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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): September 28, 1999
RAGEN MACKENZIE GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Washington 1-14243 91-1898738
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
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999 Third Avenue, Suite 4300
Seattle, Washington
(Address of principal executive offices)
98104
(Zip Code)
Registrant's telephone number, including area code (206) 343-5000
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Item 5: Other Events
On September 28, 1999, Ragen MacKenzie Group Incorporated ("Ragen
MacKenzie") and Wells Fargo & Company ("Wells Fargo") entered into an Agreement
and Plan of Merger (the "Merger Agreement") pursuant to which a wholly owned
subsidiary of Wells Fargo will merge with and into Ragen MacKenzie, with Ragen
MacKenzie being the surviving corporation. The transaction, which has been
approved by both of the Wells Fargo and Ragen MacKenzie Boards of Directors,
will be accounted for as a purchase transaction. At the effective time of the
merger, as defined in the Merger Agreement, each outstanding share of Ragen
MacKenzie common stock (other than treasury and dissenting shares) will be
converted into the right to receive $18.75 worth of Wells Fargo common stock.
However, if the average closing price of Wells Fargo common stock during a
specified period immediately preceding the date that certain closing conditions
are met is equal to or less than $36.00 per share, each share of Ragen MacKenzie
common stock will be converted into the right to receive 0.5208 shares of Wells
Fargo common stock; if the average closing price of Wells Fargo common stock
during such period is equal to or greater than $42.00 per share, each share of
Ragen MacKenzie common stock will be converted into the right to receive 0.4464
shares of Wells Fargo common stock. Options to purchase Ragen MacKenzie common
stock will be assumed by Wells Fargo and converted into options to purchase
Wells Fargo common stock on the same terms and conditions, whereby the exercise
price and number of shares of Wells Fargo common stock subject to such options
will be appropriately adjusted to reflect the applicable exchange ratio. The
merger is expected to close late in the first quarter of calendar year 2000.
The merger is intended to qualify as a tax-free reorganization under the
Internal Revenue Code. Consummation of the merger is subject to certain
conditions, including the receipt of regulatory and Ragen MacKenzie shareholder
approval. The Merger Agreement provides that, under certain circumstances, one
or both parties will have the right to terminate the transaction. These
circumstances include, among others, (i) breach by either party of the Merger
Agreement and failure to cure such breach within a specified period; (ii)
failure to obtain the approval of Ragen MacKenzie shareholders; (iii) failure to
obtain all of the required government and regulatory approvals; (iv) failure to
consummate the merger by June 30, 2000; and (v) termination by Ragen MacKenzie
if the average closing price of Wells Fargo common stock during a specified
period immediately preceding the date certain closing conditions are met is
below $32.00 per share and has underperformed an index of comparable bank
holding companies set forth in the Merger Agreement, subject to the option of
Wells Fargo to increase the exchange ratio pursuant to a specified formula.
In connection with the Merger Agreement, Ragen MacKenzie and Wells Fargo
entered into a Stock Option Agreement (the "Option Agreement"), pursuant to
which Ragen MacKenzie granted to Wells Fargo an irrevocable option to purchase,
under certain circumstances, up to 2,570,093 authorized and unissued shares of
Ragen MacKenzie common stock at a price per share of $15.50. The option was
granted as a condition and inducement to Wells Fargo's willingness to enter into
the Merger Agreement. Under certain circumstances, Ragen MacKenzie may be
required to repurchase the option or the shares acquired pursuant to the
exercise of the option.
In connection with the Merger Agreement, and as an inducement and condition
to Wells Fargo's entering into the Merger Agreement, certain Ragen MacKenzie
shareholders including directors and executive officers of Ragen MacKenzie have
entered into support agreements agreeing, among other things, to vote their
shares in favor of the merger.
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Copies of the Merger Agreement and the Option Agreement are attached hereto
as exhibits. The foregoing descriptions of such agreements are qualified by
reference to the full text of such exhibits. A joint press release announcing
the proposed transaction was issued on September 28, 1999, and is attached
hereto as an exhibit. The information contained in the September 28, 1999 press
release is incorporated herein by reference.
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Item 7: Financial Statements and Exhibits.
(c) Exhibits
2.1 Agreement and Plan of Merger dated as of September 28,
1999 by and among Wells Fargo & Company, Romero Acquisition
Corp. and Ragen MacKenzie Group Incorporated
10.1 Stock Option Agreement dated September 28, 1999 between
Ragen MacKenzie Group Incorporated and Wells Fargo &
Company
99.1 Joint Press Release dated September 28, 1999
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: September 28, 1999
RAGEN MACKENZIE GROUP INCORPORATED
By: /s/ Lesa A. Sroufe
------------------------------------
Lesa A. Sroufe
Chairman of the Board and
Chief Executive Officer
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EXHIBIT INDEX
2.1 Agreement and Plan of Merger dated as of September 28, 1999 by and among
Wells Fargo & Company, Romero Acquisition Corp. and Ragen MacKenzie Group
Incorporated
10.1 Stock Option Agreement dated September 28, 1999 between Ragen MacKenzie
Group Incorporated and Wells Fargo & Company
99.1 Joint Press Release dated September 28, 1999
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and among
WELLS FARGO & COMPANY,
ROMERO ACQUISITION CORP.
and
RAGEN MACKENZIE GROUP INCORPORATED
September 28, 1999
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AGREEMENT AND PLAN OF MERGER, dated as of September 28, 1999, by and
among RAGEN MACKENZIE GROUP INCORPORATED (the "Company"), WELLS FARGO & COMPANY
(the "Acquiror") and ROMERO ACQUISITION CORP., a wholly-owned subsidiary of the
Acquiror ("Merger Sub").
RECITALS
A. The Company. The Company is a Washington corporation, having its
principal place of business in the State of Washington.
B. The Acquiror; Merger Sub. The Acquiror is a Delaware corporation,
and Merger Sub is a Washington corporation, each having its principal place of
business in the State of California.
C. Certain Intentions of the Parties. Subject to the terms and
conditions contained in this Agreement, the parties to this Agreement intend to
effect the merger of Merger Sub with and into the Company, with the Company
being the corporation surviving such merger. It is the intention of the parties
to this Agreement that the business combination contemplated hereby be treated
as a "reorganization" under Section 368(a) of the Code.
D. Stock Option Agreement; Support Agreement. As a condition and
inducement to the Acquiror's willingness to enter into this Agreement,
concurrently with the execution and delivery of this Agreement, (1) the Company
has executed and delivered a stock option agreement with the Acquiror, pursuant
to which the Company is granting to the Acquiror an option to purchase, under
certain circumstances, shares of Company Common Stock (the "Stock Option
Agreement"), and (2) certain shareholders of the Company have executed and
delivered an agreement (the "Support Agreement") with the Acquiror pursuant to
which, among other things, such shareholders have agreed to vote all shares of
the Company owned by them in favor of the Merger.
E. Employment Arrangements. Certain employees of the Company have
executed and delivered employment and/or non-competition agreements with the
Acquiror (the "Employment Agreements").
F. Retention Program. The Acquiror and the Company have agreed to
establish a retention program on the terms described herein, the purpose of
which is to retain the services of certain employees of the Company and its
Subsidiaries following the Merger.
G. Board Action. The respective Boards of Directors of each of the
Acquiror, Merger Sub and the Company have determined that it is in the best
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interests of their respective companies and their shareholders to consummate the
transactions provided for in this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties agree as follows:
ARTICLE I
Certain Definitions; Interpretation
1.1 Certain Definitions. The following terms are used in this
Agreement with the meanings set forth below:
"Acquiror" has the meaning assigned in the preamble to this Agreement.
"Acquiror Common Stock" means the common stock, par value $1-2/3 per
share, of the Acquiror.
"Acquiror Plans" has the meaning assigned in Section 6.12.
"Acquisition Proposal" has the meaning assigned in Section 6.5.
"Affiliate" means, with respect to any specified person, any other
person directly or indirectly controlling, controlled by or under common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by Contract or
otherwise; and the terms "controlling" and "controlled" have correlative
meanings to the foregoing.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.2.
"AMEX" means the American Stock Exchange, Inc.
"Average Closing Price" means as of any date, the average of the daily
last sale price of a share of Acquiror Common Stock as reported on the NYSE
Composite Transactions Reporting System for the ten consecutive NYSE full
trading days (in which such shares are traded on the NYSE) ending at the
close of trading on the NYSE full trading day immediately preceding such
date.
"Benefit Plans" has the meaning assigned in Section 5.3(q)(1).
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"Broker-Dealer Subsidiary" has the meaning assigned in Section
5.3(g)(4).
"Client" means any person to which the Company or any of its
Subsidiaries provides products or services under any Contract.
"Code" means the Internal Revenue Code of 1986, as amended.
"Condition Date" has the meaning assigned in Section 2.2.
"Company" has the meaning assigned in the preamble to this Agreement.
"Company Articles" means the Articles of Incorporation of the Company,
as amended.
"Company Board" means the Board of Directors of the Company.
"Company Bylaws" means the Bylaws of the Company, as amended.
"Company Common Stock" means the common stock, par value $.01 per
share, of the Company.
"Company Meeting" has the meaning assigned in Section 6.2.
"Company Preferred Stock" means the preferred stock, par value $.01
per share, of the Company.
"Company Reports" has the meaning assigned in Section 5.3(l)(8).
"Company Stock" means, collectively, the Company Common Stock and the
Company Preferred Stock.
"Company Stock Option" means each option to purchase shares of Company
Common Stock under the Company Stock Plans as Previously Disclosed.
"Company Stock Plans" means the stock-based compensation and incentive
plans of the Company Previously Disclosed as of the date hereof and
includes, without limitation, the RMI 1989 Stock Option Plan, the RMI 1993
Stock Option Plan, the RMI 1996 Stock Incentive Compensation Plan and the
Company 1998 Stock Incentive Compensation Plan.
"Contract" means, with respect to any person, any agreement,
indenture, undertaking, debt instrument, contract, contractual obligation,
lease or other commitment to which such person or any of its Subsidiaries
is
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a party or by which any of them is bound or to which any of their
properties is subject.
"Covered Employees" has the meaning assigned in Section 6.12.
"CSE" means the Chicago Stock Exchange.
"Disclosure Schedule" has the meaning assigned in Section 5.1.
"Dissenting Shares" has the meaning assigned in Section 3.1(d).
"Effective Date" means the date on which the Effective Time occurs.
"Effective Time" means the date and time at which the Merger becomes
effective.
"Employment Agreements" has the meaning assigned in the recitals
hereto.
"Environmental Laws" means any federal, state or local law,
regulation, order, decree, permit, authorization, common law or agency
requirement with force of law relating to: (1) the protection or
restoration of the environment, health or safety (in each case as relating
to the environment) or natural resources, or (2) the handling, use,
presence, disposal, release or threatened release of any Hazardous
Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has, with respect to any person, the meaning
assigned in Section 5.3(q)(6).
"ERISA Client" has the meaning assigned in Section 5.3(k)(7).
"ESPP" has the meaning assigned in Section 4.1(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Agent" has the meaning assigned in Section 3.4(a).
"Exchange Fund" has the meaning assigned in Section 3.4(a).
"Exchange Ratio" has the meaning assigned in Section 3.1(a).
"Federal Reserve System" means the Board of Governors of the Federal
Reserve System and the Federal Reserve Banks.
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"Financial Statements" has the meaning assigned in Section 5.3(g)(2).
"FOCUS Reports" has the meaning assigned in Section 5.3(g)(4).
"Form ADV" has the meaning assigned in Section 5.3(k)(4).
"Form BD" has the meaning assigned in Section 5.3(k)(4).
"Governmental Authority" means any court, administrative agency or
commission or other foreign, federal, state or local governmental authority
or instrumentality.
"Hazardous Substance" means any hazardous or toxic substance, material
or waste, including those substances, materials and wastes listed in the
United States Department of Transportation Hazardous Materials Table (49
C.F.R. (S) 172.101), or by the United States Environmental Protection
Agency as hazardous substances (40 C.F.R. Part 302) and amendments thereto,
petroleum products or other such substances, materials and wastes that are
or become regulated under any applicable local, state or federal law,
including petroleum compounds, lead, asbestos and polychlorinated
biphenyls.
"Indemnified Party" has the meaning assigned in Section 6.13(a).
"Insurance Amount" has the meaning assigned in Section 6.13(b).
"Insurance Policies" has the meaning assigned in Section 5.3(v).
"Investment Advisers Act" means the Investment Advisers Act of 1940,
as amended, and the rules and regulations thereunder.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
"IRS" means the Internal Revenue Service.
"Liens" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Litigation" has the meaning assigned in Section 5.3(o).
"Material" means, with respect to any fact, circumstance, event or
thing, that such fact, circumstance, event or thing is or would reasonably
be expected to be material to (1) the financial position, results of
operations, assets, properties or business of the Acquiror and its
Subsidiaries, taken as a whole, the Company and its Subsidiaries, taken as
a whole, or the Surviving Corporation and its Subsidiaries, taken as a
whole, as the case may be (other
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than to the extent such fact, circumstance, event or thing is due to (x)
general changes in conditions in the securities industry, or in the global
or United States economy or capital markets, or (y) changes in applicable
generally accepted accounting principles or in laws, regulations or
regulatory policies of general applicability), or (2) the ability of either
the Acquiror or the Company, as the case may be, timely to perform its
obligations under this Agreement or otherwise to consummate the
transactions contemplated by this Agreement.
"Merger" has the meaning assigned in Section 2.1(a).
"Merger Consideration" has the meaning assigned in Section 2.3.
"Merger Sub" has the meaning assigned in the preamble hereto.
"Merger Sub Common Stock" has the meaning assigned in Section 3.1(e).
"MSRB" means the Municipal Securities Rulemaking Board.
"NASD" means the National Association of Securities Dealers, Inc.
"New Certificates" has the meaning assigned in Section 3.4(a).
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificates" has the meaning assigned in Section 3.4(a).
"Person" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust or unincorporated
organization.
"Previously Disclosed" has the meaning assigned in Section 5.1.
"Proxy Statement" has the meaning assigned in Section 6.3(a).
"Registration Statement" has the meaning assigned in Section 6.3(a).
"Representatives" means, with respect to any person, such person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"Rights" means, with respect to any person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person
any right to subscribe for, redeem or acquire, or any options, calls or
commitments relating to, or any stock appreciation right or other
instrument
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the value of which is determined in whole or in part by reference to the
market price or value of, shares of capital stock of such person.
"RMI" means Ragen MacKenzie Incorporated.
"Scheduled Closing Date" has the meaning assigned in Section 2.2.
"SEC" means the Securities and Exchange Commission.
"SEC Documents", with respect to the Company or the Acquiror, has the
meaning assigned in Section 5.3(g) or 5.4(g), as the case may be.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Securities Laws" means, collectively, the Securities Act, the
Exchange Act, the Investment Advisers Act, the Investment Company Act and
any state securities and "blue sky" laws.
"Self-Regulatory Organization" means the National Association of
Securities Dealers, Inc., the NYSE, the AMEX, the MSRB or other commission,
board, agency or body that is not a Governmental Authority but is charged
with the supervision or regulation of brokers, dealers, securities
underwriting or trading, stock exchanges, commodities exchanges, insurance
companies or agents, investment companies or investment advisers, or to the
jurisdiction of which the Company or one of its Subsidiaries is otherwise
subject.
"Stock Option Agreement" has the meaning assigned in the recitals
hereto.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed
to them in Rule 1-02 of SEC Regulation S-X.
"Support Agreement" has the meaning assigned in the recitals hereto.
"Surviving Corporation" has the meaning assigned in Section 2.1(a).
"Takeover Laws" has the meaning assigned in Section 5.3(c)(2).
"Taxes" means all federal, state, local and foreign taxes, levies or
other assessments imposed by any taxing authority, however denominated,
including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, goods and services, capital, transfer,
franchise, profits, license, withholding, payroll, employment, employer
health, excise, estimated, severance, stamp, occupation, property or other
taxes, and custom
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duties, together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority.
"Tax Returns" means, collectively, all returns, declarations, reports,
estimates, information returns and statements required to be filed under
federal, state, local or any foreign tax laws.
"Treasury Shares" means shares of Company Common Stock owned by the
Company or a Subsidiary of the Company.
"WBCA" means the Washington Business Corporation Act.
1.2 Interpretation. When a reference is made in this Agreement to
Recitals, Sections, Annexes or Schedules, such reference shall be to a Recital,
Section, Annex or Schedule to this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." No rule of construction against the
draftsperson shall be applied in connection with the interpretation or
enforcement of this Agreement. Whenever this Agreement shall require a party to
take an action, such requirement shall be deemed to constitute an undertaking by
such party to cause its Subsidiaries, and to use its reasonable best efforts to
cause its other Affiliates, to take appropriate action in connection therewith.
ARTICLE II
The Merger
2.1 The Merger. At the Effective Time, the business combination
contemplated by this Agreement shall occur and in furtherance thereof:
(a) Structure and Effects of the Merger. Merger Sub shall be merged by
statutory merger with and into the Company with the Company as the
surviving corporation (sometimes referred to as the "Surviving
Corporation") (the "Merger"). The Surviving Corporation shall continue to
be governed by the laws of the State of Washington, and the separate
corporate existence of the Company, with all its rights, privileges,
immunities, powers and franchises, shall continue unaffected by the Merger.
The Merger shall have the effects specified in the WBCA.
(b) Certificate of Incorporation. The certificate of incorporation of
the Surviving Corporation shall be the Company Articles as in effect
immediately prior to the Effective Time, until duly amended in accordance
with the terms thereof and the WBCA.
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(c) Bylaws. The Bylaws of the Surviving Corporation shall be the
Company Bylaws as in effect immediately prior to the Effective Time, until
duly amended in accordance with the terms thereof and the certificate of
incorporation referred to in Section 2.1(b).
(d) Directors. The directors of the Surviving Corporation shall be the
directors of Merger Sub immediately prior to the Effective Time, and such
directors shall hold such office until such time as their successors shall
be duly elected and qualified.
(e) Officers. The officers of the Surviving Corporation shall be the
officers of the Company immediately prior to the Effective Time.
2.2 Effective Time. The Merger shall become effective upon the
filing, in the office of the Secretary of State of the State of Washington, of
articles of merger in accordance with Section 23B.11.050 of the WBCA, or at such
later date and time as may be set forth in such articles. Subject to the terms
of this Agreement, the parties shall cause the Merger to become effective (1) on
the date that is the tenth full NYSE trading day (the "Scheduled Closing Date")
to occur after the date (the "Condition Date") on which last of the conditions
set forth in Article VII (other than conditions relating solely to the delivery
of documents dated the Effective Date) shall have been satisfied or waived in
accordance with the terms of this Agreement (or, at the election of the
Acquiror, on the last business day of the month in which such day occurs), or
(2) on such other date as the parties may agree in writing; provided that the
Effective Date shall not occur prior to March 16, 2000.
2.3 Reservation of Right to Revise Structure. At the Acquiror's
election, the Merger may alternatively be structured so that (1) the Company is
merged with and into any other direct or indirect wholly owned subsidiary of the
Acquiror, (2) any direct or indirect wholly owned subsidiary of the Acquiror is
merged with and into the Company, or (3) Company shall merge with and into
Acquiror; provided, however, that no such change shall (A) alter or change the
amount or kind of the consideration to be issued to the Company's shareholders
in the Merger or under such alternative structure (the "Merger Consideration"),
(B) adversely affect the tax treatment of the Company's shareholders as a result
of receiving the Merger Consideration or prevent the parties from obtaining the
opinion of Counsel referred to in Sections 7.1(g), or (C) materially impede or
delay consummation of the Merger. In the event of such an election, the parties
agree to execute an appropriate amendment to this Agreement in order to reflect
such election.
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ARTICLE III
Consideration; Exchange
3.1 Merger Consideration. Subject to the provisions of this
Agreement, at the Effective Time, automatically by virtue of the Merger and
without any action on the part of any shareholder:
(a) Outstanding Company Common Stock. Each share of Company Common
Stock, other than Treasury Shares or Dissenting Shares, issued and
outstanding immediately prior to the Effective Time shall become and be
converted into the right to receive a number of shares of Acquiror Common
Stock, together with the appropriate number of attached Acquiror Rights,
equal to (i) if the Average Closing Price as of the Condition Date is equal
to or less than $36.00, 0.5208; (ii) if the Average Closing Price as of the
Condition Date is between $36.00 and $42.00, a quotient, the numerator of
which is $18.75 and the denominator of which is the Average Closing Price
as of the Condition Date (such quotient to be rounded to the nearest ten
thousandth); or (iii) if the Average Closing Price as of the Condition Date
is $42.00 or greater, 0.4464 (in each case, subject to adjustment pursuant
to Sections 3.5 and 8.1(f), the "Exchange Ratio").
(b) Outstanding Acquiror Common Stock. Each share of Acquiror Common
Stock issued and outstanding immediately prior to the Effective Time shall
be unchanged and shall remain issued and outstanding as one share of common
stock of the Surviving Corporation.
(c) Treasury Shares. At the Effective Time, all shares of Company
Common Stock owned, directly or indirectly, by the Company or by the
Acquiror, or any of their respective wholly-owned Subsidiaries shall be
canceled and shall cease to exist, and no capital stock of the Acquiror or
other consideration shall be delivered in exchange therefor. All shares of
Acquiror Common Stock owned by the Company or any of its wholly-owned
Subsidiaries shall as of the Effective Time become Acquiror Treasury Stock.
(d) Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of Company Common Stock outstanding immediately prior
to the Effective Time and respect to which dissenters' rights shall have
been properly demanded in accordance with Chapter 23B.13 of the WBCA
("Dissenting Shares") shall not be converted into the right to receive, or
be exchangeable for, Acquiror Common Stock or cash in lieu of fractional
shares but, instead, the holders thereof shall be entitled to payment of
the appraised value of such Dissenting Shares in accordance with the
provisions of Chapter 23B.13 of the WBCA; provided, however, that (i) if
any holder of Dissenting Shares shall subsequently deliver a written
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withdrawal of such holder's demand for appraisal of such shares, or (ii) if
any holder fails to establish such holder's entitlement to dissenters
rights under Chapter 23B.13 of the WBCA, such holder or holders (as the
case may be) shall forfeit the right to appraisal of such shares of Company
Common Stock, and each of such shares shall thereupon be deemed to have
been converted into the right to receive, and to have become exchangeable
for, as of the Effective Time, Acquiror Common Stock and cash in lieu of
fractional shares, if any, without any interest thereon, as otherwise
provided in this Article III.
(e) Outstanding Merger Sub Common Stock. Each share of the common
stock, par value $.01 per share, of Merger Sub ("Merger Sub Common Stock")
issued and outstanding at the Effective Time shall be converted at the
Effective Time into one share of Company Common Stock.
3.2 Rights as Shareholders; Stock Transfers. At the Effective Time,
holders of Company Common Stock converted into the right to receive Acquiror
Common Stock and/or cash in lieu of fractional shares pursuant to Section 3.1(a)
shall cease to be, and shall have no rights as, shareholders of the Company,
other than to receive (a) any dividend or other distribution with respect to
such Company Common Stock with a record date occurring prior to the Effective
Time and (b) the consideration provided under this Article III. Following the
Effective Time, there shall be no transfers of Company Stock on the stock
transfer books of the Company or the Surviving Corporation.
3.3 Fractional Shares. Notwithstanding any other provision in this
Agreement, no fractional shares of Acquiror Common Stock, and no certificates or
scrip therefor, or other evidence of ownership thereof, will be issued in the
Merger; instead, the Acquiror shall pay to each holder of Company Common Stock
who otherwise would be entitled to a fractional share of Acquiror Common Stock
(after taking into account all Old Certificates delivered by such holder) an
amount in cash (without interest) determined by multiplying such fraction by the
Average Closing Price as of the Effective Date.
3.4 Exchange Procedures. (a) Promptly after the Effective Date, the
Acquiror shall send, or cause to be sent, to each former holder of record of
shares of Company Common Stock (other than Treasury Shares) immediately prior to
the Effective Time transmittal materials for use in exchanging such
shareholder's certificates formerly representing shares of Company Common Stock
("Old Certificates") for the Merger Consideration. The Acquiror will cause
certificates representing the shares of Acquiror Common Stock to be issued in
the Merger ("New Certificates"), and any check in respect of any fractional
share interests or dividends or distributions that a former holder of Company
Common Stock is entitled to receive, to be delivered to such shareholder upon
delivery to Norwest Bank Minnesota, N.A. (in such capacity and including any
successors that may from time to time be approved by the Acquiror, the "Exchange
Agent") of Old Certificates
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representing the shares of Company Common Stock formerly owned by such
shareholder as of the Effective Time (or indemnity satisfactory to the Surviving
Corporation and the Exchange Agent, if any of such certificates are lost, stolen
or destroyed), together with properly completed transmittal materials; provided
that such New Certificates, and any such check, shall not be issued to any
Company Affiliate unless and until such Company Affiliate has delivered an
agreement pursuant to Section 6.6. No interest will be paid on any Merger
Consideration, including cash to be paid in lieu of fractional share interests,
or in respect of dividends or distributions which any such person may be
entitled to receive pursuant to this Article III upon such delivery.
(b) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of Company Stock for any
amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(c) No dividends or other distributions on Acquiror Common Stock with
a record date occurring after the Effective Time shall be paid to the
holder of any unsurrendered Old Certificate until the holder thereof shall
be entitled to receive New Certificates in exchange therefor in accordance
with this Article III, and no such shareholder shall be eligible to vote
such Acquiror Common Stock until the holder of such Old Certificates is
entitled to receive New Certificates in accordance with this Article III.
After becoming so entitled in accordance with this Article III, the record
holder thereof also shall be entitled to receive any such dividends or
other distributions, without any interest thereon, which theretofore had
become payable with respect to shares of Acquiror Common Stock such holder
had the right to receive upon surrender of the Old Certificate.
3.5 Adjustment of Exchange Ratio. If, after the date of this
Agreement, but prior to the Effective Time, the shares of Acquiror Common Stock
issued and outstanding shall, through a reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
similar change (regardless of the method of effectuation of any of the
foregoing, including by way of a merger or otherwise) in the capitalization of
the Acquiror, increase or decrease in number or be changed into or exchanged for
a different kind or number of securities, then an appropriate and proportionate
adjustment shall be made to the Exchange Ratio.
3.6 Options. At the Effective Time, all Company Stock Options which
are then outstanding and unexercised shall cease to represent a right to acquire
shares of Company Common Stock and shall be converted into options to purchase
shares of Acquiror Common Stock on the same terms and conditions under the
applicable Company Stock Plan and the stock option agreement by which such
Company Stock Option is evidenced. From and after the Effective Time:
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(a) the number of shares of Acquiror Common Stock purchasable upon
exercise of such Company Stock Option shall equal the product (rounded down
to the nearest share) of (1) the number of shares of Company Common Stock
that were subject to such Company Stock Option immediately prior to the
Effective Time and (2) the Exchange Ratio, and
(b) the per share exercise price under each such Company Stock Option
shall be equal to the result (rounded up to the nearest cent) of dividing
the per share exercise price of each such Company Stock Option by the
Exchange Ratio.
Notwithstanding the foregoing, each Company Stock Option that is intended to be
an "incentive stock option" (as defined in Section 422 of the Code) shall be
adjusted in accordance with the requirements of Section 424 of the Code.
ARTICLE IV
Actions Pending the Effective Time
4.1 Forebearances of the Company. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement, without the
prior written consent of the Acquiror, the Company will not, and will cause each
of its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of the Company or any of
its Subsidiaries other than in the ordinary and usual course, or, to the
extent consistent therewith, fail to use reasonable best efforts to
preserve intact any of their business organizations and assets and maintain
their rights, franchises and existing relations with clients, customers,
correspondents, independent contractors, suppliers, employees and business
associates; or engage in any new lines of business.
(b) Capital Stock. Other than pursuant to the exercise of Previously
Disclosed Rights outstanding on the date hereof, and other than pursuant to
the Stock Option Agreement, (1) issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any additional shares of Company
Stock or any Rights, (2) enter into any Contract with respect to the
foregoing or (3) permit any additional shares of Company Stock to become
subject to new grants of employee or director stock options, other Rights
or similar stock-based employee rights. Without limiting the generality of
the foregoing, the Company (1) will not issue, or agree or commit to issue,
any shares of Company Stock or Rights under the Company Stock Plans other
than pursuant to the exercise of Previously Disclosed Rights outstanding on
the date hereof and (2) shall take all actions necessary to (x) provide
that the
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"offering" that commenced on July 1, 1999 and that will end on December 31,
1999 under the Company's Employee Stock Purchase Plan (the "ESPP") is the
final offering under such plan, (y) terminate the ESPP effective as of
December 31, 1999, and (z) provide that the Deferral Period (as such term
is defined in the Company's Deferred Compensation Plan as in effect on the
date hereof (the "Deferred Compensation Plan")) that commenced on July 1,
1999 shall be the last Deferral Period with respect to which any
participant therein may elect to allocate any amounts to the Company Stock
Index (as defined in the Deferred Compensation Plan) for any purpose,
including the calculation of Account Earnings (as defined in the Deferred
Compensation Plan), such that no obligation to issue shares of Company
Common Stock shall arise thereunder with respect to any subsequent Deferral
Period.
(c) Dividends, Etc. (1) Make, declare, pay or set aside for payment
any dividend on or in respect of, or declare or make any distribution on,
any shares of its capital stock, other than dividends from wholly owned
Subsidiaries to the Company (in each case having record and payment dates
consistent with past practice) or (2) directly or indirectly adjust, split,
combine, redeem, reclassify, purchase or otherwise acquire, any shares of
its capital stock, other than as required by the Company Stock Plans upon
exercise of Previously Disclosed Rights outstanding on the date hereof.
(d) Compensation; Employment Agreements; Etc. Enter into, amend,
modify or renew any Contract regarding employment, consulting, severance or
similar arrangements with any directors, officers, employees of, or
independent contractors with respect to, the Company or its Subsidiaries,
or grant any salary, wage or other increase in compensation or increase in
any employee benefit (including incentive or bonus payments), except (1)
for changes that are required by applicable law, (2) to satisfy Previously
Disclosed Contracts existing on the date hereof, or (3) for employment
arrangements for, or grants of awards to, newly hired non-executive
employees in the ordinary course of business consistent with past practice
or (4) for normal individual increases in compensation to non-officer
employees in the ordinary and usual course of business consistent with past
practice. Nothing herein shall limit year-end or period-end bonuses with
respect to fiscal year 1999 paid out in a manner or according to standard
terms and consistent with past practice. Bonuses paid to managerial
employees who, in the ordinary course of business, participate in the
Company's fiscal year 1999 year-end bonus program shall be accrued and paid
in the ordinary course consistent with past practice. Bonuses earned with
respect to the Company's fiscal year 2000 shall be calculated in the
ordinary course consistent with past practice on a prorated basis for that
portion of fiscal year 2000 completed prior to the Effective Date. The pro
rata portion of such fiscal year 2000 bonuses for the first quarter of such
fiscal year shall be accrued and paid out at the earlier of (i) promptly
following the Closing or (ii) March 31,
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2000. Bonuses paid in respect of the first quarter of fiscal year 2000
shall not exceed in the aggregate $850,000. The pro rata portion of such
fiscal year 2000 bonuses for the period commencing at the beginning of the
second quarter of fiscal year 2000 and ending on the Effective Date shall
be paid at the time bonuses are paid to existing brokerage employees of the
Acquiror, but in no event later than March 31, 2001.
(e) Benefit Plans. Enter into, establish, adopt, amend or modify any
pension, retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare Contract, plan, program or arrangement, or
any trust agreement (or similar arrangement) related thereto, in respect of
any directors, officers, employees of, or independent contractors with
respect to, the Company or its Subsidiaries, including taking any action
that accelerates the vesting or exercisability of stock options, restricted
stock or other compensation or benefits payable thereunder, except, in each
such case, as may be required by applicable law or expressly required by
the terms of Contracts Previously Disclosed in Section 4.1(e) of the
Company Disclosure Schedule as such Contracts are in effect as of the date
hereof.
(f) Dispositions. Except for sales of securities or other
investments or assets in the ordinary course of business consistent with
past practice, sell, transfer, mortgage, lease, encumber or otherwise
dispose of or discontinue any material portion of its assets, business or
properties.
(g) Acquisitions. Except for the purchase of securities or other
investments or assets in the ordinary course of business consistent with
past practice, acquire a material portion of the assets of any other
person.
(h) Governing Documents. Amend the Company Articles, the Company
Bylaws or the certificate of incorporation or bylaws (or similar governing
documents) of any of the Company's Subsidiaries.
(i) Accounting Methods. Implement or adopt any change in accounting
principles, practices or methods, other than as may be required by
generally accepted accounting principles.
(j) Contracts. Except in the ordinary course of business consistent
with past practice, enter into, renew or terminate any material Contract or
amend or modify in any material respect, or waive any material right under,
any of its existing material Contracts.
(k) Claims. Settle any claim, action or proceeding, except for any
claim, action or proceeding involving solely money damages in an amount,
individually and in the aggregate for all such settlements, not more than
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$100,000 and which could not reasonably be expected to establish an adverse
precedent or basis for subsequent settlements.
(l) Adverse Actions. (1) Take any action reasonably likely to
prevent or impede the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code or (2) knowingly take any action that
is intended or is reasonably likely to result in (A) any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (B) any of the conditions to the Merger set forth in
Article VII not being satisfied, or (C) a material breach or violation of
any provision of this Agreement.
(m) Capital Expenditures. Authorize or make any capital
expenditures, other than (1) annual budgeted amounts Previously Disclosed,
or (2) in the ordinary and usual course of business consistent with past
practice in amounts not exceeding $100,000 in the aggregate.
(n) Risk Management. Except as required by applicable law or
regulation, (1) implement or adopt any change in the risk management
policies, procedures or practices of the Company, which, individually or in
the aggregate with all such other changes, would be Material, (2) fail to
use commercially reasonable means to avoid any material increase in the
aggregate exposure of the Company to risk from the general United States
securities markets or (3) materially restructure or change its investment
securities portfolio, if any, or the manner in which such portfolio is
classified or reported.
(o) Tax Matters. Make or change any tax election, change any annual
tax accounting period, adopt or change any method of tax accounting, file
any amended Tax Return, enter into any closing agreement, settle any Tax
claim or assessment, surrender or compromise any right to claim a Tax
refund or consent to any extension or waiver of the limitations period
applicable to any Tax claim or assessment, other than any of the foregoing
actions that are (i) not, alone or in the aggregate, Material and (ii)
taken in the ordinary and usual course of business, consistent with past
practice.
(p) New Activities. Initiate any new business activity that would be
impermissible for a "bank holding company" under the Bank Holding Company
Act of 1956, as amended.
(q) Indebtedness. (i) Other than in the ordinary course of business
consistent with past practice, (A) incur any indebtedness for borrowed
money (other than short-term indebtedness incurred to refinance existing
short-term indebtedness, and indebtedness of the Company or any of its
Subsidiaries to the Company or any of its Subsidiaries, and indebtedness
under existing lines of credit), (B) assume, guarantee, endorse or
otherwise as an
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accommodation become responsible for the obligations of any other Person,
(C) make any loan or advance, or (ii) other than with respect to customary
concessions regarding margin indebtedness of brokerage clients in the
ordinary course of business consistent with past practice, and with respect
to the regularly scheduled forgiveness of loans made to employees prior to
the date hereof in connection with the hiring of such employees when and as
required by the express provisions Previously Disclosed Contracts in full
force and effect between such employees and the Company or any of its
Subsidiaries, forgive or extinguish any indebtedness to the Company or any
of its Subsidiaries for borrowed money or otherwise waive any rights under
any instrument or arrangement pursuant to which such indebtedness was
incurred.
(r) Commitments. Agree or commit to do, or adopt any resolutions of
its board of directors in support of, anything that would be precluded by
clauses (a) through (q).
4.2 Forbearances of the Acquiror and Merger Sub. From the date
hereof until the Effective Time, except as expressly contemplated by this
Agreement, without the prior written consent of the Company, each of the
Acquiror and Merger Sub will not, and will cause each of its Subsidiaries not to
(1) take any action reasonably likely to prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code
or (2) knowingly take any action that is intended or is reasonably likely to
result in (A) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time at or
prior to the Effective Time, (B) any of the conditions to the Merger set forth
in Article VII not being satisfied, or (C) a material breach of any provision of
this Agreement.
ARTICLE V
Representations and Warranties
5.1 Disclosure Schedules. On or prior to the date hereof, the
Company has delivered to the Acquiror, and the Acquiror has delivered to the
Company, a schedule (respectively, its "Disclosure Schedule") setting forth,
among other things, items the disclosure of which is necessary or appropriate
either (1) in response to an express informational requirement contained in or
requested by a provision hereof, or (2) as an exception to one or more
representations or warranties contained in Section 5.3 or 5.4, respectively, or
to one or more of its covenants contained in Article IV or VI; provided, that
the mere inclusion of an item in a Disclosure Schedule as an exception to a
representation or warranty or covenant shall not be deemed an admission by a
party that such item (or any undisclosed item or information of comparable or
greater significance) represents a Material exception or fact, event or
circumstance with respect to the Company or the Acquiror,
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respectively. "Previously Disclosed" means information set forth in a Disclosure
Schedule, whether in response to an express informational requirement or as an
exception to one or more representations or warranties or covenants, in each
case, that is contained in a correspondingly enumerated portion of such
Disclosure Schedule. To the extent information is Previously Disclosed pursuant
to the foregoing, the corresponding representation, warranty or covenant shall
be deemed to be modified by such Previously Disclosed information and references
herein (including in Section 5.2) to such corresponding representation, warranty
or covenant shall be deemed to be references to such representation, warranty or
covenant as so modified.
5.2 Standard. No representation or warranty of the Company, on the
one hand, or the Acquiror and Merger Sub, on the other, contained in Section 5.3
or 5.4 shall be deemed untrue or incorrect, and no party hereto shall be deemed
to have breached a representation or warranty, as a consequence of the existence
of any fact, event, or circumstance that is inconsistent with one or more
representations or warranties (with such representations and warranties being
read, for purposes of this Section 5.2, without regard to individual references
to "Materiality" or "Material adverse effect" set forth therein), unless such
fact, event or circumstance (individually or taken together with all other
facts, events or circumstances that are inconsistent with any representation or
warranty contained in Section 5.3 or 5.4) would be Material with respect to the
Company or the Acquiror, as the case may be.
5.3 Representations and Warranties of the Company. Except as
Previously Disclosed in a paragraph of its Disclosure Schedule corresponding to
the relevant paragraph below, the Company hereby represents and warrants to the
Acquiror as follows:
(a) Organization, Standing and Authority. The Company is a
corporation, duly organized, validly existing and in good standing under
the laws of the State of Washington, and is duly qualified to do business
and is in good standing in all jurisdictions where its ownership or leasing
of property or assets or the conduct of its business requires it to be so
qualified.
(b) Corporate Power. The Company and each of its Subsidiaries has
the corporate power and authority to carry on its business as it is now
being conducted and to own or lease all its properties and assets.
(c) Corporate Authority and Action. (1) The Company has the
requisite corporate power and authority, and has taken all corporate action
necessary, in order (A) to authorize the execution and delivery of, and
performance of its obligations under, this Agreement and the Stock Option
Agreement and (B) to consummate the transactions contemplated by the Stock
Option Agreement and, subject only to receipt of the requisite approval
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of the plan of merger contained in this Agreement by the holders of a
majority of the outstanding shares of Company Common Stock, this Agreement.
This Agreement and the Stock Option Agreement each is a valid and legally
binding obligation of the Company, enforceable in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization and similar laws of general applicability
relating to or affecting creditors' rights or by general equity
principles).
(2) The Company has taken all action required to be taken by it
in order to exempt this Agreement, the Support Agreement (to the extent
applicable) and the Stock Option Agreement and the transactions
contemplated hereby and thereby from, and this Agreement, the Support
Agreement (to the extent applicable) and the Stock Option Agreement and the
transactions contemplated hereby and thereby are each exempt from, the
requirements of (1) any applicable "moratorium," "control share," "fair
price" or other antitakeover laws and regulations of any state
(collectively, "Takeover Laws"), including Chapter 23B.19 of the WBCA and
(2) Article 10 of the Company Articles such that the prohibitions of
Section 23B.19.040 of the WBCA and supermajority vote requirement of
Section 10.2.1 of the Company Articles do not apply to this Agreement, the
Support Agreement the Stock Option Agreement or the transactions
contemplated hereby or thereby.
(d) Regulatory Filings; No Defaults. (1) No consents or approvals
of, or filings or registrations with, any Governmental Authority, Self-
Regulatory Organization or with any third party are required to be made or
obtained by the Company in connection with the execution, delivery or
performance by the Company of this Agreement, or to consummate the Merger,
except for (A) filings of applications or notices with the NYSE, the NASD
and other Previously Disclosed securities licensing or supervisory
authorities, (B) the filing with the SEC of the Proxy Statement in
definitive form, (C) approval of the Company's shareholders as contemplated
by Section 5.3(c), (D) approval of the NYSE and consents of national
securities exchanges to the transfer of ownership of seats or memberships
and (E) the filing of a certificate of merger with the Secretary of State
of the State of Washington pursuant to the WBCA. As of the date hereof, the
Company is not aware of any reason why the approvals of all Governmental
Authorities or Self-Regulatory Organizations necessary to permit
consummation of the transactions contemplated by this Agreement will not be
received.
(2) Subject only to the approval by the holders of a majority of
the outstanding shares of Company Common Stock, the receipt of the
regulatory approvals referred to in Section 5.3(d)(1), the expiration of
applicable waiting periods and the making of required filings under federal
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and state securities laws, the execution, delivery and performance of this
Agreement, the Support Agreement and the Stock Option Agreement and the
consummation of the transactions contemplated hereby and thereby do not and
will not (A) constitute a breach or violation of, or a default under, or
give rise to any Lien, any acceleration of remedies or any right of
termination (with or without the giving of notice, passage of time or both)
under, any law, rule or regulation or any judgment, decree, order,
governmental or nongovernmental permit or license, or Contract of the
Company or of any of its Subsidiaries or to which the Company or any of its
Subsidiaries or its or their properties is subject or bound, (B) constitute
a breach or violation of, or a default under, the Company Articles or the
Company Bylaws or similar governing documents of any of its Subsidiaries,
or (C) require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental or nongovernmental permit
or license or Contract.
(e) Company Stock. As of the date hereof, the authorized capital
stock of the Company consists solely of 50,000,000 shares of Company Common
Stock, of which not more than 13,500,000 shares are outstanding as of the
date hereof, and 10,000,000 shares of Company Preferred Stock, of which no
shares are outstanding. As of the date hereof, 542,347 shares of Company
Common Stock are held as Treasury Shares. The outstanding shares of Company
Common Stock have been duly authorized and are validly issued and
outstanding, fully paid and nonassessable, and subject to no preemptive
rights (and were not issued in violation of any subscriptive or preemptive
rights). As of the date hereof, other than the Company Stock Options, there
are no shares of Company Stock authorized and reserved for issuance, the
Company does not have any Rights issued or outstanding with respect to
Company Stock, and the Company does not have any commitment to authorize,
issue or sell any Company Stock or Rights, except pursuant to this
Agreement and the Stock Option Agreement. Section 5.3(e) of the Company
Disclosure Schedule sets forth a list of the holders of outstanding Company
Stock Options, the date that each such Company Stock Option was granted,
the number of shares of Company Common Stock subject to each such Company
Stock Option, the expiration date of each such Option and the price at
which each such Company Stock Option may be exercised under the applicable
Company Stock Plan.
(f) Subsidiaries. The Company has Previously Disclosed a list of all
its Subsidiaries, including the states in which such Subsidiaries are
organized, a brief description of such Subsidiaries' principal activities,
and if any of such Subsidiaries is not wholly owned by the Company or one
of its Subsidiaries, the percentage owned by the Company or any such
Subsidiary and the names, addresses and percentage ownership by any other
person. No equity securities of any of the Company's Subsidiaries are or
may become required to be issued, transferred or otherwise disposed of
(other than to the
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Company or a wholly owned Subsidiary of the Company) by reason of any
Rights with respect thereto. There are no Contracts by which any of the
Company's Subsidiaries is or may be bound to sell or otherwise issue any
shares of its capital stock, and there are no Contracts relating to the
rights or obligations of the Company to vote or to dispose of such shares.
All of the shares of capital stock of each of the Company's Subsidiaries
are fully paid and nonassessable and subject to no subscriptive or
preemptive rights or Rights and, except as Previously Disclosed, are owned
by the Company or a Company Subsidiary free and clear of any Liens. Each of
the Company's Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and is
duly qualified to do business and in good standing in each jurisdiction
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified.
(g) SEC Documents, Financial Statements. (1) The Company has
provided or made available to the Acquiror copies of each registration
statement, offering circular, report, definitive proxy statement or
information statement filed by the Company with the SEC or circulated by
the Company through the date of this Agreement and will promptly provide
each such registration statement, offering circular, report, definitive
proxy statement or information statement filed or circulated after the date
hereof (collectively, the "Company SEC Documents"), each in the form
(including exhibits and any amendments thereto) filed with the SEC (or, if
not so filed, in the form used or circulated). As of their respective dates
(and without giving effect to any amendments or modifications filed after
the date of this Agreement), each of the SEC Documents, including the
financial statements, exhibits and schedules thereto, filed or circulated
prior to the date hereof complied (and each of the SEC Documents filed
after the date of this Agreement will comply) as to form with applicable
Securities Laws and did not (or in the case of reports, statements, or
circulars filed after the date of this Agreement, will not) contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(2) Each of the Company's statements of financial condition included
in or incorporated by reference into the SEC Documents, including the
related notes and schedules, fairly presented (or, in the case of SEC
Documents filed after the date of this Agreement, will fairly present) the
consolidated financial condition of the Company and its Subsidiaries as of
the date of such statement of financial condition and each of the
statements of income, cash flows and changes in shareholders' equity
included in or incorporated by reference into the SEC Documents, including
any related notes and schedules (collectively, the foregoing financial
statements and related notes and schedules are referred to as the
"Financial Statements"),
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fairly presented (or, in the case of SEC Documents filed after the date of
this Agreement, will fairly present) the consolidated results of
operations, cash flows and shareholders' equity, as the case may be, of the
Company and its Subsidiaries for the periods set forth therein (subject, in
the case of unaudited statements, to normal year-end audit adjustments), in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved (except as may be noted
therein and except that such unaudited statements include no notes).
(3) There are no liabilities of the Company or any of its
Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances known to the Company which could
reasonably be expected to result in such a liability, other than:
(A) liabilities provided for in the statement of financial
condition included in the SEC Documents most recently filed prior to
the date hereof, or disclosed in the notes thereto; or
(B) other undisclosed liabilities which, individually or in the
aggregate, are not Material.
(4) The Company has delivered or made available to the Acquiror
true and complete copies of the FOCUS Reports filed on Form X-17A-5 (the
"FOCUS Reports") as of March 26, 1999 and June 25, 1999 by each Subsidiary
of the Company that is a "broker" or "dealer", as such terms are defined in
Sections 2(a)(4) and 2(a)(5) of the Exchange Act (collectively, the
"Broker-Dealer Subsidiaries"). Each FOCUS Report complied (and with respect
to FOCUS Reports filed after the date hereof, will comply) at the date
thereof with the rules and regulations of the SEC relating thereto and
fairly presented (or will present, as the case may be) the information
required to be presented therein pursuant to Rule 17a-5 under the Exchange
Act.
(h) Absence of Certain Changes. Since June 25, 1999, the business of
the Company and its Subsidiaries has been conducted in the ordinary and
usual course, consistent with past practice, and there has not been:
(1) any event, occurrence, development or state of circumstances
or facts which has had or could reasonably be expected to constitute
or result in a Material adverse change in the financial condition,
results of operations, business, assets, properties or shareholders'
equity of the Company and its Subsidiaries, taken as a whole;
(2) any amendment of any term of any outstanding security of the
Company or any of its Subsidiaries or to the Company or any of
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its Subsidiaries' certificate of incorporation or bylaws (or similar
governing documents);
(3) any (A) incurrence, assumption or guarantee by the Company
or any of its Subsidiaries of any indebtedness for borrowed money, or
(B) assumption, guarantee, endorsement or otherwise by the Company of
any obligations of any other person, in each case, other than in the
ordinary and usual course of business, consistent with past practice,
and in amounts and on terms consistent with past practices;
(4) any creation or assumption by the Company or any of its
Subsidiaries of any Lien on any material asset other than in the
ordinary and usual course of business consistent with past practices;
(5) prior to or on the date hereof, any making of any loan in
excess of $50,000, or aggregate loans in excess of $250,000, advance
or capital contributions to or investment in any person, in each case,
other than in the ordinary and usual course of business consistent
with past practice;
(6) any change in any accounting policies or practices by the
Company or any of its Subsidiaries; or
(7) any (A) employment, deferred compensation, severance,
retirement or other similar agreement entered into with any director,
officer, consultant, partner or employee of the Company or any of its
Subsidiaries (or any amendment to any such existing agreement), (B)
grant of any severance or termination pay to any director, officer,
consultant, partner or employee of the Company or any of its
Subsidiaries, or (C) change in compensation or other benefits payable
to any director, officer, consultant, partner or employee of the
Company or any of its Subsidiaries, except, in each case, in the
ordinary course of business or as required by Contract or applicable
law with respect to employees of the Company or any of its
Subsidiaries.
(i) Contracts. (1) The Company has Previously Disclosed each of the
following Contracts to which either the Company or any of its Subsidiaries
is a party, or by which any of them is bound or to which any of their
properties is subject:
(A) any lease of real property;
(B) any agreement in force as of the date hereof for the
purchase of materials, supplies, goods, services, equipment or other
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assets that provides for either annual payments of $25,000 or more or
aggregate payments of $50,000 or more;
(C) any partnership, joint venture or other similar agreement or
arrangement, or any options or rights to acquire from any person any
capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities or such person, in
each case, entered into other than in the ordinary course of business;
(D) any agreement relating to the acquisition or disposition of
any business (whether by merger, sale of stock, sale of assets or
otherwise);
(E) any indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment, outstanding as of the date
hereof, for the borrowing of money by the Company or one of its
Subsidiaries or the deferred purchase price of property in excess of
$50,000 (in either case, whether incurred, assumed, guaranteed or
secured by any asset);
(F) any agreement in force as of the date hereof that creates
future payment obligations in excess of $10,000 in the aggregate and
which by its terms does not terminate or is not terminable without
penalty upon notice of 90 days or less;
(G) any license, franchise or similar agreement material to the
Company or any of its Subsidiaries or any agreement relating to any
trade name or intellectual property right that is material to the
Company or any of its Subsidiaries;
(H) any exclusive dealing agreement or any agreement that limits
the freedom of the Company or any of its Subsidiaries to compete in
any line of business or with any person or in any area or that would
so limit their freedom after the Effective Date;
(I) any compensation, employment, severance, supplemental
retirement or other similar agreement or arrangement with any employee
or former employee of, or independent contractor with respect to, the
Company or any of its Subsidiaries, or any other agreement with any
current or former Affiliate of the Company; and
(J) any other Contract that is a "material contract" as defined
in Item 601(b)(10) of SEC Regulation S-K and that has not been filed
prior to the date hereof as an exhibit to the Company's SEC Documents.
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(2) Each Contract that has been, or is required to be,
Previously Disclosed pursuant to this Section is a valid and binding
agreement of the Company or one or more of its Subsidiaries, as the case
may be, and is in full force and effect, and the Company or its
Subsidiaries parties thereto are not in default or breach in any material
respect under the terms of any such Contract.
(j) Contracts with Clients. (1) Each of the Company and its
Subsidiaries is in compliance with the terms of each Contract with any
Client, and each such Contract is in full force and effect with respect to
the applicable Client. There are no disputes pending or threatened with any
Client under the terms of any such Contract or with any former Client.
(2) Each extension of credit by the Company or any of its
Subsidiaries to any Client (A) is in full compliance with Regulation T of
the Federal Reserve System or any substantially similar regulation of any
governmental or regulatory agency or authority, (B) is fully secured and
(C) the Company or one or more of its Subsidiaries, as the case may be, has
a first priority perfected security interest in the collateral securing
such extension of credit.
(k) Registration Matters. (1) Each Broker-Dealer Subsidiary is, and
at the Effective Time will be, duly registered under the Exchange Act as a
broker-dealer with the SEC, and is, and at the Effective Time will be, in
compliance with the applicable provisions of the Exchange Act and the
applicable rules and regulations thereunder, including, but not limited to
the net capital requirements thereof. Each Broker-Dealer Subsidiary is, and
at the Effective Time will be, a member in good standing with all required
Self-Regulatory Organizations and in compliance with all applicable rules
and regulations of the Self-Regulatory Organizations. Each Broker-Dealer
Subsidiary is, and at the Effective Time will be, duly registered as a
broker-dealer under, and in compliance with, the applicable laws, rules and
regulations of all jurisdictions in which it is required to be so
registered.
(2) The Company has delivered or made available to the Acquiror,
true, correct and complete copies of (A) each Broker-Dealer Subsidiary's
Uniform Application for Broker-Dealer Registration on Form BD ("Form BD")
and (B) each Uniform Application for Investment Adviser Registration filed
by the Company or any Subsidiary ("Form ADV", and together with Form BD,
"Forms"), all of the Forms reflecting all amendments thereto filed with the
NASD or the SEC, as the case may be, on or prior to the date hereof. The
Forms are in compliance with the applicable requirements of the Exchange
Act or the Investment Advisers Act, as the case may be, and the rules and
regulations under such Acts and do not contain any untrue statement of a
material fact or omit to state a material fact required to be
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stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company has
provided or made available true and complete copies of all audit reports by
the SEC or the NASD regarding the Company or its Subsidiaries. Each
director, officer, agent and employee of each Broker-Dealer Subsidiary who
is required to be registered as a representative, principal or agent with
the securities commission of any state or with any SRO is duly registered
as such and such registration is in full force and effect. Each registered
representative and principal of each Broker-Dealer Subsidiary has at least
the minimum series license for the activities which such registered
representative or principal performs for such Broker-Dealer Subsidiary.
(3) The net capital, as such term is defined in Rule 15c3-1
under the Exchange Act, of each Broker-Dealer Subsidiary satisfies, and
since their inception has satisfied, the minimum net capital requirements
of the Exchange Act and of the laws of any jurisdiction in which the
Broker-Dealer Subsidiary conducts business, and has been sufficient to
permit each Broker-Dealer Subsidiary to operate without restriction on its
ability to expand its business under NASD Conduct Rule 3130 or NYSE Rule
326.
(4) None of the Broker-Dealer Subsidiaries nor any "associated
person" thereof (a) is subject to a "statutory disqualification" as such
terms are defined in the Exchange Act, (b) is ineligible to serve as a
broker-dealer or as an associated person to a registered broker-dealer or
(c) is subject to a disqualification that would be a basis for censure,
limitations on the activities, functions or operations of, or suspension or
revocation of the registration of any Broker-Dealer Subsidiary as broker-
dealer, municipal securities dealer, government securities broker or
government securities dealer under Section 15, Section 15B or Section 15C
of the Exchange Act and there is no reasonable basis for, or proceeding or
investigation, whether formal or informal, or whether preliminary or
otherwise, that is reasonably likely to result in, any such censure,
limitations, suspension or revocation.
(5) Except as Previously Disclosed, neither the Company nor its
Subsidiaries is or is required to be registered as an investment company,
investment adviser, commodity trading advisor, commodity pool operator,
futures commission merchant, introducing broker, insurance agent, or
transfer agent under any United States federal, state, local or foreign
statutes, laws, rules or regulations. No Broker-Dealer Subsidiary acts as
the "sponsor" of a "broker-dealer trading program", as such terms are
defined in Rule 17a-23 under the Exchange Act.
(6) Neither the Company, its Subsidiaries nor any "affiliated
person" (as defined in the Investment Company Act) thereof, as applicable,
is ineligible pursuant to Section 9(a) or 9(b) of the Investment Company
Act to
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serve as an investment adviser (or in any other capacity contemplated by
the Investment Company Act) to a registered investment company. Neither the
Company, its Subsidiaries nor any "associated person" (as defined in the
Advisers Act) thereof, as applicable, is ineligible pursuant to Section 203
of the Advisers Act to serve as an investment adviser or as an associated
person to a registered investment adviser. Neither the Company nor its
Subsidiaries provides investment advisory, subadvisory or management
services to or through (i) any issuer or other Person that is an investment
company (within the meaning of the Investment Company Act), (ii) any issuer
or other Person that would be an investment company (within the meaning of
the Investment Company Act) but for the exemptions contained in Section
3(c)(1), Section 3(c)(7), the final clause of Section 3(c)(3) or the third
or fourth clauses of Section 3(c)(11) of the Investment Company Act, or
(iii) any issuer or other Person that is or is required to be registered
under the laws of the appropriate securities regulatory authority in the
jurisdiction in which the issuer is domiciled (other than the United States
or the states thereof), which is or holds itself out as engaged primarily
in the business of investing, reinvesting or trading in securities.
(7) Each account to which the Company provides investment
management, advisory or subadvisory services that (i) is an employee
benefit plan, as defined in Section 3(3) of ERISA, that is subject to Title
I of ERISA; (ii) a Person acting on behalf of such a plan; or (iii) any
entity whose underlying assets are deemed, under 29 C.F.R. Section 2510.3-
101, to include the assets of such a plan by reason of such a plan's
investment in such entity (each, an "ERISA Client") has been managed or
provided brokerage services by the Company or a Subsidiary thereof, as
applicable, such that the Company or such Subsidiary in the exercise of
such management or in the provision of such services is in compliance in
all material respects with the applicable requirements of ERISA.
(l) Compliance with Laws. Each of the Company and its Subsidiaries,
and, to the best of the Company's knowledge, each of their respective
officers and employees:
(1) is in compliance with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable to the conduct of its businesses or to
the employees conducting such businesses, and the rules of all Self-
Regulatory Organizations applicable thereto;
(2) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities and Self-Regulatory Organizations
that are required in order to permit them to own or lease their
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properties and to conduct their businesses as presently conducted; all
such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and are current and, to the
best of the Company's knowledge, no suspension or cancellation of any
of them is threatened or is reasonably likely; are in good standing
with all relevant Governmental Authorities and are members in good
standing with all relevant Self-Regulatory Organizations;
(3) has received, since January 1, 1997, no notification or
written communication (or, to the best knowledge of the Company, any
other communication) from any Governmental Authority or Self-
Regulatory Organization (A) asserting non-compliance with any of the
statutes, regulations, rules or ordinances that such Governmental
Authority or Self-Regulatory Organization enforces, (B) threatening
any material penalty or to revoke any license, franchise, seat on any
exchange, permit, or governmental authorization (nor, to the Company's
knowledge, do any grounds for any of the foregoing exist), (C)
requiring any of them (including any of the Company's or its
Subsidiary's directors or controlling persons) to enter into a cease
and desist order, agreement, or memorandum of understanding (or
requiring the board of directors thereof to adopt any resolution or
policy), or (D) restricting or disqualifying their activities (except
for restrictions imposed by rule, regulation or administrative policy
on brokers or dealers generally);
(4) is not aware of any pending or threatened investigation,
review or disciplinary proceedings by any Governmental Authority or
Self-Regulatory Organization against the Company, any of its
Subsidiaries or any officer, director or employee thereof;
(5) in the conduct of its business with respect to employee
benefit plans subject to Title I of ERISA, has not (A) breached any
applicable fiduciary duty under Part 4 of Title I of ERISA which would
subject it to liability under Sections 405 or 409 of ERISA and (B)
engaged in a "prohibited transaction" within the meaning of Section
406 of ERISA or Section 4975(c) of the Code which would subject it to
liability or Taxes under Sections 409 or 502(i) of ERISA or Section
4975(a) of the Code;
(6) The Company has made available to the Acquiror true and
correct copies of (A) each Form G-37/G-38 filed with the MSRB since
January 1, 1997 and (B) all records required to be kept by the Company
under Rule G-8(a)(xvi) of the MSRB. Since January 1, 1997, other than
as disclosed in such Forms G-37/G-38 made available to the Acquiror,
there have been no contributions or payments, and there is
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no other information, that would be required to be disclosed by the
Company or any of the Company's Subsidiaries;
(7) is not subject to any cease-and-desist or other order issued
by, or a party to any written agreement, consent agreement or
memorandum of understanding with, or a party to any commitment letter
or similar undertaking to, or subject to any order or directive by, a
recipient of any supervisory letter from or has adopted any board
resolutions at the request of, any Governmental Authority or Self-
Regulatory Organization, or been advised since January 1, 1997, by any
Governmental Authority or Self-Regulatory Organization that it is
considering issuing or requesting any such agreement or other action
or has knowledge of any pending or threatened regulatory
investigation; and
(8) since January 1, 1997, has timely filed all reports,
registrations and statements, together with any amendments required to
be made with respect thereto, that were required to be filed under any
applicable law, regulation or rule, with (A) any applicable
Governmental Authority and (B) any Self-Regulatory Organization
(collectively, the "Company Reports"). As of their respective dates,
the Company Reports complied with the applicable statutes, rules,
regulations and orders enforced or promulgated by the regulatory
authority with which they were filed.
(m) Properties; Securities. (1) Except as may be reflected in the
Company's Financial Statements dated before the date hereof, the Company
and its Subsidiaries have good and marketable title, free and clear of all
Liens (other than Liens for current taxes not yet delinquent) to all of the
Material properties and assets, tangible or intangible, reflected in such
financial statements as being owned by the Company and its Subsidiaries as
of the dates thereof. To the best of the Company's knowledge, all buildings
and all the Material fixtures, equipment, and other property and assets
held under leases or subleases by any of the Company and its Subsidiaries
are held under valid leases or subleases, enforceable in accordance with
their respective terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and to general equity principles).
The Company has Previously Disclosed a list of any and all real estate
owned or leased by it or a Company Subsidiary as of the date hereof. Each
of the Company and its Subsidiaries has good and marketable title to all
securities held by it (except securities sold under repurchase agreements
or held in any fiduciary or agency capacity), free and clear of any Lien,
except to the extent such securities are pledged in the ordinary course of
business consistent with prudent business practices to secure obligations
of each of the Company or
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any of its Subsidiaries. Such securities are valued on the books of the
Company or its Subsidiaries in accordance with generally accepted
accounting principles.
(2) Except as Previously Disclosed, neither the Company nor any
Subsidiary thereof holds any equity securities for its own account
involving, in the aggregate, ownership or control of 5% or more of any
class of an issuer's voting securities or 25% or more of the issuer's
equity (treating subordinated debt as equity). Except as Previously
Disclosed, there are no partnerships, limited liability companies, joint
ventures or similar entities, in which the Company or any of its
Subsidiaries is a general partner, manager, managing member or holds some
other similar position or owns or controls any interest, directly or
indirectly, of 5% or more and the nature and amount of each such interest.
(n) Taxes. (1) All Tax Returns with respect to the Company or its
Subsidiaries including consolidated United States federal income tax
returns of it and its Subsidiaries, have been timely filed (taking into
account any Previously Disclosed extension of time within which to file),
and such Tax Returns were true, complete and accurate;
(2) All Taxes shown to be due on such Tax Returns have been paid
in full;
(3) All Taxes due with respect to completed examinations have
been paid in full;
(4) No issues have been raised in writing (or, to the knowledge
of the Company, through any other communication) with the Company or any of
its Subsidiaries by the relevant taxing authority in connection with the
examination of any such Tax Returns;
(5) No currently effective waivers of statutes of limitations
(excluding such statues that relate to years currently under examination by
the IRS) have been given by or requested with respect to any Taxes of the
Company or any of its Subsidiaries;
(6) Each of the Company and its Subsidiaries has duly paid or
made provision for the payment of all 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 and have not been finally determined;
(7) The federal and state income Tax Returns of the Company and
its Subsidiaries have been examined by the IRS or the relevant state taxing
authorities, as the case may be, through 1995. The federal
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income tax returns of the Company and its Subsidiaries for the fiscal year
ended September 30, 1995 and for all fiscal years prior thereto are, for
purposes of routine audit by the IRS, closed because of the statute of
limitations, and no claims for additional taxes for such fiscal years are
pending. Except as previously disclosed, there are no audits by, or
disputes pending between the Company or any of its Subsidiaries and, any
taxing authority of which the Company or any of its Subsidiaries has
received written notice, or claims asserted in writing by any taxing
authority for, Taxes or assessments upon the Company or any of its
Subsidiaries. In addition, (A) proper and accurate amounts have been
withheld by the Company and its Subsidiaries from their employees for all
prior periods in compliance with the Tax withholding provisions of
applicable federal, state and local laws, (B) federal, state and local Tax
Returns that are complete and accurate have been filed by the Company and
its Subsidiaries for all periods for which Tax Returns were due with
respect to income Tax withholding, Social Security and unemployment Taxes,
(C) the amounts shown on such federal, state or local Tax Returns to be due
and payable have been paid in full and (D) there are no Tax liens upon any
property or assets of the Company or its Subsidiaries except liens for
current Taxes not yet due;
(8) Neither the Company nor any of its Subsidiaries has been
required to include in income any adjustment pursuant to Section 481 of the
Code by reason of a voluntary change in accounting method initiated by the
Company or any of its Subsidiaries, and the IRS has not initiated or
proposed any such adjustment or change in accounting method; and
(9) Neither the Company nor any of its Subsidiaries is a party
to or is bound by any Tax sharing, allocation or indemnification agreement
or arrangement. Neither the Company nor any of its Subsidiaries has any
liability for the Taxes of any person (other than the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as successor or transferee, by
contract or otherwise.
(o) Litigation. Company has furnished Acquiror copies of (i) all
attorney responses to the request of the independent auditors for Company
with respect to loss contingencies as of the end of its fiscal year most
recently completed as of the date hereof in connection with the Company's
financial statements included in the Company's most recent annual report on
Form 10-K as filed with the SEC, and (ii) a written list of legal
litigation, proceedings, investigations or controversy ("Litigation")
before any court, arbitrator, mediator, Governmental Authority or Self-
Regulatory Organization involving Company or any Company Subsidiary since
the end of such fiscal year or which have been previously disclosed in the
Company's SEC Documents ("Litigation List"). Except as disclosed in the
Litigation List,
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no Litigation before any court, arbitrator, mediator, Governmental
Authority or Self-Regulatory Organization is pending against the Company or
any of its Subsidiaries, and, to the best of the Company's knowledge, no
such Litigation has been threatened.
(p) Employees; Labor Matters. (1) Each of the Company and its
Subsidiaries is in compliance with all currently applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, including the Immigration Reform and Control Act, the
Worker Adjustment and Retraining Notification Act, any such laws respecting
employment discrimination, harassment, disability rights or benefits, equal
opportunity, plant closure issues, affirmative action, workers'
compensation, employee benefits, severance payments, labor relations,
employee leave issues, wage and hour standards, occupational safety and
health requirements and unemployment insurance and related matters. None of
the Company nor any of its Subsidiaries are engaged in any unfair labor
practice and there is no unfair labor practice complaint pending or
threatened against the Company or any of its Subsidiaries before the
National Labor Relations Board. There are no charges or complaints against
the Company or any of its Subsidiaries pending of threatened in writing
alleging sexual or other harassment, or other discrimination, by the
Company, any of its Subsidiaries or by any of their employees, agents or
representatives.
(2) Neither the Company nor any of its Subsidiaries is a party
to, or is bound by, any collective bargaining agreement, Contract or other
agreement or understanding with any labor union or organization, nor has it
agreed to recognize any union or other collective bargaining unit, nor has
any union or other collective bargaining unit been certified, or is seeking
certification, as representing any of the employees of any of the Companies
or their Subsidiaries.
(q) Employee Benefit Plans. (1) The Company has Previously
Disclosed a complete list of each employee or director benefit plan,
arrangement or agreement, whether or not written, including without
limitation any employee welfare benefit plan within the meaning of Section
3(1) of ERISA, any employee pension benefit plan within the meaning of
Section 3(2) of ERISA (whether or not such plan is subject to ERISA) and
any bonus, incentive, deferred compensation, vacation, stock purchase,
stock option, severance, employment, change of control or fringe benefit
plan, program or agreement that is sponsored, maintained or contributed to
by the Company or any of its Subsidiaries for the benefit of current or
former employees or directors or their beneficiaries (the "Benefit Plans").
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(2) The Company has heretofore made available to Acquiror (A)
true and complete copies of each of the Benefit Plans (or written
explanations of any unwritten Benefit Plans) as in effect on the date
hereof; (B) the three most recent Annual Reports (Form 5500 Series) and
accompanying schedules, if any; and (C) the most recent determination
letter from the IRS (if applicable) for such Benefit Plan.
(3) With respect to each Benefit Plan, the Company and its
Subsidiaries have complied, and are now in compliance, in all material
respects with all provisions of ERISA, the Code and all laws and
regulations applicable to such Benefit Plans and each Benefit Plan has been
administered in all material respects in accordance with its terms. The
Internal Revenue Service has issued a favorable determination letter with
respect to each Benefit Plan that is intended to be a "qualified plan"
within the meaning of Section 401(a) of the Code and the related trust that
has not been revoked, and, to the knowledge of the Company, no
circumstances exist and no events have occurred that could reasonably be
expected to adversely affect the qualified status of any such plan or the
related trust (except for changes in applicable law for which the remedial
amendment period has not yet expired). No Benefit Plan is intended to meet
the requirements of Code Section 501(c)(9).
(4) All contributions required to be made to any Benefit Plan by
applicable law or regulation or by any plan document or other contractual
undertaking, and all premiums due or payable with respect to insurance
policies funding any Plan, for any period through the date hereof have been
timely made or paid in full or, to the extent not required to be made or
paid on or before the date hereof, have been fully reflected on the
Financial Statements. Each Benefit Plan, if any, that is an employee
welfare benefit plan under Section 3(1) of ERISA is either (A) funded
through an insurance company contract and is not a "welfare benefit fund"
with the meaning of Section 419 of the Code or (B) unfunded.
(5) There is no pending or, to the knowledge of the Company,
threatened litigation relating to the Benefit Plans. Neither the Company
nor any of its Subsidiaries has engaged in a transaction with respect to
any Benefit Plan that would subject the Company or any of its Subsidiaries
to a Material tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA.
(6) No Benefit Plan is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code, and neither the Company nor any
of its Subsidiaries has contributed or been obligated to contribute to a
"multiemployer plan" (as defined in Section 3(37) of ERISA) or a plan that
has two or more contributing, but unrelated, sponsors and that is subject
to
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Title IV of ERISA at any time on or after September 26, 1980. No liability
under Subtitle C or D of Title IV of ERISA has been or is reasonably
expected to be incurred by the Company or any of its Subsidiaries with
respect to any ongoing, frozen or terminated "single-employer plan," within
the meaning of Section 4001 of ERISA, currently or formerly maintained by
any of them, or the single-employer plan of any entity which is considered
one employer with the Company under Section 4001 of ERISA or Section 414 of
the Code (an "ERISA Affiliate"). No notice of a "reportable event," within
the meaning of Section 4043 of ERISA, for which the 30-day reporting
requirement has not been waived has been required to be filed for any
Benefit Plan or, to the knowledge of the Company, by any ERISA Affiliate.
Neither the Company nor any of its Subsidiaries or ERISA Affiliates has
provided, or is required to provide, security to any Benefit Plan or any
single-employer plan of an ERISA Affiliate.
(7) Neither the Company nor any of its Subsidiaries has any
obligation for retiree health, life or other welfare benefits, except for
benefits and coverage required by applicable law, including, without
limitation, Section 4980B of the Code and Part 6 of Title I of ERISA. There
are no restrictions on the rights of the Company or any of its Subsidiaries
to amend or terminate any such plan (other than reasonable and customary
advance notice requirements) without incurring any Material liability
thereunder.
(8) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby (either standing alone
or in conjunction with any other event) will (A) result in any payment
(including severance, unemployment compensation, "excess parachute" (within
the meaning of 280G of the Code), forgiveness of indebtedness or otherwise)
becoming due to any director or any employee of the Company or any of its
Subsidiaries under any Benefit Plan, (B) increase any benefits otherwise
payable under any Benefit Plan, (C) result in any acceleration of the time
of payment or vesting of any such benefit or (D) affect in any way the
ability to amend, terminate, merge or administer any Benefit Plan.
(r) Environmental Matters. The Company and its Subsidiaries have
complied at all times with applicable Environmental Laws; no property
(including buildings and any other structures) currently or formerly owned
or operated (or which the Company or any of its Subsidiaries would be
deemed to have owned or operated under any Environmental Law) by the
Company or any of its Subsidiaries or in which the Company or any of its
Subsidiaries (whether as fiduciary or otherwise) has a Lien, has been
contaminated with, or has had any release of, any Hazardous Substance in
such form or substance so as to create any liability for the Company or its
Subsidiaries; the Company is not subject to liability for any Hazardous
Substance disposal or contamination on any other third-party property;
within the last six years,
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the Company and its Subsidiaries have not received any notice, demand
letter, claim or request for information alleging any violation of, or
liability of the Company under, any Environmental Law; the Company and its
Subsidiaries are not subject to any order, decree, injunction or other
agreement with any Governmental Authority or any third party relating to
any Environmental Law; the Company and its Subsidiaries are not aware of
any reasonably likely liability relating to environmental circumstances or
conditions (including the presence of asbestos, underground storage tanks,
lead products or polychlorinated biphenyls) involving the Company or one of
its Subsidiaries, any currently or formerly owned or operated property
(whether as fiduciary or otherwise), or any reasonably likely liability
related to any Lien held by the Company or one of its Subsidiaries; and the
Company has made available to the Acquiror copies of all environmental
reports, studies, sampling data, correspondence, filings and other
environmental information in its possession or reasonably available to it
relating to the Company or one of its Subsidiaries or any currently or
formerly owned or operated property or any property in which the Company or
one of its Subsidiaries (whether as fiduciary or otherwise) has held a
Lien.
(s) Internal Controls. The Company and its Subsidiaries have devised
and maintained a system of internal accounting controls sufficient to
provide reasonable assurances that (1) transactions are executed in
accordance with management's general or specific authorizations, (2)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principals and
to maintain accountability for assets, (3) access to assets is permitted
only in accordance with management's general or specific authorization, and
(4) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences.
(t) Derivatives; Etc. All exchange-traded, over-the-counter or other
swaps, caps, floors, collars, option agreements, futures and forward
contracts and other similar arrangements or Contracts, whether entered into
for the Company's own account, or for the account of one or more of the
Company's Subsidiaries or their customers, were entered into (1) in
accordance with prudent business practices and all applicable laws, rules,
regulations and regulatory policies and (2) with counterparties reasonably
believed to be financially responsible at the time; and each of them
constitutes the valid and legally binding obligation of the Company or one
of its Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles), and are in full force and effect. Neither the Company
nor its Subsidiaries, nor, to the best of the
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Company's knowledge, any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement. The Company's SEC
Documents disclose the value of such agreements and arrangements on a mark-
to-market basis in accordance with generally accepted accounting principles
and, since June 25, 1999, there has not been a material change in such
value.
(u) Names and Trademarks. The Company and its Subsidiaries have the
right to use the names, service-marks, trademarks and other intellectual
property currently used by them in the conduct of their businesses; each of
such names, service-marks, trademarks and other intellectual property has
been Previously Disclosed; and, in the case of such names, service-marks
and trademarks, in each state of the United States, such right of use is
free and clear of any Liens, and no other person has the right to use such
names, service-marks or trademarks in any such state.
(v) Insurance. The Company has Previously Disclosed all of the
insurance policies, binders, or bonds maintained by the Company or its
Subsidiaries ("Insurance Policies"). The Company and its Subsidiaries are
insured with reputable insurers against such risks and in such amounts as
the management of the Company reasonably has determined to be prudent in
accordance with industry practices. All of the Insurance Policies are in
full force and effect; the Company and its Subsidiaries are not in material
default thereunder; and all claims thereunder have been filed in due and
timely fashion.
(w) No Brokers. No action has been taken by the Company that would
give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the
transactions contemplated by this Agreement, excluding the fees to be paid
by the Company to Lazard Freres & Co. LLC in amounts and on terms
Previously Disclosed.
(x) Tax Treatment. As of the date hereof, the Company has no reason
to believe that the Merger will not qualify as a "reorganization" within
the meaning of Section 368(a) of the Code.
(y) Year 2000. The mission-critical computer software operated by
the Company or any of its Subsidiaries is capable of providing, or will be
adapted in a timely manner to provide, uninterrupted millennium
functionality to properly record, store, process, present, refer to and use
in calculations calendar dates falling on or after January 1, 2000 in
substantially the same manner and with substantially the same functionality
and performance as such mission-critical software records, stores,
processes, presents, refers to and uses in calculations calendar dates
falling on or before
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December 31, 1999, and no failure to provide such functionality has been or
could reasonably be expected to be Material to the Company and its
Subsidiaries taken as a whole. The costs of any adaptations referred to in
the immediately preceding sentence will not be Material to the Company and
its Subsidiaries taken as a whole. The Company has made its Year 2000
project assessment and remediation plan available to the Acquiror for
review and has furnished the Acquiror with copies of all communications
between the Company or any Company Subsidiary and Governmental Authorities
having responsibility for overseeing compliance with such Years 2000
compliance matters.
(z) Administration of Trust Accounts. The Company and each Company
Subsidiary has properly administered in all material respects all accounts
for which it acts as a fiduciary, including but not limited to 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 state and federal law and
regulation and common law. To the best knowledge of the Company, neither
the Company, and Company Subsidiary, nor any director, officer or employee
of the Company or any Company Subsidiary has committed any breach of trust
with respect to any such fiduciary account which is Material to or could
reasonably be expected to be Material to the Company and the Company
Subsidiaries taken as a whole, and the accountings for each such fiduciary
account are true and correct in all material respects and accurately
reflect the assets of such fiduciary account.
5.4 Representations and Warranties of the Acquiror. Except as
Previously Disclosed in a paragraph of its Disclosure Schedule corresponding to
the relevant paragraph below, each of the Acquiror and Merger Sub, as the case
may be, hereby represents and warrants to the Company as follows:
(a) Organization, Standing and Authority. Each of the Acquiror and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware (in the case of the
Acquiror) or the State of Washington (in the case of Merger Sub), and is
duly qualified to do business and is in good standing in all jurisdictions
where its ownership or leasing of property or assets or the conduct of its
business requires it to be so qualified.
(b) Corporate Power. The Acquiror and each of its Significant
Subsidiaries has the corporate power and authority to carry on its business
as it is now being conducted and to own all its properties and assets.
(c) Corporate Authority. Each of the Acquiror and Merger Sub has the
requisite corporate power and authority, and has taken all corporate
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action necessary, in order to authorize the execution, delivery of and
performance of its obligations under, this Agreement and the Stock Option
Agreement and to consummate the transactions contemplated by this Agreement
and the Stock Option Agreement. This Agreement and the Stock Option
Agreement each is a valid and legally binding agreement of each of the
Acquiror and Merger Sub, enforceable in accordance with its terms (except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles).
(d) Regulatory Approvals; No Defaults. (1) No consents or approvals
of, or filings or registrations with, any Governmental Authority, Self-
Regulatory Organization or with any third party are required to be made or
obtained by the Acquiror or any of its Subsidiaries in connection with the
execution, delivery or performance by the Acquiror and Merger Sub of this
Agreement, or to consummate the Merger, except for (A) the filing of
applications and notices, as applicable, with the Federal Reserve System
and the Department of Justice; (B) approval of the listing on the NYSE and
the CSE of the Acquiror Common Stock to be issued as Merger Consideration
(and related Acquiror Rights); (C) the filing and declaration of
effectiveness of the Registration Statement; (D) the filing of a
certificate of merger with the Secretary of State of the State of
Washington pursuant to the WBCA; and (E) such filings as are required to be
made or approvals as are required to be obtained under the securities or
"Blue Sky" laws of various states in connection with the issuance of
Acquiror Common Stock in the Merger. As of the date hereof, the Acquiror is
not aware of any reason why the approvals of all Governmental Authorities
or Self-Regulatory Organizations necessary to permit consummation of the
transactions contemplated hereby will not be received.
(2) Subject only to receipt of the regulatory approvals referred
to in Section 5.4(d)(1), the expiration of applicable waiting periods and
the making of all required filings under federal and state securities laws,
the execution, delivery and performance of this Agreement and the Stock
Option Agreement and the consummation of the transactions contemplated
hereby and thereby do not and will not (A) constitute a breach or violation
of, or a default under, or give rise to any Lien, any acceleration of
remedies or any right of termination under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, (B) constitute
a breach or violation of, or a default under, the certificate of
incorporation or bylaws (or similar governing documents) of the Acquiror or
any of its Subsidiaries, or (C) require any consent or approval under any
such law, rule, regulation, judgment, decree, order, governmental permit or
license or Contract.
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(e) Acquiror Capitalization. (1) As of June 30, 1999, the authorized
capital stock of Acquiror consists of (i) 20,000,000 shares of Preferred
Stock, without par value, of which as of the close of business on June 30,
1999, 955,000 shares of Cumulative Tracking Preferred Stock, at $200 stated
value, 9,596 shares of ESOP Cumulative Convertible Preferred Stock, at
$1,000 stated value, 19,903 shares of 1995 ESOP Cumulative Convertible
Preferred Stock, at $1,000 stated value, 21, 288 shares of 1996 ESOP
Cumulative Convertible Preferred Stock, at $1,000 stated value, 18, 639
shares of 1997 ESOP Cumulative Convertible Preferred Stock, at $1,000
stated value, 8,560 shares of 1998 ESOP Cumulative Convertible Preferred
Stock, at $1,000 stated value, 45,508 shares of 1999 ESOP Cumulative
Convertible Preferred Stock, at $1,000 stated value, 1,500,000 shares of
Adjustable-Rate Cumulative Convertible Preferred Stock, Series B, at $50
stated value, and 4,000,000 shares of 6.59% Adjustable Rate Noncumulative
Preferred Stock, Series B, at $50 stated value, were outstanding; (ii)
4,000,000 shares of Preference Stock, without par value, of which as of the
close of business on June 30, 1999, no shares were outstanding; and (iii)
4,0000,000,000 shares of Common Stock, $1-2/3 par value, of which as of the
close of business on June 30, 1999, 1,650,629,353 shares were outstanding
and 15,465,932 shares were held in the treasury. All of the outstanding
shares of capital stock of Acquiror have been duly and validly authorized
and issued and are fully paid and nonassessable.
(2) The shares of Acquiror Common Stock to be issued as Merger
Consideration, when issued in accordance with the terms of this Agreement,
will be duly authorized, validly issued, fully paid and nonassessable and
not in violation of any preemptive rights.
(f) Subsidiaries. Each of the Acquiror's Significant Subsidiaries
has been duly organized, is validly existing and in good standing under the
laws of the jurisdiction of its organization, and is duly qualified to do
business and in good standing in the jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified. The Acquiror has continuously owned all of the outstanding
capital stock of Merger Sub since the initial issuance by Merger Sub of its
capital stock.
(g) SEC Documents; Financial Statements. (1) Since December 31,
1996, Acquiror and each Acquiror Subsidiary has filed all reports,
registrations, and statements it was required to file with the SEC under
the Securities Act, or under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act, including, but not limited to Acquiror's Annual Reports on
Form 10-K for the fiscal years ended December 31, 1996, 1997 and 1998,
Forms 10-Q, registration statements, definitive proxy statements, and
information statements (collectively, the "Acquiror SEC Documents"). As of
their respective dates (and without giving effect to any amendments or
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modification filed after the date of this Agreement) each of the Acquiror
SEC Documents, including the financial statements, exhibits, and schedules
thereto, filed or circulated prior to the date hereof complied (and each of
the Acquiror SEC Documents filed after the date of this Agreement will
comply) as to form with applicable Securities Laws and did not (or, in the
case of reports, statements, or circular filed after the date of this
Agreement, will not) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(2) Each of the balance sheets included in or incorporated by
reference into the Acquiror SEC Documents, including the related notes and
schedules, fairly presented (or, in the case of Acquiror SEC Documents
filed after the date of this Agreement, will fairly present) the
consolidated financial condition of the Acquiror and its Subsidiaries as of
the date of such balance sheet and each of the statements of income, cash
flows and changes in shareholders' equity and comprehensive income included
in or incorporated by reference into the Acquiror SEC Documents, including
any related notes and schedules, fairly presented (or, in the case of
Acquiror SEC Documents filed after the date of this Agreement, will fairly
present) the consolidated results of operations, cash flows and
shareholders' equity, as the case may be, of the Acquiror and its
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments), in each case
in accordance with generally accepted accounting principles consistently
applied during the periods involved (except as may be noted therein and
except that such unaudited statements include no notes).
(h) Litigation. Except as disclosed in the Acquiror's SEC Documents
filed before the date of this Agreement, no Litigation before any court,
arbitrator, mediator, Governmental Authority or Self-Regulatory
Organization that has been or would reasonably be expected to be Material
to the Acquiror and its Subsidiaries taken as a whole is pending against
the Acquiror or any of its Subsidiaries, and, to the best of the Acquiror's
knowledge, no such Litigation has been threatened.
(i) Compliance with Laws. The Acquiror and each of its Significant
Subsidiaries: is in compliance with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable to the conduct of its businesses or to the
employees conducting such businesses in all material respects, and the
rules of all Self-Regulatory Organizations applicable thereto and has all
permits, licenses, authorizations, orders and approvals of, and has made
all filings, applications and registrations with, all Governmental
Authorities and Self-Regulatory
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Organizations that are required in order to permit them to own or lease
their properties and to conduct their businesses as presently conducted
(all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and are current and, to the best of
the Acquiror's knowledge, no suspension or cancellation of any of them is
threatened or is reasonably likely).
(j) No Brokers. No action has been taken by the Acquiror that would
give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the
transactions contemplated by this Agreement.
(k) Absence of Certain Changes. Since June 30, 1999, there has not
been any event, occurrence, development or state of circumstances or facts
which has had or could reasonably be expected to constitute or result in a
Material adverse change in the financial condition, results of operations,
business, assets, properties or shareholders' equity of the Acquiror and
its Subsidiaries, taken as a whole.
(l) Tax Treatment. As of the date hereof, the Acquiror has no reason
to believe that the Merger will not qualify as a "reorganization" within
the meaning of Section 368(a) of the Code.
(m) Activities of Merger Sub. Merger Sub does not have any
Subsidiaries or material investments of any kind in any entity. Merger Sub
has been incorporated on behalf of the Acquiror solely for purposes of
accomplishing the Merger, has not engaged in any other business activity
and has conducted its operations only as contemplated hereby.
ARTICLE VI
Covenants
6.1 Reasonable Best Efforts. (a) Subject to the terms and
conditions of this Agreement, each of the Company and the Acquiror agrees to use
its reasonable best efforts in good faith to take, or cause to be taken
(including causing any of its Subsidiaries to take), all actions, and to do, or
cause to be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Merger as promptly as
reasonably practicable and otherwise to enable consummation of the transactions
contemplated hereby, and shall cooperate fully with the other party hereto to
that end.
(b) Without limiting the generality of Section 6.1(a), the Company
agrees to use its reasonable best efforts to obtain the consent or approval of
all
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persons party to a Contract with the Company, to the extent the failure to
obtain such consent could reasonably be expected to have a Material adverse
effect on the Company and its Subsidiaries, taken as a whole, or its business
giving effect to the Merger, or is required in order to consummate the Merger or
for the Surviving Corporation to receive the benefits thereof.
6.2 Shareholder Approval. The Company agrees to take, in accordance
with applicable law, applicable stock exchange rules, the Company Articles and
the Company Bylaws, all action necessary to convene, and shall hold, an
appropriate meeting of shareholders of the Company to consider and vote upon the
approval and adoption of this Agreement and any other matters required to be
approved by the Company's shareholders for consummation of the Merger (including
any adjournment or postponement, the "Company Meeting") as promptly as
practicable after the Registration Statement is declared effective, and on a
date agreeable to Acquiror. Unless the Company Board, after having consulted
with and considered the written advice of outside counsel, has determined in
good faith that to do so would constitute a breach of its directors' fiduciary
duties under the WBCA, the Company Board shall recommend such approval, and the
Company shall take all reasonable, lawful action to solicit such approval by its
shareholders.
6.3 Registration Statement. (a) The Acquiror agrees to prepare a
registration statement on Form S-4 (the "Registration Statement"), to be filed
by the Acquiror with the SEC in connection with the issuance of Acquiror Common
Stock (and related Acquiror Rights) in the Merger (including the proxy statement
and prospectus and other proxy solicitation materials of the Company
constituting a part thereof (the "Proxy Statement") and all related documents).
The Company agrees to cooperate, and to cause its Subsidiaries to cooperate,
with the Acquiror, its counsel and its accountants, in preparation of the
Registration Statement and the Proxy Statement and the Company agrees to file
the Proxy Statement in preliminary form with the SEC as promptly as reasonably
practicable; and, provided that the Company and its Subsidiaries have cooperated
as required above, the Acquiror agrees to file the Registration Statement with
the SEC as soon as reasonably practicable after any SEC comments with respect to
the preliminary Proxy Statement are resolved. Each of the Company and the
Acquiror agrees to use all reasonable best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
reasonably practicable after filing thereof. The Acquiror also agrees to use all
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. The Company agrees to furnish to the Acquiror all information
concerning the Company, its Subsidiaries, officers, directors and shareholders
as may be reasonably requested in connection with the foregoing.
(b) Each of the Company and the Acquiror agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
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inclusion or incorporation by reference in (1) the Registration Statement will,
at the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and (2) the
Proxy Statement and any amendment or supplement thereto will, at the date of
mailing to shareholders and at the time of the Company Meeting, contain any
untrue statement which, at the time and in the light of the circumstances under
which such statement is made, will be false or misleading with respect to any
material fact, or which will omit to state any material fact necessary in order
to make the statements therein not false or misleading or necessary to correct
any statement in any earlier statement in the Proxy Statement or any amendment
or supplement thereto. Each of the Company and the Acquiror further agrees that
if it shall become aware prior to the Effective Date of any information
furnished by it that would cause any of the statements in the Proxy Statement to
be false or misleading with respect to any material fact, or to omit to state
any material fact necessary to make the statements therein not false or
misleading, to promptly inform the other party thereof and to take the necessary
steps to correct the Proxy Statement.
(c) The Acquiror agrees to advise the Company, promptly after the
Acquiror receives notice thereof, of the time when the Registration Statement
has become effective or any supplement or amendment has been filed, of the
issuance of any stop order or the suspension of the qualification of the
Acquiror Common Stock for offering or sale in any jurisdiction, of the
initiation or threat of any proceeding for any such purpose, or of any request
by the SEC for the amendment or supplement of the Registration Statement or for
additional information.
6.4 Access; Information. (a) The Company and its Subsidiaries, on
the one hand, and the Acquiror and its Subsidiaries, on the other, shall, upon
reasonable notice, and subject to applicable law, afford the other party hereto
and such party's officers, employees, counsel, accountants and other authorized
representatives, such access during normal business hours and at such other
times as are reasonably necessary throughout the period prior to the Effective
Time to the books, records (including tax returns and work papers of independent
auditors), properties, personnel and to such other information as such other
party may reasonably request; and, during such period, the Company shall furnish
promptly to the Acquiror (1) a copy of each material report, schedule and other
document filed by it pursuant to the requirements of federal or state securities
or banking laws and (2) all other information concerning the business,
properties and personnel of it as the Acquiror may reasonably request.
(b) Each of the Company and the Acquiror agrees that it will not, and
will cause its representatives not to, use any information furnished to the
other in connection with the transactions contemplated by this Agreement for any
purpose unrelated to the consummation of the transactions contemplated by this
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Agreement. Subject to the requirements of law, each party will keep
confidential, and will cause its representatives to keep confidential, all
information and documents furnished to the other in connection with the
transactions contemplated by this Agreement unless such information (1) was
already known to such party, (2) becomes available to such party from other
sources not known by such party to be bound by a confidentiality obligation, (3)
is disclosed with the prior written approval of the party to which such
information pertains, or (4) is or becomes readily ascertainable from published
information or trade sources. In the event that this Agreement is terminated or
the transactions contemplated by this Agreement shall otherwise fail to be
consummated, each party shall promptly cause all copies of documents or extracts
thereof containing information and data as to another party hereto to be
returned to the party which furnished the same. No investigation by either party
of the business and affairs of the other shall affect or be deemed to modify or
waive any representation, warranty, covenant or agreement in this Agreement, or
the conditions to either party's obligation to consummate the transactions
contemplated by this Agreement.
6.5 Acquisition Proposals. The Company agrees that it shall not, and
shall cause its Subsidiaries and its and its Subsidiaries' officers, directors,
agents, advisors and affiliates not to, solicit or encourage inquiries or
proposals with respect to, or engage in any negotiations concerning, or provide
any confidential information to, or have any discussions with, any person
relating to, any tender or exchange offer, proposal for a merger, consolidation
or other business combination involving the Company or any of its Subsidiaries
or any proposal or offer to acquire in any manner a substantial equity interest
in, or a substantial portion of the assets or operations of, the Company or any
of its Subsidiaries, other than the transactions contemplated by this Agreement
(any of the foregoing, an "Acquisition Proposal"); provided, that, if the
Company is not otherwise in violation of this Section 6.5, the Company Board may
provide information to, and may engage in such negotiations or discussions with,
a person, directly or through representatives, if (1) the Company Board, after
having consulted with and considered the written advice of outside counsel to
such Board, has determined in good faith that the failure to provide such
information or to engage in such negotiations or discussions would constitute a
breach of its directors' fiduciary duties under the WBCA and (2) the Company has
entered into with such person a confidentiality agreement on substantially the
same terms as the confidentiality provisions in effect between the Company and
the Acquiror. The Company also agrees immediately to cease and cause to be
terminated any activities, discussions or negotiations conducted prior to the
date of this Agreement with any parties other than the Acquiror with respect to
any of the foregoing. The Company shall promptly (but in any event within 24
hours) advise the Acquiror following the receipt by it of any Acquisition
Proposal and the substance thereof (including the identity of the person making
such Acquisition Proposal), and advise the Acquiror on a current basis of any
developments with respect to such Acquisition Proposal promptly upon the
occurrence thereof.
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6.6 Affiliate Agreements. (a) Not later than the 15th day prior to
the mailing of the Proxy Statement, the Company shall deliver to the Acquiror a
schedule of each person that, to the best of its knowledge, is or is reasonably
likely to be, as of the date of the Company Meeting, deemed to be an "affiliate"
of the Company (each, a "Company Affiliate") as that term is used in Rule 145
under the Securities Act.
(b) The Company shall use its reasonable best efforts to cause each
person who may be deemed to be a Company Affiliate to execute and deliver to the
Acquiror, on or before the date of mailing of the Proxy Statement, an agreement
in substantially the form attached hereto as Annex A.
6.7 Takeover Laws. No party shall take any action that would cause
the transactions contemplated by this Agreement to be subject to requirements
imposed by any Takeover Law and each of them shall take all necessary steps
within its control to exempt (or ensure the continued exemption of) the
transactions contemplated by this Agreement from, or if necessary challenge the
validity or applicability of, any applicable Takeover Law, as now or hereafter
in effect.
6.8 No Rights Triggered. The Company shall take all reasonable steps
necessary to ensure that the entering into of this Agreement and the
consummation of the transactions contemplated hereby and any other action or
combination of actions contemplated hereby do not and will not result in the
grant of any Rights with respect to the Company or any of its Subsidiaries to
any person (1) under the Company Articles or Company Bylaws, or (2) under any
Contract to which the Company or any of its Subsidiaries is a party.
6.9 Stock Exchange Listing. The Acquiror shall use its reasonable
best efforts to list, prior to the Effective Date, on the NYSE, subject to
official notice of issuance, the shares of Acquiror Common Stock (and related
Acquiror Rights) to be issued to the holders of Company Common Stock in the
Merger.
6.10 Regulatory Applications. (a) The Acquiror and the Company and
their respective Subsidiaries shall cooperate and use their respective
reasonable best efforts to prepare all documentation, to effect all filings and
to obtain all permits, consents, approvals and authorizations of all third
parties and Governmental Authorities necessary to consummate the transactions
contemplated by this Agreement as promptly as reasonably practicable.
Notwithstanding the foregoing, the Acquiror shall not be required to accept or
agree to any condition or requirement proposed by a Governmental Authority or
Self-Regulatory Organization relating to Acquiror, Company or its Subsidiaries
that, in the reasonable good faith judgment of Acquiror, is unreasonably
burdensome to Acquiror. Each of the Acquiror and the Company shall have the
right to review in advance, and to the extent practicable each will consult with
the other (subject in each case to applicable laws relating to the exchange of
information) with respect
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to, all material written information submitted to any third party or
Governmental Authority in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the Acquiror and the
Company agrees to act reasonably and as promptly as practicable. Each of the
Acquiror and the Company agrees that it will consult with the other party hereto
with respect to the obtaining of all material permits, consents, approvals and
authorizations of all third parties and Governmental Authorities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other party apprised of the status of material matters
relating to completion of the transactions contemplated hereby.
(b) Each of the Acquiror and the Company agrees, upon request, to
furnish the other party with all information concerning itself, its
Subsidiaries, directors, officers and shareholders and such other matters as may
be reasonably necessary or advisable in connection with any filing, notice or
application made by or on behalf of such other party or any of its Subsidiaries
to any third party or Governmental Authority.
6.11 Retention Program. At the Effective Time, the Company, in
cooperation with the Acquiror, will have established a retention program on
terms described in Schedule 6.11 to be used to retain certain employees of the
Company, and Acquiror, the Company and the Surviving Corporation, as applicable,
shall take all actions necessary to implement the provisions of such Schedule
6.11.
6.12 Certain Employee Benefits. At the Effective Time, the Acquiror
will provide employees of the Company who as of the Effective Time become
employed by the Acquiror or any of its Subsidiaries (the "Covered Employees")
with the employee benefit plans, programs and arrangements maintained by or
contributed to the Acquiror or its Subsidiaries and in which Covered Employees
are eligible to participate after the Effective Time, substantially as and on
the terms set forth on Schedule 6.12 hereto (the "Acquiror Plans"). Except as
set forth on Schedule 12, for purposes of all Acquiror Plans, the Acquiror
shall, or shall cause its Subsidiaries to, cause each such plan, program or
arrangement to treat the prior service with the Company of each Covered Employee
(to the same extent such service is recognized under any analogous plans,
programs or arrangements of the Company immediately prior to the Effective Time
to the extent such a plan, program or arrangement is in effect immediately prior
to the Effective Time) as service rendered to the Acquiror or its Subsidiaries,
as the case may be, solely for purposes of eligibility to participate and for
vesting thereunder (but not for purposes of benefit accruals). The Acquiror and
its Subsidiaries will cause any and all pre-existing condition limitations (to
the extent such limitations did not apply to a pre-existing condition under the
Benefit Plans) and eligibility waiting periods, under any health plans
maintained by the Acquiror or its Subsidiaries in which Covered Employees are
eligible to participate after the Effective Time, other than the Wells Fargo
Long Term Disability Plan and the Wells Fargo Long Term Care
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Plan, to be waived with respect to (a) Covered Employees who, immediately prior
to the Effective Time, participated in a Company-sponsored health plan and (b)
their eligible dependents. The Acquiror and its Subsidiaries will recognize, for
purposes of any annual deductible and out-of-pocket limits under its health
plans, deductible and out-of-pocket expenses paid by Covered Employees and their
dependents during the calendar year in which the Effective Time occurs under the
health plans of the Company and its Subsidiaries. The Acquiror and its
Subsidiaries shall honor, pursuant to the terms of the Previously Disclosed
Benefit Plans, and to the extent consistent with applicable law, all accrued
employee benefit obligations to current and former employees of the Company
under such plans. Nothing in this Section 6.12 shall prevent Acquiror from
amending or terminating any Benefit Plans or benefit plans of the Acquiror (or
its Subsidiaries) or any other contracts, arrangements, commitments or
understandings, in accordance with their terms and applicable law.
6.13 Indemnification. With respect to the indemnification of
directors and officers, Acquiror agrees as follows:
(a) Acquiror shall ensure that all rights to indemnification and all
limitations of liability existing in favor of any person who is now, or has been
at any time prior to the date hereof, or who becomes prior to the Effective Time
of the Merger, a director or officer of Company or any Company Subsidiary (an
"Indemnified Party" and, collectively, the "Indemnified Parties"), in the
Company Articles or Bylaws or similar governing documents of any Company
Subsidiary, as applicable in the particular case and as in effect on the date
hereof, shall, with respect to claims arising from (A) facts or events that
occurred before the Effective Time of the Merger or (B) this Agreement or any of
the transactions contemplated by this Agreement, whether in any case asserted or
arising before or after the Effective Time of the Merger, survive the Merger and
shall continue in full force and effect. Nothing contained in this paragraph
6.13(a) shall be deemed to preclude the liquidation, consolidation, or merger of
Company or any Company Subsidiary, in which case all of such rights to
indemnification and limitations on liability shall be deemed to survive and
continue as contractual rights notwithstanding any such liquidation or
consolidation or merger; provided, however, that in the event of liquidation or
sale of substantially all of the assets of Company or a Company Subsidiary, the
Acquiror shall guarantee, to the extent of the net asset value of the Company or
such Company Subsidiary as of the Effective Date of the Merger, the
indemnification obligations of Company or such Company Subsidiary to the extent
of indemnification obligations of Company and the Company Subsidiaries described
above. Notwithstanding anything to the contrary contained in this Section,
nothing contained herein shall require Acquiror to indemnify any person who was
a director or officer of Company or any Company Subsidiary to a greater extent
than Company or any Company Subsidiary is, as of the date of this Agreement,
required to indemnify any such person.
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(b) Any Indemnified Party wishing to claim indemnification under this
Section, upon learning of such claim, action, suit, proceeding, or
investigation, shall promptly notify the Acquiror thereof, but the failure to so
notify shall not relieve the Acquiror of any liability it may have to such
Indemnified Party unless such failure has actually prejudiced the Acquiror. In
the event of any such claim, action, suit, proceeding, or investigation (whether
arising before or after the Effective Time) (i) if the Acquiror agrees that the
claim, action, suit, proceeding or investigation is fully indemnifiable and that
the Acquiror will pay any liability resulting from such claim, action, suit,
proceeding or investigation, the Acquiror shall have the right to assume the
defense thereof and shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof, except that if the
Acquiror elects not to assume such defense or counsel for the Indemnified Party
advises that there are issues which raise conflicts of interest between Acquiror
and the Indemnified Party, the Indemnified Party may retain counsel satisfactory
to them, and the Acquiror shall pay the reasonable fees and expenses of such
counsel for the Indemnified Party promptly as statements therefor are received;
provided, however, that Acquiror shall be obligated pursuant to this
subparagraph (b) to pay for only one firm of counsel for all Indemnified Parties
in any jurisdiction unless the use of one counsel for such Indemnified Parties
would present such counsel with a conflict of interest, and (ii) such
Indemnified Party shall cooperate fully in the defense of any such matter.
(c) For a period of six years from the Effective Time, the Acquiror
shall use its reasonable best efforts to provide that portion of director's and
officer's liability insurance that serves to reimburse the present and former
officers and directors of the Company or any of its Subsidiaries with respect to
claims against such directors and officers arising from fact or events which
occurred before the Effective Time, which insurance shall contain at least the
same coverage and amounts, and contain terms and conditions no less
advantageous, as that coverage currently provided by the Company; provided,
however, that in no event shall the Acquiror be required to expend more than 150
percent of the current amount expended by the Company (such limit on the
premiums required to be expended by the Acquiror, the "Insurance Amount") to
maintain or procure such directors and officers insurance coverage for a
comparable six-year period; provided, further, that if the Acquiror is unable to
maintain or obtain the insurance called for by this Section 6.13(b), the
Acquiror shall use its reasonable best efforts to obtain as much comparable
insurance as is available for the Insurance Amount; provided, further, that
officers and directors of the Company or any subsidiary may be required to make
application and provide customary representations and warranties to the
Acquiror's insurance carrier for the purpose of obtaining such insurance.
(d) If the Acquiror or any of its successors shall consolidate with,
or merge into, any other entity and shall not be the continuing or surviving
entity of such consolidation or merger, or shall transfer all of its assets to
any other entity,
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then, and in each case, proper provision shall be made so that the successor and
assigns of the Acquiror shall assume the obligations set forth in this Section
6.13.
(e) The provisions of this Section 6.13 are intended to be for the
benefit of, and enforceable in accordance with their terms by, Indemnified
Parties.
6.14 Notification of Certain Matters. (a) Each of the Company and
the Acquiror shall give prompt notice to the other of any fact, event or
circumstance known to it that is reasonably likely, individually or taken
together with all other facts, events and circumstances known to it, to result
in a material breach of any of its representations, warranties, covenants or
agreements contained herein.
(b) The Company and each of its Subsidiaries shall promptly notify
the Acquiror, and the Acquiror shall promptly notify the Company, of any written
notice (or any other communication of which the Company and each of its
Subsidiaries, on the one hand, or the Acquiror, on the other hand, becomes
aware) from any person alleging that the consent of such person is or may be
required as a condition to the Acquisition or any notice or other communication
from any Governmental Authority or Self-Regulatory Organization in connection
with the transactions contemplated by this Agreement.
6.15 Press Releases. Each of the Company and the Acquiror agrees
that it will not, without the prior approval of the other party, issue any press
release or written statement for general circulation relating to the
transactions contemplated hereby, except as otherwise required by applicable law
or regulation or the rules of any applicable Self-Regulatory Organization.
6.16 Certain Policies of the Company. Upon the request of the
Acquiror, the Company shall, consistent with generally accepted accounting
principles and regulatory accounting principles, use its reasonable best efforts
to record certain accounting adjustments intended to conform the accrual and
reserve policies of the Company so as to reflect the policies of the Acquiror;
provided, however, that the Company shall not be obligated to record any such
accounting adjustments pursuant to this Section 6.16 unless and until the
Acquiror has certified to the Company that the conditions to its obligation to
consummate the Merger will be satisfied or waived on or before the Effective
Time and in no event to be effective prior to the day prior to the Effective
Date. The Company's representations, warranties and covenants contained in this
Agreement shall not be deemed to be untrue or breached in any respect for any
purpose as a consequence of any modifications or changes undertaken solely on
account of this Section 6.16.
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ARTICLE VII
Conditions to Consummation of the Merger
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of the Acquiror, Merger Sub and the Company to
consummate the Merger is subject to the fulfillment or written waiver by the
Acquiror and the Company prior to the Effective Time of each of the following
conditions:
(a) Shareholder Approval. This Agreement shall have been duly
approved by the requisite vote of the holders of outstanding shares of
Company Common Stock entitled to vote thereon in accordance with Section
23B.11.030 of the WBCA, other applicable law and the Company Articles and
Company Bylaws.
(b) Governmental and Regulatory Consents. All approvals and
authorizations of, filings and registrations with, and notifications to,
all Governmental Authorities and Self-Regulatory Organizations required for
the consummation of the Merger shall have been obtained or made and shall
be in full force and effect and all waiting periods required by law shall
have expired. No approvals, licenses, or consents granted by any
Governmental Authority or Self-Regulatory Organization shall contain any
condition or requirement relating to Acquiror, Company or its Subsidiaries
that, in the reasonable good faith judgment of Acquiror, is unreasonably
burdensome to Acquiror.
(c) No Injunction. No Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and
prohibits consummation of the transactions contemplated by this Agreement.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(e) Listing. The shares of Acquiror Common Stock (and related
Acquiror Rights) to be issued in the Merger shall have been approved for
listing on the NYSE, subject to official notice of issuance.
(f) Tax Opinions. The Acquiror shall have received an opinion of
Wachtell, Lipton, Rosen & Katz, counsel to the Acquiror, and the Company
shall have received an opinion of Perkins Coie LLP, counsel to the Company,
in each case dated the Effective Date, substantially to the effect that,
based
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on the facts and assumptions stated therein, for United States federal
income tax purposes, the Merger will qualify as a "reorganization" within
the meaning of Section 368(a) of the Code. In rendering their respective
opinions, such counsel may require and rely upon customary representations
of the officers of the Company and the Acquiror.
7.2 Conditions to Obligation of the Company. The obligation of the
Company to consummate the Merger is also subject to the fulfillment or written
waiver by the Company prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. Subject to the standard set
forth in Section 5.2, the representations and warranties of the Acquiror
and Merger Sub set forth in this Agreement shall be true and correct as of
the date of this Agreement and as of the Effective Date as though made on
and as of the Effective Date (except that representations and warranties
that by their terms speak as of the date of this Agreement or some other
date shall be true and correct only as of such date), and the Company shall
have received a certificate, dated the Effective Date, signed on behalf of
the Acquiror by the Chairman, the President, or any Vice Chairman,
Executive Vice President, or Senior Vice President of the Acquiror to such
effect.
(b) Performance of Obligations of the Acquiror. The Acquiror 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
the Company shall have received a certificate, dated the Effective Date,
signed on behalf of the Acquiror by the Chairman, the President, or any
Vice Chairman, Executive Vice President, or Senior Vice President of the
Acquiror to such effect.
7.3 Conditions to Obligation of the Acquiror and Merger Sub. The
obligation of the Acquiror and Merger Sub to consummate the Merger is also
subject to the fulfillment or written waiver by the Acquiror prior to the
Effective Time of each of the following conditions:
(a) Representations and Warranties. Subject to the standard set
forth in Section 5.2 (except with respect to Section 5.3(e), which shall be
true and correct in all material respects), the representations and
warranties of the Company set forth in this Agreement shall be true and
correct as of the date of this Agreement and as of the Effective Date as
though made on and as of the Effective Date (except that representations
and warranties that by their terms speak as of the date of this Agreement
or some other date shall be true and correct only as of such date) and the
Acquiror shall have received a certificate, dated the Effective Date,
signed on behalf of the Company by the
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Chief Executive Officer and the Chief Financial Officer of the Company to
such effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time, and
the Acquiror shall have received, prior to the Effective Time, a
certificate, dated the Effective Date, signed on behalf of the Company by
the Chief Executive Officer and the Chief Financial Officer of the Company
to such effect.
(c) Employment Agreements. The Employment Agreements for each
individual listed in Group A on Schedule 7.3(c) and each individual (each,
a "Group B individual") listed in Group B on Schedule 7.3(c) shall be in
full force and effect (other than as a consequence of death or disability)
and, in each case, such individual shall not have committed an act or
omission that would permit their termination for "cause" thereunder;
provided, however, that, if the preceding condition is not met with respect
to any Group B Individual, the Company may, in substitution for such Group
B Individual, designate (after consultation with the Acquiror) individuals
(each, a "Group C Individual") listed in Group C on Schedule 7.3(c) having
an aggregate production percentage (determined as of the date on which such
Group B Individual's Employment Agreement shall have ceased to be in full
force and effect or the Company shall have become aware of such cause for
termination) that is at least equal to such Group B Individual's production
percentage as set forth on Schedule 7.3(c).
(d) Third Party Consents. All consents or approvals of all persons,
other than Governmental Authorities, required for or in connection with the
execution, delivery and performance of this Agreement and the consummation
of the Merger shall have been obtained and shall be in full force and
effect, unless the failure to obtain any such consent or approval is not
reasonably likely to have, individually or in the aggregate, a Material
adverse effect on the Company or the Surviving Corporation.
(e) Year 2000. There shall be no feature of the Company's or
Company's Subsidiaries' mission critical data processing, operating, or
platform systems that would prevent those systems from continuing to run
independently in all material respects after December 31, 1999 until such
time as a subsequent conversion to Acquiror's systems can be completed. The
mission critical computer software operated by the Company and its
Subsidiaries will provide uninterrupted millennium functionality to
properly record, store, process, present, refer to and use in calculations
calendar dates falling on or after January 1, 2000 with substantially the
same functionality and performance as such mission critical software
records, stores, processes,
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presents, refers to, and uses in calculations calendar dates falling on or
before December 31, 1999.
(f) Company Stock. Company shall have complied with the provisions
of Section 4.1(b) hereof.
(g) Capitalization. As of immediately prior to the Effective Time,
the total number of shares of Company Stock outstanding (including Company
Stock issuable pursuant to any outstanding Rights or other obligations of
the Company or any of its Subsidiaries, other than the Stock Option
Agreement) will not be greater than 14,937,610.
ARTICLE VIII
Termination
8.1 Termination. This Agreement may be terminated, and the Merger
may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of the Acquiror and the Company.
(b) Breach. At any time prior to the Effective Time, by the Acquiror
or the Company in the event of either: (1) a breach by the other party of
any representation or warranty contained herein (subject to the standard
set forth in Section 5.2), which breach cannot be or has not been cured
within 30 days after the giving of written notice to the breaching party of
such breach, or (2) a breach by the other party of any of the covenants or
agreements contained herein, which breach cannot be or has not been cured
within 30 days after the giving of written notice to the breaching party of
such breach and which breach would be reasonably likely, individually or in
the aggregate, to have a Material adverse effect on the breaching party or
the Surviving Corporation.
(c) Delay. At any time prior to the Effective Time, by the Acquiror
or the Company in the event that the Merger is not consummated by June 30,
2000, except to the extent that the failure of the Merger then to be
consummated arises out of or results from the knowing action or inaction of
the party seeking to terminate pursuant to this Section 8.1(c).
(d) No Approval. By the Company or the Acquiror in the event (1) the
approval of any Governmental Authority required for consummation of the
Merger and the other transactions contemplated by this Agreement shall have
been denied by final nonappealable action of such Governmental Authority,
or such Governmental Authority shall have requested the permanent
withdrawal of any application therefor, or (2) the shareholder
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approval required by Section 7.1(a) herein is not obtained at the Company
Meeting or at any adjournment or postponement thereof.
(e) Failure to Recommend, Etc. By the Acquiror, if at any time prior
to the Company Meeting, the Company Board shall have failed to make its
recommendation referred to in Section 6.2, withdrawn such recommendation or
modified or changed such recommendation in a manner adverse to the
interests of the Acquiror (whether in accordance with Section 6.2 or
otherwise).
(f) by the Board of Directors of the Company, upon written notice to
the Acquiror at any time during the five-day period commencing on the first
day after the Condition Date, if both of the following conditions are
satisfied:
(1) the Average Closing Price as of the Condition Date shall be
less than $32.00; and
(2) (A) the quotient obtained by dividing the Average Closing
Price as of the Condition Date by the Starting Price (such number being
referred to herein as the "Acquiror Ratio") shall be less than (B) the
quotient obtained by dividing the Average Index Price by the Index Price on
the Starting Date and subtracting 0.15 from the quotient in this clause
(ii)(B) (such number being referred to herein as the "Index Ratio");
subject, however, to the following provisions. If the Company elects to exercise
its termination right pursuant to the immediately preceding sentence, it shall
give prompt written notice to the Acquiror; provided, however, that such notice
of election to terminate may be withdrawn at any time within the aforementioned
five-day period. During the three-day period commencing with its receipt of such
notice, the Acquiror shall have the option to elect to increase the Exchange
Ratio to equal the lesser of (i) the quotient obtained by dividing (A) the
product of $32.00 and the Exchange Ratio (as then in effect) by (B) the Average
Closing Price as of the Condition Date, and (ii) the quotient obtained by
dividing (A) the product of the Index Ratio and the Exchange Ratio (as then in
effect) by (B) the Acquiror Ratio. If the Acquiror makes such an election within
such three-day period, it shall give prompt written notice to the Company of
such election and of the revised Exchange Ratio, whereupon no termination shall
have occurred pursuant to this Section 8.1(f) and this Agreement shall remain in
effect in accordance with its terms (except as the Exchange Ratio shall have
been so modified), and any references in this Agreement to "Exchange Ratio"
shall thereafter be deemed to refer to the Exchange Ratio as adjusted pursuant
to this Section 8.1(f).
For purposes of this Section 8.1(f), the following terms shall have
the meanings indicated:
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"Average Index Price" means the average of the Index Prices for the
ten consecutive full NYSE trading days ending at the close of trading on
the Condition Date.
"Index Group" means the 19 bank holding companies listed below, the
common stocks of all of which shall be publicly traded and as to which
there shall not have been, since the Starting Date and before the Condition
Date, an announcement of a proposal for such company to be acquired or for
such company to acquire another company or companies in transactions with a
value exceeding 25% of the Acquiror's market capitalization as of the
Starting Date. In the event that the common stock of any such company
ceases to be publicly traded or any such announcement is made with respect
to any such company, such company shall be removed from the Index Group,
and the weights (which have been determined based on the number of
outstanding shares of common stock) redistributed proportionately for
purposes of determining the Index Price. The 19 bank holding companies and
the weights attributed to them are as follows:
Company Weighting (%)
------- -------------
Bank of America Corporation 19.8
Bank One Corporation 13.4
BB&T Corporation 3.6
Comerica Incorporated 1.8
Fifth Third Bancorp 3.1
First Union Corporation 10.9
Huntington Bancshares, Inc. 2.6
Keycorp 5.1
Marshall & Illsley Corporation 1.2
Mellon Bank Corporation 5.9
National City Corporation 7.1
Northern Trust Corporation 1.3
PNC Bank Corp. 3.4
Regions Financial Corporation 2.6
State Street Corporation 1.8
Summit Bancorp 2.0
SunTrust Banks, Inc. 3.7
U.S. Bancorp 8.4
Wachovia Corporation 2.3
"Index Price" on a given date means the weighted average (weighted in
accordance with the factors listed above) of the closing prices on such
date of the companies comprising the Index Group.
"Starting Date" means the last full NYSE trading day ending prior to
the date of execution of this Agreement.
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"Starting Price" shall mean the last sale price per share of Acquiror
Common Stock on the Starting Date, as reported on the NYSE.
If the Acquiror or any company belonging to the Index Group declares
or effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the Starting Date
and the Condition Date, the prices for the common stock of such company shall be
appropriately adjusted for the purposes of applying this Section 8.1(f).
8.2 Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, no party to this Agreement shall have any liability or further
obligation to any other party hereunder except (1) as set forth in Sections 9.1
and 9.5 and (2) that termination will not relieve a breaching party from
liability for any willful breach of this Agreement or of its obligations under
the Stock Option Agreement.
ARTICLE IX
Miscellaneous
9.1 Survival. No representations, warranties, agreements and
covenants contained in this Agreement shall survive the Effective Time or
termination of this Agreement if this Agreement is terminated prior to the
Effective Time; provided, however, that (a) to the extent the agreements of the
parties contained herein by their terms apply after the Effective Time, such
agreements shall survive the Effective Time, and (b) if this Agreement is
terminated prior to the Effective Time, the agreements of the parties contained
in Sections 6.4(b), 8.2 and in this Article IX shall survive such termination.
9.2 Waiver; Amendment. Prior to the Effective Time, any provision of
this Agreement may be (1) waived by the party benefited by the provision, or (2)
amended or modified at any time, by an agreement in writing between the parties
hereto approved or authorized by their respective Boards of Directors and
executed in the same manner as this Agreement, except that, after approval of
the Merger by the shareholders of the Company, no amendment may be made which
under applicable law requires further approval of such shareholders without
obtaining such required further approval.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.4 Governing Law. 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
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thereof (except to the extent that mandatory provisions of federal law or
provisions of the WBCA or the Delaware General Corporation Law apply).
9.5 Expenses. Each party hereto will bear all expenses incurred by
it in connection with this Agreement and the transactions contemplated hereby,
except that printing expenses and SEC registration fees shall be shared equally
between the Company and the Acquiror.
9.6 Notices. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given (1) on the
date of delivery, if personally delivered or telecopied (with confirmation), (2)
on the first business day following the date of dispatch, if delivered by a
recognized next-day courier service, or (3) on the third business day following
the date of mailing, if mailed by registered or certified mail (return receipt
requested), in each case to such party at its address or telecopy number set
forth below or such other address or numbers as such party may specify by notice
to the parties hereto.
<TABLE>
<CAPTION>
If to the Acquiror or Merger Sub, to: With a copy to:
<S> <C>
Wells Fargo & Company Wachtell, Lipton, Rosen & Katz
420 Montgomery Street 51 West 52nd Street
San Francisco, California 94163 New York, New York 10019
Attention: Randall J. Lewis Attention: Edward D. Herlihy, Esq.
Facsimile: (415) 646-0325 Facsimile: (212) 403-2000
If to the Company, to: With a copy to:
Ragen MacKenzie Group Incorporated Perkins Coie LLP
999 Third Avenue, Suite 4300 1201 Third Avenue, Suite 4800
Seattle, Washington 98104 Seattle, Washington 98101-3099
Attention: V. Lawrence Bensussen Attention: Stewart M. Landefeld, Esq.
Facsimile: (206) 464-8806 Facsimile: (206) 583-8500
</TABLE>
9.7 Entire Understanding, No Third Party Beneficiaries. This
Agreement (together with the Disclosure Schedules), the Stock Option Agreement
and the Support Agreement represent the entire understanding of the parties
hereto with reference to the transactions contemplated hereby and thereby and
supersede any and all other oral or written agreements heretofore made. Except
for Section 6.12, insofar as such Section expressly provides certain rights to
the persons named therein, nothing in this Agreement, expressed or implied, is
intended to confer upon any person, other than the parties hereto or their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
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9.8 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other parties hereto. Subject to the foregoing, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
WELLS FARGO & CO.
By: /s/ John E. Ganoe
-------------------------------------
Name: John E. Ganoe
Title: Executive Vice President
RAGEN MACKENZIE GROUP INCORPORATED
By: /s/ Lesa A. Sroufe
-------------------------------------
Name: Lesa A. Sroufe
Title: Chairman and
Chief Executive Officer
ROMERO ACQUISITION CORP.
By: /s/ John E. Ganoe
-------------------------------------
Name: John E. Ganoe
Title: Chief Executive Officer
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EXHIBIT 10.1
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 28, 1999, between Ragen MacKenzie
Group Incorporated, a Washington corporation ("Issuer"), and Wells Fargo &
Company, 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 thereto immediately prior to the execution of this Stock
Option Agreement (this "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 2,570,093
fully paid and nonassessable shares of Issuer's common stock, par value $.01 per
share ("Common Stock"), at a price of $15.50 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 the 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.
<PAGE>
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 90 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 (x) pursuant to Section 8.1(b) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is non-
volitional) or (y) pursuant to Section 8.1(e) of the Merger Agreement; or (iii)
the passage of 12 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 (x) Section 8.1(b) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is non-
volitional) or (y) pursuant to Section 8.1(e) of the Merger Agreement (provided
that if an Initial Triggering Event continues or occurs beyond such termination
and prior to the passage of such 12-month period, the Exercise Termination Event
shall be 12 months from the expiration of the Last Triggering Event but in no
event more than 18 months after such termination). "Last Triggering Event" shall
mean the last Initial Triggering Event to expire. 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 on or 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 shareholders
of Issuer approve or accept any Acquisition Transaction. For purposes of
this Agreement, "Acquisition Transaction" shall mean (w) a merger or
consolidation, 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
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representing 10% or more of the voting power of Issuer, 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 wholly-owned Subsidiaries or
involving only any two or more of such Subsidiaries be deemed to be an
Acquisition Transaction;
(ii) Issuer, or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended or
proposed to engage in (or publicly announced its intention to authorize,
recommend or propose to engage in) an Acquisition Transaction with any
person other than Grantee or a Grantee Subsidiary, or the Board of
Directors of Issuer shall have publicly withdrawn or modified, or publicly
announced its interest to withdraw or modify, in any manner adverse to
Grantee, its recommendation that the shareholders of Issuer approve the
transactions contemplated by the Merger Agreement, in anticipation of
engaging in an Acquisition Transaction;
(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);
(iv) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its shareholders by
public announcement, or written communication that is or becomes the
subject of public disclosure, to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or
its shareholders 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 hereinafter
defined); 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
United States Department of Justice, the United States Federal Trade
Commission, the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), the New York Stock Exchange, Inc. or the National
Association of Securities Dealers (or other federal or state regulatory
authority or
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self-regulatory organization) for approval to engage or with respect to
engaging 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
notice (together, a "Triggering Event"), 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, any regulatory agency is required in connection
with such purchase, the Holder shall promptly 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 a
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copy of 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, subject to the receipt of applicable regulatory
approvals, to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding the stock transfer books of Issuer then
being closed or certificates representing such shares of Common Stock not then
being 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, issue 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 or treasury 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
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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, without limitation, (x) complying
with all premerger notification, reporting and waiting period requirements
specified in 15 U.S.C. (S) 18a and regulations promulgated thereunder and (y) in
the event, under the Bank Holding Company Act of 1956, as amended (the "BHCA"),
or any other federal or state banking or thrift law or regulations thereunder,
prior approval of or notice to the Federal Reserve Board or other federal or any
such state 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 other federal or any
such state 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, or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price
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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 90 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 as promptly as practicable and remain current and effective 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; and 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 practical 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.
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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 the occurrence of a Repurchase Event (as
hereinafter defined), (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 at a price (the "Option Repurchase Price")
equal to the amount by which (A) the Market/Offer Price (as hereinafter defined)
exceeds (B) the Option Price, multiplied by the number of shares for which this
Option may then be exercised and (ii) at the request of the owner of Option
Shares from time to time (the "Owner"), delivered within 90 days of such
occurrence (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, a copy of 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
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<PAGE>
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 any merger, consolidation
or similar transaction involving Issuer or any purchase, lease or other
acquisition of all or a substantial portion of the assets of Issuer, other than
any such transaction which would not constitute an Acquisition Transaction
pursuant to the proviso to Section 2(b)(i) hereof, or (ii) upon the acquisition
by any person of beneficial ownership of 50% or more of the then outstanding
shares of Common Stock, provided that no such event shall constitute a
Repurchase Event unless a Subsequent Triggering Event shall have occurred prior
to an Exercise Termination Event. The parties hereto agree that Issuer's
obligations to repurchase the Option or Option Shares under this Section 7 shall
not terminate upon the occurrence of an Exercise Termination Event unless no
Subsequent Triggering Event shall have occurred prior to the occurrence of an
Exercise Termination Event.
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8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then-outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing or
surviving corporation or other organization or person of a consolidation or
merger with Issuer (if other than Issuer), (B) Issuer in a merger in which
Issuer is the continuing or surviving person, and (C) the transferee of all
or substantially all of Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the Market/Offer Price, as
defined in Section 7.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately preceding
the consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company that controls or is controlled by such person, as
the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the
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same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute Option
in substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than 19.9%
of the shares of Substitute Common Stock outstanding prior to exercise but for
this clause (e), the issuer of the Substitute Option (the "Substitute Option
Issuer") shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in this
clause (e) over (ii) the value of the Substitute Option after giving effect to
the limitation in this clause (e). This difference in value shall be 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 Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised, and at the request of the owner
(the "Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within
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the six-month period immediately preceding the date the Substitute Option Holder
gives notice of the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of the Substitute
Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective right to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this Agreement) and
certificates for Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share Owner, as the
case may be, elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the provisions
of this Section 9. As promptly as practicable, and in any event within five
business days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation from repurchasing the Substitute Option
and/or the Substitute Shares in part or in full, the Substitute Option Issuer
following a request for repurchase pursuant to this Section 9 shall immediately
so notify the Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation from delivering to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as
practicable, in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
the prohibition, whereupon, in the latter case, the Substitute Option Issuer
shall promptly (i) deliver to the Substitute Option Holder or Substitute Share
Owner, as appropriate, that portion of the Substitute Option Repurchase Price or
the Substitute Share Repurchase
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Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Common Shares it is then so prohibited from repurchasing.
10. The 90-day or 6-month periods for exercise of certain rights under
Sections 2, 6, 7, 13 and 15 shall be extended: (i) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights, for the
expiration of all statutory waiting periods; (ii) to the extent necessary to
avoid liability under Section 16(b) of the 1934 Act by reason of such exercise;
and (iii) during any period in which Grantee is precluded from exercising such
rights due to an injunction or other legal restriction, plus in each case such
additional period as is reasonably necessary for the exercise of such rights
promptly following the obtaining of such approvals or the expiration of such
periods.
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.
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
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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 Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option 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 90
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 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 any state authority for approval to
acquire the shares of Common Stock issuable hereunder until such time, if ever,
as it deems appropriate to do so.
15. (a) Grantee in its sole discretion may, at any time during which
Issuer would be required to repurchase the Option or any Option Shares pursuant
to Section 7, surrender the Option (together with any Option Shares issued to
and then owned by the Holder) to Issuer in exchange for a cash payment equal to
the Surrender Price (as hereinafter defined); provided, however, that Grantee
may not exercise its rights pursuant to this Section 15 if Issuer has previously
repurchased the Option (or any portion thereof) or any Option Shares pursuant to
Section 7. The "Surrender Price" shall be equal to (i) $7,500,000.00, plus (ii)
if applicable, the aggregate
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purchase price previously paid pursuant hereto by Grantee with respect to any
Option Shares, minus (iii) if applicable, the excess of (A) the net cash, if
any, received by Grantee pursuant to the arm's-length sale of Option Shares (or
any other securities into which such Option Shares were converted or exchanged)
to any party not affiliated with Grantee, over (B) the purchase price paid by
Grantee with respect to such Option Shares.
(b) Grantee may exercise its right to surrender the Option and any
Option Shares pursuant to this Section 15 by surrendering for such purchase to
Issuer, at its principal office, a copy of this Agreement, together with
certificates for Option Shares, if any, accompanied by a written notice stating
(i) that Grantee elects to surrender the Option and Option Shares, if any, in
accordance with the provisions of this Section 15 and (ii) the Surrender Price.
Within two business days after the surrender of the Option and the Option
Shares, if applicable, Issuer shall deliver or cause to be delivered to Grantee
the Surrender Price.
(c) To the extent that the Issuer is prohibited under applicable law
or regulation from paying the Surrender Price to Grantee in full, Issuer shall
immediately so notify Grantee and thereafter deliver, or cause to be delivered,
from time to time, to Grantee, that portion of the Surrender Price that Issuer
is not or no longer prohibited from paying, within two 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 Surrender pursuant to Section
15(b) is prohibited under applicable law or regulation from paying to Grantee
the Surrender Price in full, (i) Issuer shall (A) use its best efforts to obtain
all required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to make such payments, (B) within two business
days of the submission or receipt of any documents relating to any such
regulatory and legal approvals, provide Grantee with copies of the same, and (C)
keep Grantee advised of both the status of any such request for regulatory and
legal approvals and any discussions with any relevant regulatory or other third
party reasonably related to the same, and (ii) Grantee may revoke such notice of
surrender by delivery of a notice of revocation, the Exercise Termination Event
shall be extended to a date six months from the date on which the Exercise
Termination Event would have occurred if not for the provisions of this Section
15(c) (during which period Grantee may exercise any of its rights hereunder,
including any and all rights pursuant to this Section 15).
(d) Grantee shall have rights substantially identical to those set
forth in paragraphs (a), (b) and (c) of this Section 15 with respect to the
Substitute Option and the Substitute Option Issuer during any period in which
the Substitute Option Issuer would be required to repurchase the Substitute
Option pursuant to Section 9.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
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obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
17. 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 or Substitute Option
Issuer, as the case may be, is not permitted to repurchase pursuant to Section 7
or Section 9, as the case may be, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), or Issuer or Substitute Option Issuer is not permitted to pay the full
Surrender Price, it is the express intention of Issuer (which shall be binding
on the Substitute Option Issuer) to allow the Holder to acquire or to require
Issuer or the Substitute Option Issuer, as the case may be, to repurchase such
lesser number of shares, or to pay such portion of the Surrender Price, as may
be permissible, without any amendment or modification hereof.
18. 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.
19. 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 law or provisions of the Washington
Business Corporation Act or the Delaware General Corporation Law apply).
20. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
21. 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.
22. 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
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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 except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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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.
RAGEN MACKENZIE GROUP
INCORPORATED
By: /s/ Lesa A. Sroufe
---------------------------------
WELLS FARGO & COMPANY
By: /s/ John E. Ganoe
---------------------------------
<PAGE>
EXHIBIT 99.1
Ragen MacKenzie Wells Fargo
Media/Investor Media Investor
Larry Bensussen Dan Conway Robert S. Strickland
206-464-8879 619-688-3408 612-667-7919
WELLS FARGO AND RAGEN MACKENZIE ANNOUNCE DEFINITIVE AGREEMENT
FOR WELLS FARGO TO ACQUIRE RAGEN MACKENZIE
SAN FRANCISCO and SEATTLE, September 28, 1999 Wells Fargo & Company (NYSE:WFC)
and Ragen MacKenzie Group, Inc. (NYSE: RMG) said today they have reached a
definitive agreement for Wells Fargo to acquire Ragen MacKenzie (NYSE:RMG), a
Seattle-based full-service brokerage firm.
Ragen MacKenzie, through its distribution channels, offers private and
institutional investors an array of financial services and products, including
equities, fixed income, and municipal bonds. Its retail brokerage business has
more than 80 Ragen MacKenzie investment representatives, as well as 300
registered representatives who are associated with Ragen MacKenzie's independent
contractor and correspondent clearing businesses. Ragen MacKenzie also offers
fixed income, equity trading and investment banking.
Ragen MacKenzie serves 68,000 clients, primarily in the Pacific Northwest, from
32 offices in Washington and Oregon. It manages more than $11 billion in assets,
and has 300 employees.
The acquisition, scheduled to be completed in the first quarter of next year,
requires approval from banking regulators and shareholders of Ragen MacKenzie.
In the acquisition, Wells Fargo
<PAGE>
will issue $18.75 worth of its common stock in exchange for each share of Ragen
MacKenzie common stock subject to potential adjustment based on the price of
Wells Fargo common stock trading above or below specified price levels prior to
close.
"Ragen MacKenzie has proven equity research capabilities, outstanding investment
performance and client service track records, and a sophisticated, talented
sales force, all of which will complement Wells Fargo's diversified financial
services strategy," said Dennis Mooradian, president of Wells Fargo Private
Client Services. "By aligning the two organizations, Ragen MacKenzie's sales
force can increase our productivity while growing revenue, and Wells Fargo can
expand distribution of non-brokerage products to existing and prospective
customers."
"Our clients will benefit from Wells Fargo's capabilities," said Lesa Sroufe,
chief executive officer of Ragen MacKenzie. "Wells Fargo's trust, investment
management and private banking services, together with the strengths of our
organization, position us to meet all of our clients' financial needs."
"The acquisition of Ragen MacKenzie expands our financial service capability in
the healthy Northwest regional economy. We are very excited about the strategic
advantages of this partnership," said Mooradian.
Mooradian also said that "this business combination creates an attractive fit
because Wells Fargo has the products, technology, and infrastructure needed to
compete for the larger share of our clients' business. Ragen MacKenzie has a
sophisticated, highly regarded sales force, augmented by two key capabilities
Wells Fargo lacks -- equity research and syndication."
<PAGE>
Ragen MacKenzie Group Incorporated is a holding company for two operating
subsidiaries, Ragen MacKenzie Incorporated and Ragen MacKenzie Investment
Services, Inc. Both operating subsidiaries are regional brokerage firms located
in the Pacific Northwest whose primary business is retail securities brokerage.
Other aspects of Ragen MacKenzie Incorporated's business include: proprietary
trading of certain fixed income securities, institutional brokerage services,
correspondent brokerage services and investment banking services. Both
operating subsidiaries are headquartered in Seattle and together they have 32
offices throughout the Northwest and California through which they conduct
retail business.
Ragen MacKenzie Group Incorporated is located at 999 Third Avenue, Suite 4300,
Seattle, WA. 98104 or over the Internet at http://www.ragen-mackenzie.com.
Wells Fargo's Private Client Services group actively manages more than $120
billion assets, including $52 billion for high net-worth investors. PCS
financial consultants offer investment management, brokerage services, trust and
private banking from PCS offices and Norwest and Wells Fargo banking stores
throughout the 21 banking states of Norwest and Wells Fargo including locations
in: Denver, Los Angeles, Minneapolis, Omaha, Palo Alto, Portland (Ore.),
Sacramento, San Antonio, San Francisco, Scottsdale (Ariz.) and Seattle.
Wells Fargo is a $205 billion diversified financial services company providing
banking, insurance, investments, mortgage and consumer finance services through
almost 6,000 stores, the industry's #1 Internet bank (www.wellsfargo.com) and
other distribution channels across North America and elsewhere internationally.
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