AGREEMENT
AND PLAN OF MERGER
AGREEMENT
AND PLAN OF MERGER, dated as of September 15, 2008 (this “Agreement”), by and
between Merrill Lynch & Co., Inc., a Delaware corporation (“Company”), and Bank
of America Corporation, a Delaware corporation (“Parent”).
W I T N E
S S E T H:
WHEREAS,
promptly following the execution of this Agreement, Parent shall form a new
wholly owned subsidiary (“Merger Sub”) as a
Delaware corporation, and Parent shall cause Merger Sub to, and Merger Sub
shall, sign a joinder agreement to this Agreement and be bound
hereunder;
WHEREAS,
the Boards of Directors of Company, Parent and Merger Sub have determined that
it is in the best interests of their respective companies and their stockholders
to consummate the strategic business combination transaction provided for in
this Agreement in which Merger Sub will, on the terms and subject to the
conditions set forth in this Agreement, merge with and into Company (the “Merger”), with
Company as the surviving company in the Merger (sometimes referred to in such
capacity as the “Surviving
Company”);
WHEREAS,
for federal income Tax purposes, it is the intent of the parties hereto that the
Merger shall qualify as a “reorganization” within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the “Code”), and this
Agreement is intended to be and is adopted as a “plan of reorganization” for
purposes of Sections 354 and 361 of the Code;
WHEREAS, as an inducement and condition
to the entrance of Bank of America into this Agreement, Company is granting to
Bank of America an option pursuant to a stock option agreement in the form set
forth in Exhibit A (the “Stock Option
Agreement”); and
WHEREAS,
the parties desire to make certain representations, warranties and agreements in
connection with the Merger and also to prescribe certain conditions to the
Merger.
NOW,
THEREFORE, in consideration of the mutual covenants, representations, warranties
and agreements contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties agree as follows:
ARTICLE
I
THE
MERGER
1.1 The
Merger. (a) Subject to the terms and conditions of
this Agreement, in accordance with the Delaware General Corporation Law (the
“DGCL”), at the
Effective Time, Merger Sub shall merge with and into Company. Company
shall be the Surviving Company in the Merger and shall continue its existence as
a corporation under the laws of the State of Delaware. As of the
Effective Time, the separate corporate existence of Merger Sub shall
cease.
(b)
Parent may at any time change the method of effecting the combination (including
by providing for the merger of Company and a wholly-owned subsidiary of Parent
other than Merger Sub) if and to the extent requested by Parent; provided, however, that no such
change shall (i) alter or change the amount or kind of the Merger Consideration
provided for in this Agreement, (ii) adversely affect the Tax treatment of
Company’s stockholders as a result of receiving the Merger Consideration or the
Tax treatment of either party pursuant to this Agreement or (iii) impede or
delay consummation of the transactions contemplated by this
Agreement.
1.2 Effective
Time. The Merger shall become effective as set forth in the
certificate of merger (the “Certificate of
Merger”) that shall be filed with the Secretary of State of the State of
Delaware on the Closing Date. The term “Effective Time” shall
be the date and time when the Merger becomes effective as set forth in the
Certificate of Merger.
1.3 Effects of the
Merger. At and after the Effective Time, the Merger shall have
the effects set forth in the DGCL.
1.4 Conversion of
Stock. At the Effective Time, by virtue of the Merger and
without any action on the part of Parent, Merger Sub, Company or the holder of
any of the following securities:
(a) Each
share of common stock, par value $1.00 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and nonassessable share of common stock,
par value $1.33 1/3 per share, of the Surviving Company. From
and after the Effective Time, all certificates representing the common stock of
Merger Sub shall be deemed for all purposes to represent the number of shares of
common stock of the Surviving Company into which they were converted in
accordance with the immediately preceding sentence.
(b) All
shares of common stock, par value $1.33 1/3 per share, of Company issued
and outstanding immediately prior to the Effective Time (the “Company Common
Stock”) that are owned by Company or Parent (other than shares of Company
Common Stock held in trust accounts, managed accounts, mutual funds and the
like, or otherwise held in a fiduciary or agency capacity, that are beneficially
owned by third parties (any such shares, “Trust Account Common
Shares”) and other than shares of Company Common Stock held, directly or
indirectly, by Company or Parent in respect of a debt previously contracted (any
such shares, “DPC
Common Shares”)) shall be cancelled and shall cease to exist and no stock
of Parent or other consideration shall be delivered in exchange
therefor. All shares of Company Common Stock held by any wholly-owned
subsidiary of Company or Parent shall be converted into such number of shares of
stock of the Surviving Company such that each such subsidiary owns the same
percentage of the outstanding common stock of the Surviving Company immediately
following the Effective Time as such subsidiary owned in Company immediately
prior to the Effective Time.
(c) Subject
to Section 1.4(f), each share of Company Common Stock, except for shares of
Company Common Stock owned by Company or Parent (other than Trust Account Common
Shares and DPC Common Shares), shall be converted, in accordance with
the
procedures
set forth in Article II, into the right to receive 0.8595 (the “Exchange Ratio”) of a
share of common stock, par value $0.01 per share, of Parent (“Parent Common Stock”)
(the “Merger
Consideration”).
(d) All of
the shares of Company Common Stock converted into the right to receive the
Merger Consideration pursuant to this Article I shall no longer be outstanding
and shall automatically be cancelled and shall cease to exist as of the
Effective Time, and each certificate previously representing any such shares of
Company Common Stock (each, a “Certificate”) shall
thereafter represent only the right to receive the Merger Consideration and/or
cash in lieu of fractional shares into which the shares of Company Common Stock
represented by such Certificate have been converted pursuant to this Section 1.4
and Section 2.3(f), as well as any dividends to which holders of Company Common
Stock become entitled in accordance with Section 2.3(c).
(e) (i)
Each share of the Specified Series (as hereinafter defined) of Company Preferred
Stock outstanding immediately prior to the Effective Time shall automatically be
converted into a share of preferred stock of Parent having rights, privileges,
powers and preferences substantially identical to those of the relevant
Specified Series. (ii) Each share of the Convertible Series (as
hereinafter defined) of Company Preferred Stock outstanding immediately prior to
the Effective Time shall remain issued and outstanding and shall have the
rights, privileges, powers and preferences as set forth in the Surviving
Company’s certificate of incorporation, as amended as provided in Section
1.6.
(f) If,
between the date of this Agreement and the Effective Time, the outstanding
shares of Parent Common Stock shall have been increased, decreased, changed into
or exchanged for a different number or kind of shares or securities as a result
of a reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split, or other similar change in capitalization, an
appropriate and proportionate adjustment shall be made to the Merger
Consideration.
1.5 Stock Options and Other
Stock-Based Awards; ESPP.
(a) As of the
Effective Time, by virtue of the Merger and without any action on the part of
the holders thereof, each option to purchase shares of Company Common Stock
granted under the Long-Term Incentive Compensation Plan for Managers and
Producers, as amended through October 22, 2007, the Long-Term Incentive
Compensation Plan, as amended through October 22, 2007, the Employee Stock
Compensation Plan, as amended through October 22, 2007, the Equity Capital
Accumulation Plan, the Deferred Restricted Unit Plan for Executive Officers, the
First Republic Employee Stock Option Plan, as amended and restated, the First
Republic 1998 Stock Option Plan, as amended and restated, and the Deferred Stock
Unit Plan for Non-Employee Directors (collectively, the “Company Stock Plans”)
that is outstanding immediately prior to the Effective Time (collectively, the
“Company
Options”) shall be converted into an option (an “Adjusted Option”) to
purchase, the number of whole shares of Parent Common Stock that is equal to the
number of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio
(rounded down to the nearest whole share), at an exercise price per share of
Parent Common Stock (rounded up to the nearest whole penny) equal to the
exercise price for each such
share of
Company Common Stock subject to such Company Option immediately prior to the
Effective Time divided by the Exchange Ratio, and otherwise on the same terms
and conditions (including applicable vesting requirements and any accelerated
vesting thereof) as applied to each such Company Option immediately prior to the
Effective Time provided, that, in
the case of any Company Option to which Section 421 of the Code applies as of
the Effective Time by reason of its qualification under Section 422 of the Code,
the exercise price, the number of shares of Parent Common Stock subject to such
option and the terms and conditions of exercise of such option shall be
determined in a manner consistent with the requirements of Section 424(a) of the
Code.
(b) As of the
Effective Time, each restricted share of Company Common Stock granted under a
Company Stock Plan that is outstanding immediately prior to the Effective Time
(collectively, the “Company Restricted
Shares”) shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into a restricted share with respect to
the number of shares of Parent Common Stock that is equal to the number of
shares of Company Common Stock subject to the Company Restricted Share
immediately prior to the Effective Time multiplied by the Exchange Ratio
(rounded to the nearest whole share) (a “Parent Restricted
Share”), and otherwise on the same terms and conditions (including
applicable vesting requirements and any accelerated vesting thereof) as applied
to each such Company Restricted Share immediately prior to the Effective
Time.
(c) As of the
Effective Time, each restricted share unit with respect to shares of Company
Common Stock granted under a Company Stock Plan that is outstanding immediately
prior to the Effective Time (collectively, the “Company RSUs”) shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into a restricted share unit with respect to the number of
shares of Parent Common Stock that is equal to the number of shares of Company
Common Stock subject to the Company RSU immediately prior to the Effective Time
multiplied by the Exchange Ratio (rounded to the nearest whole share) (a “Parent RSU”), and
otherwise on the same terms and conditions (including applicable vesting
requirements, any accelerated vesting thereof and deferral provisions) as
applied to each such Company RSU immediately prior to the Effective
Time. The obligations in respect of the Parent RSUs shall be payable
or distributable in accordance with the terms of the agreement, plan or
arrangement relating to such Parent RSUs.
(d) As of the
Effective Time, each share unit with respect to shares of Company Common Stock
granted under the Financial Advisor Capital Accumulation Award Plan, as amended
through October 22, 2007 (the “Company Cap Plan”)
that is outstanding immediately prior to the Effective Time (collectively, the
“Company Cap
Units”) shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into a share unit with respect to the number
of shares of Parent Common Stock that is equal to the number of shares of
Company Common Stock subject to the Company Cap Unit immediately prior to the
Effective Time multiplied by the Exchange Ratio (rounded to the nearest whole
share) (a “Parent Cap
Unit”), and otherwise on the same terms and conditions (including
applicable vesting requirements, accelerated vesting thereof and deferral
provisions) as applied to such Company Cap Units immediately prior to the
Effective Time. The obligations in respect of the Parent Cap Units
shall be payable or distributable in accordance with the terms of the agreement,
plan or arrangement relating to such Parent Cap Units.
(e) As of the
Effective Time, all amounts denominated in Company Common Stock and held in
participant accounts (other than Company RSUs and Company Cap Units)
(collectively, the “Company Deferred Equity
Units”) either pursuant to (i) the Company Stock Plans or (ii) any
nonqualified deferred compensation program or any individual deferred
compensation agreements (the “Company Deferred Equity Unit
Plans”) shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into deferred equity units with respect to
the number of shares of Parent Common Stock that is equal to the number of
shares of Company Common Stock in which such Company Deferred Equity Units are
denominated immediately prior to the Effective Time multiplied by the Exchange
Ratio (rounded to the nearest whole share) (a “Parent Deferred Equity
Unit”), and otherwise on the same terms and conditions (including
applicable vesting requirements, accelerated vesting thereof and deferral
provisions) as applied to such Company Deferred Equity Units immediately prior
to the Effective Time. The obligations in respect of the Parent
Deferred Equity Units shall be payable or distributable in accordance with the
terms of the Company Stock Plan or Company Deferred Equity Unit Plan relating to
such Parent Deferred Equity Units.
(f) As of the
Effective Time, Parent shall assume the obligations and succeed to the rights of
Company under the Company Stock Plans, the Company Cap Plan and the Company
Deferred Equity Unit Plans with respect to the Company Options (as converted
into Adjusted Options), the Company Restricted Shares (as converted into Parent
Restricted Shares), the Company RSUs (as converted into Parent RSUs), the
Company Deferred Equity Units (as converted into Parent Deferred Equity Units)
and the Company Cap Units (as converted into Parent Cap
Units). Company and Parent agree that prior to the Effective Time
each of the Company Stock Plans, the Company Cap Plan and the Company Deferred
Equity Unit Plans shall be amended (i) to reflect the transactions contemplated
by this Agreement, including the conversion of the Company Options, Company
Restricted Shares, Company RSUs, Company Cap Units and Company Deferred Equity
Units pursuant to paragraphs (a), (b), (c), (d) and (e) above and the
substitution of Parent for Company thereunder to the extent appropriate to
effectuate the assumption of such Company Stock Plans, the Company Cap Plan and
the Company Deferred Equity Unit Plans by Parent, (ii) to preclude any automatic
or formulaic grant of options, restricted shares or other awards thereunder on
or after the Effective Time, and (iii) to the extent requested by Parent and
subject to compliance with applicable law and the terms of the plan, to
terminate any or all Company Stock Plans, the Company Cap Plan and the Company
Deferred Equity Unit Plans effective immediately prior to the Effective Time
(other than with respect to outstanding awards thereunder). From and
after the Effective Time, all references to Company (other than any references
relating to a “Change in Control” of Company) in each Company Stock Plan, the
Company Cap Plan and each Company Deferred Equity Unit Plan and in each
agreement evidencing any award of Company Options, Company Restricted Shares,
Company RSUs, Company Cap Units or Company Deferred Equity Units shall be deemed
to refer to Parent, unless Parent in good faith determines
otherwise.
(g) Company
shall, prior to the Effective Time, take all actions necessary to terminate the
1986 Employee Stock Purchase Plan (the “Company ESPP”)
effective as of the Effective Time and all outstanding rights thereunder at the
Effective Time. The offering period in effect as of immediately prior
to the Effective Time shall end and each participant in the Company ESPP will be
credited with the number of share(s) of Company Common Stock
purchased
for his or her account(s) under the Company ESPP in respect of the applicable
offering period in accordance with the terms of the Company ESPP.
(h) Prior to
the Effective Time, the Company, the Board of Directors of the Company and the
Compensation Committee of the Board of Directors of the Company, as applicable,
shall adopt resolutions and take all other actions necessary to effectuate the
provisions of this Section 1.5 and to ensure that, notwithstanding anything to
the contrary, following the Effective Time, no service provider of the Company
and its Subsidiaries shall have any right to acquire any securities of the
Company, the Surviving Company or any Subsidiary thereof or to receive any
payment, right or benefit with respect to any award previously granted under the
Company Stock Plans (whether hereunder, under any Company Stock Plan or
individual award agreement or otherwise) except the right to receive an Adjusted
Option, Parent RSU, Parent Restricted Share, Parent Cap Unit or Parent Deferred
Equity Unit or a payment, right or benefit with respect thereto as provided in
this Section 1.5.
1.6 Certificate of Incorporation
and Bylaws of the Surviving Company. At the Effective Time,
the certificate of incorporation of the Company in effect immediately prior to
the Effective Time (as amended effective immediately prior to the Effective Time
to give effect to the modifications set forth on Exhibit B hereto (such
modifications the “Certificate
Amendment”)) shall be the certificate of incorporation of the Surviving
Company until thereafter amended in accordance with applicable
law. The bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Company until thereafter
amended in accordance with applicable law and the terms of such
bylaws.
1.7 Directors and
Officers. The directors of Company and its Subsidiaries
immediately prior to the Effective Time shall submit their resignations to be
effective as of the Effective Time. The directors, if any, and
officers of Merger Sub shall, from and after the Effective Time, become the
directors and officers, respectively, of the Surviving Company until their
successors shall have been duly elected, appointed or qualified or until their
earlier death, resignation or removal in accordance with the certificate of
incorporation of the Surviving Company. At the Effective Time, the number of
directors constituting the whole board of directors of Parent shall be increased
by three (3) and the board of directors of Parent shall consist of (a) those
directors of Parent who are serving thereon immediately prior to the Effective
Time, and (b) three (3) directors as mutually agreed to by Parent and Company
from among those individuals serving as directors of Company immediately prior
to the Effective Time.
1.8 Tax
Consequences. It is intended that the Merger shall constitute
a “reorganization” within the meaning of Section 368(a) of the Code, and that
this Agreement shall constitute, and is adopted as, a “plan of reorganization”
for purposes of Sections 354 and 361 of the Code.
ARTICLE
II
DELIVERY
OF MERGER CONSIDERATION
2.1 Exchange
Agent. Prior to the Effective Time, Parent shall appoint a
bank or trust company Subsidiary of Parent or another bank or trust company
reasonably acceptable to
Company,
or Parent’s transfer agent, pursuant to an agreement (the “Exchange Agent
Agreement”) to act as exchange agent (the “Exchange Agent”)
hereunder.
2.2 Deposit of Merger
Consideration. At or prior to the Effective Time, Parent shall
(i) authorize the Exchange Agent to issue an aggregate number of shares of
Parent Common Stock equal to the aggregate Merger Consideration, and (ii)
deposit, or cause to be deposited with, the Exchange Agent, to the extent then
determinable, any cash payable in lieu of fractional shares pursuant to Section
2.3(f) (the “Exchange
Fund”).
2.3 Delivery of Merger
Consideration.
(a) As soon
as reasonably practicable after the Effective Time, the Exchange Agent shall
mail to each holder of record of Certificate(s) which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 1.4 and any cash in lieu of fractional shares of Parent
Common Stock to be issued or paid in consideration therefor (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to Certificate(s) shall pass, only upon delivery of
Certificate(s) (or affidavits of loss in lieu of such Certificates) to the
Exchange Agent and shall be substantially in such form and have such other
provisions as shall be prescribed by the Exchange Agent Agreement (the “Letter of
Transmittal”)) and (ii) instructions for use in surrendering
Certificate(s) in exchange for the Merger Consideration, any cash in lieu of
fractional shares of Parent Common Stock to be issued or paid in consideration
therefor and any dividends or distributions to which such holder is entitled
pursuant to Section 2.3(c).
(b) Upon
surrender to the Exchange Agent of its Certificate or Certificates, accompanied
by a properly completed Letter of Transmittal, a holder of Company Common Stock
will be entitled to receive promptly after the Effective Time the Merger
Consideration and any cash in lieu of fractional shares of Parent Common Stock
to be issued or paid in consideration therefor in respect of the shares of
Company Common Stock represented by its Certificate or
Certificates. Until so surrendered, each such Certificate shall
represent after the Effective Time, for all purposes, only the right to receive,
without interest, the Merger Consideration and any cash in lieu of fractional
shares of Parent Common Stock to be issued or paid in consideration therefor
upon surrender of such Certificate in accordance with, and any dividends or
distributions to which such holder is entitled pursuant to, this Article
II.
(c) No
dividends or other distributions with respect to Parent Common Stock shall be
paid to the holder of any unsurrendered Certificate with respect to the shares
of Parent Common Stock represented thereby, in each case unless and until the
surrender of such Certificate in accordance with this Article
II. Subject to the effect of applicable abandoned property, escheat
or similar laws, following surrender of any such Certificate in accordance with
this Article II, the record holder thereof shall be entitled to receive, without
interest, (i) the amount of dividends or other distributions with a record date
after the Effective Time theretofore payable with respect to the whole shares of
Parent Common Stock represented by such Certificate and not paid and/or (ii) at
the appropriate payment date, the amount of dividends or other distributions
payable with respect to shares of Parent Common Stock represented by such
Certificate with a record date after the Effective Time (but before such
surrender date) and with a
payment
date subsequent to the issuance of the Parent Common Stock issuable with respect
to such Certificate.
(d) In the
event of a transfer of ownership of a Certificate representing Company Common
Stock that is not registered in the stock transfer records of Company, the
fractional shares of Parent Common Stock and cash in lieu of fractional shares
of Parent Common Stock comprising the Merger Consideration shall be issued or
paid in exchange therefor to a person other than the person in whose name the
Certificate so surrendered is registered if the Certificate formerly
representing such Company Common Stock shall be properly endorsed or otherwise
be in proper form for transfer and the person requesting such payment or
issuance shall pay any transfer or other similar Taxes required by reason of the
payment or issuance to a person other than the registered holder of the
Certificate or establish to the satisfaction of Parent that the Tax has been
paid or is not applicable. The Exchange Agent (or, subsequent to the
earlier of (x) the one-year anniversary of the Effective Time and (y) the
expiration or termination of the Exchange Agent Agreement, Parent) shall be
entitled to deduct and withhold from any cash in lieu of fractional shares of
Parent Common Stock otherwise payable pursuant to this Agreement to any holder
of Company Common Stock such amounts as the Exchange Agent or Parent, as the
case may be, is required to deduct and withhold under the Code, or any provision
of state, local or foreign Tax law, with respect to the making of such
payment. To the extent the amounts are so withheld by the Exchange
Agent or Parent, as the case may be, and timely paid over to the appropriate
Governmental Entity, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of shares of Company Common
Stock in respect of whom such deduction and withholding was made by the Exchange
Agent or Parent, as the case may be.
(e) After the
Effective Time, there shall be no transfers on the stock transfer books of
Company of the shares of Company Common Stock that were issued and outstanding
immediately prior to the Effective Time other than to settle transfers of
Company Common Stock that occurred prior to the Effective Time. If,
after the Effective Time, Certificates representing such shares are presented
for transfer to the Exchange Agent, they shall be cancelled and exchanged for
the Merger Consideration and any cash in lieu of fractional shares of Parent
Common Stock to be issued or paid in consideration therefor in accordance with
the procedures set forth in this Article II.
(f) Notwithstanding
anything to the contrary contained in this Agreement, no fractional shares of
Parent Common Stock shall be issued upon the surrender of Certificates for
exchange, no dividend or distribution with respect to Parent Common Stock shall
be payable on or with respect to any fractional share, and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights of
a stockholder of Parent. In lieu of the issuance of any such
fractional share, each former stockholder of Company who otherwise would be
entitled to receive such fractional share shall be paid an amount in cash
(rounded to the nearest cent) equal to such holder’s proportionate interest in
the net proceeds from the sale or sales in the open market by the Exchange
Agent, on behalf of all such holders, of the aggregate fractional shares of
Parent Common Stock that would otherwise have been issued pursuant to this
Article II. As soon as practicable following the Closing Date, the
Exchange Agent shall determine the excess of (i) the number of full shares of
Parent Common Stock delivered to the Exchange Agent by Parent over (ii) the
aggregate number of full shares of Parent Common Stock to be distributed
to
holders
of shares of Company Common Stock (such excess, the “Excess Shares”), and
the Exchange Agent, as agent for the former holders of Company Common Stock,
shall sell the Excess Shares at the prevailing prices on the New York Stock
Exchange (the “NYSE”). The
sale of the Excess Shares by the Exchange Agent shall be executed on the NYSE
through one or more member firms of the NYSE and shall be executed in round lots
to the extent practicable. All commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of Excess Shares shall
reduce, but not below zero, the amount of cash paid to former stockholders of
Company in respect of fractional shares. The Exchange Agent shall
determine the portion of the proceeds of such sale to which each former holder
of Company Common Stock shall be entitled, if any, by multiplying the amount of
the proceeds of such sale by a fraction the numerator of which is the amount of
fractional share interests to which such holder of Company Common Stock is
entitled (after taking into account all shares of Company Common Stock held at
the Effective Time by such holder) and the denominator of which is the aggregate
amount of fractional share interests to which all holders of Company Common
Stock are entitled. Until the proceeds of such sale have been
distributed to the former holders of shares of Company Common Stock, the
Exchange Agent will hold such proceeds in trust for such former
holders. As soon as practicable after the determination of the amount
of cash to be paid to such former holders of shares of Company Common Stock in
lieu of any fractional interests, the Exchange Agent shall make available in
accordance with this Agreement such amounts to such former holders of shares of
Company Common Stock.
(g) Any
portion of the Exchange Fund that remains unclaimed by the stockholders of
Company as of the first anniversary of the Effective Time may be paid to
Parent. In such event, any former stockholders of Company who have
not theretofore complied with this Article II shall thereafter look only to
Parent with respect to the Merger Consideration, any cash in lieu of any
fractional shares and any unpaid dividends and distributions on the Parent
Common Stock deliverable in respect of each share of Company Common Stock such
stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon. Notwithstanding the foregoing, none of
Parent, the Surviving Company, the Exchange Agent or any other person shall be
liable to any former holder of shares of Company Common Stock for any amount
delivered in good faith to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(h) In the
event any Certificate shall have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if reasonably required by Parent or the Exchange Agent,
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 Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration deliverable
in respect thereof pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF COMPANY
Except
(i) as disclosed in any report, schedule, form or other document filed with, or
furnished to, the SEC by Company and publicly available prior to the date of
this Agreement (excluding, in each case, any disclosures set forth in any risk
factor section and in any section relating to forward-looking statements to the
extent that they are cautionary, predictive or forward-looking in nature), or
(ii) as disclosed in the disclosure schedule (the “Company Disclosure
Schedule”) delivered by Company to Parent prior to the execution of this
Agreement (which schedule sets forth, among other things, items the disclosure
of which is necessary or appropriate either in response to an express disclosure
requirement contained in a provision hereof or as an exception to one or more
representations or warranties contained in this Article III, or to one or more
of Company’s covenants contained herein, provided, however, that
disclosure in any section of such schedule shall apply only to the indicated
Section of this Agreement except to the extent that it is reasonably apparent on
the face of such disclosure that such disclosure is relevant to another Section
of this Agreement, provided, further, that
notwithstanding anything in this Agreement to the contrary, (i) no such item is
required to be set forth in such schedule as an exception to a representation or
warranty if its absence would not result in the related representation or
warranty being deemed untrue or incorrect under the standard established by
Section 9.2 and (ii) the mere inclusion of an item in such schedule as an
exception to a representation or warranty shall not be deemed an admission that
such item represents a material exception or material fact, event or
circumstance or that such item has had or would be reasonably likely to have a
Material Adverse Effect (as defined in Section 3.8) on Company), Company hereby
represents and warrants to Parent as follows:
3.1 Corporate
Organization.
(a) Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware. Company has the 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 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.
(b) True,
complete and correct copies of the Restated Certificate of Incorporation of
Company (the “Company
Certificate”), and the Amended and Restated Bylaws of Company (the “Company Bylaws”), as
in effect as of the date of this Agreement, have previously been made available
to Parent.
(c) Each
Subsidiary of Company (i) is duly incorporated or duly formed, as applicable to
each such Subsidiary, and validly existing and in good standing under the laws
of its jurisdiction of organization, (ii) has the requisite corporate power and
authority or other 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 (iii) is
duly licensed or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary. As used in this
Agreement,
the word “Subsidiary”, when
used with respect to either party, means any bank, corporation, partnership,
limited liability company or other organization, whether incorporated or
unincorporated, with respect to which such party owns, directly or indirectly,
50 percent or more of the equity interests or such party has the power to elect
50 percent or more of the directors or equivalent governing
persons.
(d) The
minute books of Company previously made available to Parent contain true,
complete and correct records of all meetings and other corporate actions held or
taken since January 1, 2007 of its stockholders and Board of Directors and the
audit committee of its Board of Directors.
3.2 Capitalization. (a) The
authorized capital stock of Company consists of 3,000,000,000 shares of common
stock, par value $1.33 ⅓ per share, of which, as of August 29,
2008 (the “Company
Capitalization Date”), 1,529,754,261 shares were issued and outstanding,
and 25,000,000 shares of preferred stock, par value $1.00 per share (the “Company Preferred
Stock”), of which, as of the Company Capitalization Date, (i) 50,000
shares are designated as “Floating Rate Non-Cumulative Preferred Stock, Series
1”, 21,000 of which were outstanding, (ii) 50,000 shares are designated as
“Floating Rate Non-Cumulative Preferred Stock, Series 2”, 37,000 of which were
outstanding, (iii) 43,333 shares are designated as “6.375% Non-Cumulative
Preferred Stock, Series 3”, 27,000 of which were outstanding, (iv) 23,333 shares
are designated as “Floating Rate Non-Cumulative Preferred Stock, Series 4”,
20,000 of which were outstanding; (v) 50,000 shares of Preferred Stock are
designated as “Floating Rate Non-Cumulative Preferred Stock, Series 5”, 50,000
of which were outstanding, (vi) 65,000 shares are designated as “6.70%
Non-Cumulative Perpetual Preferred Stock, Series 6”, 65,000 of which were
outstanding, (vii) 50,000 shares are designated as “6.25% Non-Cumulative
Perpetual Preferred Stock, Series 7”, 50,000 of which were outstanding, (viii)
97,750 shares are designated as “8.625% Non-Cumulative Preferred Stock,
Series 8”, 89,100 of which were outstanding (clauses (i) through (viii)
collectively, the “Specified Series”),
(ix) 66,000 shares are designated as “9.00% Non-Voting Mandatory Convertible
Non-Cumulative Preferred Stock, Series 1”, none of which were outstanding,
(x) 12,000 shares are designated as “9.00% Non-Voting Mandatory Convertible
Non-Cumulative Preferred Stock, Series 2”, 12,000 of which were outstanding
and (xi) 5,000 shares are designated as “9.00% Non-Voting Mandatory Convertible
Non-Cumulative Preferred Stock, Series 3”, 5,000 of which were outstanding
(clauses (x) and (xi) collectively, the “Convertible
Series”). As of the Company Capitalization Date, the Company
held 432,087,182 shares of Company Common Stock in its treasury. As
of the Company Capitalization Date, no shares of Company Common Stock or Company
Preferred Stock were reserved for issuance except for (i) 214,909,111 shares of
Company Common Stock reserved for issuance in connection with existing awards
under employee benefit, stock option and dividend reinvestment and stock
purchase plans and 83,849,895 shares of Company Common Stock reserved for
issuance in connection with future awards that have not yet been made under
employee benefit, stock option and dividend reinvestment and stock purchase
plans, (ii) 1,778,120 shares of Company Common Stock reserved for issuance in
connection with Exchangeable Shares issued by Merrill Lynch & Co. Canada
Ltd, (iii) 31,788,990 shares of Company Common Stock reserved for issuance upon
the conversion of the Company’s zero-coupon contingent convertible debt (Liquid
Yield Option Notes), and (iv) an aggregate of 58,585,859 shares of Company
Common Stock reserved for issuance upon conversion of the series of Company
Preferred Stock listed in clauses (ix), (x) and (xi) of the first sentence of
this paragraph. As of the date of this
Agreement,
304,421,097 shares of Company Common Stock were reserved for issuance
pursuant to the Stock Option Agreement. All of the issued and
outstanding shares of Company Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. As of the date
of this Agreement, no bonds, debentures, notes or other indebtedness having the
right to vote on any matters on which shareholders of Company may vote (“Voting Debt”) are
issued or outstanding. As of the date of this Agreement, except
pursuant to this Agreement, and other than as set forth in Section 3.2(a) of the
Company Disclosure Schedule, the Company does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, rights, commitments or
agreements of any character calling for the purchase or issuance of, or the
payment of any amount based on, any shares of Company Common Stock, Company
Preferred Stock, Voting Debt or any other equity securities of Company or any
securities representing the right to purchase or otherwise receive any shares of
Company Common Stock, Company Preferred Stock, Voting Debt or other equity
securities of Company. As of the date of this Agreement, except
pursuant to this Agreement, and other than as set forth in Section 3.2(a) of the
Company Disclosure Schedule, there are no contractual obligations of Company or
any of its Subsidiaries (I) to repurchase, redeem or otherwise acquire any
shares of capital stock of Company or any equity security of Company or its
Subsidiaries or any securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity security of Company or
its Subsidiaries or (II) pursuant to which Company or any of its
Subsidiaries is or could be required to register shares of Company capital stock
or other securities under the Securities Act of 1933, as amended (the “Securities
Act”).
(b) Within
five business days following the date hereof, Company shall have provided Parent
with a true, complete and correct list of the aggregate number of shares of
Company Common Stock issuable upon the exercise of each Company Option and
settlement of each Company RSU, Company Cap Unit and Company Deferred Equity
Unit granted under the Company Stock Plans, Company Cap Plan or Company Deferred
Equity Unit Plans that were outstanding as of the Company Capitalization Date
and the weighted average exercise price for the Company
Options. Other than the Company Options, Company Restricted Shares,
Company RSUs, Company Cap Units and Company Deferred Equity Units that are
outstanding as of the Company Capitalization Date, no other equity-based awards
are outstanding as of the Company Capitalization Date. Since the Company
Capitalization Date through the date hereof, the Company has not (i) issued or
repurchased any shares of Company Common Stock, Company Preferred Stock, Voting
Debt or other equity securities of Company, other than the issuance of shares of
Company Common Stock in connection with the exercise of Company Options or
settlement of the Company RSUs, Company Cap Units or Company Deferred Equity
Units granted under the Company Stock Plans, Company Cap Plan or Company
Deferred Equity Unit Plans that were outstanding on the Company Capitalization
Date or (ii) issued or awarded any options, stock appreciation rights,
restricted shares, restricted stock units, deferred equity units, awards based
on the value of Company capital stock or any other equity-based awards under any
of the Company Stock Plans.
(c) Except
for any director qualifying shares, all of the issued and outstanding shares of
capital stock or other equity ownership interests of each Subsidiary of Company
are owned by Company, directly or indirectly, free and clear of any liens,
pledges, charges, claims and security interests and similar encumbrances (“Liens”), and all of
such shares or equity
ownership
interests are duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights. No Subsidiary of Company
has or is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of capital stock or any other equity security of such Subsidiary
or any securities representing the right to purchase or otherwise receive any
shares of capital stock or any other equity security of such
Subsidiary.
3.3 Authority; No
Violation. (a) Company has full corporate power and
authority to execute and deliver this Agreement and the Stock Option Agreement
and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Stock
Option Agreement and the consummation of the transactions contemplated hereby
and thereby (including the Certificate Amendment) have been duly, validly and
unanimously approved by the Board of Directors of Company. Such
unanimous approval by the Board of Directors is sufficient to render
inapplicable the provisions of Section 3 of Article VII of the Company
Certificate. The Board of Directors of Company has determined
unanimously that this Agreement is advisable and in the best interests of
Company and its stockholders and has directed that this Agreement be submitted
to Company’s stockholders for approval and adoption at a duly held meeting of
such stockholders and has adopted a resolution to the foregoing
effect. Except for the approval and 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 at such meeting, no other corporate
proceedings on the part of Company are necessary to approve this Agreement or
the Stock Option Agreement or to consummate the transactions contemplated hereby
or thereby. This Agreement and the Stock Option Agreement have been
duly and validly executed and delivered by Company and (assuming due
authorization, execution and delivery by Parent and Merger Sub) constitute the
valid and binding obligations of Company, enforceable against Company in
accordance with their terms (except as may be limited by bankruptcy, insolvency,
fraudulent transfer, moratorium, reorganization or similar laws of general
applicability relating to or affecting the rights of creditors generally and
subject to general principles of equity (the “Bankruptcy and Equity
Exception”)).
(b) Neither
the execution and delivery of this Agreement or the Stock Option Agreement 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 of
this Agreement or the Stock Option Agreement, will (i) violate any provision of
the Company Certificate or Company Bylaws or (ii) assuming that the consents,
approvals and filings referred to in Section 3.4 are duly obtained and/or made,
(A) violate any law, judgment, order, injunction or decree applicable to
Company, any of its Subsidiaries or any of their respective properties or assets
or (B) 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 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, license, lease, franchise, permit, Company Securitization
Document, agreement, bylaw or other instrument or obligation 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 is bound.
3.4 Consents and
Approvals. Except for (i) filings of applications and notices
with, and receipt of consents, authorizations, approvals, exemptions or
nonobjections from, the Securities and Exchange Commission (the “SEC”), NYSE, non-U.S.
and state securities authorities, the Financial Industry Regulatory Authority
(“FINRA”), the
Commodities and Futures Trading Commission (“CFTC”), the Federal
Energy Regulatory Commission (“FERC”), applicable
securities, commodities and futures exchanges, the United Kingdom Financial
Services Authority (“FSA”), and other
industry self-regulatory organizations (“SRO”), (ii) the
filing of an application (the “BHCA Application”)
with the Board of Governors of the Federal Reserve System (the “Federal Reserve
Board”) under Section 4 of the Bank Holding Company Act of 1956, as
amended (the “BHC
Act”) and approval of such application, (iii) the filing of any required
applications with the Federal Deposit Insurance Corporation (the “FDIC”), the Utah
Department of Financial Institutions, the New York State Banking Division and
any other non-U.S., federal or state banking, consumer finance, mortgage
banking, insurance or other regulatory, self-regulatory or enforcement
authorities or any courts, administrative agencies or commissions or other
governmental authorities or instrumentalities (each a “Governmental Entity”)
and approval of or non-objection to such applications, filings and notices
(taken together with the items listed in clauses (i) and (ii), the “Regulatory
Approvals”), (iv) the filing with the SEC of a Proxy Statement in
definitive form relating to the respective meetings of Company’s and Parent’s
stockholders to be held in connection with this Agreement and the transactions
contemplated by this Agreement (the “Joint Proxy
Statement”) and of a registration statement on Form S-4 (the “Form S-4”) in which
the Joint Proxy Statement will be included as a prospectus, and declaration of
effectiveness of the Form S-4, (v) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware pursuant to the DGCL, (vi) any
notices to or filings with the Small Business Administration (the “SBA”), (vii) any
notices or filings required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the “HSR Act”) and the
antitrust laws and regulations of any non-U.S. jurisdiction and (viii) such
filings and approvals as are required to be made or obtained under the
securities or “Blue Sky” laws of various states in connection with the issuance
of the shares of Parent Common Stock pursuant to this Agreement and approval of
listing of such Parent Common Stock on the NYSE, no consents or approvals of or
filings or registrations with any Governmental Entity are necessary in
connection with the consummation by Company of the Merger and the other
transactions contemplated by this Agreement or the Stock Option
Agreement. No consents or approvals of or filings or registrations
with any Governmental Entity are necessary in connection with the execution and
delivery by Company of this Agreement or the Stock Option
Agreement.
3.5 Reports; Regulatory
Matters.
(a) Company
and each of its Subsidiaries have timely filed all reports, registrations,
statements and certifications, together with any amendments required to be made
with respect thereto, that they were required to file since January 1, 2006 with
(i) FINRA, (ii) the SEC, (iii) the Office of Thrift Supervision (the “OTS”), (iv) the FDIC,
(v) the NYSE, (vi) any state consumer finance, mortgage banking or insurance
regulatory authority or agency, (vii) any non-U.S. regulatory authority and
(viii) any SRO (collectively, “Regulatory Agencies”)
and with each other applicable Governmental Entity, and all other reports and
statements required to be filed by them since January 1, 2006, including any
report or statement required to be filed pursuant to the laws, rules or
regulations of the United States, any state, any non-U.S. entity, or any
Regulatory Agency or other Governmental Entity, and have paid all fees and
assessments
due and
payable in connection therewith. Except for normal examinations
conducted by a Regulatory Agency or other Governmental Entity in the ordinary
course of the business of Company and its Subsidiaries, no Regulatory Agency or
other Governmental Entity has initiated since January 1, 2006 or has pending any
proceeding, enforcement action or, to the knowledge of Company, investigation
into the business, disclosures or operations of Company or any of its
Subsidiaries. Since January 1, 2006, no Regulatory Agency or other
Governmental Entity has resolved any proceeding, enforcement action or, to the
knowledge of Company, investigation into the business, disclosures or operations
of Company or any of its Subsidiaries. There is no unresolved, or, to
Company’s knowledge, threatened criticism, comment, exception or stop order by
any Regulatory Agency or other Governmental Entity with respect to any report or
statement relating to any examinations or inspections of Company or any of its
Subsidiaries. Since January 1, 2006, there have been no formal or
informal inquiries by, or disagreements or disputes with, any Regulatory Agency
or other Governmental Entity with respect to the business, operations, policies
or procedures of Company or any of its Subsidiaries (other than normal
examinations conducted by a Regulatory Agency or other Governmental Entity in
Company’s ordinary course of business).
(b) Neither
Company nor any of its Subsidiaries is subject to any cease-and-desist or other
order or formal or informal enforcement action issued by, or is a party to any
written agreement, consent agreement or memorandum of understanding with, or is
a party to any commitment letter or similar undertaking to, or is subject to any
order or directive by, or has been ordered to pay any civil money penalty by, or
has been since January 1, 2006 a recipient of any supervisory letter from, or
since January 1, 2006 has adopted any policies, procedures or board resolutions
at the request or suggestion of, any Regulatory Agency or other Governmental
Entity that currently restricts or affects in any material respect the conduct
of its business (or to Company’s knowledge that, upon consummation of the
Merger, would restrict in any material respect the conduct of the business of
Parent or any of its Subsidiaries), or that in any material manner relates to
its capital adequacy, its ability to pay dividends, its credit, risk management
or compliance policies, its internal controls, its management or its business,
other than those of general application that apply to similarly situated
companies or their Subsidiaries (each item in this sentence, a “Company Regulatory
Agreement”), nor has Company or any of its Subsidiaries been advised
since January 1, 2006 by any Regulatory Agency or other Governmental Entity that
it is considering issuing, initiating, ordering, or requesting any such Company
Regulatory Agreement. The Company and each of its subsidiaries are
currently in compliance with all applicable laws and regulations relating to
capital adequacy and, to the knowledge of Company, there has not been any event
or occurrence since January 1, 2006 that would result in a determination that
Merrill Lynch Bank & Trust Co., FSB or Merrill Lynch Bank USA is not “well
capitalized” as a matter of applicable banking law.
(c) Company
has previously made available to Parent an accurate and complete copy of each
(i) final registration statement, prospectus, report, schedule and definitive
proxy statement filed with or furnished to the SEC by Company or any of its
Subsidiaries pursuant to the Securities Act or the Securities Exchange Act of
1934, as amended (the “Exchange Act”) since
January 1, 2006 (the “Company SEC Reports”)
and prior to the date of this Agreement and (ii) communication mailed by Company
to its stockholders since January 1, 2006 and prior to the date of this
Agreement. No such Company SEC Report or communication, at the time
filed, furnished or communicated (and, in the case of registration statements
and proxy statements, on
the dates
of effectiveness and the dates of the relevant meetings, respectively),
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 made therein, in light of the circumstances in which they were made,
not misleading, except that information as of a later date (but before the date
of this Agreement) shall be deemed to modify information as of an earlier
date. As of their respective dates, all Company SEC Reports complied
as to form in all material respects with the published rules and regulations of
the SEC with respect thereto. Each current Subsidiary of Company that
has filed since January 1, 2006 a Form S-3 registration statement with the SEC
meets the requirements for the use of Form S-3, and no event has occurred that
would reasonably be expected to result in Form S-3 eligibility requirements no
longer being satisfied by any such Subsidiary. No executive officer
of Company has failed in any respect to make the certifications required of him
or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”).
3.6 Financial
Statements.
(a) The
financial statements of Company and its Subsidiaries included (or incorporated
by reference) in the Company SEC Reports (including the related notes, where
applicable) (i) have been prepared from, and are in accordance with, the books
and records of Company and its Subsidiaries, (ii) fairly present in all material
respects the consolidated results of operations, cash flows, changes in
stockholders’ equity and consolidated financial position of Company and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth (subject in the case of unaudited statements to recurring
year-end audit adjustments normal in nature and amount), (iii) complied as to
form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, and (iv) have been prepared in
accordance with U.S. generally accepted accounting principles (“GAAP”) consistently
applied during the periods involved, except, in each case, as indicated in such
statements or in the notes thereto. 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. Deloitte & Touche LLP has not resigned or been
dismissed as independent public accountants of Company as a result of or in
connection with any disagreements with Company on a matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure.
(b) Neither
Company nor any of its Subsidiaries has any material liability or obligation of
any nature whatsoever (whether absolute, accrued, contingent, determined,
determinable or otherwise and whether due or to become due), except for (i)
those liabilities that are reflected or reserved against on the consolidated
balance sheet of Company included in its Quarterly Report on Form 10-Q for the
fiscal quarter ended June 27, 2008 (including any notes thereto) and (ii)
liabilities incurred in the ordinary course of business consistent with past
practice since June 27, 2008 or in connection with this Agreement and the
transactions contemplated hereby.
(c) The
records, systems, controls, data and information of Company and its Subsidiaries
are recorded, stored, maintained and operated under means (including any
electronic, mechanical or photographic process, whether computerized or not)
that are under the
exclusive
ownership and direct control of Company or its Subsidiaries or accountants
(including all means of access thereto and therefrom), except for any
non-exclusive ownership and non-direct control that would not reasonably be
expected to have a material adverse effect on the system of internal accounting
controls described below in this Section 3.6(c). Company (x) has
implemented and maintains disclosure controls and procedures (as defined in Rule
13a-15(e) of the Exchange Act) to ensure that material information relating to
Company, including its consolidated Subsidiaries, is made known to the chief
executive officer and the chief financial officer of Company by others within
those entities, and (y) has disclosed, based on its most recent evaluation prior
to the date hereof, to Company’s outside auditors and the audit committee of
Company’s Board of Directors (i) any significant deficiencies and material
weaknesses in the design or operation of internal controls over financial
reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are
reasonably likely to adversely affect Company’s ability to record, process,
summarize and report financial information and (ii) any fraud, whether or not
material, that involves management or other employees who have a significant
role in Company’s internal controls over financial reporting. These
disclosures were made in writing by management to Company’s auditors and audit
committee, a copy of which has previously been made available to
Parent. As of the date hereof, there is no reason to believe that
Company’s outside auditors, chief executive officer and chief financial officer
will not be able to give the certifications and attestations required pursuant
to the rules and regulations adopted pursuant to Section 404 of the
Sarbanes-Oxley Act, without qualification, when next due.
(d) Since
December 28, 2007, (i) neither Company nor any of its Subsidiaries nor, to the
knowledge of Company, any director, officer, employee, auditor, accountant or
representative of Company or any of its Subsidiaries has received or otherwise
had or obtained knowledge of any material complaint, allegation, assertion or
claim, whether written or oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of Company or any of its Subsidiaries or
their respective internal accounting controls, including any material complaint,
allegation, assertion or claim that Company or any of its Subsidiaries has
engaged in questionable accounting or auditing practices, and (ii) no attorney
representing Company or any of its Subsidiaries, whether or not employed by
Company or any of its Subsidiaries, has reported evidence of a material
violation of securities laws, breach of fiduciary duty or similar violation by
Company or any of its officers, directors, employees or agents to the Board of
Directors of Company or any committee thereof or to any director or officer of
Company.
3.7 Broker’s
Fees. Neither Company nor any of its Subsidiaries nor any of
their respective officers, directors, employees or agents has utilized any
broker, finder or financial advisor or incurred any liability for any broker’s
fees, commissions or finder’s fees in connection with the Merger or any other
transactions contemplated by this Agreement, other than as set forth in Section
3.7 of the Company Disclosure Schedule and pursuant to letter agreements, true,
complete and correct copies of which have been previously delivered to
Parent.
3.8 Absence of Certain Changes
or Events. (a) Since June 27, 2008, no event or
events have occurred that have had or would reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect on
Company. As used in this Agreement, the term “Material Adverse
Effect” means, with respect to Parent or Company, as the case may be, a
material adverse effect on (i) the financial condition, results of operations or
business of such
party and
its Subsidiaries taken as a whole (provided, however, that, with
respect to clause (i), a “Material Adverse Effect” shall not be deemed to
include effects to the extent resulting from (A) changes, after the date
hereof, in GAAP or regulatory accounting requirements applicable generally to
companies in the industries in which such party and its Subsidiaries operate,
(B) changes, after the date hereof, in laws, rules, regulations or the
interpretation of laws, rules or regulations by Governmental Authorities of
general applicability to companies in the industries in which such party and its
Subsidiaries operate, (C) actions or omissions taken with the prior written
consent of the other party or expressly required by this Agreement, (D) changes
in global, national or regional political conditions (including acts of
terrorism or war) or general business, economic or market conditions, including
changes generally in prevailing interest rates, currency exchange rates, credit
markets and price levels or trading volumes in the United States or foreign
securities markets, in each case generally affecting the industries in which
such party or its Subsidiaries operate and including changes to any previously
correctly applied asset marks resulting therefrom, (E) the execution of this
Agreement or the public disclosure of this Agreement or the transactions
contemplated hereby, including acts of competitors or losses of employees to the
extent resulting therefrom, (F) failure, in and of itself, to meet earnings
projections, but not including any underlying causes thereof or (G) changes in
the trading price of a party’s common stock, in and of itself, but not including
any underlying causes, except, with respect to clauses (A), (B) and (D), to the
extent that the effects of such change are disproportionately adverse to the
financial condition, results of operations or business of such party and its
Subsidiaries, taken as a whole, as compared to other companies in the industry
in which such party and its Subsidiaries operate) or (ii) the ability of such
party to timely consummate the transactions contemplated by this
Agreement.
(b) Since
June 27, 2008 through and including the date of this Agreement, Company and its
Subsidiaries have carried on their respective businesses in all material
respects in the ordinary course of business consistent with their past
practice.
(c) Since
June 27, 2008 through and including the date of this Agreement, neither Company
nor any of its Subsidiaries has (i) except for (A) normal increases for or
payments to employees (other than officers subject to the reporting requirements
of Section 16(a) of the Exchange Act (the “Executive Officers”))
made in the ordinary course of business consistent with past practice or (B) as
required by applicable law or contractual obligations existing as of the date
hereof, increased the wages, salaries, compensation, pension, or other fringe
benefits or perquisites payable to any Executive Officer or other employee or
director from the amount thereof in effect as of June 27, 2008, granted any
severance or termination pay, entered into any contract to make or grant any
severance or termination pay (in each case, except as required under the terms
of agreements or severance plans listed on Section 3.11 of the Company
Disclosure Schedule, as in effect as of the date hereof ), or paid any cash
bonus in excess of $1,000,000 other than the customary year-end bonuses in
amounts consistent with past practice and other than the monthly incentive
payments made to financial advisors under current Company programs, (ii) granted
any options to purchase shares of Company Common Stock, any restricted shares of
Company Common Stock or any right to acquire any shares of its capital stock, or
any right to payment based on the value of Company’s capital stock, to any
Executive Officer or other employee or director other than grants to employees
(other than Executive Officers) made in the ordinary course of business
consistent with past practice under the Company Stock Plans or grants relating
to shares of Company Common Stock with an aggregate
value for
all such grants of less than $1 million for any individual, (iii) changed any
financial accounting methods, principles or practices of Company or its
Subsidiaries affecting its assets, liabilities or businesses, including any
reserving, renewal or residual method, practice or policy, (iv) suffered any
strike, work stoppage, slow-down, or other labor disturbance, or (v) except for
publicly disclosed ordinary dividends on the Company Common Stock or Company
Preferred Stock and except for distributions by wholly-owned Subsidiaries of
Company to Company or another wholly-owned Subsidiary of Company, made or
declared any distribution in cash or kind to its stockholder or repurchased any
shares of its capital stock or other equity interests.
3.9 Legal
Proceedings. (a) Neither Company nor any of its
Subsidiaries is a party to any, and there are no pending or, to Company’s
knowledge, threatened, legal, administrative, arbitral or other proceedings,
claims, actions, suits or governmental or regulatory investigations of any
nature against Company or any of its Subsidiaries or to which any of their
assets are subject.
(b) There is
no judgment, settlement agreement, order, injunction, decree or regulatory
restriction (other than those of general application that apply to similarly
situated savings and loan holding companies or their Subsidiaries) imposed upon
Company, any of its Subsidiaries or the assets of Company or any of its
Subsidiaries (or that, upon consummation of the Merger, would apply to Parent or
any of its Subsidiaries).
3.10 Taxes and Tax
Returns.
(a) Each of
Company and its Subsidiaries has duly and timely filed (including all applicable
extensions) all material Tax Returns required to be filed by it on or prior to
the date of this Agreement (all such Tax Returns being accurate and complete in
all material respects), has paid all Taxes shown thereon as arising and has duly
paid or made provision for the payment of all material Taxes that have been
incurred or are due or claimed to be due from it by federal, state, foreign or
local taxing authorities other than Taxes that are not yet delinquent or are
being contested in good faith, have not been finally determined and have been
adequately reserved against under GAAP. The federal, state and local
income Tax Returns of Company and its Subsidiaries have been examined by the
Internal Revenue Service (the “IRS”) or other
relevant taxing authority for all years to and including 2001, and any liability
with respect thereto has been satisfied or any liability with respect to
deficiencies asserted as a result of such examination is covered by reserves
that are adequate under GAAP. There are no material disputes pending,
or written claims asserted, for Taxes or assessments upon Company or any of its
Subsidiaries for which Company does not have reserves that are adequate under
GAAP. Neither Company nor any of its Subsidiaries is a party to or is
bound by any Tax sharing agreement or arrangement (other than such an agreement
or arrangement exclusively between or among Company and its
Subsidiaries). Within the past five years (or otherwise as part of a
“plan (or series of related transactions)” within the meaning of Section 355(e)
of the Code of which the Merger is also a part), neither Company nor any of its
Subsidiaries has been a “distributing corporation” or a “controlled corporation”
in a distribution intended to qualify under Section 355(a) of the
Code. Neither Company nor any of its Subsidiaries is required to
include in income any adjustment pursuant to Section 481(a) of the Code, no such
adjustment has been proposed by the IRS and no pending request for permission to
change any accounting method has been submitted by Company or any of its
Subsidiaries. Neither Company nor any of its Subsidiaries
has
participated
in a “listed transaction” within the meaning of Treasury Regulation Section
1.6011-4(b)(2) subsequent to such transaction becoming listed.
(b) As used
in this Agreement, the term “Tax” or “Taxes” means (i) all
federal, state, local, and foreign income, excise, gross receipts, gross income,
ad valorem, profits,
gains, property, capital, sales, transfer, use, payroll, employment, severance,
withholding, duties, intangibles, franchise, backup withholding, value added and
other taxes, charges, levies or like assessments together with all penalties and
additions to tax and interest thereon and (ii) any liability for Taxes described
in clause (i) above under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor or by
contract.
(c) As used
in this Agreement, the term “Tax Return” means a
report, return or other information (including any amendments) required to be
supplied to a governmental entity with respect to Taxes including, where
permitted or required, combined or consolidated returns for any group of
entities that includes Company or any of its Subsidiaries.
(d) Without
regard to this Agreement or the Stock Option Agreement, Company has not
undergone any “ownership change” within the meaning of Section 382 of the Code
and, other than as a result of an acquisition by Company or any of its
Subsidiaries, the availability of any net operating loss and other carryovers
available to Company or its Subsidiaries has not been affected by Sections 382,
383 or 384 of the Code or by the SRLY limitations of Treasury Regulation
Sections 1.1502-21, 1.1502-21T or 1.1502-22.
(e) Company
and its Subsidiaries have complied in all material respects with all applicable
laws relating to the payment and withholding of Taxes (including withholding of
Taxes pursuant to Sections 1441, 1442 and 3402 of the Code or any comparable
provision of any state, local or foreign laws) and have, within the time and in
the manner prescribed by applicable law, withheld from and paid over all amounts
required to be so withheld and paid over under applicable laws.
3.11 Employee
Matters.
(a) Section
3.11 of the Company Disclosure Schedule (which shall be delivered by Company to
Parent within five business days following the date hereof), sets forth a true,
complete and correct list of each material “employee benefit plan” as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”),
whether or not subject to ERISA, and each material employment, consulting,
bonus, incentive or deferred compensation, vacation, stock option or other
equity-based, severance, termination, retention, change of control,
profit-sharing, fringe benefit or other similar plan, program, agreement or
commitment, whether written or unwritten, for the benefit of any employee,
former employee, director or former director of Company or any of its
Subsidiaries entered into, maintained or contributed to by Company or any of its
Subsidiaries or to which Company or any of its Subsidiaries is obligated to
contribute, or with respect to which Company or any of its Subsidiaries has any
liability, direct or indirect, contingent or otherwise (including any liability
arising out of an indemnification, guarantee, hold harmless or similar
agreement) or otherwise providing benefits to any current, former or future
employee, officer or director of Company or
any of
its Subsidiaries or to any beneficiary or dependent thereof (such plans,
programs, agreements and commitments, herein referred to as the “Company Benefit
Plans”).
(b) Except as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, (i) each of the Company Benefit Plans has been operated
and administered in all material respects with applicable law, including, but
not limited to, ERISA, the Code and in each case the regulations thereunder;
(ii) each Company Benefit Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service, or has pending an application for such
determination from the Internal Revenue Service with respect to those provisions
for which the remedial amendment period under Section 401(b) of the Code has not
expired, and, to the knowledge of the Company, there is not any reason why any
such determination letter should be revoked; (iii) with respect to each Company
Benefit Plan that is subject to Title IV or Section 302 of ERISA or Section 412
or 4971 of the Code, as of the last day of the most recent plan year ended prior
to the date hereof, the actuarially determined present value of all “benefit
liabilities” within the meaning of Section 4001(a)(16) of ERISA did not exceed
the then current value of assets of such Company Benefit Plan or, if such
liabilities did exceed such assets, the amount thereof was properly reflected on
the financial statements of Company or its applicable Subsidiary previously
filed with the SEC; (iv) no Company Benefit Plan provides benefits, including,
without limitation, death or medical benefits (whether or not insured), with
respect to current or former employees or directors of the Company or any
Company Subsidiary beyond their retirement or other termination of service,
other than (1) coverage mandated by applicable law or (2) death benefits or
retirement benefits under any "employee pension plan" (as such term is defined
in Section 3(2) of ERISA); (v) no Controlled Group Liability has been incurred
by the Company, a Company Subsidiary or any of their respective ERISA Affiliates
that has not been satisfied in full, and no condition exists that presents a
risk to the Company, a Company Subsidiary or any of their respective ERISA
Affiliates of incurring any such liability; (vi) neither the Company nor any
Company Subsidiary contributes on behalf of employees of the Company or any
Company Subsidiary to a "multiemployer pension plan" (as such term is defined in
Section 3(37) of ERISA) or a plan that has two or more contributing sponsors at
least two of whom are not under common control, within the meaning of Section
4063 of ERISA; (vii) all contributions or other amounts payable by the Company
or a Company Subsidiary with respect to each Company Benefit Plan in respect of
current or prior plan years have been paid or accrued in accordance with
generally accepted accounting principles; (viii) neither the Company nor a
Company Subsidiary has engaged in a transaction in connection with which the
Company or a Company Subsidiary reasonably could be subject to either a civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax
imposed pursuant to Section 4975 or 4976 of the Code; and (ix) there are no
pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Company Benefit Plans or any
trusts related thereto which could reasonably be expected to result in any
liability of the Company or any Company Subsidiary.
(c) Each
Company Benefit Plan that is a “nonqualified deferred compensation plan” within
the meaning of Section 409A(d)(1) of the Code (a “Nonqualified Deferred
Compensation Plan”) and any award thereunder, in each case that is
subject to Section 409A of the Code has been operated in compliance in all
material respects with Section 409A of the Code since January 1, 2006, based
upon a good faith, reasonable interpretation of (A) Section 409A of
the Code
and (B)(1) the proposed and final Treasury Regulations issued thereunder and (2)
Internal Revenue Service Notice 2005-1, all subsequent Internal Revenue Service
Notices and other interim guidance on Section 409A of the Code.
(d) Except as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, all Company Options have been granted in compliance
with the terms of the applicable Company Benefit Plans, with applicable law, and
with the applicable provisions of the Company Certificate and Company Bylaws as
in effect at the applicable time, and all such Company Options are accurately
disclosed as required under applicable law in the Company SEC Reports, including
the financial statements contained therein or attached thereto (if amended or
superseded by a filing with the SEC made prior to the date of this Agreement, as
so amended or superseded).
(e) Neither
the execution or delivery of this Agreement nor the consummation of the
transactions contemplated by this Agreement will, either alone or in conjunction
with any other event, (i) result in any material payment or benefit becoming due
or payable, or required to be provided, to any director, employee or independent
contractor of Company or any of its Subsidiaries or to such individuals in the
aggregate, (ii) materially increase the amount or value of any benefit or
compensation otherwise payable or required to be provided to any such director,
employee or independent contractor, (iii) result in the acceleration of the time
of payment, vesting or funding of any such benefit or compensation or (iv)
result in any material limitation on the right of Company or any of its
Subsidiaries to amend, merge or, terminate any Company Benefit Plan or related
trust. No Company Benefit Plan provides for the reimbursement of
excise Taxes under Section 4999 of the Code or any income Taxes under the
Code.
(f) No labor
organization or group of employees of the Company or any of its subsidiaries has
made a pending demand for recognition or certification, and there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened to be brought or
filed, with the National Labor Relations Board or any other labor relations
tribunal or authority. There are no organizing activities, strikes,
work stoppages, slowdowns, lockouts, material arbitrations or material
grievances, or other material labor disputes pending or threatened against or
involving the Company or any of its subsidiaries. Except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, each of the Company and its Subsidiaries is in compliance in all
material respects with all applicable laws and collective bargaining agreements
respecting employment and employment practices, terms and conditions of
employment, wages and hours and occupational safety and health.
(g) “Controlled Group
Liability” means any and all liabilities (i) under Title IV of ERISA,
(ii) under Section 302 of ERISA, (iii) under Sections 412 and 4971 of the Code,
and (iv) as a result of a failure to comply with the continuation coverage
requirements of Section 601 et seq. of ERISA and section 4980B of the
Code.
(h) “ERISA Affiliate”
means any entity if it would have ever been considered a single employer with
the Company under ERISA Section 4001(b) or part of the same “controlled
group” as the Company for purposes of ERISA
Section 302(d)(8)(C) or Code Sections 414(b) or (c) or a Member of an
affiliated service group for purposes of Code Section 414(m).
3.12 Compliance with Applicable
Law. (a) Company and each of its Subsidiaries hold
all licenses, franchises, permits and authorizations necessary for the lawful
conduct of their respective businesses under and pursuant to each, and have
complied in all respects with and are not in default in any respect under any,
law, rule, regulation or legal requirement applicable to Company or any of its
Subsidiaries.
(b) Company
and each of its Subsidiaries has properly administered all accounts for which it
acts as a fiduciary, including accounts for which it serves as a trustee, agent,
custodian, personal representative, guardian, conservator or investment advisor,
in accordance with the terms of the governing documents and applicable
law. None of Company, any of its Subsidiaries, or any director,
officer or employee of Company or of any of its Subsidiaries has committed any
breach of trust or fiduciary duty with respect to any such fiduciary account and
the accountings for each such fiduciary account are true and correct and
accurately reflect the assets of such fiduciary account.
3.13 Certain
Contracts. (a) Neither Company nor any of its
Subsidiaries is a party to or bound by any contract, arrangement, commitment or
understanding (whether written or oral) (i) that is a “material contract” (as
such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) to be
performed after the date of this Agreement that has not been filed or
incorporated by reference in the Company SEC Reports filed prior to the date
hereof, (ii) that contains a non-compete or client or customer non-solicit
requirement or other provision that materially restricts the conduct of, or the
manner of conducting, any line of business material to the Company and its
Subsidiaries, taken as a whole, or, to the knowledge of Company, upon
consummation of the Merger could materially restrict the ability of Parent, the
Surviving Company or any of their respective Subsidiaries to engage in any
material line of business, (iii) that obligates Company or any of its
Subsidiaries to conduct business on an exclusive or preferential basis with any
third party or upon consummation of the Merger will obligate Parent, the
Surviving Company or any of their respective Subsidiaries to conduct business
with any third party on an exclusive or preferential basis, in any case of the
preceding which is material, (iv) with or to a labor union or guild (including
any collective bargaining agreement). Each contract, arrangement,
commitment or understanding of the type described in this Section 3.13(a),
whether or not set forth in the Company Disclosure Schedule, is referred to as
an “Company
Contract”.
(b) (i) Each
Company Contract is valid and binding on Company or its applicable Subsidiary,
enforceable against it in accordance with its terms (subject to the Bankruptcy
and Equity Exception), and is in full force and effect, (ii) Company and each of
its Subsidiaries and, to Company’s knowledge, each other party thereto has duly
performed all obligations required to be performed by it to date under each
Company Contract and (iii) no event or condition exists that constitutes or,
after notice or lapse of time or both, will constitute, a breach, violation or
default on the part of Company or any of its Subsidiaries or, to Company’s
knowledge, any other party thereto under any such Company
Contract. There are no disputes pending or, to Company’s knowledge,
threatened with respect to any Company Contract.
3.14 Risk Management
Instruments. (a) “Derivative
Transactions” means any swap transaction, option, warrant, forward
purchase or sale transaction, futures transaction, cap transaction, floor
transaction or collar transaction relating to one or more currencies,
commodities, bonds, equity securities, loans, servicing rights, interest rates,
prices, values, or other financial or non-financial assets, credit-related
events or conditions or any indexes, or any other similar transaction or
combination of any of these transactions, including collateralized mortgage
obligations or other similar instruments or any debt or equity instruments
evidencing or embedding any such types of transactions, and any related credit
support, collateral or other similar arrangements related to such transactions;
provided that,
for the avoidance of doubt, the term “Derivative Transactions” shall not include
any Company Option.
(b) All
Derivative Transactions, whether entered into for the account of Company or any
of its Subsidiaries or for the account of a customer of Company or any of its
Subsidiaries, were entered into in the ordinary course of business consistent
with past practice and in accordance with prudent banking practice and
applicable laws, rules, regulations and policies of any Regulatory Authority and
in accordance with the investment, securities, commodities, risk management and
other policies, practices and procedures employed by Company and its
Subsidiaries, and with counterparties believed at the time to be financially
responsible and able to understand (either alone or in consultation with their
advisers) and to bear the risks of such Derivative Transactions. All
of such Derivative Transactions are valid and binding obligations of Company or
one of its Subsidiaries enforceable against it in accordance with their terms
(subject to the Bankruptcy and Equity Exception), and are in full force and
effect. Company and its Subsidiaries and, to Company’s knowledge, all
other parties thereto have duly performed their obligations under the Derivative
Transactions to the extent that such obligations to perform have accrued and, to
Company’s knowledge, there are no breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
3.15 Investment Securities and
Commodities. (a) Except as would not reasonably be
expected to have a Material Adverse Effect on Company, each of Company and its
Subsidiaries has good title to all securities and commodities owned by it
(except those sold under repurchase agreements or held in any fiduciary or
agency capacity), free and clear of any Liens, except to the extent such
securities or commodities are pledged in the ordinary course of business to
secure obligations of Company or its Subsidiaries. Such securities
and commodities are valued on the books of Company in accordance with GAAP in
all material respects.
(b) Company
and its Subsidiaries and their respective businesses employ investment,
securities, commodities, risk management and other policies, practices and
procedures which Company believes are prudent and reasonable in the context of
such businesses.
3.16 Property. Company
or one of its Subsidiaries (a) has good and marketable title to all the
properties and assets reflected in the latest audited balance sheet included in
such Company SEC Reports as being owned by Company or one of its Subsidiaries or
acquired after the date thereof (except properties sold or otherwise disposed of
since the date thereof in the ordinary course of business) (the “Owned Properties”),
free and clear of all Liens of any nature whatsoever, except (i) statutory Liens
securing payments not yet due, (ii) Liens for real property Taxes not yet due
and payable, (iii) easements, rights of way, and other similar
encumbrances
that do
not materially affect the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair business operations at such
properties and (iv) such imperfections or irregularities of title or Liens as do
not materially affect the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair business operations at such
properties (collectively, “Permitted
Encumbrances”), and (b) is the lessee of all leasehold estates reflected
in the latest audited financial statements included in such Company SEC Reports
or acquired after the date thereof (except for leases that have expired by their
terms since the date thereof) (the “Leased Properties”
and, collectively with the Owned Properties, the “Real Property”), free
and clear of all Liens of any nature whatsoever, except for Permitted
Encumbrances, and is in possession of the properties purported to be leased
thereunder, and each such lease is valid without default thereunder by the
lessee or, to Company’s knowledge, the lessor. The Real Property is
in material compliance with all applicable zoning laws and building codes, and
the buildings and improvements located on the Real Property are in good
operating condition and in a state of good working order, ordinary wear and tear
excepted. There are no pending or, to the knowledge of Company,
threatened condemnation proceedings against the Real
Property. Company and its Subsidiaries are in compliance with all
applicable health and safety related requirements for the Real Property,
including those under the Americans with Disabilities Act of 1990 and the
Occupational Health and Safety Act of 1970. Company and its
Subsidiaries own and have good and valid title to, or have valid rights to use,
all material tangible personal property used by them in connection with the
conduct of their businesses, in each case, free and clear of all Liens, other
than Permitted Encumbrances.
3.17 Intellectual
Property.
(a) Definitions. For
purposes of this Agreement, the following terms shall have the meanings assigned
below:
“Company IP” means all
Intellectual Property owned, used, held for use or exploited by Company or any
of its Subsidiaries.
“Intellectual
Property” means collectively, all intellectual property and other similar
proprietary rights in any jurisdiction throughout the world, whether owned, used
or held for use under license, whether registered or unregistered, including
such rights in and to: (i) trademarks, service marks, brand names,
certification marks, trade dress, logos, trade names and corporate names and
other indications of origin, and the goodwill associated with any of the
foregoing (collectively, “Trademarks”); (ii)
patents and patent applications, and any and all divisions, continuations,
continuations-in-part, reissues, continuing patent applications, provisional
patent applications, re-examinations, and extensions thereof, any counterparts
claiming priority therefrom, utility models, patents of
importation/confirmation, certificates of invention, certificates of
registration and like rights (collectively, “Patents”), and
inventions, invention disclosures, discoveries and improvements, whether or not
patentable; (iii) trade secrets (including, those trade secrets defined in the
Uniform Trade Secrets Act and under corresponding foreign statutory law and
common law), business, technical and know-how information, non-public
information, and confidential information and rights to limit the use or
disclosure thereof by any person (collectively, “Trade Secrets”); (iv)
all works of authorship (whether copyrightable or not), copyrights and
proprietary rights in copyrighted works including writings, other works of
authorship, and databases (or other collections of information,
data,
works or
other materials) (collectively, “Copyrights”); (v)
software, including data files, source code, object code, firmware, mask works,
application programming interfaces, computerized databases and other
software-related specifications and documentation (collectively, “Software”); (vi)
designs and industrial designs; (vii) Internet domain names; (viii) rights of
publicity and other rights to use the names and likeness of individuals; (ix)
moral rights; and (x) claims, causes of action and defenses relating to the
past, present and future enforcement of any of the foregoing; in each case of
(i) to (ix) above, including any registrations of, applications to register, and
renewals and extensions of, any of the foregoing with or by any Governmental
Entity in any jurisdiction.
“License Agreement”
means any legally binding contract, whether written or oral, and any amendments
thereto (including license agreements, sub-license agreements, research
agreements, development agreements, distribution agreements, consent to use
agreements, customer or client contracts, coexistence, non assertion or
settlement agreements), pursuant to which any interest in, or any right to use
or exploit any Intellectual Property has been granted.
“Licensed Company IP”
means the Intellectual Property owned by a third party that Company or any of
its Subsidiaries has a right to use or exploit by virtue of a License
Agreement.
“Owned Company IP”
means the Intellectual Property that is owned by Company or any of its
Subsidiaries.
(b) Company
and its Subsidiaries collectively own all right, title and interest in, or have
the valid right to use, all of the Company IP, free and clear of any Liens, and
there are no obligations to, covenants to or restrictions from third parties
affecting Company’s or its applicable Subsidiary’s use, enforcement, transfer or
licensing of the Owned Company IP.
(c) The Owned
Company IP and Licensed Company IP constitute all the Intellectual Property
necessary and sufficient to conduct the businesses of Company and its
Subsidiaries as they are currently conducted, as they have been conducted since
December 28, 2007.
(d) The Owned
Company IP and, to the knowledge of Company, Licensed Company IP, are valid,
subsisting and enforceable.
(e) Neither
Company nor any of its Subsidiaries has infringed, misappropriated or otherwise
violated any Intellectual Property of any third party.
(f) No Owned
Company IP or Licensed Company IP is being used or enforced in a manner that
would result in the abandonment, cancellation or unenforceability of such
Intellectual Property. To the knowledge of Company, no third party
has infringed, misappropriated or otherwise violated any Owned Company
IP.
3.18 Environmental
Liability. There are no legal, administrative, arbitral or
other proceedings, claims, actions, causes of action or notices with respect to
any environmental, health or safety matters or any private or governmental
environmental, health or safety investigations or remediation activities of any
nature, whether relating to the Real Property or
otherwise,
seeking to impose, or that are reasonably likely to result in, any liability or
obligation of Company or any of its Subsidiaries arising under common law or
under any local, state or federal environmental, health or safety statute,
regulation, ordinance, or other requirement of any Governmental Entity,
including the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, and any similar state laws (“Environmental Laws”),
pending or threatened against Company or any of its Subsidiaries. To
the knowledge of Company, there is no reasonable basis for, or circumstances
that are reasonably likely to give rise to, any such proceeding, claim, action,
cause of action, notice, investigation, or remediation activities that would
result in any such liability or obligation of Company or any of its
Subsidiaries. Neither Company nor any of its Subsidiaries is subject
to any agreement, order, judgment, decree, letter or memorandum by or with any
Governmental Entity or third party imposing any liability or obligation with
respect to any of the foregoing. Company, its Subsidiaries, and the
activities, operations and conditions on the Real Property have complied with
all applicable Environmental Laws.
3.19 Broker-Dealer, Fund and
Investment Advisory Matters.
(a) Each of
Company and its Subsidiaries and each of their respective officers and employees
who are required to be registered, licensed or qualified as (i) a broker-dealer,
investment adviser, futures commission merchant, commodity trading advisor or
commodity pool operator or (ii) a registered principal, registered
representative, investment adviser representative, insurance agent, salesperson,
or in any other capacity, with the SEC or any securities or insurance commission
or other Governmental Entity are duly registered as such and such registrations
are in full force and effect, or are in the process of being registered as such
within the time periods required by applicable law. Each of Company
and its Subsidiaries and each of their respective officers and employees are in
compliance with all applicable federal, state and foreign laws requiring any
such registration, licensing or qualification, and are not subject to any
liability or disability by reason of the failure to be so registered, licensed
or qualified. There is no action, suit, proceeding or investigation pending or,
to the knowledge of Company, threatened which would reasonably be expected to
lead to the revocation, amendment, failure to renew, limitation, suspension or
restriction of any such registration, license or qualification.
(b) With
respect to Company and each Subsidiary that serves in a capacity described in
Section 9(a) or 9(b) of the 1940 Act with respect to a Fund, (i) such person is
not (taking into account any applicable exemption) ineligible under such Section
9(a) or 9(b) to serve in such capacity, (ii) no “affiliated person” (as defined
in Section 2(a)(3) of the 1940 Act) of such person is (taking into account any
applicable exemption) ineligible under such Section 9(b) to serve as an
“affiliated person” of such person and (iii) there is no proceeding or
investigation pending and served on Company or any Company Subsidiary or, to
Company’s knowledge, pending and not so served or threatened by any Governmental
Entity, which would result in (A) the ineligibility of such person to serve
in such capacity under such Section 9(a) or 9(b) or (B) the ineligibility under
such Section 9(b) of such “affiliated person” to serve as an “affiliated person”
of such person.
(c) With
respect to Company and each Subsidiary that acts as an investment adviser within
the meaning of the Advisers Act, (i) such person is not (taking into account
any
applicable
exemption) ineligible pursuant to Section 203(e) of the Advisers Act to act as
an investment adviser, (ii) no “person associated” (as defined in Section
202(a)(17) of the Advisers Act) with such person is (taking into account any
applicable exemption) ineligible under Section 203(f) of the Advisers Act to
serve as a “person associated” with an investment adviser and (iii) there is no
proceeding or investigation pending and served on Company or any Company
Subsidiary or, to Company’s knowledge, pending and not so served or threatened
by any Governmental Entity, which would result in (A) the ineligibility under
such Section 203(e) of such person to act as an investment adviser or (B) the
ineligibility under such Section 203(f) of such “person associated” with such
person to serve as a “person associated” with an investment
adviser.
(d) With
respect to Company and each Subsidiary that acts as a broker or dealer within
the meaning of the Exchange Act, (i) such person is not (taking into account any
applicable exemption) ineligible pursuant to Section 15(b)(4) of the Exchange
Act to act as a broker or dealer, (ii) no “person associated” (as defined in
Section 3(a)(18) of the Exchange Act) with such person is (taking into account
any applicable exemption) ineligible under Section 15(b)(6) of the Exchange Act
to serve as a “person associated” with a broker or dealer and (iii) there
is no proceeding or investigation pending and served on Company or any
Subsidiary or, to Company’s knowledge, pending and not so served or threatened
by any Governmental Entity, which would result in (A) the ineligibility under
such Section 15(b)(4) of such person to act as a broker or dealer or (B) the
ineligibility under such Section 15(b)(6) of such “person associated” with such
person to serve as a “person associated” with a broker or dealer.
(e) Each Fund
sponsored by Company or any Subsidiary and, to Company’s knowledge, each other
Fund (“Non-Sponsored
Fund”) has filed all registrations, reports, prospectuses, proxy
statements, statements of additional information, financial statements, sales
literature, statements, notices and other filings required to be filed by it
with any Governmental Entity (other than Tax Returns), including all amendments
or supplements to any of the above for the past two years, in each case to the
extent related to its business. Each Fund sponsored by Company or any
Subsidiary and, to Company’s knowledge, each Non-Sponsored Fund, holds all
legally required licenses, registrations, franchises, permits and authorizations
and are in compliance with, and are not in violation of, under any applicable
law, statute, order, rule, regulation, policy and/or guideline of any
Governmental Entity of competent jurisdiction, and neither Company nor any of
its Subsidiaries knows of, or has received notice of, any violations of any of
the above.
(f) Each of
Company and its Subsidiaries, and, to Company’s knowledge, its solicitors, third
party administrators, managers, brokers and distributors, have marketed, sold
and issued investment products and securities in compliance with all applicable
laws governing sales processes and practices and in compliance with all advisory
or other agreements under which such products and securities are sold or under
which such investment management, investment advisory and sub-advisory services
are provided. Company and each Subsidiary has at all times since January 1, 2003
rendered investment advisory services to Clients and Funds sponsored by Company
or any Subsidiary and, to Company’s knowledge, Non-Sponsored Funds, with whom
they are or were a party to an Investment Advisory Agreement, in compliance with
all requirements, if any, as to investment objectives, portfolio composition and
portfolio management, the terms of the applicable Investment Advisory Agreement,
written instructions
from such
Clients and Funds, prospectuses, registration statements, offering memorandums,
board of director or trustee directives, applicable law and, to Company’s
knowledge, the organizational documents of such Clients and Funds.
(g) Each Fund
sponsored by Company or its Subsidiaries that is a juridical entity is duly
organized, validly existing and, with respect to jurisdictions that recognize
the concept of “good standing,” in good standing under the laws of the
jurisdiction of its organization and has the requisite corporate, trust, company
or partnership power and authority to own its properties and to carry on its
business conducted as of the date of this Agreement, and is qualified to do
business in each jurisdiction where it is required to be so qualified under
applicable law. The shares or units of each Fund sponsored by Company
or its Subsidiaries (i) have been issued and sold by such Fund in compliance
with applicable law, (ii) are, in the case of such public Funds only, qualified
for public offering and sale by such Funds in each jurisdiction where offers are
made to the extent required under applicable law and (iii) to the extent
applicable, have been duly authorized and validly issued and are fully paid and
non-assessable.
(h) For
purposes of this Agreement, the following terms shall have the meanings assigned
below:
(i)
“1940 Act” shall mean
the Investment Company Act of 1940, as amended.
(ii)
“Advisers Act” shall
mean the Investment Advisers Act of 1940, as amended.
(iii)
“Client” means any
person to which Company or any of its Subsidiaries provides investment
management or investment advisory services, including any sub-advisory services,
pursuant to an Investment Advisory Agreement.
(iv)
“Fund” means any
pooled investment vehicle (including each portfolio or series thereof, if any)
for which Company or any of its Subsidiaries acts as investment adviser,
investment sub-adviser, manager, general partner or sponsor, whether or not
registered or qualified for offer and sale to members of the public generally
with any Governmental Entity.
(v)
“Investment Advisory
Agreement” means an agreement under which Company or any of its
Subsidiaries acts as an investment adviser or sub-adviser to, or manages any
investment or trading account of, any Client.
3.20 Securitization
Matters. In each case except as would not reasonably be
expected to have a Material Adverse Effect on Company:
(a) Each of
Company and its applicable Subsidiaries and, to the knowledge of Company, each
other party thereto has performed in all material respects the obligations to be
performed by it under each of the Company Securitization Documents, including
any required filing of any financing statements, continuation statements or
amendments under the Uniform Commercial Code of each applicable jurisdiction
with the appropriate filing offices.
(b) Each of
the Company Securitization Interests, each series of certificates or other
securities issued by any Company Securitization Trust and each of the Company
Securitization Documents to which Company, any of its Subsidiaries, or any
Company Securitization Trust, as the case may be, is a party, is in full force
and effect and is a valid, binding and enforceable obligation of Company, such
Subsidiary or any Company Securitization Trust, as the case may be, and, to the
knowledge of Company, of the other parties thereto, subject to the Bankruptcy
and Equity Exception. Each Company Securitization Interest
(including, without limitation, each Retained Interest) is fully paid and
subject to no further assessment or obligation, other than required servicing or
master servicing advances in transactions for which Company or any of its
Subsidiaries serves as servicer or master servicer.
(c) All
Company Securitization Documents required to be qualified under the Trust
Indenture Act of 1939, as amended, have been so qualified and no Company
Securitization Trust is required to be registered under the 1940
Act. The sale of all securities issued by any Company Securitization
Trust was either duly registered under, or exempt from the registration
requirements of, the Securities Act.
(d) Since
January 1, 2006, on a consolidated basis, Company has properly accounted for the
sale of all loan agreements, notes or borrowing arrangements (including leases,
credit enhancements, commitments, guarantees and interest-bearing assets)
payable to the Company or its Subsidiaries (collectively, “Loans”) under GAAP,
including Statement of Financial Accounting Standards No. 140, and including in
respect of the reporting of income arising from the sale of such
Loans.
(e) On a
consolidated basis, Company consolidates any variable interest entity as
required under GAAP, including FIN 46 and FIN 46R, as in effect as of the date
hereof in connection with any transaction related to a Company Securitization
Trust.
(f) All
reports required to be filed since January 1, 2006 with the SEC or any other
Governmental Entity in connection with any offering of securities in any loan or
other asset securitization transaction in which Company or any of its
Subsidiaries was an issuer, sponsor or depositor (a “Company Sponsored Asset
Securitization Transaction”) complied as to form in all material respects
with the published rules and regulations of the SEC or such other Governmental
Entity with respect thereto. No person has failed in any respect to
make the certifications required of him or her under Section 302 of the
Sarbanes-Oxley Act with respect to such reports. All assessments and
attestations regarding servicing compliance required to be delivered or filed by
Company or any of its Subsidiaries have been timely and accurately filed, and no
material instances of noncompliance have been identified in such assessments or
attestations. Since December 28, 2007, neither Company nor any of its
Subsidiaries nor, to the knowledge of Company, any director, officer, employee,
auditor, accountant or representative of Company or any of its Subsidiaries has
received or otherwise had or obtained knowledge of any material complaint,
allegation, assertion or claim, whether written or oral, regarding the
accounting or auditing practices, procedures, methodologies or methods of any
Company Securitization Trust or their respective internal accounting
controls.
(g) No event
or condition exists which does now or with either notice or the passage of time
would constitute a default, event of default, early redemption event,
payout
event,
early amortization event or other similar event under any Company Securitization
Document. No Adverse Development has occurred and is continuing in
connection with any Company Sponsored Asset Securitization
Transaction. No event or condition exists which constitutes a
Servicer Default or other similar event permitting the termination of the
servicer under any of the Company Securitization Documents (a “Servicer Default or
Termination”). The consummation of the transactions
contemplated hereby (including the Merger) shall not cause the occurrence of any
Adverse Development or Servicer Default or Termination.
(h) For
purposes of this Agreement, the following terms shall have the meanings assigned
below:
“Adverse Development”
means any event or condition which is or with either notice or the passage of
time would (i) constitute a breach, default, event of default, early redemption
event, payout event, early amortization event or other similar event under any
Company Securitization Document or (ii) trigger any requirement under any
Company Securitization Document to (x) fund an increase in any form of internal
credit enhancement, external credit enhancement, spread account or similar
account (other than with respect to spread accounts that have already been
funded), (y) draw on any such internal or external credit enhancement or account
under the terms of any Company Securitization Document or (z) otherwise increase
any otherwise required credit enhancement required under the Company
Securitization Documents.
“Company Securitization
Documents” includes each security issued by any Company Securitization
Trust, and each loan sale agreement, pooling and servicing agreement, indenture,
bond insurance agreement (and related policy), pool insurance agreement (and
related policy), guarantee, swap or derivative contract, prospectus, offering
circular, underwriting agreement, purchase agreement and each other material
agreement related to any such security and each supplement, terms or pricing
agreement or other agreement relating to the foregoing and each document
required to be delivered in connection therewith.
“Company Securitization
Interests” means any securities, any Retained Interest, any reserve
account, cash collateral account, other residual or servicing interest or other
ongoing obligations (in each case whether or not certificated) owned by Company
or any of its Subsidiaries created pursuant to or associated with any Company
Securitization Document.
“Company Securitization
Trust” means any trust or other special purpose vehicle created by
Company.
“Retained Interest”
means any interest retained by Company or any of its Subsidiaries pursuant to
the Company Securitization Documents.
“Servicer Default”
means a servicer or master servicer default or similar event, as specified in
the relevant pooling and servicing agreement, indenture or other Company
Securitization Document, as the case may be.
(i) For
purposes of this Section 3.20 and Section 3.5(c), “Subsidiary” shall include any
Subsidiary of Company and, if and to the extent not otherwise included, also
include
each
issuer, sponsor and/or depositor in each Company Sponsored Asset Securitization
Transaction.
3.21 State Takeover
Laws. The Board of Directors of Company has unanimously
approved this Agreement and the transactions contemplated hereby as required to
render inapplicable to this Agreement and such transactions the restrictions on
“business combinations” set forth in Section 203 of the DGCL or any other
“moratorium,” “control share,” “fair price,” “takeover” or “interested
stockholder” law (any such laws, “Takeover
Statutes”).
3.22 Interested Party
Transactions. Except as set forth in the Company SEC Documents
or Section 3.22 of the Company Disclosure Schedule, no event has occurred since
December 28, 2007 that would be required to be reported by Company pursuant to
Item 404(a) of Regulation S-K promulgated by the SEC.
3.23 Reorganization. As
of the date of this Agreement, Company is not aware of any fact or circumstance
that could reasonably be expected to prevent the Merger from qualifying as a
“reorganization” within the meaning of Section 368(a) of the Code.
3.24 Opinion. The
Board of Directors of Company has received the opinion of Merrill Lynch, Pierce,
Fenner & Smith, Incorporated, to the effect that, as of the date hereof, and
based upon and subject to the factors and assumptions set forth therein, the
Exchange Ratio is fair from a financial point of view to the holders of Company
Common Stock. Such opinion has not been amended or rescinded as of
the date of this Agreement.
3.25 Company
Information. The information relating to Company and its
Subsidiaries that is provided by Company or its representatives for inclusion in
the Proxy Statement and Form S-4, or in any application, notification or other
document filed with any other Regulatory Agency or other Governmental Entity in
connection with the transactions contemplated by this Agreement, will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading. The portions of the Proxy Statement
relating to Company and its Subsidiaries and other portions within the
reasonable control of Company and its Subsidiaries will comply in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF PARENT
Except
(i) as disclosed in any report, schedule, form or other document filed with, or
furnished to, the SEC by Parent and publicly available prior to the date of this
Agreement (excluding, in each case, any disclosures set forth in any risk factor
section and in any section relating to forward-looking statements to the extent
that they are cautionary, predictive or forward-looking in nature), or (ii) as
disclosed in the disclosure schedule (the “Parent Disclosure
Schedule”) delivered by Parent to Company prior to the execution of this
Agreement (which schedule sets forth, among other things, items the disclosure
of which is necessary or appropriate either in response to an express disclosure
requirement contained in a provision hereof or as an
exception
to one or more representations or warranties contained in this Article IV, or to
one or more of Parent’s covenants contained herein, provided, however, that
disclosure in any section of such schedule shall apply only to the indicated
Section of this Agreement except to the extent that it is reasonably apparent on
the face of such disclosure that such disclosure is relevant to another Section
of this Agreement, provided, further, that
notwithstanding anything in this Agreement to the contrary, (i) no such item is
required to be set forth in such schedule as an exception to a representation or
warranty if its absence would not result in the related representation or
warranty being deemed untrue or incorrect under the standard established by
Section 9.2, and (ii) the mere inclusion of an item in such schedule as an
exception to a representation or warranty shall not be deemed an admission that
such item represents a material exception or material fact, event or
circumstance or that such item has had or would be reasonably likely to have a
Material Adverse Effect on Parent), Parent hereby represents and warrants to
Company as follows:
4.1 Corporate
Organization. (a) Parent is, and Merger Sub will
be, a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware. Parent has and Merger Sub will
have the 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 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. Parent is duly registered as a bank holding
company under the BHC Act and is a financial holding company pursuant to Section
4(1) of the BHC Act and meets the applicable requirements for qualification as
such. True, complete and correct copies of the Amended and Restated
Certificate of Incorporation, as amended (the “Parent Certificate”),
and Bylaws of Parent (the “Parent Bylaws”), as
in effect as of the date of this Agreement, have previously been made available
to Company.
(b) Each
Subsidiary of Parent (i) is duly incorporated or duly formed, as applicable to
each such Subsidiary, and validly existing and in good standing under the laws
of its jurisdiction of organization, (ii) has the requisite corporate power and
authority or other 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 (iii) is
duly qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification
necessary.
4.2 Capitalization. The
authorized capital stock of Parent consists of 7,500,000,000 shares of Parent
Common Stock, of which, as of July 31, 2008 (the “Parent Capitalization
Date”), 4,560,112,687 shares were issued and outstanding, and 100,000,000
shares of preferred stock, $0.01 par value (the “Parent Preferred
Stock”), of which, as of the Parent Capitalization Date, (i) 3,000,000
shares were authorized as ESOP Convertible Preferred Stock, Series C, none of
which were issued and outstanding, (ii) 35,045 shares were authorized as
Cumulative Redeemable Preferred Stock, Series B, 7,667 of which were issued and
outstanding, (iii) 20,000,000 shares were authorized as $2.50 Cumulative
Convertible Preferred Stock, Series BB, none of which were issued and
outstanding, (iv) 85,100 shares were authorized as Floating Rate Non-Cumulative
Preferred Stock, Series E, of which and issued 81,000 shares were issued and
outstanding, (v) 34,500 shares were authorized as 6.204% Non-Cumulative Series D
Preferred Stock, of which 33,000 were issued and outstanding, (vi) 7,001
were
authorized
as Floating Rate Non-Cumulative Preferred Stock, Series F, none of which were
issued and outstanding, (vii) 8,501 were authorized as Adjustable Rate
Non-Cumulative Preferred Stock, Series G, none of which were issued and
outstanding, (viii) 25,300 were authorized as 6.625% Non-Cumulative Preferred
Stock, Series I, 22,000 of which were issued and outstanding, (ix) 41,400 were
authorized as 7.25% Non-Cumulative Preferred Stock, Series J, 41,400 of which
were issued and outstanding, (x) 6,900,000 were authorized as 7.25%
Non-Cumulative Perpetual Convertible Preferred Stock, Series L, 6,900,000 of
which were issued and outstanding, (xi) 240,000 were authorized as
Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series K, 240,000 of
which were issued and outstanding, (xii) 160,000 were authorized as
Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series M, 160,000 of
which were issued and outstanding, and (xiii) 124,200 were authorized as 8.20%
Non-Cumulative Preferred Stock, Series H, 117,000 of which were issued and
outstanding. As of the Parent Capitalization Date, no shares of
Parent Common Stock were held in Parent’s treasury. As of the Parent
Capitalization Date, no shares of Parent Common Stock or Parent Preferred Stock
were reserved for issuance, except for (i) 373,427,609 shares of Parent Common
Stock reserved for issuance upon exercise of options issued pursuant to employee
and director stock plans of Parent or a Subsidiary of Parent in effect as of the
date of this Agreement (the “Parent Stock Plans”),
(ii) 159,954 shares of Parent Common Stock reserved for issuance pursuant to a
convertible note agreement (the “Convertible Note
Agreement”) and (iii) 138,000,000 shares of Parent Common Stock reserved
for issuance upon conversion of the 7.25% Non-Cumulative Perpetual Convertible
Preferred Stock, Series L and (iv) 13,181,696 shares of Parent Common Stock
reserved for the conversion of Countrywide Financial Corporation Series A and
Series B Convertible Debentures Due 2037. All of the issued and
outstanding shares of Parent Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. As of the date
of this Agreement, no Voting Debt of Parent is issued or
outstanding. As of the Parent Capitalization Date, except pursuant to
this Agreement, the Parent Stock Plans, the Convertible Note Agreement, Parent’s
dividend reinvestment plan and stock repurchase plans entered into by Parent
from time to time, Parent does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, rights, commitments or agreements of
any character calling for the purchase or issuance of any shares of Parent
Common Stock, Parent Preferred Stock, Voting Debt of Parent or any other equity
securities of Parent or any securities representing the right to purchase or
otherwise receive any shares of Parent Common Stock, Parent Preferred Stock,
Voting Debt of Parent or other equity securities of Parent. The
shares of Parent Common Stock to be issued pursuant to the Merger will be duly
authorized and validly issued and, at the Effective Time, all such shares will
be fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof.
4.3 Authority; No
Violation. (a) Parent has and Merger Sub will have
full corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by the Board of Directors of Parent,
and will be so approved in the case of Merger Sub. The Board of
Directors of Parent has determined that this Agreement and the transactions
contemplated hereby are in the best interests of Parent and its stockholders and
has directed that the issuance of Parent Common Stock in connection with the
Merger be submitted to Parent’s stockholders for approval and adoption at a duly
held meeting of such stockholders and has adopted a resolution
to the
foregoing effect. Except for the approval and adoption of this
Agreement by the affirmative vote of the holders of a majority of the
outstanding shares of Parent Common Stock present or represented and entitled to
vote at such meeting, no other corporate proceedings on the part of Parent are
necessary to approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Parent and (assuming due authorization, execution and delivery by
Company) constitutes the valid and binding obligation of Parent, enforceable
against each of Parent in accordance with its terms (subject to the Bankruptcy
and Equity Exception).
(b) Neither
the execution and delivery of this Agreement by Parent or Merger Sub, nor the
consummation by Parent or Merger Sub of the transactions contemplated hereby,
nor compliance by Parent or Merger Sub with any of the terms or provisions of
this Agreement, will (i) violate any provision of the Parent Certificate or the
Parent Bylaws or the certificate of incorporation or bylaws of Merger Sub, or
(ii) assuming that the consents, approvals and filings referred to in Section
4.4 are duly obtained and/or made, (A) violate any law, judgment, order,
injunction or decree applicable to Parent, any of its Subsidiaries or any of
their respective properties or assets or (B) 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
result in the creation of any Lien upon any of the respective properties or
assets of Parent or any of its Subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which any of them or any of their respective
properties or assets is bound.
4.4 Consents and
Approvals. Except for (i) the Regulatory Approvals, (ii) the
filing with the SEC of the Joint Proxy Statement and the filing and declaration
of effectiveness of the Form S-4, (iii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware pursuant to the DGCL, (iv)
any notices to or filings with the SBA, (v) any notices or filings required
under the HSR Act and the antitrust laws and regulations of any foreign
jurisdiction, and (vi) such filings and approvals as are required to be made or
obtained under the securities or “Blue Sky” laws of various states in connection
with the issuance of the shares of Parent Common Stock pursuant to this
Agreement and approval of listing of such Parent Common Stock on the NYSE, no
consents or approvals of or filings or registrations with any Governmental
Entity are necessary in connection with the consummation by Parent or Merger Sub
of the Merger and the other transactions contemplated by this
Agreement. No consents or approvals of or filings or registrations
with any Governmental Entity are necessary in connection with the execution and
delivery by Parent or Merger Sub of this Agreement.
4.5 Reports; Regulatory
Matters.
(a) Parent
and each of its Subsidiaries have timely filed all reports, registration
statements, proxy statements and other materials, together with any amendments
required to be made with respect thereto, that they were required to file since
January 1, 2006 with the Regulatory Agencies and each other applicable
Governmental Entity, and all other reports and statements required to be filed
by them since January 1, 2006, including any report or statement required to be
filed pursuant to the laws, rules or regulations of the United States, any
state, any
foreign
entity, or any Regulatory Agency or other Governmental Entity, and have paid all
fees and assessments due and payable in connection therewith. Except
for normal examinations conducted by a Regulatory Agency or other Governmental
Entity in the ordinary course of the business of Parent and its Subsidiaries, no
Regulatory Agency or other Governmental Entity has initiated since January 1,
2006 or has pending any proceeding, enforcement action or, to the knowledge of
Parent, investigation into the business, disclosures or operations of Parent or
any of its Subsidiaries. Since January 1, 2006, no Regulatory Agency
or other Governmental Entity has resolved any proceeding, enforcement action or,
to the knowledge of Parent, investigation into the business, disclosures or
operations of Parent or any of its Subsidiaries. There is no
unresolved violation, criticism, comment or exception by any Regulatory Agency
or other Governmental Entity with respect to any report or statement relating to
any examinations or inspections of Parent or any of its
Subsidiaries. Since January 1, 2006 there has been no formal or
informal inquiries by, or disagreements or disputes with, any Regulatory Agency
or other Governmental Entity with respect to the business, operations, policies
or procedures of Parent or any of its Subsidiaries (other than normal
examinations conducted by a Regulatory Agency or other Governmental Entity in
Parent’s ordinary course of business).
(b) Neither
Parent nor any of its Subsidiaries is subject to any cease-and-desist or other
order or formal or informal enforcement action issued by, or is a party to any
written agreement, consent agreement or memorandum of understanding with, or is
a party to any commitment letter or similar undertaking to, or is subject to any
order or directive by, or has been since January 1, 2006 a recipient of any
supervisory letter from, or has been ordered to pay any civil money penalty by,
or since January 1, 2006 has adopted any policies, procedures or board
resolutions at the request or suggestion of, any Regulatory Agency or other
Governmental Entity that currently restricts or affects in any material respect
the conduct of its business or that in any material manner relates to its
capital adequacy, its ability to pay dividends, its credit, risk management or
compliance policies, its internal controls, its management or its business,
other than those of general application that apply to bank holding companies or
their Subsidiaries (each, a “Parent Regulatory
Agreement”), nor has Parent or any of its Subsidiaries been advised since
January 1, 2006 by any Regulatory Agency or other Governmental Entity that it is
considering issuing, initiating, ordering or requesting any such Parent
Regulatory Agreement.
(c) Parent
has previously made available to Company an accurate and complete copy of each
(i) final registration statement, prospectus, report, schedule and definitive
proxy statement filed with or furnished to the SEC by Parent pursuant to the
Securities Act or the Exchange Act since January 1, 2006 (the “Parent SEC Reports”)
and prior to the date of this Agreement and (ii) communication mailed by Parent
to its stockholders since January 1, 2006 and prior to the date of this
Agreement. No such Parent SEC Report or communication, at the time
filed, furnished or communicated (and, in the case of registration statements
and proxy statements, on the dates of effectiveness and the dates of the
relevant meetings, respectively), 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 made therein, in light of the
circumstances in which they were made, not misleading, except that information
as of a later date (but before the date of this Agreement) shall be deemed to
modify information as of an earlier date. As of their respective
dates, all Parent SEC Reports complied as to form in all material respects with
the published rules and regulations of the SEC with respect
thereto. No
executive
officer of Parent has failed in any respect to make the certifications required
of him or her under Section 302 or 906 of the Sarbanes-Oxley Act.
4.6 Financial
Statements.
(a) The
financial statements of Parent and its Subsidiaries included (or incorporated by
reference) in the Parent SEC Reports (including the related notes, where
applicable) (i) have been prepared from, and are in accordance with, the books
and records of Parent and its Subsidiaries; (ii) fairly present in all material
respects the consolidated results of operations, cash flows, changes in
stockholders’ equity and consolidated financial position of Parent and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth (subject in the case of unaudited statements to recurring
year-end audit adjustments normal in nature and amount); (iii) complied as to
form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto; and (iv) have been prepared in
accordance with GAAP consistently applied during the periods involved, except,
in each case, as indicated in such statements or in the notes
thereto. The books and records of Parent 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. PricewaterhouseCoopers LLP has not resigned or been
dismissed as independent public accountants of Parent as a result of or in
connection with any disagreements with Parent on a matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure.
(b) Neither
Parent nor any of its Subsidiaries has any material liability or obligation of
any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due), except for those liabilities that are reflected
or reserved against on the consolidated balance sheet of Parent included in its
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2008
(including any notes thereto) and for liabilities incurred in the ordinary
course of business consistent with past practice since June 30, 2008 or in
connection with this Agreement and the transactions contemplated
hereby.
(c) The
records, systems, controls, data and information of Parent and its Subsidiaries
are recorded, stored, maintained and operated under means (including any
electronic, mechanical or photographic process, whether computerized or not)
that are under the exclusive ownership and direct control of Parent or its
Subsidiaries or accountants (including all means of access thereto and
therefrom), except for any non-exclusive ownership and non-direct control that
would not reasonably be expected to have a material adverse effect on the system
of internal accounting controls described below in this Section
4.6(c). Parent (x) has implemented and maintains disclosure controls
and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that
material information relating to Parent, including its consolidated
Subsidiaries, is made known to the chief executive officer and the chief
financial officer of Parent by others within those entities, and (y) has
disclosed, based on its most recent evaluation prior to the date hereof, to
Parent’s outside auditors and the audit committee of Parent’s Board of Directors
(i) any significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting (as defined in Rule
13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect
Parent’s ability to record, process, summarize and report financial information
and (ii) any fraud, whether or not material, that involves
management
or other employees who have a significant role in Parent’s internal controls
over financial reporting. These disclosures were made in writing by
management to Parent’s auditors and audit committee, a copy of which has
previously been made available to Company. As of the date hereof,
there is no reason to believe that Parent’s outside auditors, chief executive
officer and chief financial officer will not be able to give the certifications
and attestations required pursuant to the rules and regulations adopted pursuant
to Section 404 of the Sarbanes-Oxley Act, without qualification, when next
due.
(d) Since
December 31, 2007, (x) neither Parent nor any of its Subsidiaries nor, to the
knowledge of the officers of Parent, any director, officer, employee, auditor,
accountant or representative of Parent or any of its Subsidiaries has received
or otherwise had or obtained knowledge of any material complaint, allegation,
assertion or claim, whether written or oral, regarding the accounting or
auditing practices, procedures, methodologies or methods of Parent or any of its
Subsidiaries or their respective internal accounting controls, including any
material complaint, allegation, assertion or claim that Parent or any of its
Subsidiaries has engaged in questionable accounting or auditing practices, and
(y) no attorney representing Parent or any of its Subsidiaries, whether or not
employed by Parent or any of its Subsidiaries, has reported evidence of a
material violation of securities laws, breach of fiduciary duty or similar
violation by Parent or any of its officers, directors, employees or agents to
the Board of Directors of Parent or any committee thereof or to any director or
officer of Parent.
4.7 Broker’s
Fees. Neither Parent nor any of its Subsidiaries nor any of
their respective officers or directors has employed any broker or finder or
incurred any liability for any broker’s fees, commissions or finder’s fees in
connection with the Merger or related transactions contemplated by this
Agreement, other than as set forth on Section 4.7 of the Parent Disclosure
Schedule.
4.8 Absence of Certain Changes
or Events.
(a) Since
June 30, 2008, no event or events have occurred that have had or would
reasonably be expected to have a Material Adverse Effect on Parent.
(b) Since
June 30, 2008 through and including the date of this Agreement, Parent and its
Subsidiaries have carried on their respective businesses in all material
respects in the ordinary course of business consistent with their past
practice.
4.9 Legal
Proceedings. (a) Neither Parent nor any of its
Subsidiaries is a party to any, and there are no pending or, to Parent’s
knowledge, threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory investigations of any nature
against Parent or any of its Subsidiaries or to which any of their assets are
subject.
(b) There is
no judgment, order, injunction, decree or regulatory restriction (other than
those of general application that apply to similarly situated bank holding
companies or their Subsidiaries) imposed upon Parent, any of its Subsidiaries or
the assets of Parent or any of its Subsidiaries.
4.10 Taxes and Tax
Returns. Each of Parent and its Subsidiaries has duly and
timely filed (including all applicable extensions) all material Tax Returns
required to be filed by
it on or
prior to the date of this Agreement (all such returns being accurate and
complete in all material respects), has paid all Taxes shown thereon as arising
and has duly paid or made provision for the payment of all material Taxes that
have been incurred or are due or claimed to be due from it by federal, state,
foreign or local taxing authorities other than Taxes that are not yet delinquent
or are being contested in good faith, have not been finally determined and have
been adequately reserved against. There are no material disputes
pending, or claims asserted, for Taxes or assessments upon Parent or any of its
Subsidiaries for which Parent does not have reserves that are adequate under
GAAP.
4.11 Compliance with Applicable
Law. Parent and each of its Subsidiaries hold all licenses,
franchises, permits and authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to each, and have complied in all
respects with and are not in default in any respect under any, law applicable to
Parent or any of its Subsidiaries.
4.12 Reorganization;
Approvals. As of the date of this Agreement, Parent is not
aware of any fact or circumstance that could reasonably be expected to prevent
the Merger from qualifying as a “reorganization” within the meaning of Section
368(a) of the Code.
4.13 Opinion. The
Board of Directors of Parent has received the opinions of Fox-Pitt Kelton,
Cochran Caronia Waller (USA) LLC and J.C. Flowers & Co. LLC , to
the effect that, as of the date hereof, and based upon and subject to the
factors and assumptions set forth therein, the Merger Consideration is fair from
a financial point of view to Parent. Such opinions have not been
amended or rescinded as of the date of this Agreement.
4.14 Certain
Contracts. (a) Neither Company nor any of its
Subsidiaries is a party to or bound by any contract, arrangement, commitment or
understanding (whether written or oral) that is a “material contract” (as such
term is defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed
after the date of this Agreement that has not been filed or incorporated by
reference in the Company SEC Reports filed prior to the date hereof (any such
contract, arrangement, commitment or understanding, whether or not set forth in
the Parent Disclosure Schedule, is referred to as a “Parent
Contract.”
(b) (i) Each
Company Contract is valid and binding on Parent or its applicable Subsidiary,
enforceable against it in accordance with its terms (subject to the Bankruptcy
and Equity Exception), and is in full force and effect, (ii) Parent and each of
its Subsidiaries and, to Parent’s knowledge, each other party thereto has duly
performed all obligations required to be performed by it to date under each
Parent Contract and (iii) no event or condition exists that constitutes or,
after notice or lapse of time or both, will constitute, a breach, violation or
default on the part of Parent or any of its Subsidiaries or, to Parent’s
knowledge, any other party thereto under any such Parent
Contract. There are no disputes pending or, to Parent’s knowledge,
threatened with respect to any Parent Contract.
4.15 Risk Management
Instruments. All Derivative Transactions, whether entered into
for the account of Parent or any of its Subsidiaries or for the account of a
customer of Parent or any of its Subsidiaries, were entered into in the ordinary
course of business consistent with past practice and in accordance with prudent
banking practice and applicable laws, rules, regulations and policies of any
Regulatory Authority and in accordance with the
investment,
securities, commodities, risk management and other policies, practices and
procedures employed by Parent and its Subsidiaries, and with counterparties
believed at the time to be financially responsible and able to understand
(either alone or in consultation with their advisers) and to bear the risks of
such Derivative Transactions. All of such Derivative Transactions are
valid and binding obligations of Parent or one of its Subsidiaries enforceable
against it in accordance with their terms (subject to the Bankruptcy and Equity
Exception), and are in full force and effect. Parent and its
Subsidiaries and, to Parent’s knowledge, all other parties thereto have duly
performed their obligations under the Derivative Transactions to the extent that
such obligations to perform have accrued and, to Parent’s knowledge, there are
no breaches, violations or defaults or allegations or assertions of such by any
party thereunder
4.16 Intellectual
Property.
(a) Definitions. For
purposes of this Agreement, the following terms shall have the meanings assigned
below:
“Parent IP” means all
Intellectual Property owned, used, held for use or exploited by Parent or any of
its Subsidiaries.
“Licensed Parent IP”
means the Intellectual Property owned by a third party that Parent or any of its
Subsidiaries has a right to use or exploit by virtue of a License
Agreement.
“Owned Parent IP”
means the Intellectual Property that is owned by Parent or any of its
Subsidiaries.
(b) Parent
and its Subsidiaries collectively own all right, title and interest in, or have
the valid right to use, all of the Parent IP, free and clear of any Liens, and
there are no obligations to, covenants to or restrictions from third parties
affecting Parent’s or its applicable Subsidiary’s use, enforcement, transfer or
licensing of the Owned Parent IP.
(c) The Owned
Parent IP and Licensed Parent IP constitute all the Intellectual Property
necessary and sufficient to conduct the businesses of Parent and its
Subsidiaries as they are currently conducted, as they have been conducted since
December 31, 2007.
(d) The Owned
Parent IP and, to the knowledge of Parent, Licensed Parent IP, are valid,
subsisting and enforceable.
(e) Neither
Parent nor any of its Subsidiaries has infringed, misappropriated or otherwise
violated any Intellectual Property of any third party.
(f) No Owned
Parent IP or Licensed Parent IP is being used or enforced in a manner that would
result in the abandonment, cancellation or unenforceability of such Intellectual
Property. To the knowledge of Parent, no third party has infringed,
misappropriated or otherwise violated any Owned Parent IP.
4.17 Parent
Information. The information relating to Parent and its
Subsidiaries that is provided by Parent or its representatives for inclusion in
the Joint Proxy Statement and the Form S-4, or in any application, notification
or other document filed with any other Regulatory
Agency or
other Governmental Entity in connection with the transactions contemplated by
this Agreement, will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light of
the circumstances in which they are made, not misleading. The
portions of the Joint Proxy Statement relating to Parent and its Subsidiaries
and other portions within the reasonable control of Parent and its Subsidiaries
will comply in all material respects with the provisions of the Exchange Act and
the rules and regulations thereunder. The Form S-4 will comply in all material
respects with the provisions of the Securities Act and the rules and regulations
thereunder.
ARTICLE
V
COVENANTS
RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Businesses Prior
to the Effective Time. Except as expressly contemplated by or
permitted by this Agreement or with the prior written consent of the other
party, during the period from the date of this Agreement to the Effective Time,
each of Company and Parent shall, and shall cause each of its respective
Subsidiaries to, (a) conduct its business in the ordinary course in all material
respects, (b) use reasonable best efforts to maintain and preserve intact its
business organization and advantageous business relationships and retain the
services of its key officers and key employees and (c) take no action that would
reasonably be expected to adversely affect or materially delay the ability of
Company, Parent or Merger Sub 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 or to consummate the transactions contemplated hereby or
thereby.
5.2 Company
Forbearances. During the period from the date of this
Agreement to the Effective Time, except as set forth in this Section 5.2 of the
Company Disclosure Schedule or except as expressly contemplated or permitted by
this Agreement, Company shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of Parent:
(a) other
than in the ordinary course of business consistent with past practice, incur any
indebtedness for borrowed money, or assume, guarantee, endorse or otherwise as
an accommodation become responsible for the obligations of any other individual,
corporation or other entity (it being understood and agreed that incurrence of
indebtedness in the ordinary course of business consistent with past practice
shall include the creation of deposit liabilities, securitizations,
sales of certificates of deposit and entering into repurchase agreements,
participation in structured note programs and the rollover of indebtedness for
borrowed money outstanding as of the date hereof from time to time as such
indebtedness becomes due and payable, in each case in the ordinary course of
business consistent with past practice);
(b) (i) adjust,
split, combine or reclassify any of its capital stock;
(ii)
make,
declare or pay any dividend, 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 (whether currently
convertible or convertible only after the passage of time or the occurrence of
certain events) into or exchangeable for any shares of its capital stock (except
(A) for regular quarterly cash dividends on the Company Common Stock at
a rate
not in excess of $0.35 per share with record dates and payment dates consistent
with the prior year, (B) dividends on the Company Preferred Stock, (C) dividends
paid by any of the Subsidiaries of Company to Company or to any of its
wholly-owned Subsidiaries, and (D) the acceptance of shares of Company Common
Stock in payment of the exercise price or withholding Taxes incurred by any
employee or director in connection with the exercise of stock options or stock
appreciation rights or the vesting of restricted shares of (or settlement of
other equity-based awards in respect of) Company Common Stock granted under a
Company Stock Plan, the Company Cap Plan or a Company Deferred Equity Unit Plan,
in each case in accordance with past practice and the terms of the applicable
the Company Stock Plan, Company Cap Plan and related award agreements or a
Company Deferred Equity Unit Plan);
(iii) grant any
stock options, stock appreciation rights, restricted shares, restricted stock
units, deferred equity units, awards based on the value of Company’s capital
stock or other equity-based award with respect to shares of Company Common Stock
under any of the Company Stock Plans, the Company Cap Plan or any of the Company
Deferred Equity Unit Plans or otherwise, or grant any individual, corporation or
other entity any right to acquire any shares of its capital stock;
or
(iv) issue any
additional shares of capital stock or other securities, except pursuant to the
exercise of stock options or stock appreciation rights or the settlement of
other equity-based awards granted under a Company Stock Plan, the Company Cap
Plan or a Company Deferred Equity Unit Plan that are outstanding as of the date
of this Agreement;
(c) except as
required under applicable law or the terms of any Company Benefit Plan existing
as of the date hereof, (i) increase in any manner the compensation or benefits
of any of the current or former directors, officers or employees of Company or
its Subsidiaries (collectively, “Employees”), (ii) pay
any amounts to Employees not required by any current plan or agreement (other
than base salary in the ordinary course of business), (iii) become a party to,
establish, amend, commence participation in, make any adjustment, terminate or
commit itself to the adoption of any stock option plan or other stock-based
compensation plan, compensation (including any employee co-investment fund),
severance, pension, retirement, profit-sharing, welfare benefit, or other
employee benefit plan or agreement or employment agreement with or for the
benefit of any Employee (or newly hired employees), (iv) accelerate the vesting
of any stock-based compensation or other long-term incentive compensation under
any Company Benefit Plans, (v) (x) hire employees in the position of Vice
President or above or (y) terminate the employment of any employee in the
position of Vice President or above (other than due to terminations for cause)
or (vi) take any action which could reasonably be expected to give rise to a
“good reason” (or any term of similar import) claim;
(d) sell,
transfer, pledge, lease, license, mortgage, encumber or otherwise dispose of any
material amount of its properties or assets (including pursuant to
securitizations) to any individual, corporation or other entity other than a
Subsidiary or cancel, release or assign any material amount of indebtedness to
any such person or any material claims held by any such person, in each case
other than in the ordinary course of business consistent with past practice or
pursuant to contracts in force at the date of this Agreement;
(e) enter
into any new line of business or change in any material respect its lending,
investment, underwriting, risk and asset liability management and other banking,
operating, securitization and servicing policies, except as required by
applicable law, regulation or policies imposed by any Governmental
Entity;
(f) transfer
ownership, or grant any license or other rights, to any person or entity of or
in respect of any material Company IP, other than grants of non-exclusive
licenses pursuant to License Agreements entered into in the ordinary course of
business consistent with past practice;
(g) other
than in the ordinary course of business consistent with past practice, 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 or other entity;
(h) take any
action, or knowingly fail to take any action, which action or failure to act is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code;
(i) amend its
charter or bylaws, or otherwise take any action to exempt any person or entity
(other than Parent or its Subsidiaries) or any action taken by any person or
entity from any Takeover Statute or similarly restrictive provisions of its
organizational documents or terminate, amend or waive any provisions of any
confidentiality or standstill agreements in place with any third
parties;
(j) (i) amend
or otherwise modify, except in the ordinary course of business, or knowingly
violate, in each case in any material respect, the terms of, any Company
Contract, or (ii) create, renew or amend any agreement or contract or, except as
may be required by applicable law, other binding obligation of Company or its
Subsidiaries containing (A) any material restriction on the ability of Company
or its Subsidiaries to conduct its business as it is presently being conducted
or (B) any material restriction on the ability of Company or its affiliates to
engage in any type of activity or business;
(k) commence
or settle any material claim, action or proceeding;
(l) take any
action or fail to take any action that is intended or may reasonably be expected
to result in any of the conditions to the Merger set forth in Article VII not
being satisfied;
(m) implement
or adopt any material change in its Tax accounting or financial accounting
principles, practices or methods, other than as may be required by applicable
law, GAAP or regulatory guidelines;
(n) file or
amend any material Tax Return, make or change any material Tax election, or
settle or compromise any material Tax liability, in each case, other than in the
ordinary course of business or as required by law; or
(o) agree to
take, make any commitment to take, or adopt any resolutions of its board of
directors in support of, any of the actions prohibited by this Section
5.2.
5.3 Parent
Forbearances. Except as expressly permitted by this Agreement
or with the prior written consent of Company, during the period from the date of
this Agreement to the Effective Time, Parent shall not, and shall not permit any
of its Subsidiaries to, (a) amend, repeal or otherwise modify any provision of
the Parent Certificate or the Parent Bylaws in a manner that would adversely
affect Company, the stockholders of Company or the transactions contemplated by
this Agreement; (b) take any action, or knowingly fail to take any action, which
action or failure to act is reasonably likely to prevent the Merger from
qualifying as a “reorganization” within the meaning of Section 368(a) of the
Code; (c) take any action or willfully fail to take any action that is intended
or may reasonably be expected to result in any of the conditions to the Merger
set forth in Article VII not being satisfied; (d) take any action that would be
reasonably expected to prevent, materially impede or materially delay the
consummation of the transactions contemplated by this Agreement; or (e) agree to
take, make any commitment to take, or adopt any resolutions of its board of
directors in support of, any of the actions prohibited by this Section
5.3.
ARTICLE
VI
ADDITIONAL
AGREEMENTS
6.1 Regulatory
Matters. (a) Parent and Company shall promptly
prepare and file with the SEC the Form S-4, in which the Joint Proxy Statement
will be included as a prospectus. 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 such filing, and Company
shall thereafter mail or deliver the Joint Proxy Statement to its
stockholders. Parent shall also use its reasonable best efforts to
obtain all necessary state securities law or “Blue Sky” permits and approvals
required to carry out the transactions contemplated by this Agreement, and
Company shall furnish all information concerning Company and the holders of
Company Common Stock as may be reasonably requested in connection with any such
action.
(b) The
parties shall cooperate with each other and use their respective reasonable best
efforts to promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties (including any unions, works councils or other labor organizations) and
Governmental Entities that are necessary or advisable to consummate the
transactions contemplated by this Agreement (including the Merger), and to
comply with the terms and conditions of all such permits, consents, approvals
and authorizations of all such third parties or Governmental
Entities. Company and Parent shall have the right to review in
advance, and, to the extent practicable, each will consult the other on, in each
case subject to applicable laws relating to the confidentiality of information,
all the information relating to Company or Parent, as the case may be, and any
of their respective Subsidiaries, that appear in any filing made with, or
written materials submitted to, any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties shall act reasonably and as
promptly as practicable. The parties shall consult with each other
with respect to the obtaining of all permits, consents, approvals
and
authorizations
of all third parties and Governmental Entities necessary or advisable to
consummate the transactions contemplated by this Agreement and each party will
keep the other apprised of the status of matters relating to completion of the
transactions contemplated by this Agreement.
(c) Each of
Parent and Company shall, upon request, furnish to the other all information
concerning itself, its Subsidiaries, directors, officers and stockholders and
such other matters as may be reasonably necessary or advisable in connection
with the Joint Proxy Statement, the Form S-4 or any other statement, filing,
notice or application made by or on behalf of 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.
(d) Each of
Parent and Company shall promptly advise the other upon receiving any
communication from any Governmental Entity the consent or approval of which is
required for consummation of the transactions contemplated by this Agreement
that causes such party to believe that there is a reasonable likelihood that any
Parent Requisite Regulatory Approval or Company Requisite Regulatory Approval,
respectively, will not be obtained or that the receipt of any such approval may
be materially delayed.
6.2 Access to
Information. (a) Upon reasonable notice and subject
to applicable laws relating to the confidentiality of information, each of
Company and Parent shall, and shall cause each of its Subsidiaries to, afford to
the officers, employees, accountants, counsel, advisors, agents and other
representatives of the other party, reasonable access, during normal business
hours during the period prior to the Effective Time, to all its properties,
books, contracts, commitments and records, and, during such period, such party
shall, and shall cause its Subsidiaries to, make available to the other party
(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 federal or state banking or insurance laws (other
than reports or documents that such party is not permitted to disclose under
applicable law) and (ii) all other information concerning its business,
properties and personnel as the other party may reasonably request (in the case
of access or a request by Company, the foregoing rights provided by this Section
6.2(a) shall be limited to information concerning Parent that is reasonably
related to the prospective value of Parent Common Stock or to Parent’s ability
to consummate the transactions contemplated hereby). Neither Company
nor Parent, nor any of their Subsidiaries, shall be required to provide access
to or to disclose information where such access or disclosure would jeopardize
the attorney-client privilege of such party or its Subsidiaries or contravene
any law, rule, regulation, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. The
parties shall make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence
apply.
(b) All
information and materials provided pursuant to this Agreement shall be subject
to the provisions of the Confidentiality Agreement entered into between the
parties as of September 14, 2008 (the “Confidentiality
Agreement”).
(c) No
investigation by a party hereto or its representatives shall affect the
representations and warranties of the other party set forth in this
Agreement.
6.3 Stockholder
Approval. Each of Company and Parent shall call a meeting of
its stockholders to be held as soon as reasonably practicable for the purpose of
obtaining the requisite stockholder approval required in connection with the
Merger, on substantially the terms and conditions set forth in this Agreement,
and shall use its reasonable best efforts to cause such meeting to occur as soon
as reasonably practicable. The Board of Directors of Company shall
use its reasonable best efforts to obtain from its stockholders the stockholder
vote approving the Merger, on substantially the terms and conditions set forth
in this Agreement, required to consummate the transactions contemplated by this
Agreement, and shall recommend such approval except to the extent expressly
permitted under Section 6.10(d). Company shall submit this Agreement
to its stockholders at the stockholder meeting even if its Board of Directors
shall have withdrawn, modified or qualified its recommendation. The Board of
Directors of Company has adopted resolutions approving the Merger, on
substantially the terms and conditions set forth in this Agreement, and
directing that the Merger, on such terms and conditions, be submitted to
Company’s stockholders for their consideration. The Board of Directors of Parent
shall use its reasonable best efforts to obtain from its stockholders the
stockholder vote approving the issuance of Parent Common Stock in the Merger, on
substantially the terms and conditions set forth in this Agreement, required to
consummate the issuance of Parent Common Stock contemplated by this Agreement,
and shall recommend such approval except to the extent making such
recommendation would cause the Board of Directors of Parent to violate its
fiduciary duties to Parent stockholders under applicable law. Parent
shall submit the stock issuance proposal to its stockholders at the stockholder
meeting even if its Board of Directors shall have withdrawn, modified or
qualified its recommendation. The Board of Directors of Parent has adopted
resolutions approving the Merger, on substantially the terms and conditions set
forth in this Agreement, and directing that the issuance of Parent Common Stock
in the Merger, on such terms and conditions, be submitted to Parent’s
stockholders for their consideration.
6.4 NYSE
Listing. Parent shall cause the shares of Parent Common Stock
to be issued in the Merger to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Effective Time.
6.5 Employee
Matters. (a) For the period from the Effective Time
through December 31, 2009, Parent shall maintain or cause to be maintained
employee benefit plans and compensation opportunities for the benefit of
employees (as a group) who are actively employed by Company and its Subsidiaries
on the Closing Date (“Covered Employees”)
that provide employee benefits and compensation opportunities which, in the
aggregate, are substantially comparable to the employee benefits and
compensation opportunities that were provided to such Covered Employees
immediately prior to the Effective Time.
(b) To the
extent that a Covered Employee becomes eligible to participate in an employee
benefit plan maintained by Parent or any of its Subsidiaries, Parent shall (i)
cause such employee benefit plan to recognize the service of such Covered
Employee with Company or its Subsidiaries (or their predecessor entities) for
purposes of eligibility, participation, vesting, and, except under defined
benefit pension plans, benefit accrual under such employee benefit plan of
Parent or any of its Subsidiaries (including, without limitation, for purposes
of the Company Stock Plans, the Company Cap Plan and the Company Deferred Equity
Unit Plans as assumed by Parent pursuant to Section 1.5), to the same extent
such service was recognized immediately
prior to
the Effective Time under a comparable Company Benefit Plan in which such Covered
Employee was eligible to participate immediately prior to the Effective Time;
provided that
such recognition of service shall not operate to duplicate any benefits of a
Covered Employee with respect to the same period of service, and (ii) with
respect to any health, dental, vision or other welfare plan of Parent or any of
its Subsidiaries (other than Company and its Subsidiaries) in which any Covered
Employee is eligible to participate for the plan year in which such Covered
Employee is first eligible to participate, use its reasonable best efforts to
(x) cause any pre-existing condition limitations or eligibility waiting periods
under such Parent or Subsidiary plan to be waived with respect to such Covered
Employee, to the extent such limitation would have been waived or satisfied
under the Company Benefit Plan in which such Covered Employee participated
immediately prior to the Effective Time, and (y) recognize any health, dental or
vision expenses incurred by such Covered Employee in the year that includes the
Closing Date (or, if later, the year in which such Covered Employee is first
eligible to participate) for purposes of any applicable deductible and annual
out-of-pocket expense requirements under any such health, dental or vision plan
of Parent or any of its Subsidiaries.
(c) From and
after the Effective Time, Parent shall, or shall cause its Subsidiaries to,
honor, in accordance with the terms thereof as in effect as of the date hereof
or as may be amended after the date hereof (i) with the prior written consent of
Parent or (ii) as permitted pursuant to Section 5.2(c) of this Agreement, each
Company Benefit Plan.
(d) Nothing
in this Section 6.5 shall be construed to limit the right of Parent or any of
its Subsidiaries (including, following the Closing Date, Company and its
Subsidiaries) to amend or terminate any Company Benefit Plan or other employee
benefit plan, to the extent such amendment or termination is permitted by the
terms of the applicable plan, nor shall anything in this Section 6.5 be
construed to prohibit the Parent or any of its Subsidiaries (including,
following the Closing Date, Company and its Subsidiaries) from terminating the
employment of any particular Covered Employee following the Closing
Date.
(e) Without
limiting the generality of Section 9.10, the provisions of this Section 6.5 are
solely for the benefit of the parties to this Agreement, and no current or
former employee, director or independent contractor or any other individual
associated therewith shall be regarded for any purpose as a third-party
beneficiary of the Agreement, and nothing herein shall be construed as an
amendment to any Company Benefit Plan or other employee benefit plan for any
purpose.
6.6 Indemnification; Directors’
and Officers’ Insurance.
(a) In the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative (a “Claim”), including
any such Claim in which any individual who is now, or has been at any time prior
to the date of this Agreement, or who becomes prior to the Effective Time, a
director or officer of Company or any of its Subsidiaries or who is or was
serving at the request of Company or any of its Subsidiaries as a director or
officer of another person (the “Indemnified
Parties”), is, or is threatened to be, made a party based in whole or in
part on, or arising in whole or in part out of, or pertaining to (i) the fact
that he or she is or was a director or officer of Company or any of its
Subsidiaries prior to the Effective Time or (ii) this Agreement or any of the
transactions contemplated by this
Agreement,
whether asserted or arising before or after the Effective Time, the parties
shall cooperate and use their reasonable best efforts to defend against and
respond thereto. All rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time
now existing in favor of any Indemnified Party as provided in their respective
certificates or articles of incorporation or bylaws (or comparable
organizational documents), and any indemnification agreements which are existing
as of the date hereof, shall survive the Merger and shall continue in full force
and effect in accordance with their terms, and 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 such individuals for
acts or omissions occurring at or prior to the Effective Time or taken at the
request of Parent pursuant to Section 6.7, it being understood that nothing in
this sentence shall require any amendment to the certificate of incorporation or
bylaws of the Surviving Company.
(b) From and
after the Effective Time, Parent shall or shall cause the Surviving Company to,
to the fullest extent permitted by applicable law, indemnify, defend and hold
harmless, and provide advancement of expenses to, each Indemnified Party against
all losses, claims, damages, costs, expenses, liabilities or judgments or
amounts that are paid in settlement of or in connection with any Claim based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director or officer of Company or any of its Subsidiaries,
and pertaining to any matter existing or occurring, or any acts or omissions
occurring, at or prior to the Effective Time, whether asserted or claimed prior
to, or at or after, the Effective Time (including matters, acts or omissions
occurring in connection with the approval of this Agreement and the consummation
of the transactions contemplated hereby) or taken at the request of Parent
pursuant to Section 6.7.
(c) Parent
shall cause the individuals serving as officers and directors of Company or any
of its Subsidiaries 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 that are not less advantageous than such policy)
with respect to acts or omissions occurring prior to the Effective Time that
were committed by such officers and directors in their capacity as such;
provided that in no event shall Parent be required to expend annually in the
aggregate an amount in excess of 250% of the annual premiums currently paid by
Company (which current amount is set forth in Section 6.6 of the Company
Disclosure Schedule) for such insurance (the “Insurance Amount”),
and provided further that if Parent is unable to maintain such policy (or such
substitute policy) as a result of the preceding proviso, Parent shall obtain as
much comparable insurance as is available for the Insurance Amount.
(d) The
provisions of this Section 6.6 shall survive the Effective Time and are intended
to be for the benefit of, and shall be enforceable by, each Indemnified Party
and his or her heirs and representatives.
6.7 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 any merger between a Subsidiary of Parent, on the one hand,
and a Subsidiary of Company, on the other) or to vest the Surviving Company with
full title to all properties, assets, rights,
approvals,
immunities and franchises of either party to the Merger, the proper officers and
directors of each party and their respective Subsidiaries shall, at Parent’s
sole expense, take all such necessary action as may be reasonably requested by
Parent.
6.8 Advice of
Changes. Each of Parent and Company shall promptly advise the
other of any change or event (i) having or reasonably likely to have a Material
Adverse Effect on it or (ii) that it believes would or would be reasonably
likely to cause or constitute a material breach of any of its representations,
warranties or covenants contained in this Agreement; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or the conditions
to the obligations of the parties under this Agreement; and provided further that a
failure to comply with this Section 6.8 shall not constitute a breach of this
Agreement or the failure of any condition set forth in Article VII to be
satisfied unless the underlying Material Adverse Effect or material breach would
independently result in the failure of a condition set forth in Article VII to
be satisfied.
6.9 Exemption from Liability
Under Section 16(b). Prior to the Effective Time, Parent and
Company shall each take all such steps as may be reasonably necessary or
appropriate, and the parties shall cooperate with each other as necessary, to
cause any deemed disposition of shares of Company Common Stock or conversion of
any derivative securities in respect of such shares of Company Common Stock or
any deemed acquisition of shares of Parent Common Stock by an individual who
after the Merger is expected to be subject to Section 16(b) of the Exchange Act
with respect to Parent, in each case in connection with the consummation of the
transactions contemplated by this Agreement to be exempt under Rule 16b-3
promulgated under the Exchange Act.
6.10 No
Solicitation.
(a) None of
Company, its Subsidiaries or any officer, director, employee, agent or
representative (including any investment banker, financial advisor, attorney,
accountant or other representative) of Company or any of its Subsidiaries shall
directly or indirectly (i) solicit, initiate, encourage, facilitate (including
by way of furnishing information) or take any other action designed to
facilitate any inquiries or proposals regarding any merger, share exchange,
consolidation, sale of assets, sale of shares of capital stock (including by way
of a tender offer) or similar transactions involving Company or any of its
Subsidiaries that, if consummated, would constitute an Alternative Transaction
(any of the foregoing inquiries or proposals, including the indication of any
intention to propose any of the foregoing, being referred to herein as an “Alternative
Proposal”), (ii) participate in any discussions or negotiations regarding
an Alternative Transaction or (iii) enter into any agreement regarding any
Alternative Transaction. Notwithstanding the foregoing, the Board of
Directors of Company shall be permitted, prior to the meeting of Company
stockholders to be held pursuant to Section 6.3, and subject to compliance with
the other terms of this Section 6.10 and to first entering into a
confidentiality agreement with the person proposing such Alternative Proposal on
terms substantially similar to, and no less favorable to Company than, those
contained in the Confidentiality Agreement, to consider and participate in
discussions and negotiations with respect to a bona fide Alternative Proposal
received by Company, and furnish information in connection therewith (provided
that the Company shall simultaneously provide to Parent any such information
that was not
previously
provided to Parent) if and only to the extent that and so long as the Board of
Directors of Company determines in good faith (after consultation with outside
legal counsel) that failure to do so would cause it to violate its fiduciary
duties to Company stockholders under applicable law.
As used
in this Agreement, “Alternative
Transaction” means any of (i) a transaction pursuant to which any person
(or group of persons) (other than Parent or its affiliates), directly or
indirectly, acquires or would acquire more than 15% of the outstanding shares of
Company or any of its Subsidiaries or outstanding voting power or of any new
series or new class of preferred stock that would be entitled to a class or
series vote with respect to a merger with Company or any of its Subsidiaries,
whether from Company or pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger, share exchange, consolidation or other business
combination involving Company or any of its Subsidiaries (other than the
Merger), (iii) any transaction pursuant to which any person (or group of
persons) (other than Parent or its affiliates) acquires or would acquire control
of assets (including for this purpose the outstanding equity securities of
subsidiaries of Company and securities of the entity surviving any merger or
business combination including any of Company’s Subsidiaries) of Company or any
of its Subsidiaries representing more than 15% of the fair market value of all
the assets, net revenues or net income of Company and its Subsidiaries, taken as
a whole, immediately prior to such transaction, or (iv) any other consolidation,
business combination, recapitalization or similar transaction involving Company
or any of its Subsidiaries other than the transactions contemplated by this
Agreement.
(b) Company
shall notify Parent promptly (but in no event later than 24 hours) after receipt
of any Alternative Proposal, or any material modification of or material
amendment to any Alternative Proposal, or any 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, other than any such
request that does not relate to and would not reasonably be expected to lead to,
an Alternative Proposal. Such notice to Parent shall be made orally
and in writing, and shall indicate the identity of the person making the
Alternative Proposal or intending to make or considering making an Alternative
Proposal or requesting non-public information or access to the books and records
of Company or any of its Subsidiaries, and a copy (if in writing) and summary of
the material terms of any such Alternative Proposal or modification or amendment
to an Alternative Proposal. Company shall use its best efforts to
keep Parent fully informed, on a current basis, of any material changes in the
status and any material changes or modifications in the terms of any such
Alternative Proposal, indication or request. Company shall also
provide Parent 24 hours written notice before it enters into any discussions or
negotiations concerning any Alternative Proposal in accordance with Section
6.10(a). The Company shall not enter into any confidentiality or other agreement
that would impede its ability to comply with its obligations under this Section
6.10(b).
(c) Company
and its Subsidiaries shall immediately cease and cause to be terminated any
existing discussions or negotiations with any persons (other than Parent)
conducted heretofore with respect to any of the foregoing, and shall use
reasonable best efforts to cause all persons other than Parent who have been
furnished confidential information regarding Company in connection with the
solicitation of or discussions regarding an Alternative Proposal within the 12
months prior to the date hereof promptly to return or destroy such
information.
Company
agrees not to, and to cause its Subsidiaries not to, release any third party
from the confidentiality and standstill provisions of any agreement to which
Company or its Subsidiaries is or may become a party, and shall immediately take
all steps necessary to terminate any approval that may have been heretofore
given under any such provisions authorizing any person to make an Alternative
Proposal. Neither Company nor the Board of Directors of Company shall
approve or take any action to render inapplicable to any Alternative Proposal or
Alternative Transaction Section 203 of the DGCL or any similar Takeover
Statutes.
(d) Except as
expressly permitted by this Section 6.10(d), neither the Board of Directors of
Company nor any committee thereof shall (i) withdraw, modify or qualify, or
propose publicly to withdraw, modify or qualify, the recommendation by the Board
of Directors of Company of this Agreement and/or the Merger to Company’s
stockholders, (ii) take any public action or make any public statement in
connection with the meeting of Company stockholder to be held pursuant to
Section 6.3 substantively inconsistent with such recommendation or
(iii) approve or recommend, or publicly propose to approve or recommend, or fail
to recommend against, any Alternative Proposal (any of the actions described in
clauses (i), (ii) or (iii), a “Change of
Recommendation”). Notwithstanding the foregoing, the Board of
Directors of Company may make a Change of Recommendation, if, and only if, each
of the following conditions is satisfied:
(i) it
receives an Alternative Proposal not solicited in breach of this Section 6.10
that constitutes a Superior Proposal and such Superior Proposal has not been
withdrawn;
(ii) it
determines in good faith (after consultation with outside legal counsel), that
in light of a Superior Proposal the failure to effect such Change of
Recommendation would cause it to violate its fiduciary duties to Company
stockholders under applicable law;
(iii) Parent
has received written notice from Company (a “Change of Recommendation
Notice”) at least three business days prior to such Change of
Recommendation, which notice shall (1) state expressly that Company has received
an Alternative Proposal which the Board of Directors of Company has determined
is a Superior Proposal and that Company intends to effect a Change of
Recommendation and the manner in which it intends or may intend to do so and (2)
include the identity of the person making such Alternative Proposal and a copy
(if in writing) and summary of material terms of such Alternative Proposal;
provided that
any material amendment to the terms of such Alternative Proposal shall require a
new Change of Recommendation Notice and at least two business days prior to such
Change of Recommendation; and
(iv) during
any such notice period, Company and its advisors have negotiated in good faith
with Parent (provided that Parent desires to negotiate) to make adjustments in
the terms and conditions of this Agreement such that such Alternative Proposal
would no longer constitute a Superior Proposal.
As used
in this Agreement, “Superior Proposal”
means any proposal made by a third party (A) to acquire, directly or indirectly,
for consideration consisting of cash and/or securities, 100% of the outstanding
shares of Company Common Stock or 100% of the assets, net revenues or net income
of Company and its Subsidiaries, taken as a whole and (B) which is
otherwise
on terms which the Board of Directors of Company determines in its reasonable
good faith judgment (after consultation with its financial advisor and outside
legal counsel), taking into account, among other things, all legal, financial,
regulatory and other aspects of the proposal and the person making the proposal,
that the proposal, (i) if consummated would result in a transaction that is more
favorable, from a financial point of view, to Company’s stockholders than the
Merger and the other transactions contemplated hereby and (ii) is reasonably
capable of being completed, including to the extent required, financing which is
then committed or which, in the good faith judgment of the Board of Directors of
Company, is reasonably capable of being obtained by such third
party.
(e) Company
shall ensure that the officers, directors and all employees, agents and
representatives (including any investment bankers, financial advisors,
attorneys, accountants or other representatives) of Company or its Subsidiaries
are aware of the restrictions described in this Section 6.10 as reasonably
necessary to avoid violations thereof. It is understood that any
violation of the restrictions set forth in this Section 6.10 by any officer,
director, employee, agent or representative (including any investment banker,
financial advisor, attorney, accountant or other representative) of Company or
its Subsidiaries shall be deemed to be a breach of this Section 6.10 by
Company.
(f) Nothing
contained in this Section 6.10 shall prohibit Company or its Subsidiaries from
taking and disclosing to its stockholders a position required by Rule 14e-2(a)
or Rule 14d-9 promulgated under the Exchange Act.
6.11 Dividends. After
the date of this Agreement, each of Parent and Company shall coordinate with the
other regarding the declaration of any dividends in respect of Parent Common
Stock and Company Common Stock and the record dates and payment dates relating
thereto, it being the intention of the parties that holders of Company Common
Stock shall not receive two dividends, or fail to receive one dividend, for any
quarter with respect to their shares of Company Common Stock and any shares of
Parent Common Stock any such holder receives in exchange therefor in the
Merger.
6.12 Redemption of Exchangeable
Shares. Prior to the Effective Time, the Company shall take
all actions necessary to redeem, and shall redeem, the Exchangeable Shares of
Merrill Lynch & Co. Canada Ltd. in accordance with the terms of such
securities.
6.13 Tax
Matters. Company shall consult with Parent regarding any
significant transactions or Tax Return positions reasonably expected to
materially increase or affect the Company’s net operating losses or capital
losses for any taxable year or period and shall, in Company’s reasonable
discretion, take account of Parent’s views on such matters to the extent
reasonably feasible.
ARTICLE
VII
CONDITIONS
PRECEDENT
7.1 Conditions to Each Party’s
Obligation to Effect the Merger. The respective obligations of
the parties to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) Stockholder
Approvals. (i) This Agreement, on substantially the terms and
conditions set forth in this Agreement, shall have been adopted by the requisite
affirmative vote of the holders of Company Common Stock entitled to vote
thereon, and (ii) the issuance of Parent Common Stock in the Merger, on
substantially the terms and conditions set forth in this Agreement, shall have
been approved by the requisite affirmative vote of the holders of Parent Common
Stock entitled to vote thereon.
(b) NYSE
Listing. The shares of Parent Common Stock to be issued to the
holders of Company Common Stock upon consummation of the Merger shall have been
authorized for listing on the NYSE, subject to official notice of
issuance.
(c) Form
S-4. The Form S-4 shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the Form S-4
shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(d) No Injunctions or
Restraints; Illegality. No order, injunction or decree issued
by any court or agency of competent jurisdiction or other law preventing or
making illegal the consummation of the Merger or any of the other transactions
contemplated by this Agreement shall be in effect.
7.2 Conditions to Obligations of
Parent. The obligation of Parent and Merger Sub to effect the
Merger is also subject to the satisfaction, or waiver by Parent, at or prior to
the Effective Time, of the following conditions:
(a) Representations and
Warranties. Subject to the standard set forth in Section 9.2,
the representations and warranties of Company set forth in this Agreement shall
be true and correct as of the date of this Agreement and as of the Effective
Time as though made on and as of the Effective Time (except that representations
and warranties that by their terms speak specifically as of the date of this
Agreement or another date shall be true and correct as of such date); and Parent
shall have received a certificate signed on behalf of Company by the Chief
Executive Officer or the Chief Financial Officer of Company to the foregoing
effect.
(b) Performance of Obligations
of Company. Company shall have performed in all material
respects all obligations required to be performed by it under this Agreement at
or prior to the Effective Time; and Parent shall have received a certificate
signed on behalf of Company by the Chief Executive Officer or the Chief
Financial Officer of Company to such effect.
(c) Federal Tax
Opinion. Parent shall have received the opinion of its
counsel, Wachtell, Lipton, Rosen & Katz, in form and substance reasonably
satisfactory to Parent, dated
the
Closing Date, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion that are consistent
with the state of facts existing at the Effective Time, the Merger will qualify
as a “reorganization” within the meaning of Section 368(a) of the
Code. In rendering such opinion, counsel may require and rely upon
customary representations contained in certificates of officers of Company and
Parent.
(d) Regulatory
Approvals. All approvals set forth in Section 4.4 required to
consummate the transactions contemplated by this Agreement, including the
Merger, shall have been obtained and shall remain in full force and effect and
all statutory waiting periods in respect thereof shall have expired (all such
approvals and the expiration of all such waiting periods being referred as the
“Parent Requisite
Regulatory Approvals”).
7.3 Conditions to Obligations of
Company. The obligation of Company to effect the Merger is
also subject to the satisfaction or waiver by Company at or prior to the
Effective Time of the following conditions:
(a) Representations and
Warranties. Subject to the standard set forth in Section 9.2,
the representations and warranties of Parent set forth in this Agreement shall
be true and correct as of the date of this Agreement and as of the Effective
Time as though made on and as of the Effective Time (except that representations
and warranties that by their terms speak specifically as of the date of this
Agreement or another date shall be true and correct as of such date); and
Company shall have received a certificate signed on behalf of Parent by the
Chief Executive Officer or the Chief Financial Officer of Parent to the
foregoing effect.
(b) Performance of Obligations
of Parent. Parent shall have performed in all material
respects all obligations required to be performed by it under this Agreement at
or prior to the Effective Time, and Company shall have received a certificate
signed on behalf of Parent by the Chief Executive Officer or the Chief Financial
Officer of Parent to such effect.
(c) Federal Tax
Opinion. Company shall have received the opinion of its
counsel, Shearman & Sterling LLP, in form and substance reasonably
satisfactory to Company, dated the Closing Date, substantially to the effect
that, on the basis of facts, representations and assumptions set forth in such
opinion that are consistent with the state of facts existing at the Effective
Time, the Merger will qualify as a “reorganization” within the meaning of
Section 368(a) of the Code. In rendering such opinion, counsel may
require and rely upon customary representations contained in certificates of
officers of Company and Parent.
(d) Regulatory
Approvals. All approvals set forth in Section 3.4 required to
consummate the transactions contemplated by this Agreement, including the
Merger, shall have been obtained and shall remain in full force and effect and
all statutory waiting periods in respect thereof shall have expired (all such
approvals and the expiration of all such waiting periods being referred as the
“Company Requisite
Regulatory Approvals”).
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 of the matters presented in connection with the Merger
by the stockholders of Company:
(a) by
mutual consent of Company and Parent in a written instrument authorized by the
Boards of Directors of Company and Parent;
(b) by
either Company or Parent, if any Governmental Entity that must grant a Parent
Requisite Regulatory Approval or a Company Requisite Regulatory Approval has
denied approval of the Merger and such denial has become final and nonappealable
or any Governmental Entity of competent jurisdiction shall have issued a final
and nonappealable order, injunction or decree permanently enjoining or otherwise
prohibiting or making illegal the consummation of the transactions contemplated
by this Agreement;
(c) by
either Company or Parent, if the Merger shall not have been consummated on or
before the first anniversary of the date of this Agreement unless the failure of
the Closing to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth in this Agreement;
(d) by
either Company or Parent (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein), if there shall have been a breach of any of the covenants or
agreements or any of the representations or warranties set forth in this
Agreement on the part of Company, in the case of a termination by Parent, or
Parent or Merger Sub, in the case of a termination by Company, which breach,
either individually or in the aggregate, would result in, if occurring or
continuing on the Closing Date, the failure of the conditions set forth in
Section 7.2 or 7.3, as the case may be, and which is not cured within 30 days
following written notice to the party committing such breach or by its nature or
timing cannot be cured within such time period;
(e) by
Parent, if (i) the Board of Directors of Company shall have (A) failed to
recommend in the Joint Proxy Statement the approval and adoption of this
Agreement, (B) made any Change of Recommendation, (C) approved or recommended,
or publicly proposed to approve or recommend, any Alternative Proposal, whether
or not permitted by the terms hereof or (D) failed to recommend to Company’s
stockholders that they reject any tender offer or exchange offer that
constitutes an Alternative Transaction within the ten business day period
specified in Rule 14e-2(a) of the Exchange Act, or (ii) Company shall have
breached its obligations under Section 6.3 in any material respect;
(f) by
Company, if Parent shall have breached its obligations under Section 6.3 in any
material respect;
(g) by
either Company or Parent, if the approval of Company stockholders required by
Section 7.1(a) shall not have been obtained at a meeting of Company stockholders
convened for purposes of approving and adopting this Agreement; or
(h) by
either Company or Parent, if the approval of Parent stockholders required by
Section 7.1(a) shall not have been obtained at a meeting of Parent stockholders
convened for purposes of approving the issuance of Parent Common Stock in the
Merger.
The party
desiring to terminate this Agreement pursuant to clause (b), (c), (d), (e), (f),
(g) or (h) of this Section 8.1 shall give written notice of such termination to
the other party in accordance with Section 9.4, specifying the provision or
provisions hereof pursuant to which such termination is effected.
8.2 Effect of
Termination. In the event of termination of this Agreement by
either Company or Parent as provided in Section 8.1, this Agreement shall
forthwith become void and have no effect, and none of Company, Parent, any of
their respective Subsidiaries or any of the officers or directors of any of them
shall have any liability of any nature whatsoever under this Agreement, or in
connection with the transactions contemplated by this Agreement, except that (i)
Sections 6.2(b), 8.2, 8.3, 9.3, 9.4, 9.5, 9.6, 9.7, 9.8 and 9.10 shall survive
any termination of this Agreement, and (ii) neither Company nor Parent shall be
relieved or released from any liabilities or damages arising out of its knowing
breach of any provision of this Agreement. Notwithstanding the
foregoing, in the event of any termination of this Agreement, the Stock Option
Agreement shall remain in full force and affect in accordance with its
terms.
8.3 Fees and
Expenses. Except with respect to costs and expenses of
printing and mailing the Joint Proxy Statement and all filing and other fees
paid to the SEC in connection with the Merger, which shall be borne equally by
Company and Parent, all fees and expenses incurred in connection with the
Merger, this Agreement, and the transactions contemplated by this Agreement
shall be paid by the party incurring such fees or expenses, whether or not the
Merger is consummated.
8.4 Amendment. This
Agreement may be amended by the parties, 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 Merger by the respective stockholders of
Company and Parent; provided, however, that after
any approval of the transactions contemplated by this Agreement by the
stockholders of Company or Parent, there may not be, without further approval of
such stockholders, any amendment of this Agreement that requires further
approval under applicable law. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the
parties.
8.5 Extension;
Waiver. At any time prior to the Effective Time, the parties,
by action taken or authorized by their respective Board of Directors, may, to
the extent legally allowed, (a) extend the time for the performance of any of
the obligations or other acts of the other party, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or (c) waive
compliance with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party 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 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 Closing. On
the terms and subject to the conditions set forth in this Agreement, the closing
of the Merger (the “Closing”) shall take
place at 10:00 a.m. on a date and at a place to be specified by the parties,
which date shall be no later than five business days after the satisfaction or
waiver (subject to applicable law) of the latest to occur of the conditions set
forth in Article VII (other than those conditions that by their nature are to be
satisfied or waived at the Closing), unless extended by mutual agreement of the
parties (the “Closing
Date”). If the conditions set forth in Article VII are
satisfied or waived during the two weeks immediately prior to the end of a
fiscal quarter of Parent, then Parent may postpone the Closing until the first
full week after the end of that fiscal quarter.
9.2 Standard. No
representation or warranty of Company contained in Article III or of Parent
contained in Article IV shall be deemed untrue, inaccurate or incorrect for any
purpose under this Agreement, and no party hereto shall be deemed to have
breached a representation or warranty for any purpose under this Agreement, in
any case as a consequence of the existence or absence of any fact, circumstance
or event unless such fact, circumstance or event, individually or when taken
together with all other facts, circumstances or events inconsistent with any
representations or warranties contained in Article III, in the case of Company,
or Article IV, in the case of Parent, has had or would reasonably be expected to
have a Material Adverse Effect with respect to Company or Parent, respectively
(disregarding for purposes of this Section 9.2 all qualifications or limitations
set forth in any representations or warranties as to “materiality,” “Material
Adverse Effect” and words of similar import). Notwithstanding the
immediately preceding sentence, the representations and warranties contained in
(x) Section 3.2(a) shall be deemed untrue and incorrect if not true and correct
except to a de minimis extent, (y) Sections 3.2(b), 3.3(a), 3.3(b)(i), 3.7 and
3.25, in the case of Company, and Sections 4.2, 4.3(a), 4.3(b)(i) and 4.7, in
the case of Parent, shall be deemed untrue and incorrect if not true and correct
in all material respects and (z) Section 3.8(a), in the case of Company, and
Section 4.8(a), in the case of Parent, shall be deemed untrue and incorrect if
not true and correct in all respects.
9.3 Nonsurvival of
Representations, Warranties and Agreements. None of the
representations, warranties, covenants and agreements set forth in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for Section 6.7 and for those other covenants
and agreements contained in this Agreement that by their terms apply or are to
be performed in whole or in part after the Effective Time.
9.4 Notices. All
notices and other communications in connection with this Agreement shall be in
writing and shall be deemed given if delivered personally, sent via facsimile
(with confirmation), mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with confirmation) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if
to Company, to:
Merrill
Lynch & Co., Inc.
4 World
Financial Center
250 Vesey
Street
New York,
NY 10080
Attention:
Rosemary T. Berkery
Vice
Chairman and General Counsel
Facsimile:
(212) 449-9336
with a copy to:
Shearman
& Sterling LLP
599
Lexington Avenue
New York,
NY 10022
Attention:
John J. Madden
John A.
Marzulli, Jr.
Scott D.
Petepiece
Fax:
(212) 848-7179
(b) if
to Parent, to:
Bank of
America Corporation
Bank of
America Corporate Center
100 North
Tryon Street
Charlotte,
NC 28255
Attention:
Timothy J. Mayopoulos,
Executive
Vice President and General Counsel
Facsimile:
(704) 370-3515
with a
copy to:
Wachtell,
Lipton, Rosen & Katz
51 West
52nd Street
New York,
NY 10019
Attention:
Edward D. Herlihy
Lawrence
S. Makow
Nicholas
G. Demmo
Fax: (212)
403-2000
9.5 Interpretation. When
a reference is made in this Agreement to Articles, Sections, Exhibits or
Schedules, such reference shall be to an Article or Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the
meaning
or interpretation of this Agreement. Whenever the words “include,”
“includes” or “including” are used in this Agreement, they shall be deemed to be
followed by the words “without limitation.” The Company Disclosure
Schedule and the Parent Disclosure Schedule, as well as all other schedules and
all exhibits hereto, shall be deemed part of this Agreement and included in any
reference to this Agreement. This Agreement shall not be interpreted
or construed to require any person to take any action, or fail to take any
action, if to do so would violate any applicable law.
9.6 Counterparts. This
Agreement may be executed in two or more 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
party, it being understood that each party need not sign the same
counterpart.
9.7 Entire
Agreement. This Agreement (including the documents and the
instruments referred to in this Agreement), together with the Confidentiality
Agreement and the Stock Option Agreement, constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter of this Agreement, other
than the Confidentiality Agreement and the Stock Option Agreement.
9.8 Governing Law;
Jurisdiction. This Agreement shall be governed and construed
in accordance with the internal laws of the State of Delaware applicable to
contracts made and wholly-performed within such state, without regard to any
applicable conflicts of law principles. The parties hereto agree that any suit,
action or proceeding brought by either party to enforce any provision of, or
based on any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby shall be brought in any federal or state court
located in the State of Delaware. Each of the parties hereto submits to the
jurisdiction of any such court in any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of, or in
connection with, this Agreement or the transactions contemplated hereby and
hereby irrevocably waives the benefit of jurisdiction derived from present or
future domicile or otherwise in such action or proceeding. Each party
hereto irrevocably waives, to the fullest extent permitted by law, any objection
that it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient
forum.
9.9 Publicity. Neither
Company nor Parent shall, and neither Company nor Parent shall permit any of its
Subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to, or otherwise make any public statement
concerning, the transactions contemplated by this Agreement without the prior
consent (which consent shall not be unreasonably withheld) of Parent, in the
case of a proposed announcement or statement by Company, or Company, in the case
of a proposed announcement or statement by Parent; provided, however, that either
party may, without the prior consent of the other party (but after prior
consultation with the other party to the extent practicable under the
circumstances) issue or cause the publication of any press release or other
public announcement to the extent required by law or by the rules and
regulations of the NYSE.
9.10 Assignment; Third Party
Beneficiaries. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned by either of the
parties
(whether
by operation of law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by each of the parties
and their respective successors and assigns. Except as otherwise
specifically provided in Section 6.6, this Agreement (including the documents
and instruments referred to in this Agreement) is not intended to and does not
confer upon any person other than the parties hereto any rights or remedies
under this Agreement.
Remainder
of Page Intentionally Left Blank
IN
WITNESS WHEREOF, Company and Parent have caused this Agreement to be executed by
their respective officers thereunto duly authorized as of the date first above
written.
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Signature
Page to Agreement and Plan of Merger
Exhibit
A
THE
TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN
PROVISIONS CONTAINED HEREIN AND TO
RESALE
RESTRICTIONS UNDER THE
SECURITIES
ACT OF 1933, AS AMENDED
STOCK
OPTION AGREEMENT, dated September 15, 2008, between MERRILL LYNCH & CO.,
INC., a Delaware corporation (“Issuer”), and BANK OF
AMERICA CORPORATION, a Delaware corporation (“Grantee”).
W I T N E S S E T
H:
WHEREAS,
Grantee and Issuer have entered into an Agreement and Plan of Merger of even
date herewith (the “Merger Agreement”),
which agreement has been executed by the parties hereto in connection with this
Stock Option Agreement (the “Agreement”);
and
WHEREAS,
as a condition to Grantee’s entering into the Merger Agreement and in
consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined);
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer
hereby grants to Grantee an unconditional, irrevocable option (the “Option”) to purchase,
subject to the terms hereof, up to 304,421,097 fully paid and nonassessable
shares of Issuer’s Common Stock, par value $1.331/3 per
share (“Common
Stock”), at a price of $17.05 per share (the “Option Price”); provided, however, that in no
event shall the number of shares of Common Stock for which this Option is
exercisable exceed 19.9% of the Issuer’s issued and outstanding shares of Common
Stock without giving effect to any shares subject to or issued pursuant to the
Option. The number of shares of Common Stock that may be received
upon the exercise of the Option and the Option Price are subject to adjustment
as herein set forth.
(b) In
the event that any additional shares of Common Stock are either (i) issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement) or (ii) redeemed, repurchased, retired or otherwise
cease to be outstanding after the date of this Agreement, the number of shares
of Common Stock subject to the Option shall be increased or decreased, as
appropriate, so that, after such issuance, such number equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the
Option. Nothing contained in this Section 1(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer or Grantee to breach any provision
of the Merger Agreement.
2. (a) The
Holder (as hereinafter defined) may exercise the Option, in whole or part, and
from time to time, if, but only if, both an Initial Triggering Event (as
hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the
Holder shall have sent the written notice of such exercise (as provided in
subsection (e) of this Section 2) within 180 days following such Subsequent
Triggering Event. Each of the following shall be an “Exercise
Termination Event”: (i) the Effective Time (as defined in the Merger
Agreement) of the Merger; (ii) termination of the Merger Agreement in accordance
with the provisions thereof if such termination occurs prior to the occurrence
of an Initial Triggering Event except a termination by Grantee pursuant to
Section 8.1(d) (unless the breach by Issuer giving rise to such right of
termination is non-volitional) or Section 8.1(e) of the Merger Agreement; or
(iii) the passage of 18 months after termination of the Merger Agreement if such
termination follows the occurrence of an Initial Triggering Event or is a
termination by Grantee pursuant to Section 8.1(d) (unless the breach by Issuer
giving rise to such right of termination is non-volitional) or Section 8.1(e) of
the Merger Agreement. The term “Holder” shall mean the holder or
holders of the Option.
(b) The
term “Initial
Triggering Event” shall mean any of the following events or transactions
occurring after the date hereof:
(i) Issuer
or any of its Subsidiaries (each an “Issuer Subsidiary”),
without having received Grantee’s prior written consent, shall have entered into
an agreement to engage in an Acquisition Transaction (as hereinafter defined)
with any person (the term “person” for purposes
of this Agreement having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and the
rules and regulations thereunder) other than Grantee or any of its Subsidiaries
(each a “Grantee Subsidiary”)
or the Board of Directors of Issuer shall have recommended that the stockholders
of Issuer approve or accept any Acquisition Transaction with any person other
than Grantee or a Subsidiary of Grantee. For purposes of this
Agreement, “Acquisition
Transaction” shall mean (w) a merger, consolidation or share exchange, or
any similar transaction, involving Issuer or any Significant Subsidiary (as
defined in Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission (the “SEC”)) of Issuer, (x)
a purchase, lease or other acquisition or assumption of all or a substantial
portion of the assets or deposits of Issuer or any Significant Subsidiary of
Issuer, (y) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 10% or
more of the voting power of Issuer (provided that this
clause (y) shall not be triggered as a result of Temasek Capital (Private)
Limited or its subsidiaries acquiring beneficial ownership of 10% or more of the
outstanding shares of Common Stock solely as a result of their holdings of
Common Stock as of the date hereof taken together with their acquisition of
additional shares of Common Stock under their existing agreement to purchase
Common Stock entered into with Issuer on July 28, 2008), or (z) any
substantially similar transaction; provided, however, that in no
event shall any merger, consolidation, purchase or similar transaction involving
only the Issuer and one or more of its Subsidiaries or involving only any two or
more of such Subsidiaries, be deemed to be an Acquisition Transaction, provided that any
such transaction is not entered into in violation of the terms of the Merger
Agreement;
(ii) Any
event set forth in Section 8.1(e) of the Merger Agreement shall have
occurred;
(iii) Any
person other than Grantee, any Grantee Subsidiary or any Issuer Subsidiary
acting in a fiduciary capacity in the ordinary course of its business shall have
acquired beneficial ownership or the right to acquire beneficial ownership of
10% or more of the outstanding shares of Common Stock (the term “beneficial ownership”
for purposes of this Agreement having the meaning assigned thereto in Section
13(d) of the 1934 Act, and the rules and regulations thereunder); provided that this
clause (iii) shall not be triggered as a result of Temasek Capital (Private)
Limited or its subsidiaries acquiring beneficial ownership of 10% or more of the
outstanding shares of Common Stock solely as a result of their holdings of
Common Stock as of the date hereof taken together with their acquisition of
additional shares of Common Stock under their existing agreement to purchase
Common Stock entered into with Issuer on July 28, 2008;
(iv) Any
person other than Grantee or any Grantee Subsidiary shall have made a bona fide proposal to Issuer
or its stockholders that is public or becomes the subject of public disclosure
to engage in an Acquisition Transaction;
(v) After
the receipt by Issuer or its stockholders of any bona fide inquiry or proposal
(or the bona fide
indication of any intention to propose) from a third party to engage in
an Acquisition Transaction, Issuer shall have breached any covenant or
obligation contained in the Merger Agreement and such breach (x) would entitle
Grantee to terminate the Merger Agreement and (y) shall not have been cured
prior to the Notice Date (as defined below); or
(vi) Any
person other than Grantee or any Grantee Subsidiary, other than in connection
with a transaction to which Grantee has given its prior written consent, shall
have filed an application or notice with the Federal Reserve Board, or other
federal or state bank regulatory authority, which application or notice has been
accepted for processing, for approval to engage in an Acquisition
Transaction.
(c) The
term “Subsequent
Triggering Event” shall mean either of the following events or
transactions occurring after the date hereof:
(i) The
acquisition by any person of beneficial ownership of 20% or more of the then
outstanding Common Stock; or
(ii) The
occurrence of the Initial Triggering Event described in paragraph (i) of
subsection (b) of this Section 2, except that the percentage referred to in
clause (y) shall be 20%.
(d) Issuer
shall notify Grantee promptly in writing of the occurrence of any Initial
Triggering Event or Subsequent Triggering Event of which it has knowledge, it
being understood that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
(e) In
the event the Holder is entitled to and wishes to exercise the Option, it shall
send to Issuer a written notice (the date of which being herein referred to as
the “Notice
Date”) specifying (i) the total number of shares it will purchase
pursuant to such exercise and (ii) a place and date not earlier than three
business days nor later than 60 business days from the Notice Date for the
closing of such purchase (the “Closing Date”); provided that if
prior notification to or approval of the Federal Reserve Board or any other
regulatory agency is required in connection with such purchase, the Holder shall
as soon as reasonably practicable file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed. Any exercise of the Option shall be deemed to occur on
the Notice Date relating thereto.
(f) At
the closing referred to in subsection (e) of this Section 2, the Holder shall
pay to Issuer the aggregate purchase price for the shares of Common Stock
purchased pursuant to the exercise of the Option in immediately available funds
by wire transfer to a bank account designated by Issuer, provided that failure
or refusal of Issuer to designate such a bank account shall not preclude the
Holder from exercising the Option.
(g) At
such closing, simultaneously with the delivery of immediately available funds as
provided in subsection (f) of this Section 2, Issuer shall deliver to the Holder
a certificate or certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in part only, a
new Option evidencing the rights of the Holder thereof to purchase the balance
of the shares purchasable hereunder, and the Holder shall deliver to Issuer this
Agreement and a letter agreeing that the Holder will not offer to sell or
otherwise dispose of such shares in violation of applicable law or the
provisions of this Agreement.
(h) Certificates
for Common Stock delivered at a closing hereunder may be endorsed with a
restrictive legend that shall read substantially as follows:
“The
transfer of the shares represented by this certificate is subject to certain
provisions of an agreement between the registered holder hereof and Issuer and
to resale restrictions arising under the Securities Act of 1933, as
amended. A copy of such agreement is on file at the principal office
of Issuer and will be provided to the holder hereof without charge upon receipt
by Issuer of a written request therefor.”
It is
understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the “1933 Act”), in the
above legend shall be removed by delivery of substitute certificate(s) without
such reference if the Holder shall have delivered to Issuer a copy of a letter
from the staff of the SEC, or an opinion of counsel, in form and
substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions of
this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by
law.
(i) Upon
the giving by the Holder to Issuer of the written notice of exercise of the
Option provided for under subsection (e) of this Section 2 and the tender of the
applicable purchase price in immediately available funds, the Holder shall be
deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder. Issuer shall pay
all expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issuance
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer
agrees: (i) that it shall at all times maintain, free from preemptive
rights, sufficient authorized but unissued shares of Common Stock so that the
Option may be exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible securities and other
rights to purchase Common Stock; (ii) that it will not, by charter amendment or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act, avoid or seek to avoid the observance or performance
of any of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. § 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the “BHCA”), or the Change
in Bank Control Act of 1978, as amended, or any state banking law, prior
approval of or notice to the Federal Reserve Board or to any state or other
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such other regulatory
authority as they may require) in order to permit the Holder to exercise the
Option and Issuer duly and effectively to issue shares of Common Stock pursuant
hereto; and (iv) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. This
Agreement (and the Option granted hereby) are exchangeable, without expense, at
the option of the Holder, upon presentation and surrender of this Agreement at
the principal office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase, on the same
terms and subject to the same conditions as are set forth herein, in the
aggregate the same number of shares of Common Stock purchasable
hereunder. The terms “Agreement” and “Option” as used
herein include any Stock Option Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon
receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of
this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
5. In
addition to the adjustment in the number of shares of Common Stock that are
purchasable upon exercise of the Option pursuant to Section 1 of this Agreement,
the number of shares of Common Stock purchasable upon the exercise of the Option
and the Option Price shall be subject to adjustment from time to time as
provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for
such proper adjustment and the full satisfaction of the Issuer’s obligations
hereunder.
6. Upon
the occurrence of a Subsequent Triggering Event that occurs prior to an Exercise
Termination Event, Issuer shall, at the request of Grantee delivered within 180
days of such Subsequent Triggering Event (whether on its own behalf or on behalf
of any subsequent holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare, file and keep current
a shelf registration statement under the 1933 Act covering this Option and any
shares issued and issuable pursuant to this Option and shall use its reasonable
best efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of this Option and any
shares of Common Stock issued upon total or partial exercise of this Option
(“Option
Shares”) in accordance with any plan of disposition requested by
Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall
have the right to demand two such registrations. The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
the Option or Option Shares as provided above, Issuer is in registration with
respect to an underwritten public offering of shares of Common Stock, and if in
the good faith judgment of the managing underwriter or managing underwriters,
or, if none, the sole underwriter or underwriters, of such offering the
inclusion of the Holder’s Option or Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided, however, that after
any such required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Issuer in the aggregate; and
provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practicable and no reduction shall thereafter
occur. Each such Holder shall provide all information reasonably
requested by Issuer for inclusion in any registration statement to be filed
hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating
itself in
respect of representations, warranties, indemnities and other agreements
customarily included in secondary offering underwriting agreements for the
Issuer. Upon receiving any request under this Section 6 from any
Holder, Issuer agrees to send a copy thereof to any other person known to Issuer
to be entitled to registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Notwithstanding anything to
the contrary contained herein, in no event shall Issuer be obligated to effect
more than two registrations pursuant to this Section 6 by reason of the fact
that there shall be more than one Grantee as a result of any assignment or
division of this Agreement.
7. (a) Immediately
prior to, or after, the occurrence of a Repurchase Event (as defined below), (i)
following a request of the Holder, delivered prior to an Exercise Termination
Event, Issuer (or any successor thereto) shall repurchase the Option from the
Holder immediately prior to the Repurchase Event (or, as requested by the
Holder, after the Repurchase Event) at a price (the “Option Repurchase
Price”) equal to the product of the number of shares for which this
Option may then be exercised multiplied by the amount by which (A) the
Market/Offer Price (as defined below) exceeds (B) the Option Price, and (ii) at
the request of the owner of Option Shares from time to time (the “Owner”), delivered
prior to an Exercise Termination Event and within 90 days of the occurrence of a
Repurchase Event (or such later period as provided in Section 10), Issuer shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the “Option Share Repurchase
Price”) equal to the Market/Offer Price multiplied by the number of
Option Shares so designated. The term “Market/Offer Price”
shall mean the highest of (i) the price per share of Common Stock at which a
tender offer or exchange offer therefor has been made, (ii) the price per share
of Common Stock to be paid by any third party pursuant to an agreement with
Issuer, (iii) the highest closing price for shares of Common Stock within the
six-month period immediately preceding the date the Holder gives notice of the
required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a
sale of all or a substantial portion of Issuer’s assets, the sum of the price
paid in such sale for such assets and the current market value of the remaining
assets of Issuer as determined by a nationally recognized investment banking
firm selected by the Holder or the Owner, as the case may be, and reasonably
acceptable to the Issuer, divided by the number of shares of Common Stock of
Issuer outstanding at the time of such sale. In determining the
Market/Offer Price, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm selected by the
Holder or Owner, as the case may be, and reasonably acceptable to the
Issuer.
(b) The
Holder and the Owner, as the case may be, may exercise its right to require
Issuer to repurchase the Option and any Option Shares pursuant to this Section 7
by surrendering for such purpose to Issuer, at its principal office, this
Agreement or certificates for Option Shares, as applicable, accompanied by a
written notice or notices stating that the Holder or the Owner, as the case may
be, elects to require Issuer to repurchase this Option and/or the Option Shares
in accordance with the provisions of this Section 7. Within the
latter to occur of (x) five business days after the surrender of the Option
and/or certificates representing Option Shares and the receipt of such notice or
notices relating thereto and (y) the time that is immediately prior to the
occurrence of a Repurchase Event, Issuer shall deliver or cause to be delivered
to the Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof, if any, that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To
the extent that Issuer is prohibited under applicable law or regulation from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or regulation
from delivering to the Holder and/or the Owner, as appropriate, the Option
Repurchase Price and the Option Share Repurchase Price, respectively, in full
(and Issuer hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices, in each case as
promptly as practicable in order to accomplish such repurchase), the Holder or
Owner may revoke its notice of repurchase of the Option or the Option Shares
either in whole or to the extent of the prohibition, whereupon, in the latter
case, Issuer shall promptly (i) deliver to the Holder and/or the Owner, as
appropriate, that portion of the Option Repurchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock obtained by multiplying the number of shares of Common Stock for
which the surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, or
(B) to the Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing.
(d) For
purposes of this Section 7, a “Repurchase Event”
shall be deemed to have occurred (i) upon the consummation of an Acquisition
Transaction with respect to Issuer (and not solely involving one or more
subsidiaries of Issuer) (except that the percentage referred to in clause (y) of
the definition thereof shall be 50%) or (ii) upon the acquisition by any person
of beneficial ownership of 50% or more of the then outstanding shares of Common
Stock.
8.
[Intentionally
Omitted]
9.
[Intentionally Omitted]
10. The
90-day or 180-day periods for exercise of certain rights under Sections 2, 6, 7
and 13 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such
exercise.
11. Issuer
hereby represents and warrants to Grantee as follows:
(a) Issuer
has full corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution and
delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of Issuer and no
other corporate proceedings on the part of Issuer are necessary to authorize
this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and
delivered by Issuer.
(b) Issuer
has taken all necessary corporate action to authorize and reserve and to permit
it to issue, and at all times from the date hereof through the termination of
this Agreement in accordance with its terms will have reserved for issuance upon
the exercise of the Option, that number of shares of Common Stock equal to the
maximum number of shares of Common Stock at any time and from time to time
issuable hereunder, and all such shares, upon issuance pursuant hereto, will be
duly authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(c) The
Board of Directors of Issuer has unanimously approved this Agreement and the
transactions contemplated hereby (including by reserving shares for issuance of
shares of Common Stock on exercise of the Option) and taken any other action as
required to render inapplicable to such agreement and transactions Section 203
of the Delaware General Corporation Law and, to the knowledge of Issuer, any
similar Takeover Statutes.
12. Grantee
hereby represents and warrants to Issuer that:
(a) Grantee
has all requisite corporate power and authority to enter into this Agreement
and, subject to any approvals or consents referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of
Grantee. This Agreement has been duly executed and delivered by
Grantee.
(b) The
Option is not being, and any shares of Common Stock or other securities acquired
by Grantee upon exercise of the Option will not be, acquired with a view to the
public distribution thereof and will not be transferred or otherwise disposed of
except in a transaction registered or exempt from registration under the 1933
Act.
13. Neither
of the parties hereto may assign any of its rights or obligations under this
Agreement or the Option created hereunder to any other person, without the
express written consent of the other party, except that in the event a
Subsequent Triggering Event shall have occurred prior to an Exercise Termination
Event, Grantee, subject to the express provisions hereof, may assign in whole or
in part its rights and obligations hereunder within 180 days following such
Subsequent Triggering Event (or such later period as provided in Section 10);
provided, however, that until
the date 15 days following the date on which the Federal Reserve Board approves
an application by Grantee under the BHCA to acquire the shares of Common Stock
subject to the Option, Grantee may not assign its rights under the Option except
in (i) a widely dispersed public distribution, (ii) a private placement in which
no one party acquires the right to purchase in excess of 2% of the voting shares
of Issuer, (iii) an assignment to a single party (e.g., a broker or
investment banker) for the purpose of conducting a widely dispersed
public
distribution on Grantee’s behalf, or (iv) any other manner approved by the
Federal Reserve Board.
14. Each
of Grantee and Issuer will use its best efforts to make all filings with, and to
obtain consents of, all third parties and governmental authorities necessary to
the consummation of the transactions contemplated by this Agreement, including
without limitation making application to list the shares of Common Stock
issuable hereunder on the New York Stock Exchange upon official notice of
issuance and applying to the Federal Reserve Board under the BHCA for approval
to acquire the shares issuable hereunder, but Grantee shall not be obligated to
apply to state banking authorities for approval to acquire the shares of Common
Stock issuable hereunder until such time, if ever, as it deems appropriate to do
so.
15. [Intentionally
Omitted]
16. (a) Notwithstanding
any other provision of this Agreement, in no event shall the Grantee’s Total
Profit (as hereinafter defined) exceed $2 billion and, if it otherwise would
exceed such amount, the Grantee, at its sole election, shall either (i) reduce
the number of shares of Common Stock subject to this Option, (ii) deliver to
Issuer for cancellation Option Shares previously purchased by Grantee, (iii) pay
cash to Issuer, or (iv) any combination thereof, so that Grantee’s actually
realized Total Profit shall not exceed $2 billion after taking into account the
foregoing actions.
(b) Notwithstanding
any other provision of this Agreement, this Option may not be exercised for a
number of shares as would result in a Notional Total Profit (as defined below)
of more than $2 billion.
(c) As
used herein, the term “Total Profit” shall
mean the aggregate amount (before taxes) of the following: (i) the amount
received by Grantee pursuant to Issuer’s repurchase of the Option (or any
portion thereof) pursuant to Section 7, (ii) (x) the amount received by Grantee
pursuant to Issuer’s repurchase of Option Shares pursuant to Section 7, less (y)
the Grantee’s purchase price for such Option Shares, (iii) (x) the net cash
amounts received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, less (y) the Grantee’s purchase price of such Option Shares,
(iv) any amounts received by Grantee on the transfer of the Option (or any
portion thereof) to any unaffiliated party, and (v) any amount equivalent to the
foregoing with respect to the Substitute Option.
(d) As
used herein, the term “Notional Total
Profit” with respect to any number of shares as to which Grantee may
propose to exercise this Option shall be the Total Profit determined as of the
date of such proposed exercise assuming that this Option were exercised on such
date for such number of shares and assuming that such shares, together with all
other Option Shares held by Grantee and its affiliates as of such date, were
sold for cash at the closing market price for the Common Stock as of the close
of business on the preceding trading day (less customary brokerage
commissions).
17. The
parties hereto acknowledge that damages would be an inadequate remedy for a
breach of this Agreement by either party hereto and that the obligations of the
parties
hereto shall be enforceable by either party hereto through injunctive or other
equitable relief.
18. If
any term, provision, covenant or restriction contained in this Agreement is held
by a court or a federal or state regulatory agency of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions and
covenants and restrictions contained in this Agreement shall remain in full
force and effect, and shall in no way be affected, impaired or
invalidated. If for any reason such court or regulatory agency
determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section
1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
19. All
notices, requests, claims, demands and other communications hereunder shall be
deemed to have been duly given when delivered in person, by cable, telegram,
telecopy or telex, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
20. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof (except to the extent that
mandatory provisions of federal or state law apply).
21. This
Agreement may be executed in two counterparts, each of which shall be deemed to
be an original, but all of which shall constitute one and the same
agreement.
22. Except
as otherwise expressly provided herein, each of the parties hereto shall bear
and pay all costs and expenses incurred by it or on its behalf in connection
with the transactions contemplated hereunder, including fees and expenses of its
own financial consultants, investment bankers, accountants and
counsel.
23. Except
as otherwise expressly provided herein or in the Merger Agreement, this
Agreement contains the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended
to confer upon any party, other than the parties hereto, and their respective
successors and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
24. Capitalized
terms used in this Agreement and not defined herein shall have the meanings
assigned thereto in the Merger Agreement.
IN
WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on
its behalf by its officers thereunto duly authorized, all as of the date first
above written.
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MERRILL
LYNCH & CO., INC. |
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(Issuer)
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By: |
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Name: |
John
A. Thain |
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Title: |
Chairman
and Chief Executive Officer |
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BANK
OF AMERICA CORPORATION |
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(Grantee)
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By: |
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Name: |
Kenneth
D. Lewis |
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Title: |
Chairman
and Chief Executive Officer |
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Signature
Page to Stock Option Agreement
Exhibit
B
Immediately
prior to the Effective Time, the Company Certificate shall be amended as
follows:
(1) Section
5 of the Certificate of Designations of the 9.00% Non-Voting Mandatory
Convertible Non-Cumulative Preferred Stock, Series 2 and Section 5 of the
Certificate of Designations of the 9.00% Non-Voting Mandatory Convertible
Non-Cumulative Preferred Stock, Series 3 shall each be amended to provide
that (a) each share of such series of Company Preferred Stock shall vote
together as a single class with the shares of Company Common Stock on all
matters presented for a vote of the holders of Company Common Stock, and (b)
each such share shall be entitled to 600 votes.
At the
Effective Time, the Company Certificate shall be amended as
follows:
(1) Section
2B.(b) of Article IV of the Company Certificate shall be amended to provide
that, effective as of the Effective Time, each holder of Company Common Stock
shall be entitled to 250,000 votes for each share thereof held by such
holder.
(2) Section
1 of Article XI of the Company Certificate shall be amended to provide that,
effective as of the Effective Time, holders of Company Common Stock may take
action without a meeting by written consent of the holders of 80% of the shares
of Company Common Stock outstanding and entitled to vote.