d) Neither Parent, Sub nor any of their affiliates shall have become an
"Acquiring Person", and no "Stock Acquisition Date", "Distribution Date", or
"Triggering Event" (as such terms are defined in the Company Rights
Agreement) shall have occurred pursuant to the Company Rights Agreement.
(e) The number of Dissenting Shares as of the Effective Time shall be
less than 10% of the number of shares of Company Common Stock outstanding at
the Effective Time.
42
(f) Any consent required of, or notice or other document required to be
delivered to, FSA in connection with the transactions contemplated hereby or
by the Receivables Agreements pursuant to the Securitization Agreements shall
have been obtained or given and be in effect at the Effective Time.
(g) All consents or approvals of or filings with any third party which
are necessary to consummate the transactions contemplated by this Agreement
shall have been obtained and shall be in full force and effect, other than
such consents, approvals or filings the failure of which to have been
obtained or made could not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on Company or the Surviving
Corporation.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval by the
shareholders of Company of the matters presented in connection with the
Merger:
(a) by mutual consent of Parent and Company;
(b) by either Parent or the Board of Directors of Company if (i) any
Governmental Entity of competent jurisdiction which must grant a Requisite
Regulatory Approval the receipt of which is a condition to the Obligations of
Parent and Sub pursuant to Section 7.3(c) has denied such approval and such
denial has become final and nonappealable or any Governmental Entity of
competent jurisdiction shall have issued an order, decree or ruling or taken
any other action permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement, and such order, decree,
ruling or other action shall have become final and nonappealable, PROVIDED,
HOWEVER, that the right to terminate this Agreement under this Section
8.1(b)(i) shall not be available to any party whose failure to comply with
Section 6.2 or any other provision of this Agreement has been the cause of
such action, (ii) the Company Shareholder Approval shall not have been
received at the Company Shareholders Meeting duly called and held or (iii)
the Effective Time shall not have occurred on or before 180 days after the
execution by all parties of this Agreement (the "TERMINATION DATE"),
PROVIDED, HOWEVER, that the right to terminate this Agreement under this
Section 8.1(b)(iii) shall not be available to any party whose failure to
fulfill any obligations under this Agreement has been the primary cause of
the failure of the Effective Time to occur on or before the Termination Date
until ten business days after such failure has been cured.
(c) by the Board of Directors of Company, if, prior to Effective Time,
(i) Parent or Sub shall have failed to perform in any material respect any of
their obligations under this Agreement to be performed at or prior to such
date of termination, which failure to perform is not cured or is incapable of
being cured within 10 days after the receipt by Parent of written notice of
such failure, (ii) any representation or warranty of Parent or Sub contained
43
in this Agreement shall not be true and correct (except for changes permitted by
this Agreement and those representations which address matters only as of a
particular date shall remain true and correct as of such date), except, in any
case, such failures to be true and correct which are not reasonably likely to
materially adversely affect Parents's or Sub's ability to complete the Merger,
PROVIDED, that such failure to be true and correct is not cured or is incapable
of being cured within 10 days after the receipt by Parent of written notice of
such failure or (iii) prior to the Company Shareholder Approval, upon five
business days' prior irrevocable written notice to Parent, in order to accept an
unsolicited Superior Proposal; PROVIDED, HOWEVER, that (A) such notice shall
include a copy of any proposed or definitive documentation relating to such
Superior Proposal (including all financing documentation), and shall otherwise
specify all material terms, conditions and other information with respect
thereto and (B) prior to any such termination, Company shall, if requested by
Parent in connection with any revised proposal Parent might make, negotiate in
good faith for such five business day period with Parent, and such third party
proposal remains a Superior Proposal after taking into account any revised
proposal during such five business day period; and PROVIDED, FURTHER, that it
shall be a condition to termination pursuant to this Section 8.1(c)(iii) that
Company shall have made the payment of the fee to Parent required by Section
8.2(c) and the payment in respect of Parent Expenses required by Section 8.2(b);
(d) by Parent, if, prior to Effective Time, (i) Company shall have
failed to perform in any material respect any of its obligations under this
Agreement to be performed at or prior to such date of termination, which
failure to perform is not cured or is incapable of being cured within 10 days
after the receipt by Company of written notice of such failure, (ii) any
representation or warranty of Company contained in this Agreement shall not
be true and correct (except for changes permitted by this Agreement and those
representations which address matters only as of a particular date shall
remain true and correct as of such date), except, in any case, such failures
to be true and correct which are not reasonably likely to materially
adversely affect Company's ability to complete the Merger, PROVIDED, that
such failure to be true and correct is not cured or is incapable of being
cured within ten days after the receipt by Company of written notice of such
failure, (iii) the Board of Directors of Company withdraws or materially
modifies or changes its recommendation of this Agreement and/or transactions
contemplated hereby (including the Merger) in a manner adverse to Parent or
Sub or approves, accepts or recommends another Transaction Proposal or fails
to reconfirm such recommendation if so requested by Parent, within 10
business days following such request; (iv) (A) if a Transaction Proposal that
is publicly disclosed shall have been commenced, publicly proposed or
communicated to Company which contains a proposal as to price (without regard
to the specificity of such price proposal) and (B) Company shall not have
rejected such Acquisition Proposal within 10 business days after the date its
existence first becomes publicly disclosed; (v) Parent, Sub or any of their
affiliates shall have become an "Acquiring Person", or a "Stock Acquisition
Date", "Distribution Date", or "Triggering Event" (as such terms are defined
in the Company Rights Agreement) shall have occurred pursuant to the Company
Rights Agreement; or (vi) the conclusions of E&Y set forth in its report
rendered to Parent pursuant to Section 6.14 hereof shall not be reasonably
consistent with information previously provided E&Y or Parent by Company;
PROVIDED, HOWEVER,
44
that any termination by Parent pursuant to Section 8.1(d) (vi) must occur within
45 days after the date of this Agreement.
8.2 EFFECT OF TERMINATION. (a) In the event of termination
of this Agreement by either Parent or Company as provided in Section 8.1,
written notice thereof shall forthwith be given to the other party or parties
specifying the provision hereof pursuant to which such termination is made,
and this Agreement shall forthwith become void and have no effect, and none
of Parent, Company, any of their respective affiliates or any of the officers
or directors of any of them shall have any liability of any nature whatsoever
hereunder, or in connection with the transactions contemplated hereby, except
that (i) Section 6.3(c), this Section 8.2 and Article IX shall survive any
termination of this Agreement, (ii) notwithstanding anything to the contrary
contained in this Agreement, neither Parent nor Company shall be relieved or
released from any liabilities or damages arising out of its breach of any
provision of this Agreement and (iii) Company shall pay to Parent the
Termination Fee (as defined below) and Parent Expenses (as defined below), if
applicable, in accordance with this Section 8.2.
(b) In addition to any other amounts which may be payable to
Parent pursuant to any other paragraph of this Section 8.2, Company shall,
following the termination of this Agreement pursuant to Section 8.1(c)(iii) or
pursuant to Section 8.1(d)(iii), (iv) or (v) promptly, but in no event later
than one business day following written notice thereof, together with reasonable
supporting documentation, reimburse Parent, in an aggregate amount of up to $1
million, for all out-of-pocket expenses and fees (including reasonable fees
payable to all counsel, accountants, financial advisors, financial printers,
experts and consultants), whether incurred prior to, concurrently with or after
the execution of this Agreement (up to the date of termination), in connection
with the preparation, negotiation and execution of this Agreement and the other
agreements contemplated hereby and the consummation of the transactions
contemplated by this Agreement (collectively, the "PARENT EXPENSES").
(c) In the event that this Agreement is terminated by Parent
pursuant to clause (d)(iii), (d)(iv) or (d)(v) of Section 8.1 or by Company
pursuant to Section 8.1(c)(iii), Company shall pay to Parent by wire transfer of
immediately available funds to an account designated by Parent on the next
business day following such termination an amount equal to $8 million (the
"TERMINATION FEE").
(d) If a Transaction Proposal relating to more than 15% of the
outstanding fully diluted Company Common Stock or any other class of equity
securities or more than 15% of the consolidated assets of Company is commenced,
publicly disclosed, publicly proposed or otherwise communicated or made known to
Company at any time on or after the date of this Agreement and prior to the
termination hereof, and this Agreement is terminated pursuant to clause (b)(ii)
or (b)(iii) (but, in the case of clause (b)(iii), only if the Company
Shareholders Meeting has not been duly held) of Section 8.1; clause (d)(i) of
Section 8.1 based on a breach of Section 6.8 or a willful failure to perform any
other obligation hereunder; or clause (d)(ii) of Section 8.1 based on a willful
act or omission causing a representation or warranty not to be true, and within
12 months of the date of such termination, Company enters into a definitive
agreement with respect to, or consummates, any Transaction
45
Proposal relating to more than 15% of the outstanding fully diluted Company
Common Stock or any other class of equity securities or more than 15% of the
consolidated assets of Company, then Company shall pay to Parent an amount equal
to the Termination Fee, plus any amount paid by Parent pursuant to Section
8.2(d), concurrently with the earlier of the execution of such definitive
agreement or the consummation of such Transaction Proposal.
(e) In the event that this Agreement is terminated pursuant to
clause (b)(i), (b)(ii), (b)(iii), (c)(i), (c)(ii), (d)(i), (d)(ii) or (d)(vi) of
Section 8.1 and Company paid a prepayment penalty resulting from a failure to
deliver receivables to the prefunded Securitization Trust 1999-C originated by
Company, Parent shall pay to Company the amount of such penalty paid by Company
(but not in excess of $3,759,560), provided, that no amount shall be payable
pursuant to this Section 8.2(e) in the event that Company is obligated to pay
the Termination Fee.
(f) If Company or Parent fails to pay any amounts due under
this Section 8.2 within the time periods specified herein, such party shall pay
to the other all costs and expenses (including legal fees and expenses) incurred
by the other party in connection with any action or proceeding (including the
filing of any lawsuit) taken by it to collect such unpaid amounts, together with
interest on such unpaid amounts at the publicly announced prime or base lending
rate of The Chase Manhattan Bank from the date such amounts were required to be
paid until the date actually received by Parent.
8.3 AMENDMENT. Subject to compliance with applicable law,
this Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or
after approval of the matters presented in connection with the Merger by the
shareholders of Company; PROVIDED, HOWEVER, that after any approval of the
transactions contemplated by this Agreement by the shareholders of Company,
there may not be, without further approval of such shareholders, any
amendment of this Agreement which changes the amount or the form of the
consideration to be delivered to the holders of Company Common Stock
hereunder other than as contemplated by this Agreement. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
8.4 EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (a) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto or
(c) waive compliance with any of the agreements or conditions contained
herein; PROVIDED, HOWEVER, that after any approval of the transactions
contemplated by this Agreement by the shareholders of Company, there may not
be, without further approval of such shareholders, any extension or waiver of
this Agreement or any portion thereof which reduces the amount or changes the
form of the consideration to be delivered to the holders of Company Common
Stock hereunder other than as contemplated by this Agreement. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in a written instrument signed on behalf of such party, but
such extension or waiver or failure to insist on strict compliance with an
46
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. None of the representations, warranties, covenants and agreements
in this Agreement or in any instrument delivered pursuant to this Agreement
(other than pursuant to the Support Agreement and the Receivables Agreements,
which shall terminate in accordance with their respective terms) shall
survive the Effective Time, except for those covenants and agreements
contained herein and therein which by their terms apply in whole or in part
after the Effective Time.
9.2 EXPENSES. Subject to Section 8.2(b), all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense;
PROVIDED, HOWEVER, that the costs and expenses of printing and mailing the
Form S-4 and the Proxy Statement/Prospectus, and all filing and other fees
paid to the SEC in connection with the Merger, shall be borne equally by
Company and Parent.
9.3 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given (i) when delivered personally
to the recipient, (ii) when sent to the recipient by telecopy (receipt
electronically confirmed by sender's telecopy machine) if during normal
business hours of the recipient, otherwise on the next business day, (iii)
one business day after the date when sent to the recipient by reputable
express courier service (charges prepaid), or (iv) seven business days after
the date when mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices and other communications
shall be sent to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent, to:
Associates First Capital Corporation
000 Xxxxxxxxx Xxxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Fax: (000) 000-0000
47
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
and
(b) if to Company, to:
Arcadia Financial Ltd.
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: General Counsel
Fax: (000) 000-0000
with copies to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Xx., Esq.
Fax: (000) 000-0000
and
Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
9.4 INTERPRETATION. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation". No provision of this Agreement shall be
construed to require Company, Parent or any of their respective Subsidiaries
or affiliates to take any action which would violate any applicable law, rule
or regulation.
9.5. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. This Agreement may be executed by facsimile
signatures of the parties hereto.
48
9.6 ENTIRE AGREEMENT. This Agreement (including the
documents and the instruments referred to herein) constitutes the entire
agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
other than the Support Agreement, the Confidentiality Agreement and the
Receivables Agreements (each of which is enforceable in accordance with the
specific terms of the respective agreement).
9.7 GOVERNING LAW. Except to the extent that the laws of
the State of Minnesota are mandatorily applicable to the Merger, this
Agreement shall be governed and construed in accordance with the laws of the
State of New York, without regard to any applicable principles of conflicts
of law.
9.8 SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
9.9 ASSIGNMENT; THIRD PARTY BENEFICIARIES. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall 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, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns. Except as otherwise specifically provided in Section 6.5, this
Agreement (including the documents and instruments referred to herein) is not
intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
9.10 ENFORCEMENT. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any
Federal court or New York State court sitting in the Borough of Manhattan,
City of New York, this being in addition to any other remedy to which they
are entitled at law or in equity.
9.11 SCHEDULES. The disclosure of any item in a Disclosure
Schedule to this Agreement shall be deemed to be a disclosure for all
purposes of this Agreement on any other Schedule on which it is specifically
referenced or identified, but shall expressly not be deemed to constitute an
admission by either party, or to otherwise imply or concede that any item is
material or would (or would be reasonably likely to) have a Material Adverse
Effect for purposes of this Agreement. ARTICLE I.1
49
IN WITNESS WHEREOF, Parent, Sub and Company have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
ASSOCIATES FIRST CAPITAL CORPORATION
By: /s/ XXX XXXXXXX
Name: Xxx Xxxxxxx
Title: Senior Executive Vice President
and Chief Financial Officer
AFCC NEWCO, INC.
By: /s/ XXX XXXXXXX
Name: Xxx Xxxxxxx
Title: Senior Executive Vice President
and Chief Financial Officer
ARCADIA FINANCIAL LTD.
By: /s/ XXXXXXX XXXXXXXXXX
Name: Xxxxxxx Xxxxxxxxxx
Title: Chief Executive Officer
Exhibit A
Terms of Residual Value Obligation
PAYMENT RIGHT: Each RVO shall represent the right
to receive an amount in cash equal
to a PRO RATA share of 50% of the
Residual Cash Flow remaining after
application of the Residual Cash
Flow to the AFCC Amount, RVO
Expenses and Litigation Expenses,
calculated pursuant to, and subject
to, the terms below.
PAYMENT DATES: Amounts allocated for payment on
the RVOs as provided below under
"Application of Residual Cash
Flow", if any, will be paid on the
second business day after the
Distribution Dates in April, July,
October and January to holders of
record on the immediately preceding
March 1, June 1, September 1 or
December 1, respectively,
commencing with the first payment
date following the Effective Time
(or, if the Effective Time is after
the record date in respect of such
first payment date, then on the
next succeeding payment date).
APPLICATION OF RESIDUAL CASH FLOW: On the business day after each
Distribution Date occurring after
the Effective Time (each such day,
an "ALLOCATION DATE"), the Residual
Cash Flow received on such
Distribution Date (including as a
result of the addition of
Litigation Reserve Interest) shall
be allocated as follows:
1. 100% to reduce RVO
Expenses incurred after the third
preceding Distribution Date and on
or prior to the second preceding
Distribution Date (provided, that,
in the case of the first allocation
date occurring after the Effective
Time, the allocation shall be 100%
to reduce RVO Expenses incurred on
or after November 12, 1999 and on
or prior to the second preceding
Distribution Date), PLUS any RVO
Expenses incurred on or prior to
the third preceding Distribution
Date which were not previously
reduced by a prior allocation of
Residual Cash Flow, until such
amounts have been reduced to zero,
then
2. 100% of the remaining
Residual Cash Flow, if any, to
reduce Litigation Expenses incurred
after the third preceding
Distribution Date and on or prior
to the second preceding
Distribution Date (provided, that,
in the case of the first allocation
date occurring after the Effective
Time, the allocation shall be 100%
to reduce Litigation Expenses
incurred on or after November 12,
1999 and on or prior to
Exhibit A - Page 2
the second preceding Distribution
Date), PLUS any Litigation Expenses
incurred on or prior to the third
preceding Distribution Date which
were not previously reduced by a
prior allocation of Residual Cash
Flow, until such amounts have been
reduced to zero, then
3. 100% of remaining
Residual Cash Flow, if any, to
reduce the AFCC Amount until the
AFCC Amount has been reduced to
zero, then
4. 50% of remaining
Residual Cash Flow, if any, to make
payments on the RVOs.
In addition to, and after giving
effect to, the allocation of
Residual Cash Flow described above,
on the second allocation date
following the final disposition of
all litigation giving rise to
Damages and the final determination
of all legal fees and expenses
related thereto, an amount equal to
the excess, if any, of (i) the
aggregate amount of Residual Cash
Flow allocated to reduce Litigation
Expenses pursuant to clause 2 above
(calculated after giving effect to
the allocation of Residual Cash
Flow described above on such
allocation date) over (ii) the
aggregate amount of Damages, shall
be allocated as follows:
1. 100% to reduce the AFCC
Amount (calculated after giving
effect to the allocation of
Residual Cash Flow described above
on such allocation date) until the
AFCC Amount has been reduced to
zero, then
2. 50% of remaining
Residual Cash Flow, if any, to make
payments on the RVOs.
Amounts allocated on an Allocation
Date to make payments on the RVOs
shall accrue interest from and
including such Allocation Date
through and including the day prior
to the payment of such amounts at
30-day LIBOR as in effect at the
end of the day on such Allocation
Date.
Exhibit A - Page 3
Notwithstanding the foregoing,
Parent shall not be required to
make payments on the RVOs on any
payment date if the amount of the
payment that would otherwise be
made on each RVO would be less than
$0.05. Any amounts not paid in
accordance with this paragraph
shall (i) be carried over to the
next payment date, (ii) continue to
accrue interest as provided in the
immediately preceding paragraph and
(iii) subject to the immediately
preceding sentence, be allocated
100% to make payments on the RVOs.
RESIDUAL CASH FLOW: "RESIDUAL CASH FLOW" means the cash
actually released from the "spread
accounts" established in connection
with the securitization
transactions listed on Annex 1 to
this Exhibit A on or after
September 30, 1999 and the cash
flow (net of losses, servicing
expenses and funding costs pursuant
to the terms of the related
securitization transactions) from
any receivables which were
securitized as of September 30,
1999 in connection with such
securitization transactions but are
no longer securitized for any
reason; PROVIDED, that Residual
Cash Flow shall be INCREASED on
each Distribution Date after the
Effective Time by the amount of
Litigation Reserve Interest, if
any, for the period ending on the
day prior to such Distribution Date
and beginning on the immediately
preceding Distribution Date; and,
PROVIDED, FURTHER, that Residual
Cash Flow shall be decreased on
each Distribution Date after
September 30, 1999 by all cash
actually released from the "spread
accounts" established in connection
with the securitization
transactions listed on Annex 1 to
this Exhibit A during the period
ending on the day prior to such
Distribution Date and beginning on
the immediately preceding
Distribution Date which cash is
contractually required to be
applied other than as provided
above under "Application of
Residual Cash Flow". In calculating
Residual Cash Flow, GAP insurance
will be included and repossession
expenses (other than repossession
expenses paid to an auction house)
will be excluded.
"LITIGATION RESERVE INTEREST", for
any period, means interest accrued
during such period on the excess,
if any, of (i) the aggregate amount
of Residual Cash Flow
Exhibit A - Page 4
allocated to reduce Litigation
Expenses over (ii) the aggregate
amount of Damages (such excess
being calculated as of the day
after the allocation date during
such period) at 30-day LIBOR as of
the end of the first day of such
period.
AFCC AMOUNT; AFCC AMOUNT "AFCC AMOUNT" means $512 million;
INTEREST : PROVIDED, that such amount shall be
(i) DECREASED on the Closing Date
by the amount of the Residual Cash
Flow generated on and after
September 30, 1999 and prior to the
Closing Date, (ii) INCREASED on
each Distribution Date by the
amount of AFCC Amount Interest for
the period ending on the day prior
to such Distribution Date and
beginning on the immediately
preceding Distribution Date and
(iii) DECREASED (but without
duplication of any decrease
pursuant to clause (i) above) on
each allocation date by the amount
of Residual Cash Flow allocated to
the reduction of the AFCC Amount on
such date as provided above under
"Application of Residual Cash
Flow".
"AFCC AMOUNT INTEREST", for any
period, means interest accrued
during such period at the rate of
1.25% per month on the AFCC Amount
as of the first day of such period
(after giving effect to any
increase in the AFCC Amount on such
date). AFCC Amount Interest shall
be calculated on a 30/360 day
basis.
LISTING: Parent shall use reasonable efforts
to arrange for the listing of the
RVOs on a national securities
exchange.
NUMBER OF RVOS TO BE ISSUED: In accordance with the Agreement to
which this Exhibit A is attached.
The RVOs shall be issued pursuant
to a RVO agreement between Parent
and a trustee (or person acting in
a similar capacity) reasonably
acceptable to Company.
MINIMUM PAYMENT: None.
Exhibit A - Page 5
DETERMINATIONS: Parent's determination of all
amounts and other matters shall be
final and conclusive in the absence
of manifest error; PROVIDED, that
Parent shall engage its independent
auditors to review the calculations
and determinations made by Parent
to the same extent as Parent
engages its independent auditors to
perform a similar function with
respect to securitization
transactions effected by or for the
benefit of Parent and its
Subsidiaries.
All interest amounts other than
AFCC Amount Interest shall be
calculated on the basis of the
actual number of days elapsed and a
360-day year.
SERVICING: Parent shall, or shall
cause its affiliates to, service or
arrange for the servicing of the
receivables giving rise to Residual
Cash Flow in accordance with
customary business practices and
Parent's applicable policies and
procedures and, if Parent or any of
its Subsidiaries is then servicing,
or arranging for the servicing of,
indirectly originated automobile
loans, consistent with such
servicing.
CLEAN-UP CALL: Parent shall have an option to
purchase for fair value (as
determined in good faith by Parent)
all outstanding RVOs at any time
when the amount of the receivables
remaining in the securitization
trusts listed in Annex 1 to this
Exhibit A is less than or equal to
5% of the amount of the receivables
remaining in the securitization
Trusts listed in
Annex 1 to this Exhibit A as of the
Closing Date.
DEFINITIONS:
TERMS NOT DEFINED Capitalized terms used in this
Exhibit A without definition shall
have the definitions assigned
thereto in the Agreement to which
this Exhibit A is attached.
DISTRIBUTION DATE: Each "distribution date" in
connection with the securitization
transactions listed on Annex 1 to
this
Exhibit A - Page 6
Exhibit A.
RVO EXPENSES: "RVO EXPENSES" means the sum of (i)
the out-of-pocket fees and expenses
paid or incurred directly or
indirectly by Parent relating to
the issuance and administration of
the RVOs (including, without
limitation, fees and expenses of
printing certificates representing
the RVOs; fees and expenses of the
transfer agent and
registrar/trustee for the RVOs; and
related legal expenses), but
excluding accounting fees and
expenses, audit fees, if any, and
the fees and expenses relating to
the listing of the RVOs on a
national securities exchange and
(ii) the reasonable actual or
reasonably imputed cost to Parent
of providing alternative credit
support in connection with the
early release of cash from the
"spread accounts" established in
connection with the securitization
transactions listed on Annex 1 to
this Exhibit A; PROVIDED, that the
costs referenced in this clause
(ii) shall be included as RVO
Expenses as such costs are incurred
(or deemed to be incurred if
imputed) or, at Parent's election,
in a lump sum calculated on a
present value basis (discounted at
the rate of 1.25% per month) at the
time of the related release of
cash.
LITIGATION EXPENSES; LITIGATION INTEREST: "LITIGATION EXPENSES" means the sum
of (i) $10,000,000 and (ii) the,
amount of all damages, judgments,
settlements, defense costs and
other expenses paid or incurred by
Company, Parent or any of their
Affiliates after the date of the
Agreement to which this Exhibit A
is attached in connection with any
litigation brought by or on behalf
of shareholders of Company or by or
in the right of Company, net of
insurance proceeds, if any (the
amount referred to in this clause
(ii) being referred to herein as,
"DAMAGES"); PROVIDED, that the
aggregate amount of the Damages
shall be deemed to be INCREASED on
each Distribution Date by the
amount of Litigation Interest for
the period ending on the day prior
to such Distribution Date and
beginning on the immediately
preceding Distribution Date.
"LITIGATION INTEREST", for any
period, means interest accrued
during such period on the amount of
Damages as
Exhibit A - Page 7
of the first day of such period
(after giving effect to any
increase in Damages on such date)
at 30-day LIBOR as of the end of
the first day of such period.
Exhibit A - Page 8
Olympic Automobile Receivables Trust, 1994-B
Olympic Automobile Receivables Trust, 1995-A
Olympic Automobile Receivables Trust, 1995-B
Olympic Automobile Receivables Trust, 1995-C
Olympic Automobile Receivables Trust, 1995-D
Olympic Automobile Receivables Trust, 1995-E
Olympic Automobile Receivables Trust, 1996-A
Olympic Automobile Receivables Trust, 1996-B
Olympic Automobile Receivables Trust, 1996-C
Olympic Automobile Receivables Trust, 1996-D
Olympic Automobile Receivables Trust, 1997-A
Arcadia Automobile Receivables Trust, 1997-B
Arcadia Automobile Receivables Trust, 1997-C
Arcadia Automobile Receivables Trust, 1997-D
Arcadia Automobile Receivables Trust, 1998-A
Arcadia Automobile Receivables Trust, 1998-B
Arcadia Automobile Receivables Trust, 1998-C
Arcadia Automobile Receivables Trust, 1998-D
Arcadia Automobile Receivables Trust, 1998-E
Arcadia Automobile Receivables Trust, 1999-A
Arcadia Automobile Receivables Trust, 1999-B
Arcadia Automobile Receivables Trust, 1999-C
EXHIBIT B
AGREED UPON PROCEDURES
E&Y shall test sample selections of customer account information and
determine such accounts are correctly reflected in Company's books and records
(both serviced and owned accounts).
E&Y shall perform a test of Company's system's ability to accurately
age, recompute the interest amortization and the reduction of principal on
customer accounts.
