FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of a Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month(s) of: August 1999
NEWCOURT CREDIT GROUP INC.
207 Queens Quay West
Suite 700
Toronto, Ontario Canada
M5J 1A7
[Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.]
Form 20-F / / Form 40-F /X/
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.]
Yes / / No /X/
[If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b)]
82-________________
SIGNATURES
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, thereunto duly authorized.
Date: August 9, 1999
NEWCOURT CREDIT GROUP INC.
/s/ Scott J. Moore
--------------------------------
By: Scott J. Moore
Executive Vice President
Legal and General Counsel
MATERIAL CHANGE REPORT
VIA EDGAR
REPORTING ISSUER:
Newcourt Credit Group Inc. ("Newcourt")
Newcourt Centre
207 Queens Quay West
Suite 700
Toronto, Ontario M5J 1A7
DATE OF MATERIAL CHANGE:
August 5, 1999
PRESS RELEASE:
The press release reporting the material change described in this report
was issued on August 5, 1999.
The press release was distributed in Canada through Canada Newswire and in
the United States via the National Wire Services of the Canadian Press, and
was filed with The Toronto Stock Exchange, The Montreal Exchange, The New
York Stock Exchange and with each of the securities regulatory authorities
in each of the provinces in which Newcourt's common shares are qualified
for distribution and distributed in Canada.
SUMMARY OF MATERIAL CHANGE:
On August 5, 1999, Newcourt jointly announced with The CIT Group, Inc. of
Livingston, New Jersey ("CIT"), that the parties had entered into an
amended and negotiated Agreement and Plan of Reorganization as of August 5,
1999 (the "Amended Agreement") to merge Newcourt and CIT pursuant to a Plan
of Arrangement under the Business Corporation Act (Ontario). The Amended
Agreement replaces and supersedes the original agreement and plan of
reorganization as of March 7, 1999 (the "Original Agreement")
Under terms of the Amended Agreement, an exchange ratio of 0.70 (subject to
possible downward adjustment pursuant to the terms of the Amended
Agreement) will be applied, such that each outstanding Newcourt common
share will be transferred by the holder thereof to Exchangeco, an indirect
Nova Scotia subsidiary of CIT, in exchange for 0.70 shares of CIT common
stock or, in the case of Canadian resident shareholders of Newcourt who so
elect, 0.70 exchangeable shares of Exchangeco (which exchangeable shares
will have similar attributes to CIT common stock and will be exchangeable
at the holders' election into shares of CIT common stock for a period of
five years following closing). The exchangeable shares, which will be
listed on The Toronto Stock Exchange, will allow eligible electing holders
of Newcourt common shares to defer any tax payable on the merger. All
outstanding options to acquire common shares of Newcourt will be converted
at closing into options to acquire CIT common stock on the same adjustable
0.70 exchange ratio, with all other terms and conditions of the Newcourt
options (including vesting) remaining the same.
Following the acquisition, which will be accounted for on a purchase basis
under United States generally accepted accounting principles, CIT
shareholders will own approximately 61% of the combined company and
Newcourt shareholders will own approximately 39%. Under the agreement,
CIT's largest shareholder, The Dai-Ichi Kangyo Bank will own approximately
26.7% of the combined company. CIBC and Nomura Securities, two of
Newcourt's largest shareholders, will own approximately 3.7% and 4.6% of
the combined company, respectively.
The Agreement provides that upon closing of the transaction, CIT's board of
directors will have 16 members, consisting of 12 directors from CIT and 4
directors from Newcourt. Mr. Gamper will serve as President and Chief
Executive Officer of CIT. Mr. Banks, Newcourt's current Chairman, will be
named non-executive Vice-Chairman of CIT and a member of its board of
directors. Steven K. Hudson will retire as Chief Executive Officer of
Newcourt Credit Group Inc. when the CIT Group Inc. acquisition of Newcourt
is completed. The transaction, which has been unanimously approved by the
board of directors of both companies, is expected to close, subject to
regulatory approval, during the fourth quarter of 1999. The combined
company will have its principal offices in New Jersey.
As part of the Amended Agreement, Newcourt has entered into a stock option
agreement with CIT pursuant to which Newcourt has granted CIT an option to
acquire up to 22,273,249 common shares of Newcourt at an exercise price
subject to adjustment of U.S.$15.6875 per share. The option will be
exercised only upon occurrence of certain events none of which has occurred
as of the date hereof. The total value which CIT may realise through the
option may not exceed US$15 million.
Completion of the merger is conditional upon, among other things, customary
regulatory approvals, including approvals under the Bank Act (Canada), the
Competition Act (Canada) and the Investment Bank Act as well as applicable
US regulatory approvals. An arrangement must also be approved by the
Ontario court as well as by shareholders of CIT and Newcourt. A joint proxy
circular describing the transaction will be mailed to all CIT and Newcourt
shareholders prior to the shareholder meetings necessary to consider the
transaction.
Goldman Sachs and CIBC Wood Gundy Securities acted as financial advisors to
Newcourt in connection with the merger and each of Goldman Sachs and CIBC
Wood Gundy Securities have delivered an opinion to Newcourt that the
adjustable exchange ratio of 0.70 shares of CIT common stock or, if so
elected, 0.70 exchangeable shares, for each Newcourt common share is fair
from a financial point of view to Newcourt's shareholders.
A copy of the Agreement and Plan of Reorganization is filed herewith and
incorporated by reference in its entirety in this paragraph hereof. Certain
information included in an analysts' presentation (the "Analysts'
Presentation") given by CIT is also filed herewith and incorporated in its
entirety in this paragraph hereof.
FULL DESCRIPTION OF MATERIAL CHANGE:
See joint CIT/Newcourt Press Release dated August 5, 1999 attached as
Schedule "A".
RELIANCE ON SECTION 75(3) OF THE ACT:
Not applicable.
OMITTED INFORMATION:
Not applicable.
SENIOR OFFICER:
For further information, please contact:
Scott J. Moore
Executive Vice President, Legal and General Counsel
Newcourt Credit Group Inc.
Telephone: (973) 355-7053
STATEMENT OF SENIOR OFFICER:
The foregoing accurately discloses the material change referred to herein.
This report may contain forward-looking statements about the operations,
objectives and strategies of Newcourt. These statements are subject to
risks and uncertainties. Actual results may differ materially due to a
variety of factors including competitions, technological change, issues
relating to Year 2000 readiness, the global capital markets and general
economic conditions in the U.S., Canada, or internationally. These and
other factors should be considered carefully and readers should not place
undue reliance on Newcourt's forward-looking statements.
DATED at Toronto, Ontario this 9th day of August, 1999.
Joint Press Release
CIT AND NEWCOURT AGREE ON REVISED EXCHANGE RATIO
- -- Acquisition Will Create World's Largest Publicly-Traded Commercial Finance
Company; Deal Expected To Close In Fourth Quarter --
LIVINGSTON, NJ. August 5, 1999 -- The CIT Group, Inc. (NYSE: CIT) and
Newcourt Credit Group Inc. (NYSE, TSE, MSE: NCT) today announced that the
companies have signed a new definitive agreement under which CIT will acquire
Newcourt in an exchange of .70 share of CIT stock for each share of Newcourt.
The combined company will be the largest publicly-held commercial finance
company, with leadership positions in a diverse range of business segments.
The transactions, which is expected to close during the
fourth quarter of 1999, has been approved by the Board of Directors of both
companies. Completion of this transactions is conditioned upon, among other
things, customary regulatory and shareholder approvals.
"We are pleased that after an extensive reassessement of
Newcourt's value, we have arrived at a reasonable and fair exchange ratio," said
Albert R. Gamper, Jr., CIT President and CEO. "Our mission now is to complete
this deal as quickly as possible so that we can begin taking full advantage of
the potent combination of CIT's balance sheet and credit capabilities and
Newcourt's exceptional origination platform."
"Through this bold and transforming transaction CIT will
make significant gains in terms of scale, geographic reach and business
diversification. Specifically, with the addition of relationships with top tier
vendors such as Lucent, Dell, Snap-On Tools and Western Star, as well as
Newcourt's experienced capital finance team, we believe we have put together a
powerful engine for sustained, disciplined growth and value creation," he added.
David F. Banks, Chairman of the Board of Newcourt said,
"We have always agreed that an acquisition by CIT affords Newcourt a number of
strong benefits, particularly in the critical areas of
<PAGE>
funding costs and management disciplines. The synergies in this combination are
tremendous. We look forward to the swift completion of this transaction and a
smooth integration process."
Mr. Gamper will remain Chief Executive Officer of The CIT Group. Mr.
Banks, Newcourt's current Chairman, will be named non-executive Vice Chairman of
CIT and a member of its Board of Directors. Following the close of the
transactions, CIT's Board will have 16 members, including 12 directors from CIT
and four directors from Newcourt.
On a combined basis, The CIT Group will have more than $50 billion in
managed assets and $2.2 billion in revenues, with more than 8,000 employees in
locations throughout the world. The combined company will have its principal
offices in New Jersey.
Following the acquisition, which will be accounted for on a purchase
basis, CIT shareholders will own approximately 61% of the combined company and
Newcourt shareholders will own approximately 39%. The Dai-Ichi Kangyo Bank,
CIT's largest shareholder, will own approximately 26.7% of the combined company
and CIBC and Nomura Securities, two of Newcourt's largest shareholders, will own
approximately 3.7% and 4.6% respectively.
J.P. Morgan and Donaldson, Lufkin & Jenrette acted as financial advisors
and provided fairness opinions to CIT, Goldman Sachs and CIBC Wood Gundy
Securities acted as financial advisors and provided fairness opinions to
Newcourt.
###
For further information:
Media Contacts: Michael J. McGowan, The CIT Group (973) 535-3506
Rick Perkins, Newcourt Services (416) 507-5437;
Investor Contacts: Jeffrey D. Simon, The CIT Group (973) 535-5911
Geoff Ichii, Newcourt Services (416) 507-6151
###
CONFORMED COPY
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
Between
THE CIT GROUP, INC.
and
NEWCOURT CREDIT GROUP INC.
Amended and Restated as of August 5, 1999
TABLE OF CONTENTS
Page
ARTICLE I
THE ARRANGEMENT . . . . . . . . . . . . . . 2
1.1. Plan of Arrangement . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Implementation of Arrangement by Newcourt . . . . . . . . . . . . . 3
1.3. Implementation of Arrangement by CIT . . . . . . . . . . . . . . . 3
1.4. Interim Order . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.5. Articles of Arrangement . . . . . . . . . . . . . . . . . . . . . . 5
1.6. Treatment of Stock Options . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II
CERTAIN DEFINITIONS . . . . . . . . . . . . . 6
2.1. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES . . . . . . . . . 18
3.1. Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . 18
3.2. Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWCOURT . . . . . . . 19
4.1. Corporate Organization . . . . . . . . . . . . . . . . . . . . . 19
4.2. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3. Authority; No Violation . . . . . . . . . . . . . . . . . . . . . 21
4.4. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 22
4.5. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . 24
4.7. Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.8. Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . 25
4.9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 26
4.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.11. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.12. OSC and SEC Reports. . . . . . . . . . . . . . . . . . . . . . . 28
4.13. Newcourt Information. . . . . . . . . . . . . . . . . . . . . . 29
4.14. Compliance with Applicable Law . . . . . . . . . . . . . . . . . 29
4.15. Certain Contracts. . . . . . . . . . . . . . . . . . . . . . . . 30
4.16. Agreements with Regulatory Agencies . . . . . . . . . . . . . . 30
4.17. Environmental Matters . . . . . . . . . . . . . . . . . . . . . 31
4.18. Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.19. [reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.20. Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.21. Year 2000 Compliance Plan . . . . . . . . . . . . . . . . . . . 32
4.22. Interested Party Transactions . . . . . . . . . . . . . . . . . 33
4.23. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.24. Board Approval . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.25. Intellectual Property . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF CIT . . . . . . . . . . . . . . . . 34
5.1. Corporate Organization . . . . . . . . . . . . . . . . . . . . . 34
5.2. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.3. Authority; No Violation . . . . . . . . . . . . . . . . . . . . . 36
5.4. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 37
5.5. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . 38
5.7. Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.8. Absence of Changes; Conduct of Business . . . . . . . . . . . . . 39
5.9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 40
5.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.11. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.12. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.13. CIT Information . . . . . . . . . . . . . . . . . . . . . . . . 43
5.14. Compliance with Applicable Law . . . . . . . . . . . . . . . . . 43
5.15. Certain Contracts. . . . . . . . . . . . . . . . . . . . . . . . 43
5.16. Agreements with Regulatory Agencies . . . . . . . . . . . . . . 44
5.17. Environmental Matters . . . . . . . . . . . . . . . . . . . . . 44
5.18. Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.19. Ownership of Newcourt Common Shares. . . . . . . . . . . . . . . 45
5.20. Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.21. Year 2000 Compliance Plan . . . . . . . . . . . . . . . . . . . 46
5.22. Interested Party Transactions . . . . . . . . . . . . . . . . . 46
5.23. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.24. Board Approval . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.25. Intellectual Property . . . . . . . . . . . . . . . . . . . . . 46
5.26. DGCL Section 203 . . . . . . . . . . . . . . . . . . . . . . . . 47
5.27. CIT Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . 47
6.1. Covenants of CIT and Newcourt . . . . . . . . . . . . . . . . . . 47
ARTICLE VII
ADDITIONAL AGREEMENTS . . . . . . . . . . . 52
7.1. Regulatory Matters. . . . . . . . . . . . . . . . . . . . . . . . 52
7.2. Access to Information . . . . . . . . . . . . . . . . . . . . . . 55
7.3. Shareholder Meetings . . . . . . . . . . . . . . . . . . . . . . 55
7.4. Legal Conditions to Arrangement . . . . . . . . . . . . . . . . . 57
7.5. Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.6. Stock Exchange Listings; Tax Status . . . . . . . . . . . . . . . 57
7.7. Employee Benefit Plans; Existing Agreements . . . . . . . . . . . 58
7.8. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.9. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . 62
7.10. Coordination of Dividends . . . . . . . . . . . . . . . . . . . 62
7.11. [reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.12. [reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.13. Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 63
7.14. Notification of Certain Matters . . . . . . . . . . . . . . . . 64
7.15. Comfort Letters. . . . . . . . . . . . . . . . . . . . . . . . . 64
7.16. Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
7.17. No Inconsistent Actions . . . . . . . . . . . . . . . . . . . . 64
7.18. [reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
7.19. Phase II Transactions . . . . . . . . . . . . . . . . . . . . . 64
7.20. Newcourt Allowance . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE VIII
CONDITIONS PRECEDENT . . . . . . . . . . . 66
8.1. Conditions to Each Party's Obligation To Effect the Arrangement . 66
8.2. Conditions to Obligations of CIT . . . . . . . . . . . . . . . . 68
8.3. Conditions to Obligations of Newcourt . . . . . . . . . . . . . . 70
8.4. No Adverse DKB Regulatory Condition; No Adverse Amendment . . . . 71
8.5. Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . 72
ARTICLE IX
TERMINATION AND AMENDMENT . . . . . . . . . . 72
9.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
9.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . 74
9.3. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.4. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE X
GENERAL PROVISIONS . . . . . . . . . . . . 77
10.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.2. Nonsurvival of Representations, Warranties and Agreements . . . 77
10.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.4. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.5. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.6. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.7. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 80
10.8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.9. Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . 80
10.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.11. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.12. Assignment; No Third Party Beneficiaries . . . . . . . . . . . 81
10.13. No Personal Liability . . . . . . . . . . . . . . . . . . . . . 81
Exhibit A Form of Plan of Arrangement (including
Exchangeable Share Provisions)
Exhibit B Form of Arrangement Resolution
Exhibit C Form of Support Agreement
Exhibit D Form of Voting and Exchange Trust Agreement
Exhibit E Forms of Comfort Letters
Exhibit F Form of Comfort Letter for Final Adjusted
Shareholders' Equity calculation
Exhibit 7.5 Forms of Affiliates Letters
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION,
amended and restated as of August 5, 1999 (this "Agreement"), between The
CIT Group, Inc., a Delaware corporation ("CIT"), and Newcourt Credit Group
Inc., an Ontario corporation ("Newcourt").
WHEREAS, the parties previously entered into an Agreement and
Plan of Reorganization, dated as of March 7, 1999 (as amended, the "March
Agreement"); and
WHEREAS, the Boards of Directors of CIT and Newcourt have
determined that it is in the best interests of their respective companies
and their shareholders to amend and restate the March Agreement and to
consummate the business combination transaction provided for herein; and
WHEREAS, in order to induce Newcourt to enter into this
Agreement, The Dai-Ichi Kangyo Bank, Limited, a Japanese bank ("DKB") which
beneficially owns approximately 43% of the outstanding shares of CIT Common
Stock (as defined herein) is contemporaneously entering into an Amended and
Restated Voting Agreement, of even date herewith (the "DKB Voting
Agreement"), with Newcourt; and
WHEREAS, in order to induce CIT to enter into this Agreement,
each of Hercules Holdings (Cayman) Limited, a Cayman Islands company which
beneficially owns approximately 11.8% of the outstanding Newcourt Common
Shares (as defined herein), and Canadian Imperial Bank of Commerce, a
chartered bank pursuant to the Bank Act (Canada) which beneficially owns
approximately 9.5% of the outstanding Newcourt Common Shares, and each of
the executive officers of Newcourt listed on Appendix I attached hereto, is
contemporaneously entering into a Voting Agreement, of even date herewith,
with CIT; and
WHEREAS, as a condition and inducement to CIT's willingness to
enter into this Agreement, Newcourt and CIT are contemporaneously entering
into a Stock Option Agreement, of even date herewith (the "Stock Option
Agreement"); and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Arrangement (as defined
herein) and also to prescribe certain conditions to the Arrangement.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending
to be legally bound hereby, the parties agree as follows:
ARTICLE I
THE ARRANGEMENT
1.1. Plan of Arrangement. Subject to the terms and conditions
of this Agreement and the Plan of Arrangement, substantially in the form
attached hereto as Exhibit A (the "Plan of Arrangement"), at the Effective
Time (as defined herein) (i) each outstanding Newcourt Common Share of
which the holder is an Eligible Electing Holder (as defined in Section 2.1
hereof) for which the holder thereof shall have made a valid election shall
be transferred by the holder thereof, without any act or formality on the
part of such holder, to Exchangeco in exchange for a number of fully paid
and non-assessable shares of Class A Common Stock, par value $0.01 per
share (the "CIT Common Stock"), of CIT equal to the Exchange Ratio (as
defined in Section 2.1 hereof), (ii) each Newcourt Common Share of which
the holder is an Eligible Electing Holder for which the holder thereof
shall have made a valid election shall be transferred by the holder
thereof, without any act or formality on the part of such holder, to
Exchangeco in exchange for a number of fully paid and non-assessable shares
in the class of non-voting exchangeable shares in the capital of Exchangeco
(each, an "Exchangeable Share") equal to the Exchange Ratio, (iii) each
Newcourt Common Share held by any holder who is not an Eligible Electing
Holder or who is an Eligible Electing Holder but who has not made a valid
election as described above (other than (x) Newcourt Common Shares held by
a Dissenting Shareholder who is ultimately entitled to be paid the fair
value of the Newcourt Common Shares held by such shareholder and (y)
Newcourt Common Shares held by CIT or any Subsidiary or affiliate thereof)
shall be transferred by the holder thereof, without any act or formality on
the part of such holder, to Exchangeco in exchange for a number of fully
paid and non-assessable shares of CIT Common Stock equal to the Exchange
Ratio, (iv) each Newcourt Option shall be exchanged for a Replacement
Option to purchase shares of CIT Common Stock as contemplated by Section
1.6 and (v) the other terms set forth in the Plan of Arrangement shall be
implemented. The Plan of Arrangement provides for the terms of the
Arrangement and the mode of carrying the Arrangement into effect. Such
terms and conditions are incorporated by reference herein and made a part
hereof.
1.2. Implementation of Arrangement by Newcourt. Newcourt shall,
following preparation with CIT of the Proxy Circular:
(a) apply in a manner reasonably acceptable to CIT under section
182 of the OBCA for an order approving the Arrangement and for the Interim
Order, and thereafter proceed with and diligently pursue the obtaining of
the Interim Order;
(b) convene and hold the meeting of Newcourt's shareholders
contemplated by Section 7.3 hereof for the purpose of considering the
Arrangement Resolution and for any other proper purpose as may be set out
in the notice for such meeting;
(c) subject to obtaining such shareholder approval as is
required by the Interim Order, proceed with and diligently pursue the
application to the Court for the Final Order; and
(d) subject to obtaining the Final Order and the satisfaction or
waiver of the other conditions set forth herein, send to the Director for
endorsement as a certificate of arrangement under section 183(2) of the
OBCA, the Articles of Arrangement and such other documents as may be
required in connection therewith under the OBCA to give effect to the
Arrangement.
1.3. Implementation of Arrangement by CIT. (a) As promptly as
practicable following the date of this Agreement:
(1) CIT shall incorporate Newco as a Nova Scotia
unlimited liability company and a wholly owned Subsidiary of CIT
with a class of common shares ("Newco Common Shares") and a class
of preferred shares ("Newco Preferred Shares"); and
(2) CIT shall, or shall cause Newco to, incorporate
Exchangeco as a Nova Scotia limited liability company and a
Subsidiary of Newco with authorized capital of (A) one million
common shares ("Exchangeco Common Shares"), (B) 15 billion non-
cumulative non-voting Class A preferred shares ("Exchangeco Class
A Preferred Shares"), which shares shall be redeemable and
retractable at any time for C$1.00 per share, (C) one billion
cumulative non-voting Class B preferred shares ("Exchangeco Class
B Preferred Shares"), which shares shall be redeemable after
seven years at the option of Exchangeco for C$1.00 per share, and
(D) one billion Exchangeable Shares.
(b) At or prior to the Effective Time and subject to the
satisfaction or waiver of the other conditions set forth herein:
(1) CIT shall execute and deliver, and shall cause each
of Newco and Exchangeco to execute and deliver, the Support
Agreement;
(2) CIT shall execute and deliver, and shall cause each
of Newco and Exchangeco to execute and deliver, the Voting and
Exchange Trust Agreement; and
(3) CIT shall issue to the Trustee the CIT Special
Voting Share.
(c) Not later than the day next preceding the Effective Date,
and subject to the satisfaction or waiver of the conditions set forth
herein:
(1) CIT shall transfer to Newco, in exchange for
additional Newco Common Shares, shares of CIT Common Stock (the
"CIT Closing Issuance Shares") in an amount sufficient to allow
Exchangeco to meet its obligations to transfer CIT Common Stock
to shareholders of Newcourt in accordance with the terms of the
Plan of Arrangement;
(2) CIT shall cause Newco to transfer the CIT Closing
Issuance Shares to Exchangeco, in exchange for (A) Exchangeco
Class B Preferred Shares having an aggregate fair market value
not less than 2 percent of the value of Newcourt on the date of
this Agreement (determined based on the Exchange Ratio and the
closing price of CIT Common Stock on the New York Stock Exchange
on the day prior to the date of this Agreement) and (B)
Exchangeco Class A Preferred Shares having an aggregate
redemption price equal to the amount obtained by subtracting the
aggregate fair market value of the Exchangeco Class B Preferred
Shares from the aggregate current market price of the CIT Closing
Issuance Shares; and
(3) CIT shall cause Newco to sell to a third party not
affiliated with either CIT or Newcourt a number of Exchangeco
Class B Preferred Shares that exceeds 20 percent of the number of
Exchangeco Class B Preferred Shares transferred to Newco pursuant
to Section 1.3(c)(2).
1.4. Interim Order. The notice of motion for the application
referred to in Section 1.2(a) shall request that the Interim Order provide:
(a) for the class of Persons to whom notice is to be provided in
respect of the Arrangement and the meeting of Newcourt's shareholders
contemplated by Section 7.3 hereof and for the manner in which such notice
is to be provided;
(b) that the requisite shareholder approval for the Arrangement
Resolution shall be 662/3% of the votes cast on the Arrangement Resolution
by holders of Newcourt Common Shares present in person or by proxy at the
meeting of Newcourt's shareholders contemplated by Section 7.3 hereof;
(c) that, in all other respects, the terms, restrictions and
conditions of the by-laws and articles of Newcourt, including quorum
requirements and all other matters, shall apply in respect of the meeting
of Newcourt's shareholders contemplated by Section 7.3 hereof; and
(d) for the grant of the Dissent Rights.
1.5. Articles of Arrangement. The Articles of Arrangement shall,
with such other matters as are necessary to effect the Arrangement as
described in Sections 1.1 and 1.6 hereof, provide as contemplated by the
Plan of Arrangement.
1.6. Treatment of Stock Options. At the Effective Time, each
option granted by Newcourt (a "Newcourt Option") to purchase Newcourt
Common Shares which is outstanding and unexercised immediately prior
thereto shall be converted automatically into an option to purchase shares
of CIT Common Stock (each a "Replacement Option") under the CIT Transition
Option Plan in an amount and at an exercise price determined as provided
below (and otherwise subject to the terms of the CIT Transition Option
Plan):
(a) The number of shares of CIT Common Stock to be subject to
the Replacement Option shall be equal to the product of the number of
Newcourt Common Shares subject to the original Newcourt Option immediately
prior to the Effective Time and the Exchange Ratio, provided that any
fractional shares of CIT Common Stock resulting from such multiplication
shall be rounded down to the nearest whole number of shares of CIT Common
Stock;
(b) The exercise price per share of CIT Common Stock under the
Replacement Option shall be equal to the exercise price per Newcourt Common
Share under the original Newcourt Option immediately prior to the Effective
Time divided by the Exchange Ratio, provided that such exercise price shall
be rounded up to the nearest cent; and
(c) The Board of Directors of Newcourt shall not exercise any
discretion or take any action which would result in the acceleration of the
vesting of any unvested Newcourt Option, or would result in any cash
becoming payable by Newcourt or, after the Effective Time, CIT in respect
of any such option; provided, however, that nothing contained herein shall
be deemed to prohibit any such acceleration or cashout which is provided in
any employment agreement between Newcourt and any holder of a Newcourt
Option or in any new employment agreement between CIT and any holder of a
Newcourt Option.
The duration and other terms of each Replacement Option shall be the same
as the original Newcourt Option immediately prior to the Effective Time,
except that all references to Newcourt shall be deemed to be references to
CIT and except to the extent a new employment agreement to be entered into
hereunder modifies the duration or the terms of the Replacement Options.
ARTICLE II
CERTAIN DEFINITIONS
2.1. Certain Definitions. For purposes of this Agreement, the
following terms shall have the respective meanings indicated:
"Acquisition Proposal" means any tender or exchange offer,
proposal for a merger, consolidation, amalgamation, arrangement or other
business combination involving, or a recapitalization of, a party to this
Agreement 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 of, a party to this Agreement or any of its Subsidiaries other
than the transactions contemplated or permitted by this Agreement, but
"Acquisition Proposal" shall not include the entering into of partnerships,
joint ventures, virtual joint ventures, investment funds and other similar
arrangements as part of the ordinary course funding activities of such
party;
"Adjusted Exchange Ratio" means the Exchange Ratio that would be
applicable under the first proviso to the definition of Exchange Ratio if
Final Adjusted Shareholders' Equity was exactly $1,730,319,000.
"Adjusted Shareholders Equity" as of any date shall mean total
shareholders' equity reflected on the Section 7.2(d) Balance Sheet as of
such date, (i) minus the amount of goodwill reflected on the Section 7.2(d)
Balance Sheet as of such date, minus (ii) Excess After-Tax Securitization
Fees, and (iii) adjusted to exclude the effects of any Net Worth Charges.
"Arrangement" means an arrangement under Section 182 of the OBCA
on the terms and subject to the conditions set forth in the Plan of
Arrangement, subject to any amendments or variations thereto made in
accordance with Section 9.3 hereof or Article 6 of the Plan of Arrangement
or made at the direction of the Court in the Final Order.
"Arrangement Documents" has the meaning set forth in Section 5.3.
"Arrangement Resolution" means the special resolution of the
holders of Newcourt Common Shares, to be substantially in the form and
content of Exhibit B attached hereto.
"Articles of Arrangement" means the articles of arrangement of
Newcourt in respect of the Arrangement filed under the OBCA after the Final
Order is made giving effect to the Arrangement.
"Bankruptcy Exception" means, in respect of any agreement,
contract or commitment, any limitation thereon imposed (i) by any
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
or similar law affecting creditors' rights and remedies generally and (ii)
with respect to the enforceability of any agreement, contract or
commitment, by general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in equity).
"Base Equity" equals $1,830,319,000.
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Canadian GAAP" means Canadian generally accepted accounting
principles.
"Canadian Resident" means a resident of Canada for the purpose of
the Income Tax Act (Canada).
"CIT Closing Issuance Shares" has the meaning set forth in
Section 1.3(c)(1).
"CIT Common Stock" has the meaning set forth in Section 1.1 (it
being understood that to the extent that, prior to the Effective Time, the
CIT Certificate of Incorporation is amended to rename or reclassify the
Class A common stock, "CIT Common Stock" shall refer to the Class A common
stock as so renamed or reclassified).
"CIT Contract" has the meaning set forth in Section 5.15.
"CIT Disclosure Schedule" has the meaning set forth in Section
3.1.
"CIT ERISA Affiliate" has the meaning set forth in Section 5.11.
"CIT Plans" has the meaning set forth in Section 5.11.
"CIT Price" means $26.0625.
"CIT Regulatory Agencies" has the meaning set forth in Section
5.5.
"CIT Regulatory Agreement" has the meaning set forth in Section
5.16.
"CIT Reports" has the meaning set forth in Section 5.12.
"CIT Shareholder Matters" has the meaning set forth in Section
7.3.
"CIT Special Voting Share" has the meaning set forth in the
Voting and Exchange Trust Agreement.
"CIT Subsidiary" means each Subsidiary of CIT.
"CIT Transition Option Plan" means an option plan to be
established by CIT pursuant to which Replacement Options will be issued.
"Closing" has the meaning set forth in Section 10.1.
"Closing Date" has the meaning set forth in Section 10.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" has the meaning set forth in Section
7.2.
"Court" means the Ontario Court of Justice (General Division).
"Co-Venturer" has the meaning set forth in Section 7.1.
"Date Data" has the meaning set forth in Section 4.21.
"Date-Sensitive System" has the meaning set forth in Section
4.21.
"Dell Contract" means the Agreement of Limited Partnership of
Dell Financial Services, LP, dated April 14, 1997, by and among Dell Credit
Company LLC, Dell DFS Corporation and Newcourt DFS Inc. and the "Ancillary
Agreements" contemplated therein.
"Director" means the Director appointed pursuant to Section 278
of the OBCA.
"Dissenting Shareholder" has the meaning set forth in Section 1.1
of the Plan of Arrangement.
"Dissent Rights" means the rights of dissent in respect of the
Arrangement granted to holders of Newcourt Common Shares described in the
Plan of Arrangement.
"Effective Time" has the meaning set forth in the Plan of
Arrangement.
"Eligible Holder" means a holder of Newcourt Common Shares (i)
who is a Canadian Resident, or (ii) which is a partnership that owns
Newcourt Common Shares if one or more of its members would be an Eligible
Electing Holder under clause (i) of this definition if such members held
such shares directly.
"Encumbrance" means, with respect to any Property, any
encumbrance, mortgage, hypothecation, prior claim, lien, pledge, collateral
assignment, assignment for security, charge, security interest or equitable
interest in respect of such Property or any restriction on the right to
vote, sell or otherwise dispose of such Property.
"Environmental Laws" has the meaning set forth in Section 4.17.
"ERISA" has the meaning set forth in Section 4.11.
"ERISA Affiliate" has the meaning set forth in Section 4.11.
"Excess After-Tax Securitization Fees" shall mean the product of
(i) Excess Securitization Fees and (ii) .60.
"Excess Securitization Fees" shall mean: (i) if the Final Net
Worth Statement is dated as of September 30, 1999, the amount, if any, by
which Securitization Fees realized during the period from July 1, 1999
through September 30, 1999 exceeds $90 million; (ii) if the Final Net Worth
Statement is dated as of October 31, 1999, the amount, if any, by which
Securitization Fees realized during the period from July 1, 1999 through
October 31, 1999 exceeds $120 million; (iii) if the Final Net Worth
Statement is dated as of November 30, 1999, the amount, if any, by which
Securitization Fees realized during the period from July 1, 1999 through
November 30, 1999 exceeds $150 million; and (iv) if the Final Net Worth
Statement is dated as of December 31, 1999, the amount, if any, by which
Securitization Fees realized during the period from July 1, 1999 through
December 31, 1999 exceeds $210 million.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Ratio" shall mean .70, provided, however, that if Final
Adjusted Shareholders' Equity is less than Base Equity and equal to or
greater than $1,730,319,000, then the Exchange Ratio shall equal the
quotient (rounded to the nearest ten-thousandth (1/10,000) of a share)
obtained by dividing (i) the amount by which (A) the product of (x) .70 and
(y) Total Newcourt Shares exceeds (B) the quotient obtained by dividing (x)
the amount by which Base Equity exceeds Final Adjusted Shareholders' Equity
by (y) the CIT Price by (ii) Total Newcourt Shares; provided further,
however, that if Final Adjusted Shareholders' Equity is less than
$1,730,319,000 then the Exchange Ratio shall equal the quotient (rounded to
the nearest ten-thousandth (1/10,000) of a share) obtained by dividing (i)
the amount by which (A) the product of (x) the Adjusted Exchange Ratio and
(y) Total Newcourt Shares exceeds (B) the quotient obtained by dividing (x)
the product of (1) 1.5 and (2) the amount by which $1,730,319,000 exceeds
Final Adjusted Shareholders' Equity by (y) the CIT Price by (ii) Total
Newcourt Shares.
"Exchangeable Shares" has the meaning set forth in Section 1.1.
"Exchangeco" means a Subsidiary of Newco incorporated as a
limited liability company under the laws of the Province of Nova Scotia,
all of the Exchangeco Common Shares of which will be owned by Newco.
"Exchangeco Class A Preferred Shares" has the meaning set forth
in Section 1.3(a)(2).
"Exchangeco Class B Preferred Shares" has the meaning set forth
in Section 1.3(a)(2).
"Exchangeco Common Shares" has the meaning set forth in Section
1.3(a)(2).
"Federal Reserve Board" has the meaning set forth in Section 5.4.
"Final Adjusted Shareholders' Equity" shall mean Adjusted
Shareholders' Equity calculated on the basis of the Final Net Worth
Statement.
"Final Net Worth Statement" shall mean the Section 7.2(d) Balance
Sheet as of the end of the month immediately preceding the month in which
the Closing shall occur; provided, however, that if the Closing Date is a
day that is the fifteenth or earlier day of a month, then the "Final Net
Worth Statement" shall mean the Section 7.2(b) Balance Sheet as of the end
of the second preceding month prior to the month in which the Closing shall
occur.
"Final Order" means the final order of the Court approving the
Arrangement as such order may be amended at any time prior to the Effective
Time or, if appealed, then unless such appeal is withdrawn or denied, as
affirmed.
"Governmental Entity" has the meaning set forth in Section 4.4.
"Hazardous Materials" has the meaning set forth in Section 4.17.
"Injunction" has the meaning set forth in Section 8.1.
"Interim Order" means the interim order of the Court in respect
of the Arrangement as contemplated by Section 1.4.
"ITA" means the Income Tax Act (Canada).
"Lucent Contract" means the Financial Services Agreement, dated
March 9, 1998, by and between Lucent Technologies Inc. and Newcourt Credit
Group, Inc.
"Material Adverse Effect" means, with respect to CIT or Newcourt,
as the case may be, a material adverse effect on (a) the business or
financial condition of such party and its Subsidiaries taken as a whole,
other than any such effect attributable to or resulting from (i) any change
in general economic or capital market conditions or in prevailing levels of
interest rates, (ii) with respect to Newcourt, any change in Canadian GAAP
or, with respect to CIT, any change in U.S. GAAP, (iii) any action or
omission of Newcourt or CIT or any Subsidiary of either of them taken with
the prior written consent of the other party hereto, or (iv) solely with
respect to a material adverse effect on the financial condition of Newcourt
and its Subsidiaries taken as a whole, any fact, circumstance or event to
the extent such fact, circumstance or event is reflected in the calculation
of Final Adjusted Shareholders' Equity, or (b) the ability of such party
and its Subsidiaries to consummate the transactions contemplated hereby.
"ME" means the Montreal Exchange.
"New CIT" means CIT from and after the Effective Time.
"Net Worth Charge" means costs, losses, provisions, charge-offs
and write-offs (including provisions that are made to comply with Section
7.20 hereof to the extent such provisions are made in respect of charge-
offs of any assets set forth on Schedule X attached to Section 4.6 of the
Newcourt Disclosure Schedule) which have the effect of reducing
shareholders' equity and which result from or relate to (i) the assets,
accounts and balance sheet items reflected on such Schedule X but only to
the extent specified thereon and (ii) up to $30 million of out-of-pocket or
accrued fees and expenses (consisting of legal, accounting, and investment
banking fees and expenses, registration and filing fees, and printing
expenses) incurred and to be incurred by Newcourt in connection with the
transactions contemplated hereby, plus litigation costs in respect of any
shareholder litigation commenced on or after the date hereof, plus all
severance-related costs (other than those set forth in Section 2.1 of the
Newcourt Disclosure Schedule), retention-related costs not to exceed $12
million and disclosed prior to the date hereof to CIT, and retention-
related costs expressly approved by CIT after the date hereof.
"Newco" means a wholly owned Subsidiary of CIT incorporated as an
unlimited liability company under the laws of the Province of Nova Scotia.
"Newco Common Share" has the meaning set forth in Section
1.3(a)(1).
"Newco Preferred Share" has the meaning set forth in Section
1.3(a)(1).
"Newcourt Common Share" means a common share in the capital of
Newcourt, and, for purposes of Section 1.1, shall mean a common share in
the capital of Newcourt or a Newcourt Special Share.
"Newcourt Contract" has the meaning set forth in Section 4.15.
"Newcourt Disclosure Schedule" has the meaning set forth in
Section 3.1.
"Newcourt Employees" has the meaning set forth in Section 7.7.
"Newcourt Fee Amount" has the meaning set forth in Section
9.2(b).
"Newcourt Option Plan" means the Employee Stock Option Plan of
Newcourt, adopted on November 19, 1993, as amended on October 24, 1995,
March 25, 1997, May 2, 1997, February 4, 1998 and February 18, 1999.
"Newcourt OSC Report" has the meaning set forth in Section 4.12.
"Newcourt SEC Report" has the meaning set forth in Section 4.12.
"Newcourt Regulatory Agency" has the meaning set forth in Section
4.5.
"Newcourt Regulatory Agreement" has the meaning set forth in
Section 4.16.
"Newcourt Reports" has the meaning set forth in Section 4.12.
"Newcourt Shareholder Matters" has the meaning set forth in
Section 7.3.
"Newcourt Special Share" has the meaning set forth in Section
4.2.
"Newcourt Subsidiary" means each Subsidiary of Newcourt.
"NYSE" means the New York Stock Exchange.
"OBCA" means the Business Corporations Act (Ontario).
"Ontario Securities Act" means the Securities Act (Ontario).
"OSC" means the Ontario Securities Commission.
"OSFI" means the Office of the Superintendent of Financial
Institutions of Canada.
"Outside Termination Date" has the meaning set forth in Section
9.1(c).
"Permitted Encumbrance" means, with respect to a particular
party, (a) any lien for Taxes not yet due and payable or being contested in
good faith, (b) any mechanics', materialmen's, workmen's, warehousemen's,
carriers' and other similar liens and Encumbrances arising in the ordinary
course of business, (c) as to any Property with respect to which such party
or any of its Subsidiaries is the lessor, seller or secured party, as the
case may be, pursuant to the terms of any loan, lease, sale contract,
credit or finance agreement or similar arrangement (a "receivable")
(whether initially or as an assignee), any Encumbrance that is permitted in
accordance with the terms of, or created by, such receivable relating to
such Property, (d) any Encumbrance to the extent that the obligation
secured thereby is reflected on such party's December 31, 1998 balance
sheet, (e) any imperfection of title, easement or Encumbrance, if any, that
does not interfere with the use or materially impair the value of the
respective Property as such Property is used on the date of this Agreement,
(f) any Encumbrance incurred after December 31, 1998, in the ordinary
course of business, consistent with past practice, (g) any rights under any
vendor program permitting the repurchase of receivables originated,
purchased or financed thereunder and (h) buyout rights under partnerships,
joint ventures or virtual joint venture relationships in accordance with
the terms of the agreements establishing such partnerships, joint ventures
or virtual joint venture relationships.
"Person" means an individual, partnership, limited partnership,
limited liability partnership, limited liability company, foreign limited
liability company, trust, estate, corporation, custodian, trustee,
executor, administrator, nominee or any other entity.
"Phase II Transactions" has the meaning set forth in Section
7.19(a).
"Plan" has the meaning set forth in Section 4.11.
"Plan of Arrangement" has the meaning set forth in Section 1.1.
"Primary Approvals" means the approvals, if any, of the Federal
Reserve Board, the OSFI, the Minister of Finance of Canada, the Governor in
Council of Canada, the Ministry of Finance of Japan (including any
acceptance of notice by the Ministry of Finance of Japan) and the Financial
Supervisory Agency of Japan required to consummate the transactions
contemplated hereby (including the Arrangement), and compliance with the
pre-merger notification filing requirements under Part IX of the
Competition Act (Canada) and the expiration of the applicable waiting
period in relation thereto or the receipt of an ARC (as defined in Section
4.4 hereof) pursuant to Section 102 of such act.
"Property" means any property and assets of whatsoever nature,
including real property, personal property (whether tangible or intangible)
and any claims, rights and choses in action.
"Proxy Circular" has the meaning set forth in Section 4.4.
"Registration Statement" has the meaning set forth in Section
7.1.
"Replacement Option" has the meaning set forth in Section 1.6.
"SEC" means the Securities and Exchange Commission.
"Section 7.2(d) Balance Sheet" means any consolidated balance
sheet delivered pursuant to Section 7.2(d) hereof.
"Section 7.2(d) Income Statement" means any consolidated income
statement delivered pursuant to Section 7.2(d) hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization Fees" means securitization gains of Newcourt
recorded during the period July 1, 1999 through the date of the Final Net
Worth Statement, as set forth in the Schedule 7.2(d) Income Statements for
such period and calculated on a basis consistent with past practice.
"Significant Newcourt Subsidiary" means any Newcourt Subsidiary
that constitutes a "significant subsidiary" under Rule 405 promulgated by
the SEC under the Securities Act.
"Significant CIT Subsidiary" means any CIT Subsidiary that
constitutes a "significant subsidiary" under Rule 405 promulgated by the
SEC under the Securities Act.
"SRO" has the meaning set forth in Section 4.5.
"State Regulator" has the meaning set forth in Section 4.5.
"Stock Option Agreement" has the meaning set forth in the fifth
WHEREAS clause at the beginning of this Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other organization, whether incorporated or unincorporated,
which is consolidated with such Person for financial reporting purposes.
"Support Agreement" means an Exchangeable Share Support Agreement
to be made among Exchangeco, CIT and Newco substantially in the form and
content attached to Exhibit C hereto, with such changes thereto as shall be
reasonably acceptable to the parties hereto.
"Taxes" has the meaning set forth in Section 4.10.
"Tax Return" has the meaning set forth in Section 4.10.
"Total Newcourt Shares" shall mean the sum of (i) the total
number of Newcourt Common Shares issued and outstanding immediately prior
to the Effective Time (including Newcourt Common Shares held by CIT or any
of its Subsidiaries, Newcourt Common Shares held by shareholders who
perfect Dissent Rights and Newcourt Common Shares held by Newcourt or any
of its Subsidiaries to the extent such shares are held in a fiduciary
capacity for the benefit of third parties) and (ii) the number of Newcourt
Common Shares subject to Newcourt Options that are deemed to be outstanding
immediately prior to the Effective Time calculated under the treasury
method assuming the Exchange Ratio is .70 and based on the CIT Price.
"Trustee" means a Canadian trust company reasonably acceptable to
both Newcourt and CIT, which will act as trustee under the Voting and
Exchange Trust Agreement.
"TSE" means The Toronto Stock Exchange.
"U.S. GAAP" has the meaning set forth in Section 5.6.
"Voting and Exchange Trust Agreement" means an agreement to be
made among CIT, Exchangeco and the Trustee substantially in the form and
content of Exhibit D attached hereto, with such changes thereto as shall be
reasonably acceptable to the parties hereto.
"Year 2000 Compliant" has the meaning set forth in Section 4.21.
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
3.1. Disclosure Schedules. Prior to the execution and delivery
of this Agreement, Newcourt has delivered to CIT, and CIT has delivered to
Newcourt, a schedule (in the case of Newcourt, the "Newcourt Disclosure
Schedule," and in the case of CIT, the "CIT Disclosure Schedule") setting
forth, among other things, items the disclosure of which is necessary or
appropriate either in response to an express disclosure requirement
contained in a provision hereof or as an exception to one or more of such
party's representations or warranties contained in Article IV, in the case
of Newcourt, or Article V, in the case of CIT, or to one or more of such
party's covenants contained in Article VI; provided, however, that
notwithstanding anything in this Agreement to the contrary (a) no such item
is required to be set forth in the Disclosure Schedule as an exception to a
representation or warranty (other than Sections 4.2, 4.3(a) and 4.3(b)(i),
4.7, 4.11(a) and 4.18, with respect to Newcourt, and Sections 5.2, 5.3(a)
and 5.3(b)(i), 5.7, 5.11(a) and 5.18, with respect to CIT) if its absence
would not result in the related representation or warranty being deemed
untrue or incorrect under the standard established by Section 3.2;
provided, that the party shall have used its best efforts to cause its
Disclosure Schedule to be accurate (provided that a party shall not be
deemed not to have used its best efforts if it fails to disclose items or
matters which, individually or in the aggregate, are not material), and (b)
the mere inclusion of an item in a Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by a party that
such item represents a material exception or material fact, event or
circumstance or that such item has had or is reasonably expected to have a
Material Adverse Effect with respect to either Newcourt or CIT,
respectively.
3.2. Standards. No representation or warranty of Newcourt
contained in Article IV (other than the representations and warranties
contained in Sections 4.2, 4.3(a) and 4.3(b)(i), 4.7, 4.11(a), and 4.18) or
of CIT contained in Article V (other than the representations and
warranties contained in Sections 5.2, 5.3(a) and 5.3(b)(i), 5.7, 5.11(a),
and 5.18) shall be deemed untrue or incorrect for any purpose under this
Agreement, and no party hereto shall be deemed to have breached any such
representation or warranty for any purpose under this Agreement, in any
case as a consequence of the existence or absence of any fact, circumstance
or event unless such fact, circumstance or event, individually or when
taken together with all other facts, circumstances or events inconsistent
with any representations or warranties contained in Article IV, in the case
of Newcourt, or Article V, in the case of CIT, has had or is reasonably
expected to have a Material Adverse Effect with respect to Newcourt or CIT,
respectively.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWCOURT
Subject to Article III and except as contemplated by this
Agreement and the Plan of Arrangement or as set forth in the Newcourt
Disclosure Schedule, Newcourt hereby represents and warrants to CIT as
follows:
4.1. Corporate Organization. (a) Newcourt is a corporation
duly organized, validly existing and in good standing under the laws of
Ontario. Newcourt has the corporate power and authority to own or lease
all of its properties and assets and to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it
makes such licensing or qualification necessary. The restated articles of
incorporation dated February 8, 1996, as amended by articles of amendment
dated March 26, 1997 (the "Restated Articles of Incorporation"), and by-
laws no. 1 and 4 of Newcourt, copies of which have previously been
delivered to CIT, are true and correct copies of such documents as in
effect as of the date of this Agreement.
(b) Each Newcourt Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each Newcourt Subsidiary
has the corporate power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted and is
duly licensed or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or the location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary. The articles of incorporation, by-laws and
similar governing documents of each Significant Newcourt Subsidiary, copies
of which have previously been made available to CIT, are true and correct
copies of such documents as in effect as of the date of this Agreement. As
of the date of this Agreement, other than the Newcourt Subsidiaries,
Newcourt does not own beneficially, directly or indirectly, more than 5% of
any class of equity securities or similar interests of any corporation,
bank, business trust, association or similar organization, and is not,
directly or indirectly, a partner in any partnership or party to any joint
venture.
(c) The minute books of Newcourt and each Newcourt
Subsidiary contain true and correct records of all meetings and other
corporate actions held or taken since December 31, 1996 of their respective
shareholders and Boards of Directors (including committees of their
respective Boards of Directors).
4.2. Capitalization. (a) As of the date of this Agreement, the
authorized capital stock of Newcourt consists of an unlimited number of
Newcourt Common Shares, an unlimited number of special shares (the
"Newcourt Special Shares") and an unlimited number of Class A preference
shares (the "Newcourt Class A Preferred Shares"). As of August 3, 1999,
there were 148,488,329 Newcourt Common Shares outstanding and no Newcourt
Common Shares held by Newcourt as treasury stock. As of August 3, 1999,
there were (i) no Newcourt Common Shares reserved for issuance upon
exercise of outstanding stock options or otherwise, except for (x)
7,137,055 Newcourt Common Shares reserved for issuance pursuant to options
outstanding under the Newcourt Option Plan and (y) 22,273,249 Newcourt
Common Shares reserved for issuance upon exercise of the option granted to
CIT pursuant to the Stock Option Agreement, and (ii) no Newcourt Special
Shares or Newcourt Class A Preference Shares issued or outstanding, held in
Newcourt's treasury or reserved for issuance upon exercise of outstanding
stock options or otherwise. All of the issued and outstanding Newcourt
Common Shares have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. Except as referred to above,
Newcourt does not have and is not bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character
calling for the purchase or issuance of any Newcourt Common Shares,
Newcourt Special Shares or Newcourt Class A Preferred Shares or any other
equity security of Newcourt or any securities representing the right to
purchase or otherwise receive any Newcourt Common Shares or any other
equity security of Newcourt. The names of the optionees, the date of each
option to purchase Newcourt Common Shares granted, the number of shares
subject to each such option, the expiration date of each such option, and
the price at which each such option may be exercised under the Newcourt
Option Plan are set forth in Section 4.2(a) of the Newcourt Disclosure
Schedule.
(b) Section 4.2(b) of the Newcourt Disclosure Schedule
sets forth a true and correct list of all of the Newcourt Subsidiaries as
of the date of this Agreement. As of the date of this Agreement, Newcourt
owns, directly or indirectly, all of the issued and outstanding shares of
the capital stock of each of such Subsidiaries, free and clear of all
Encumbrances other than Permitted Encumbrances contemplated by clause (h)
of the definition thereof, and all of such shares are duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof.
Except for Permitted Encumbrances contemplated by clause (h) of the
definition thereof, as of the date of this Agreement, no Newcourt
Subsidiary has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any other
equity security of such Subsidiary. Assuming compliance by CIT with
Section 1.6, at the Effective Time, there will not be any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character by which Newcourt or any of the Newcourt Subsidiaries will be
bound calling for the purchase or issuance of any shares of the capital
stock of Newcourt or, except for buyout rights under partnerships, joint
ventures or virtual joint venture relationships in accordance with the
terms of the agreements establishing such partnerships, joint ventures or
virtual joint venture relationships, any of the Newcourt Subsidiaries.
4.3. Authority; No Violation. (a) Newcourt has full corporate
power and authority to execute and deliver this Agreement and, subject to
receipt of the approval of Newcourt's shareholders and the Court, to
consummate the transactions contemplated hereby and by the Plan of
Arrangement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and by the Plan of
Arrangement have been duly and validly approved by the Board of Directors
of Newcourt. The Board of Directors of Newcourt has directed that the
Arrangement Resolution be submitted to Newcourt's shareholders for approval
at a meeting of such shareholders and, except for the approval of the
Arrangement Resolution by the requisite vote of the holders of the Newcourt
Common Shares and the approval by Newcourt of the Proxy Circular and of
other matters relating solely to the implementation of the Arrangement, no
other corporate proceedings on the part of Newcourt are necessary to
approve this Agreement and the Plan of Arrangement and to consummate the
transactions contemplated hereby and thereby. This Agreement has been duly
and validly executed and delivered by Newcourt and (assuming due
authorization, execution and delivery by CIT) this Agreement constitutes a
valid and binding obligation of Newcourt, enforceable against Newcourt in
accordance with its terms, except as may be limited by the Bankruptcy
Exception.
(b) Neither the execution and delivery of this Agreement
by Newcourt, nor the consummation by Newcourt of the transactions
contemplated hereby or by the Plan of Arrangement, nor compliance by
Newcourt with any of the terms or provisions hereof, will (i) violate any
provision of the Restated Articles of Incorporation or By-laws of Newcourt,
(ii) violate any provision of the certificate of incorporation, by-laws or
similar governing documents of any of the Newcourt Subsidiaries, or (iii)
assuming that the consents and approvals referred to in Section 4.4 hereof
are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, mandatory government policy, judgment, order, writ, decree or
injunction applicable to Newcourt or any of the Newcourt Subsidiaries, or
any of their respective Properties, or (y) violate, conflict with, result
in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, require any payment under, result
in the termination of or a right of termination or cancellation under,
accelerate or permit the creation of an obligation to accelerate the
performance required by, result in the loss of any benefit under, or result
in a right of first refusal or option to purchase or acquire, or result in
the creation of any Encumbrance (other than any Permitted Encumbrance) upon
any of the respective Properties of Newcourt or any of the Newcourt
Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, loan or credit
agreement or other agreement or other instrument or obligation to which
Newcourt or any of the Newcourt Subsidiaries is a party, or by which they
or any of their respective Properties may be bound or affected.
4.4. Consents and Approvals. Except for (a)(i) compliance with
the premerger notification filing requirements under Part IX of the
Competition Act (Canada) and the expiration of the applicable waiting
period in relation thereto or (ii) receipt of an advance ruling certificate
(an "ARC") pursuant to section 102 of the Competition Act (Canada), (b) the
filing of applications with the appropriate financial regulatory
authorities in the provinces, states and countries in which Newcourt or any
Newcourt Subsidiary conducts business, (c) receipt of exemption orders from
the provincial securities regulators from the registration and prospectus
requirements with respect to the Exchangeable Shares, (d) the filing with
the Court, the SEC, the OSC and other Canadian securities regulatory
authorities of a joint proxy statement and proxy circular in definitive
form relating to the meetings of Newcourt's shareholders and CIT's
shareholders to be held in connection with this Agreement and the
transactions contemplated hereby (the "Proxy Circular") and the mailing to
Newcourt's shareholders of the Proxy Circular and the filing by CIT and
declaration of the effectiveness of the Registration Statement in respect
of the shares of CIT Common Stock issuable upon the exchange of the
Exchangeable Shares, (e) the approval of the Plan of Arrangement by the
requisite vote of the shareholders of Newcourt, (f) filings with the
Director appointed pursuant to Section 278 of the OBCA, (g) approval of the
TSE regarding the listing of the Exchangeable Shares, (i) the approval of
the Court of the Arrangement and the filing of the Articles of Arrangement
and any other documents required by the OBCA by way of issuance of the
Interim Order and the Final Order, and (h) such filings, authorizations,
orders and approvals as may be required under the Ontario Securities Act
and other relevant Canadian securities statutes, any other applicable
federal, provincial or state securities laws and the rules of the TSE, the
ME and the NYSE, no consents, orders or approvals of or filings or
registrations with any foreign or domestic court, regulatory body,
administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity") or with any third party are
necessary in connection with (1) the execution and delivery by Newcourt of
this Agreement and the Plan of Arrangement and (2) the consummation by
Newcourt of the Arrangement and the other transactions contemplated hereby.
4.5. Reports. Newcourt and each of the Newcourt Subsidiaries
have timely filed all reports, schedules, forms, registrations, statements
and other documents, together with any amendments required to be made with
respect thereto, that they were required to file since December 31, 1996
with (i) any state finance commissions or any other provincial or state
regulatory authority, other than Tax authorities (each a "State
Regulator"), (ii) the OSC, (iii) the TSE, the ME and the NYSE and (iv) any
self-regulatory organization ("SRO") (collectively, the "Newcourt
Regulatory Agencies"), and have paid all fees and assessments due and
payable in connection therewith. Except for normal examinations conducted
by a Newcourt Regulatory Agency in the regular course of the business of
Newcourt and the Newcourt Subsidiaries, and except as set forth in Section
4.5 of the Newcourt Disclosure Schedule, no Newcourt Regulatory Agency has
initiated any proceeding or, to the knowledge of Newcourt, investigation
into the business or operations of Newcourt or any of the Newcourt
Subsidiaries since December 31, 1996. Except as set forth in Section 4.5
of the Newcourt Disclosure Schedule, there is no unresolved violation or
exception by any Newcourt Regulatory Agency with respect to any report or
statement relating to any examinations of Newcourt or any of the Newcourt
Subsidiaries.
4.6. Financial Statements. Newcourt has previously made
available to CIT copies of (a) the consolidated balance sheets of Newcourt
and the Newcourt Subsidiaries as of December 31 for the fiscal years 1997
and 1998, and the related consolidated statements of income and retained
earnings and cash flows for the fiscal years 1996 through 1998, inclusive,
in each case accompanied by the audit report of Ernst & Young, independent
public accountants with respect to Newcourt and (b) the unaudited
consolidated balance sheets of Newcourt and the Newcourt Subsidiaries as of
March 31, 1999 and June 30, 1999 and the related unaudited consolidated
statements of income and retained earnings and cash flows for the three
month and six month periods then ended, respectively, each of which has
been reviewed by Ernst & Young in accordance with the procedures specified
by the Canadian Institute of Chartered Accountants for a review of interim
financial information as described in Section 7100 of the Handbook of the
Canadian Institute of Chartered Accountants. The December 31, 1997 and
1998 consolidated balance sheets of Newcourt, including the related notes,
fairly present the consolidated financial position of Newcourt and the
Newcourt Subsidiaries as of the dates thereof, and the other financial
statements referred to in this Section 4.6 (including the related notes,
where applicable) fairly present, and the financial statements to be filed
with the OSC after the date hereof will fairly present (subject, in the
case of unaudited interim statements, to recurring audit adjustments normal
in nature and amount), the results of the consolidated operations and
consolidated financial position of Newcourt and the Newcourt Subsidiaries
for the respective fiscal periods or as of the respective dates therein set
forth; each of such statements (including the related notes, where
applicable) complies, and the financial statements to be filed with the OSC
after the date hereof will comply, with applicable accounting requirements
and with the published rules and regulations of the OSC with respect
thereto; and each of such statements (including the related notes, where
applicable) has been, and the financial statements to be filed with the OSC
after the date hereof will be, prepared in accordance with Canadian GAAP
consistently applied during the periods involved, except as indicated in
the notes thereto or, in the case of unaudited interim statements, as
permitted by the rules and regulations of the OSC. Except (A) as reflected
in such financial statements or in the notes thereto, (B) for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby and (C) for liabilities or obligations incurred in the ordinary
course of business, neither Newcourt nor any of the Newcourt Subsidiaries
has any liabilities or obligations of any nature as of the date of this
Agreement, which, individually or in the aggregate, have had a Material
Adverse Effect on Newcourt as of the date of this Agreement. The books and
records of Newcourt and the Significant Newcourt Subsidiaries have been,
and are being, maintained in all material respects in accordance with
Canadian GAAP and any other applicable legal and accounting requirements.
4.7. Broker's Fees. Neither Newcourt nor any Newcourt
Subsidiary nor any of their respective officers or directors has employed
any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated by this Agreement, except that Newcourt has engaged, and will
pay a fee or commission to, Goldman, Sachs & Co. ("Goldman Sachs") and CIBC
World Markets Inc. ("Gundy") in accordance with the terms of a letter
agreement among Goldman Sachs, Gundy and Newcourt, a true and correct copy
of which has been previously made available by Newcourt to CIT.
4.8. Absence of Changes. (a) Since December 31, 1998, (x) there
has not been: (1) any declaration, setting aside or payment of any
dividend or other distribution with respect to Newcourt's shares other than
the declaration and payment of regular quarterly cash dividends; (2) to the
knowledge of Newcourt, any labor dispute or charge of unfair labor practice
(other than routine individual grievances), any activity or proceeding by a
labor union or representative hereof to organize any employees of Newcourt
or any Newcourt Subsidiary or any campaign conducted to solicit
authorization from such employees to be represented by such labor union; or
(3) any increase in or modification of the compensation or benefits payable
or to become payable by any of Newcourt or the Newcourt Subsidiaries to any
of its directors or employees, except in the ordinary course of business
consistent with past practices; (4) any acquisition or sale of Property of
Newcourt or any Significant Newcourt Subsidiary, other than in the ordinary
course of business consistent with past practice and other than as
permitted under Section 6.1 or 7.4(b); (5) any change by Newcourt in
accounting methods, principles or practices (other than as disclosed in the
notes to Newcourt's consolidated financial statements as of and for the
year ended December 31, 1998) except as required by changes in Canadian
GAAP or U.S. GAAP as concurred to by Newcourt's independent auditors; or
(6) through the date of this Agreement, any writing off of the value of any
assets, other than as disclosed in the Newcourt Reports filed after
December 31, 1998 and prior to the date of this Agreement or disclosed in
the consolidated financial statements of Newcourt furnished to CIT prior to
the date of this Agreement; and (y) except for actions taken by Newcourt in
connection with the transactions contemplated by this Agreement or the
March Agreement, Newcourt and the Newcourt Subsidiaries have carried on
their respective businesses in the ordinary course consistent with their
past practices.
(b) The books, records and accounts of Newcourt and the
Newcourt Subsidiaries (i) have been maintained in accordance with good
business practices on a basis consistent with prior years and (ii) are
stated in reasonable detail and accurately and fairly reflect the
transactions and dispositions of Newcourt. Newcourt has devised and
maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (x) transactions are executed in accordance with
management's general or specific authorization; and (y) transactions are
recorded as necessary (A) to permit preparation of financial statements in
conformity with Canadian GAAP, U.S. GAAP or any other criteria applicable
to such statements and (B) to maintain accountability of assets.
4.9. Legal Proceedings. (a) Neither Newcourt nor any of the
Newcourt Subsidiaries is a party to any, and there are no pending or, to
the knowledge of Newcourt, threatened, legal, administrative, arbitral or
other proceedings, claims, actions or governmental or regulatory
investigations of any nature against Newcourt or any of the Newcourt
Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon Newcourt, any of the Newcourt
Subsidiaries or the assets of Newcourt or any of the Newcourt Subsidiaries.
4.10. Taxes. (a) Each of Newcourt and the Newcourt Subsidiaries
has (i) duly and timely filed (including applicable extensions granted
without penalty) all material Tax Returns (as hereinafter defined) required
to be filed at or prior to the Effective Time, and such Tax Returns are
true and correct in all material respects except to the extent adequate
provision has been made with respect thereto in Newcourt's consolidated
financial statements, (ii) paid in full or made adequate provision in the
financial statements of Newcourt (in accordance with Canadian GAAP) for all
Taxes (as hereinafter defined) shown to be due on such Tax Returns and
(iii) not received written notice of a proposed assessment or reassessment
of a material liability for unpaid Taxes, the amount of which has not been
previously paid or adequately provided for in Newcourt's consolidated
financial statements. As of the date hereof neither Newcourt nor any of
the Newcourt Subsidiaries has requested any extension of time within which
to file any material Tax Returns in respect of any fiscal year which have
not since been filed and no request for waivers of the time to assess any
Taxes are pending or outstanding. No material Tax liens have been filed
with respect to Newcourt or any Newcourt Subsidiary, other than for Taxes
not yet due and payable or those being contested in good faith.
(b) For the purposes of this Agreement, "Taxes" shall
mean all taxes, charges, fees, levies, penalties or other assessments
imposed by any United States federal, state, local or foreign taxing
authority, including, but not limited to income, excise, property, sales,
transfer, franchise, payroll, Canada or Quebec Pension Plan premiums,
withholding, social security or other taxes, including any interest,
penalties or additions attributable thereto. For purposes of this
Agreement, "Tax Return" shall mean any return, report, information return
or other document (including any related or supporting information) with
respect to Taxes.
4.11. Employees. (a) Section 4.11(a) of the Newcourt
Disclosure Schedule sets forth a true and correct list of each material
deferred compensation plan, incentive compensation plan, equity
compensation plan, "welfare" plan, fund or program (within the meaning of
section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")); "pension" plan, fund or program (within the meaning of
section 3(2) of ERISA or the ITA); each material employment, termination or
severance agreement (other than employment letters with employees entered
into in the ordinary course of business); and each other material employee
benefit plan, fund, program, agreement or arrangement, in each case, that
is (or, with respect to any pension plan that is or was subject to Title IV
of ERISA, during any time in the last six years was) sponsored, maintained,
participated in or contributed to or required to be contributed to (the
"Plans") by Newcourt, any of the Newcourt Subsidiaries or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), all of which
together with Newcourt would be deemed a "single employer" within the
meaning of Section 4001 of ERISA, for the benefit of any employee or former
employee of Newcourt or any Newcourt Subsidiary.
(b) To the extent that Newcourt has provided or made
available any of the following documents to CIT, the copies so provided or
made available were true and correct copies of such documents: (i) any Plan
document including all amendments thereto; (ii) any actuarial report for
such Plan for each of the last two years, (iii) the most recent
determination letter from the Internal Revenue Service for any such Plan;
(iv) the most recent summary plan description and related summaries of
modifications or (v) the most recent Form 5500 (including all schedules)
filed with the IRS and the most recent reports and declarations filed with
Revenue Canada.
(c) Each of the Plans is in compliance with all
applicable provisions of the Code and ERISA; each of the Plans and related
trusts intended to be "qualified" within the meaning of Sections 401(a) and
501(a) of the Code has received a favorable determination letter from the
IRS and nothing has occurred to cause the loss of such qualified status; no
Plan has an accumulated or waived funding deficiency within the meaning of
Section 412 of the Code; all contributions required to be made by Newcourt
or any Newcourt Subsidiary to any Plan have been made by the due date;
neither Newcourt nor any ERISA Affiliate has incurred, directly or
indirectly, any liability to or on account of a Plan pursuant to Title IV
of ERISA (other than for premiums not yet due to the Pension Benefit
Guaranty Corporation); to the knowledge of Newcourt no proceedings have
been instituted to terminate any Plan that is subject to Title IV of ERISA;
no "reportable event," as such term is defined in Section 4043(c) of ERISA,
has occurred with respect to any Plan (other than a reportable event with
respect to which the thirty day notice period has been waived); and no
condition exists that presents a risk to Newcourt of incurring a liability
to or on account of a Plan pursuant to Title IV of ERISA; no Plan is a
multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) and
no Plan is a multiple employer plan (as defined in Section 413 of the
Code); except as required by Section 4980B of the Code or Part 6 of Title I
of ERISA, no Plan provides post-retirement welfare benefits and there are
no pending, or to the knowledge of Newcourt, threatened or anticipated
claims (other than routine claims for benefits) by, on behalf of or against
any of the Plans or any trusts related thereto or against Newcourt, any
Newcourt Subsidiary or any individual or entity for which the Plans,
Newcourt or any Newcourt Subsidiary may have liability; all employee
benefit plans that are subject to the laws of any jurisdiction outside the
United States are in compliance with such applicable laws and the
requirements of any trust deed or other document under which they are
established or maintained.
4.12. OSC and SEC Reports. (a) No final report, schedule,
statement, shareholder communication or other document required to be filed
since December 31, 1996 by Newcourt with the OSC (the "Newcourt OSC
Reports") contained any misrepresentation (as defined in the Ontario
Securities Act), except that information as of a later date contained or
incorporated by reference in a Newcourt OSC Report filed prior to the date
of this Agreement shall be deemed to modify information as of an earlier
date.
(b) No final report, schedule, statement, shareholder
communication or other document required to be filed since December 31,
1996 by Newcourt with the SEC pursuant to the Securities Act or the
Exchange Act (the "Newcourt SEC Reports" and, together with the Newcourt
OSC Reports, the "Newcourt Reports") contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading, except that
information as of a later date contained or incorporated by reference in a
Newcourt SEC Report filed prior to the date of this Agreement shall be
deemed to modify information as of an earlier date. Since December 31,
1996, Newcourt has timely filed all material Newcourt Reports and other
material documents required to be filed by it with the OSC or the SEC, as
the case may be, and, as of their respective dates, all Newcourt Reports
complied in all material respects with the published rules and regulations
of the OSC or the SEC, as the case may be, and the rules, regulations and
mandatory policies of the TSE and the ME, in each case, with respect
thereto.
4.13. Newcourt Information. The information which is provided
to CIT by Newcourt specifically for inclusion in the Proxy Circular and the
Registration Statement, or in any other document filed with any other
regulatory agency in connection herewith, will not at the time the Proxy
Circular is mailed to shareholders and at the time of each of the Newcourt
and the CIT shareholders' meetings contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances in which they are made,
not misleading. The Proxy Circular (except for such portions thereof that
relate only to or are prepared by CIT or any of the CIT Subsidiaries) will
comply in all material respects with the provisions of the OBCA, applicable
law and the rules, regulations and mandatory policies of the TSE and the
ME.
4.14. Compliance with Applicable Law. Newcourt and each of the
Newcourt Subsidiaries hold, and have at all times held, all licenses,
franchises, permits and authorizations necessary for the lawful conduct of
their respective businesses under and pursuant to all, and have complied
with and are not in default in any respect under any, applicable law,
statute, order, rule, regulation, policy and/or guideline of any
Governmental Entity relating to Newcourt or any of the Newcourt
Subsidiaries or the conduct of their respective businesses, and neither
Newcourt nor any of the Newcourt Subsidiaries has received notice of any
violations of any of the above.
4.15. Certain Contracts. (a) Except as set forth in Section
4.15(a) of the Newcourt Disclosure Schedule, neither Newcourt nor any of
the Newcourt Subsidiaries is a party to or bound by any contract or
commitment (whether written or oral) (i) which, upon the consummation of
the transactions contemplated by this Agreement, will (either alone or upon
the occurrence of any additional acts or events) result in any payment or
benefits (whether of severance pay or otherwise) becoming due, or the
acceleration or vesting of any rights to any payment or benefits, from CIT,
Newcourt or any of their respective Subsidiaries to any director, officer,
employee, contractor or consultant thereof, (ii) which is a material
contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be
performed after the date of this Agreement that has not been filed or
incorporated by reference in the Newcourt Reports, (iii) which materially
increases any benefits otherwise payable under any Newcourt compensation
plan or other benefit arrangement, (iv) which requires Newcourt to register
any securities under the Securities Act or otherwise or (v) which
materially restricts the conduct of any line of business by Newcourt or any
of the Newcourt Subsidiaries. Each contract, arrangement, commitment or
understanding of the type described in clause (ii) of this Section 4.15(a),
whether or not set forth in Section 4.15(a) of the Newcourt Disclosure
Schedule, and any amendment, side letter or business plan relating thereto
is referred to herein as a "Newcourt Contract". Newcourt has previously
delivered or made available to CIT true and correct copies of each Newcourt
Contract listed in Section 4.15(a) of the Newcourt Disclosure Schedule
which is marked with an asterisk.
(b) (i) Each Newcourt Contract is valid and binding and
in full force and effect, (ii) neither Newcourt nor any of the Newcourt
Subsidiaries is in default in respect of its obligations under any Newcourt
Contract, (iii) no event or condition exists which constitutes or, after
notice or lapse of time or both, would constitute, a default on the part of
Newcourt or any of the Newcourt Subsidiaries under any Newcourt Contract,
and (iv) no other party to any Newcourt Contract is, to the knowledge of
Newcourt, in default in any respect thereunder.
4.16. Agreements with Regulatory Agencies. Neither Newcourt nor
any of the Newcourt Subsidiaries is subject to any cease-and-desist or
other order issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or is a party to any
commitment letter or similar undertaking to, or is subject to any order or
directive by, or is a recipient of any extraordinary supervisory letter
from, or has adopted any board resolutions at the request of (each, whether
or not set forth on Section 4.16 of the Newcourt Disclosure Schedule, a
"Newcourt Regulatory Agreement"), any Newcourt Regulatory Agency or other
Governmental Entity that restricts the conduct of its business or that
relates to its capital adequacy, its credit policies, its management or its
business, nor has Newcourt or any of the Newcourt Subsidiaries been advised
by any Newcourt Regulatory Agency or other Governmental Entity that it is
considering issuing or requesting any Newcourt Regulatory Agreement.
4.17. Environmental Matters. (a) Each of Newcourt and the
Newcourt Subsidiaries and, to the knowledge of Newcourt, each of the
Participation Facilities (as hereinafter defined), are in compliance with
all applicable Canadian or United States federal, provincial, state, local
and foreign laws, including common law, regulations and ordinances, and
with all applicable decrees, orders and contractual obligations relating to
pollution or the discharge of, or exposure to, Hazardous Materials (as
hereinafter defined) in the environment or workplace ("Environmental
Laws");
(b) There is no suit, claim, action or proceeding,
pending or, to the knowledge of Newcourt, threatened, before any
Governmental Entity or other forum in which Newcourt, any of the Newcourt
Subsidiaries or any Participation Facility, has been or, with respect to
threatened proceedings, could reasonably be expected to be, named as a
defendant (x) for alleged noncompliance (including by any predecessor) with
any Environmental Laws, or (y) relating to the release, threatened release
or exposure to any Hazardous Material whether or not occurring at or on a
site owned, leased or operated by Newcourt or any of the Newcourt
Subsidiaries or any Participation Facility;
(c) To the knowledge of Newcourt, during the period of
(i) Newcourt's or any of the Newcourt Subsidiaries' ownership or operation
of any of their respective current or former properties or (ii) Newcourt's
or any of the Newcourt Subsidiaries' participation in the management of any
Participation Facility, there has been no release of Hazardous Materials
in, on, under or affecting any such property. To the knowledge of
Newcourt, prior to the period of (x) Newcourt's or any of the Newcourt
Subsidiaries' ownership or operation of any of their respective current or
former properties or (y) Newcourt's or any of the Newcourt Subsidiaries'
participation in the management of any Participation Facility, there was no
release of Hazardous Materials in, on, under or affecting any such property
or Participation Facility; and
(d) The following definitions apply for purposes of this
Section 4.19: (x) "Hazardous Materials" means any chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum or other regulated
substances or materials, and (y) "Participation Facility" means any
facility in which Newcourt or any of the Newcourt Subsidiaries participates
in the management and, where required by the context, said term means the
owner or operator of such facility.
4.18. Opinion. Prior to the execution of this Agreement,
Newcourt has received opinions from each of Goldman Sachs and Gundy to the
effect that as of the date thereof and based upon and subject to the
matters set forth therein, the Exchange Ratio is fair to the holders of
Newcourt Common Shares from a financial point of view. Such opinions have
not been amended or rescinded as of the date of this Agreement.
4.19. [reserved]
4.20. Property. Newcourt or one of the Newcourt Subsidiaries
has good and marketable title free and clear of all Encumbrances to all of
the Properties which are reflected on the consolidated balance sheet of
Newcourt as of December 31, 1998 or were acquired after such date, except
for (i) Permitted Encumbrances and (ii) dispositions of, and Encumbrances
on, such Properties in the ordinary course of business or as otherwise
permitted or required hereunder.
4.21. Year 2000 Compliance Plan. (a) Section 4.21 of the
Newcourt Disclosure Schedule sets forth a true and complete copy of
Newcourt's plan to cause all of the Date-Sensitive Systems owned, leased
for use by or used by Newcourt or any Newcourt Subsidiary intended and
necessary for use after December 31, 1999, or licensed to Newcourt or any
Newcourt Subsidiary for use by Newcourt or such Newcourt Subsidiary, and
all of Newcourt's and each Newcourt Subsidiary's Date Data to be Year 2000
Compliant (Newcourt's "Y2K Plan"). Newcourt believes that its Y2K Plan can
be substantially achieved on or before September 30, 1999, with aggregate
expenditures under the Y2K Plan not materially in excess of $35,000,000.
(b) For purposes of this Agreement, the following terms
shall have the meanings set forth below:
"Date Data" means any data of any type that includes date
information or that is otherwise derived from, dependent on, or related to
date information.
"Date-Sensitive System" means, with respect to a particular
Person, any software, microcode or hardware system or component, including
any electronic or electronically controlled system or component, that
processes any Date Data and that is installed in a development or on order
by such Person or any Subsidiary of such Person for its internal use.
"Year 2000 Compliant" means, (i) with respect to Date Data, that
such data that are in proper format for all dates in the twentieth and
twenty-first centuries and (ii) with respect to Date-Sensitive Systems,
that each such system accurately processes all Date Data, including for the
twentieth and twenty-first centuries, without loss of any functionality or
performance, including calculating, comparing, sequencing, storing and
displaying such Date Data (including all leap-year considerations), when
used as a stand-alone system or in combination with other software or
hardware.
4.22. Interested Party Transactions. Except as disclosed in the
Newcourt Reports filed prior to the date of this Agreement, no executive
officer of Newcourt has, either directly or indirectly, a material interest
in (1) any Person which purchases from or sells, licenses or furnishes to
Newcourt or any of the Newcourt Subsidiaries any material goods, property,
technology or intellectual or other material property rights or services or
(2) any material contract or agreement to which Newcourt or any of the
Newcourt Subsidiaries is a party or by which it may be bound or affected.
4.23. Insurance. Newcourt and each of the Newcourt Subsidiaries
have their respective assets insured against loss or damages as appropriate
in their businesses and assets in such amounts and against such risks as
are appropriate in their business, and such insurance coverage will be
continued in full force and effect to and including the Effective Time.
4.24. Board Approval. The Board of Directors of Newcourt has,
as of the date hereof, (i) approved this Agreement, (ii) determined that
the Arrangement is in the best interests of the shareholders of Newcourt
and (iii) recommended the shareholders of Newcourt approve the Arrangement
Resolution.
4.25. Intellectual Property. Newcourt and the Newcourt
Subsidiaries own or have a valid license to use all trademarks, service
marks and trade names (including any registrations or applications for
registration of any of the foregoing) (collectively, the "Newcourt
Intellectual Property") necessary to carry on its business substantially as
currently conducted. Neither Newcourt nor any such subsidiary has received
any notice of infringement of or conflict with, and, to Newcourt's
knowledge, there are no infringements of or conflicts with, the rights of
others with respect to the use of any material Newcourt Intellectual
Property which have not been previously resolved.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF CIT
Subject to Article III and except as contemplated by this
Agreement and the Plan of Arrangement or as set forth in the CIT Disclosure
Schedule, CIT hereby represents and warrants to Newcourt as follows:
5.1. Corporate Organization. (a) CIT is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. CIT has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it
is now being conducted, and is duly licensed or qualified to do business in
each jurisdiction in which the nature of the business conducted by it or
the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary. The Certificate of
Incorporation and By-laws of CIT, copies of which have previously been
delivered to Newcourt, are true and correct copies of such documents as in
effect as of the date of this Agreement.
(b) Each CIT Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each CIT Subsidiary has the corporate power and authority
to own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or qualified to
do business in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and assets
owned or leased by it makes such licensing or qualification necessary. The
articles of incorporation, by-laws and similar governing documents of each
Significant CIT Subsidiary, copies of which have previously been made
available to Newcourt, are true and correct copies of such documents as in
effect as of the date of this Agreement.
(c) The minute books of CIT and each CIT Subsidiary
contain true and correct records of all meetings and other corporate
actions held or taken since December 31, 1996 of their respective
shareholders and Boards of Directors (including committees of their
respective Boards of Directors).
5.2. Capitalization. (a) As of the date of this Agreement, the
authorized capital stock of CIT consists of 700,000,000 shares of CIT
Common Stock, 510,000,000 shares of Class B Common Stock, par value $0.01
per share ("CIT B Stock"), and 50,000,000 shares of preferred stock, par
value $0.01 per share ("CIT Preferred Stock"). As of August 2, 1999, there
were 161,604,093 shares of CIT Common Stock, no shares of CIT B Stock and
no shares of CIT Preferred Stock issued and outstanding, and 1,580,480
shares of CIT Common Stock held in CIT's treasury. As of the date of this
Agreement, no shares of CIT Common Stock or CIT Preferred Stock were
reserved for issuance, except that (i) 12,898,999 shares of CIT Common
Stock were reserved for issuance upon the exercise of stock options
pursuant to the Employee Long Term Equity Compensation Plan and the
Employee Stock Purchase Plan (collectively, the "CIT Stock Plans"). All of
the issued and outstanding shares of CIT Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except as referred to above,
CIT does not have and is not bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character
calling for the purchase or issuance of any shares of CIT Common Stock or
CIT Preferred Stock or any other equity securities of CIT or any securities
representing the right to purchase or otherwise receive any shares of CIT
Common Stock or CIT Preferred Stock. The shares of CIT Common Stock to be
issued pursuant to the Arrangement or upon exchange from time to time of
the Exchangeable Shares have been duly authorized and, on their respective
dates of issue, such shares will be validly issued, fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.
(b) Section 5.2(b) of the CIT Disclosure Schedule sets
forth a true and correct list of all of the CIT Subsidiaries as of the date
of this Agreement. As of the date of this Agreement, CIT owns, directly or
indirectly, all of the issued and outstanding shares of capital stock of
each of the CIT Subsidiaries, free and clear of all Encumbrances other than
Permitted Encumbrances, and all of such shares are duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. As
of the date of this Agreement, except for Permitted Encumbrances, no CIT
Subsidiary has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any other
equity security of such Subsidiary. At the Effective Time, there will not
be any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character by which CIT or any of the CIT Subsidiaries
will be bound calling for the purchase or issuance of any shares of the
capital stock of CIT or any of the CIT Subsidiaries.
5.3. Authority; No Violation. (a) CIT has full corporate power
and authority to execute and deliver this Agreement and, subject to receipt
of the approval of CIT's shareholders, to consummate the transactions
contemplated hereby and by the Plan of Arrangement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby and by the Plan of Arrangement, and the execution of
the DKB Voting Agreement by CIT, have been duly and validly approved by the
Board of Directors of CIT. The Board of Directors of CIT has directed that
the CIT Shareholder Matters (as defined in Section 7.3) be submitted to
CIT's shareholders for approval at a meeting of such shareholders and,
except for the approval of the CIT Shareholder Matters by the requisite
vote of CIT's shareholders, no other corporate proceedings on the part of
CIT are necessary to approve this Agreement and the Plan of Arrangement and
to consummate the transactions contemplated hereby and thereby. This
Agreement and the Plan of Arrangement have been (and in the case of the
Arrangement Documents, will be) duly and validly executed and delivered by
CIT and (assuming due authorization, execution and delivery by Newcourt)
each of this Agreement and the Plan of Arrangement constitutes a valid and
binding obligation of CIT, enforceable against CIT in accordance with its
terms, except as may be limited by the Bankruptcy Exception. Upon their
formation, each of Newco and Exchangeco will have full corporate power and
authority to execute and deliver the Support Agreement and the Voting and
Exchange Trust Agreement (the "Arrangement Documents") and to consummate
the transactions contemplated thereby. The execution and delivery of the
Arrangement Documents and the consummation of the transactions contemplated
thereby will be duly and validly approved by the Board of Directors of each
of CIT, Newco and Exchangeco. Upon the due and valid approval of the
Arrangement Documents by the Board of Directors of each of CIT, Newco and
Exchangeco, no other corporate proceedings on the part of CIT, Newco or
Exchangeco are necessary to approve the Arrangement Documents and to
consummate the transactions contemplated thereby. The Arrangement
Documents will be duly and validly executed and delivered by each of CIT,
Newco and Exchangeco and (assuming due authorization, execution and
delivery by Newcourt) each of the Arrangement Documents will constitute a
valid and binding obligation of each of CIT, Newco and Exchangeco,
enforceable against each of CIT, Newco and Exchangeco in accordance with
its terms, except as may be limited by the Bankruptcy Exception.
(b) Neither the execution and delivery of this Agreement
and the Arrangement Documents by CIT or the Arrangement Documents by Newco
and Exchangeco, nor the consummation by CIT, Newco and Exchangeco of the
transactions contemplated hereby or by the Plan of Arrangement or the
Arrangement Documents, nor compliance by CIT, Newco and Exchangeco with any
of the terms or provisions hereof or thereof, will (i) violate any
provision of the Certificate of Incorporation or By-Laws of CIT, (ii)
violate the articles of incorporation or by-laws or similar governing
documents of any of the CIT Subsidiaries or (iii) assuming that the
consents and approvals referred to in Section 5.4 are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, mandatory
government policy, judgment, order, writ, decree or injunction applicable
to CIT or any of its Subsidiaries or any of their respective Properties, or
(y) violate, conflict with, result in a breach of any provision of or the
loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under,
require any payment under, result in the termination of or a right of
termination or cancellation under, accelerate or permit the creation of an
obligation to accelerate the performance required by, result in the loss of
any benefit under, or result in a right of first refusal or option to
purchase or acquire, or result in the creation of any Encumbrance (other
than any Permitted Encumbrance) upon any of the respective Properties of
CIT or any of the CIT Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, loan or credit agreement or other agreement or other instrument or
obligation to which CIT or any of the CIT Subsidiaries is a party, or by
which they or any of their respective Properties may be bound or affected.
5.4. Consents and Approvals. Except for (a) the filing of
applications and notices, as applicable, with the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") under the BHC Act and
approval of such applications and notices, (b)(i) compliance with the
premerger notification filing requirements under Part IX of the Competition
Act (Canada) and the expiration of the applicable waiting period in
relation thereto or (ii) receipt of an ARC pursuant to section 102 of the
Competition Act (Canada), (c) the filing of a notification under the
Investment Canada Act, (d) the filing of applications with, and the
approval of such applications by, the appropriate financial regulatory
authorities in the provinces, states and countries in which CIT or any CIT
Subsidiary conducts business, (e) receipt of exemption orders from the
provincial securities regulators from the registration and prospectus
requirements with respect to the issuance of and first trade in CIT Common
Stock, (f) the filing with the Court, the SEC, the OSC and other Canadian
securities regulatory authorities of the Proxy Circular and the filing and
declaration of effectiveness of the Registration Statement, (g) the
approval of the CIT Shareholder Matters, (h) approval of the listing of the
CIT Common Stock to be issued in the Arrangement, upon exchange of the
Exchangeable Shares and upon exercise of the Replacement Options on the
NYSE, (i) approvals or orders in respect of CIT and/or DKB under section
518 or 521 of the Bank Act (Canada), and (j) approvals, if applicable, of
the Ministry of Finance of Japan and the Financial Supervisory Agency of
Japan, no consents, orders or approvals of or filings or registrations with
any Governmental Entity or with any third party are necessary in connection
with (1) the execution and delivery by CIT of this Agreement, the
Arrangement Documents and the Plan of Arrangement and by Newco and
Exchangeco of the Arrangement Documents and (2) the consummation by CIT,
Newco and Exchangeco of the Arrangement and the other transactions
contemplated hereby and by the Arrangement Documents.
5.5. Reports. CIT and each of the CIT Subsidiaries have timely
filed all reports, schedules, forms, registrations, statements and other
documents, together with any amendments required to be made with respect
thereto, that they were required to file since December 31, 1996 with the
Federal Reserve Board, any State Regulator or any SRO (collectively, the
"CIT Regulatory Agencies"), and have paid all fees and assessments due and
payable in connection therewith. Except for normal examinations conducted
by a CIT Regulatory Agency in the regular course of the business of CIT and
the CIT Subsidiaries, no CIT Regulatory Agency has initiated any proceeding
or, to the knowledge of CIT, investigation into the business or operations
of CIT or any of the CIT Subsidiaries since December 31, 1996. There is no
unresolved violation or exception by any CIT Regulatory Agency with respect
to any report or statement relating to any examinations of CIT or any of
the CIT Subsidiaries.
5.6. Financial Statements. CIT has previously made available to
Newcourt copies of (a) the consolidated balance sheets of CIT and the CIT
Subsidiaries as of December 31 for the fiscal years 1997 and 1998 and the
related consolidated statements of income, changes in shareholders' equity
and cash flows for the fiscal years 1996 through 1998, inclusive, in each
case accompanied by the audit report of KPMG LLP, independent public
accountants with respect to CIT and (b) the unaudited consolidated balance
sheets of CIT and the CIT Subsidiaries as of March 31, 1999 and June 30,
1999 and the related unaudited consolidated statements of income, changes
in shareholders' equity and cash flows for the three month and six month
periods then ended, respectively. The December 31, 1997 and 1998
consolidated balance sheets of CIT, including the related notes, fairly
present the consolidated financial position of CIT and its Subsidiaries as
of the dates thereof, and the other financial statements referred to in
this Section 5.6 (including the related notes, where applicable) fairly
present and the financial statements to be filed with the SEC after the
date hereof will fairly present (subject, in the case of unaudited interim
statements, to recurring audit adjustments normal in nature and amount),
the results of the consolidated operations and changes in shareholders'
equity and consolidated financial position of CIT and the CIT Subsidiaries
for the respective fiscal periods or as of the respective dates therein set
forth; each of such statements (including the related notes, where
applicable) complies, and the financial statements to be filed with the SEC
after the date hereof will comply, with applicable accounting requirements
and with the published rules and regulations of the SEC with respect
thereto; and each of such statements (including the related notes, where
applicable) has been, and the financial statements to be filed with the SEC
after the date hereof will be, prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP") consistently applied
during the periods involved, except as indicated in the notes thereto or,
in the case of unaudited interim statements, as permitted by Form 10-Q.
Except (A) as reflected in such financial statements or in the notes
thereto, (B) for liabilities incurred in connection with this Agreement or
the transactions contemplated hereby and (C) for liabilities or obligations
incurred in the ordinary course of business, neither CIT nor any of the CIT
Subsidiaries has any liabilities or obligations of any nature as of the
date of this Agreement, which, individually or in the aggregate, have had a
Material Adverse Effect on CIT as of the date of this Agreement. The books
and records of CIT and the Significant CIT Subsidiaries have been, and are
being, maintained in all material respects in accordance with U.S. GAAP and
any other applicable legal and accounting requirements.
5.7. Broker's Fees. Neither CIT nor any CIT Subsidiary, nor any
of their respective officers or directors, has employed any broker or
finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with any of the transactions contemplated by
this Agreement, except that CIT has engaged, and will pay a fee or
commission to, each of J.P. Morgan Securities Inc. and Donaldson Lufkin &
Jenrette Securities Corporation.
5.8. Absence of Changes; Conduct of Business. (a) Since
December 31, 1998, (x) there has not been: (1) any declaration, setting
aside or payment of any dividend or other distribution with respect to CIT
capital stock other than the declaration and payment of regular quarterly
cash dividends; (2) any change by CIT in accounting methods, principles or
practices except as required by changes in U.S. GAAP as concurred to by
CIT's independent auditors; (3) to the knowledge of CIT, any labor dispute
or charge of unfair labor practice (other than routine individual
grievances), any activity or proceeding by a labor union or representative
hereof to organize any employees of CIT or any CIT Subsidiary or any
campaign conducted to solicit authorization from such employees to be
represented by such labor union; (4) any increase in or modification of the
compensation or benefits payable or to become payable by any of CIT or the
CIT Subsidiaries to any of its directors or employees, except in the
ordinary course of business consistent with past practice; (5) any
acquisition or sale of Property of CIT or any Significant CIT Subsidiary,
other than in the ordinary course of business consistent with past practice
and other than as permitted under Section 6.1 or 7.4(b); or (6) through the
date of this Agreement, any writing off of the value of any assets, other
than as disclosed in the CIT Reports filed after December 31, 1998 and
prior to the date of this Agreement or disclosed in the consolidated
financial statements of CIT furnished to Newcourt prior to the date of this
Agreement; and (y) CIT and the CIT Subsidiaries have carried on their
respective businesses in the ordinary course consistent with their past
practices.
(b) The books, records and accounts of CIT and the CIT
Subsidiaries (i) have been maintained in accordance with good business
practices on a basis consistent with prior years and (ii) are stated in
reasonable detail and accurately and fairly reflect the transactions and
dispositions of CIT. CIT has devised and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (x)
transactions are executed in accordance with management's general or
specific authorization; and (y) transactions are recorded as necessary (A)
to permit preparation of financial statements in conformity with U.S. GAAP
or any other criteria applicable to such statements and (B) to maintain
accountability of assets.
5.9. Legal Proceedings. (a) Neither CIT nor any of the CIT
Subsidiaries is a party to any and there are no pending or, to CIT's
knowledge, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations
of any nature against CIT or any of the CIT Subsidiaries or challenging the
validity or propriety of the transactions contemplated by this Agreement.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon CIT, any of the CIT Subsidiaries or the
assets of CIT or any of the CIT Subsidiaries.
5.10. Taxes. Each of CIT and its Subsidiaries has (i) duly and
timely filed (including applicable extensions granted without penalty) all
material Tax Returns required to be filed at or prior to the Effective
Time, and such Tax Returns are true and correct in all material respects
except to the extent adequate provision has been made with respect thereto
in CIT's consolidated financial statements, (ii) paid in full or made
adequate provision in the financial statements of CIT (in accordance with
U.S. GAAP) for all Taxes shown to be due on such Tax Returns and (iii) not
received written notice of a proposed assessment or reassessment of a
material liability for unpaid Taxes, the amount of which has not been
previously paid or adequately provided for in CIT's consolidated financial
statements. As of the date hereof, neither CIT nor any of its Subsidiaries
has requested any extension of time within which to file any material Tax
Returns in respect of any fiscal year which have not since been filed and
no request for waivers of the time to assess any Taxes are pending or
outstanding. No material Tax liens have been filed with respect to CIT or
any CIT Subsidiary, other than for Taxes not yet due and payable or those
being contested in good faith.
5.11. Employees. (a) Section 5.11(a) of the CIT Disclosure
Schedule sets forth a true and correct list of each material deferred
compensation plan, incentive compensation plan, equity compensation plan,
"welfare" plan, fund or program (within the meaning of section 3(1) of the
ERISA); "pension" plan, fund or program (within the meaning of section 3(2)
of ERISA); each material employment, termination or severance agreement;
and each other material employee benefit plan, fund, program, agreement or
arrangement, in each case, that is (or, with respect to any pension plan
that is or was subject to Title IV of ERISA, during any time in the last
six years was) sponsored, maintained, participated in or contributed to or
required to be contributed to as of the date of this Agreement (the "CIT
Plans") by CIT, any of its Subsidiaries or by any trade or business,
whether or not incorporated (a "CIT ERISA Affiliate"), all of which
together with CIT would be deemed a "single employer" within the meaning of
Section 4001 of ERISA, for the benefit of any employee or former employee
of CIT or any Subsidiary.
(b) To the extent that CIT has provided or made available
any of the following documents to Newcourt, the copies so provided or made
available were true and correct copies of such documents: (i) any CIT Plan
document including all amendments thereto; (ii) any actuarial report for
such CIT Plan for each of the last two years, (iii) the most recent
determination letter from the Internal Revenue Service for any such CIT
Plan; (iv) the most recent summary plan description and related summaries
of modifications or (v) the most recent Form 5500 (including all schedules)
filed with the IRS.
(c) Each of the CIT Plans is in compliance with all
applicable provisions of the Code and ERISA; each of the CIT Plans and
related trusts intended to be "qualified" within the meaning of Sections
401(a) and 501(a) of the Code has received a favorable determination letter
from the IRS and nothing has occurred to cause the loss of such qualified
status; no CIT Plan has an accumulated or waived funding deficiency within
the meaning of Section 412 of the Code; all contributions required to be
made by CIT or any CIT Subsidiary to any CIT Plan have been made by the due
date; neither CIT nor any CIT ERISA Affiliate has incurred, directly or
indirectly, any liability to or on account of a CIT Plan pursuant to Title
IV of ERISA (other than for premiums not yet due to the Pension Benefit
Guaranty Corporation); to the knowledge of CIT no proceedings have been
instituted to terminate any CIT Plan that is subject to Title IV of ERISA;
no "reportable event," as such term is defined in Section 4043(c) of ERISA,
has occurred with respect to any CIT Plan (other than a reportable event
with respect to which the thirty day notice period has been waived); and no
condition exists that presents a risk to CIT of incurring a liability to or
on account of a CIT Plan pursuant to Title IV of ERISA; no CIT Plan is a
multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) and
no CIT Plan is a multiple employer plan (as defined in Section 413 of the
Code); except as required by Section 4980B of the Code or Part 6 of Title I
of ERISA, no CIT Plan provides post-retirement welfare benefits and there
are no pending, or, to the knowledge of CIT, threatened or anticipated
claims (other than routine claims for benefits) by, on behalf of or against
any of the CIT Plans or any trusts related thereto or against CIT, any CIT
Subsidiary or any individual or entity for which the CIT Plans, CIT or any
CIT Subsidiary may have liability; all employee benefit plans that are
subject to the laws of any jurisdiction outside the United States are in
compliance with such applicable laws and the requirements of any trust deed
or other document under which they are established or maintained.
5.12. SEC Reports. No final registration statement, prospectus,
report, schedule, definitive proxy statement or other document required to
be filed since December 31, 1996 by CIT with the SEC pursuant to the
Securities Act or the Exchange Act (the "CIT Reports") contained any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances in which they were made, not misleading,
except that information as of a later contained or incorporated by
reference in a CIT Report date shall be deemed to modify information as of
an earlier date. Since December 31, 1996, CIT has timely filed all
material CIT Reports and other material documents required to be filed by
it under the Securities Act and the Exchange Act, and, as of their
respective dates, all CIT Reports complied in all material respects with
the published rules and regulations of the SEC with respect thereto.
5.13. CIT Information. The information to be contained in the
Proxy Circular and the Registration Statement, or in any other document
filed with any other regulatory agency in connection herewith (other than
any information which is provided to CIT by Newcourt specifically for
inclusion in such document), will not at the time the Proxy Circular is
mailed to shareholders and at the time of each of the Newcourt and the CIT
shareholders' meetings contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
light of the circumstances in which they are made, not misleading. The
Proxy Circular (except for such portions thereof that relate only to or are
prepared by Newcourt or any of the Newcourt Subsidiaries) will comply with
the provisions of the Exchange Act and the rules and regulations
thereunder. The Registration Statement will comply with the provisions of
the Securities Act and the rules and regulations thereunder.
5.14. Compliance with Applicable Law. CIT and each of its
Subsidiaries holds, and has at all times held, all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to all, and have complied with and
are not in default in any respect under any, applicable law, statute,
order, rule, regulation, policy and/or guideline of any Governmental Entity
relating to CIT or any of its Subsidiaries or the conduct of their
respective businesses and neither CIT nor any of the CIT Subsidiaries knows
of, or has received notice of violation of, any violations of any of the
above.
5.15. Certain Contracts. (a) Except as set forth in Section
5.15(a) of the CIT Disclosure Schedule, neither CIT nor any of the CIT
Subsidiaries is a party to or bound by any contract or commitment (whether
written or oral) (i) which, upon the consummation of the transactions
contemplated by this Agreement, will (either alone or upon the occurrence
of any additional acts or events) result in any payment or benefits
(whether of severance pay or otherwise) becoming due, or the acceleration
or vesting of any rights to any payment or benefits, from CIT, Newcourt or
any of their respective Subsidiaries to any director, officer, employee,
contractor or consultant thereof, (ii) which is a material contract (as
defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed
after the date of this Agreement that has not been filed or incorporated by
reference in the CIT Reports, (iii) which materially increases any benefits
otherwise payable under any CIT compensation plan or other benefit
arrangement, (iv) which requires CIT to register any securities under the
Securities Act or otherwise or (v) which materially restricts the conduct
of any line of business by CIT or any of the CIT Subsidiaries. Each
contract, arrangement, commitment or understanding of the type described in
clause (ii) of this Section 5.15(a), whether or not set forth in Section
5.15(a) of the CIT Disclosure Schedule, is referred to herein as a "CIT
Contract". CIT has previously delivered or made available to Newcourt true
and correct copies of each CIT Contract.
(b) (i) Each CIT Contract is valid and binding and in
full force and effect, (ii) neither CIT nor any of the CIT Subsidiaries is
in default in respect of its obligations under any CIT Contract, (iii) no
event or condition exists which constitutes or, after notice or lapse of
time or both, would constitute, a default on the part of CIT or any of the
CIT Subsidiaries under any CIT Contract, and (iv) no other party to any CIT
Contract is, to the knowledge of CIT, in default in any respect thereunder.
5.16. Agreements with Regulatory Agencies. Neither CIT nor any
of its Subsidiaries is subject to any cease-and-desist or other order
issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any
board resolutions at the request of (each, whether or not set forth in
Section 5.16 of the CIT Disclosure Schedule, a "CIT Regulatory Agreement"),
any CIT Regulatory Agency or other Governmental Entity that restricts the
conduct of its business or that relates to its capital adequacy, its credit
policies, its management or its business, nor has CIT or any of its
Subsidiaries been advised by any CIT Regulatory Agency or other
Governmental Entity that it is considering issuing or requesting any CIT
Regulatory Agreement.
5.17. Environmental Matters. (a) Each of CIT and its
Subsidiaries and, to the knowledge of CIT, each of the Participation
Facilities (as hereinafter defined), are in compliance with all
Environmental Laws;
(b) There is no suit, claim, action or proceeding,
pending or, to the knowledge of CIT, threatened, before any Governmental
Entity or other forum in which CIT, any of its Subsidiaries or any
Participation Facility, has been or, with respect to threatened
proceedings, could reasonably be expected to be, named as a defendant (x)
for alleged noncompliance (including by any predecessor) with any
Environmental Laws, or (y) relating to the release, threatened release or
exposure to any Hazardous Material whether or not occurring at or on a site
owned, leased or operated by CIT or any of its Subsidiaries or any
Participation Facility;
(c) To the knowledge of CIT during the period of (i)
CIT's or any of its Subsidiaries' ownership or operation of any of their
respective current or former properties or (ii) CIT's or any of its
Subsidiaries' participation in the management of any Participation
Facility, there has been no release of Hazardous Materials in, on, under or
affecting any such property. To the knowledge of CIT, prior to the period
of (x) CIT's or any of its Subsidiaries' ownership or operation of any of
their respective current or former properties or (y) CIT's or any of its
Subsidiaries' participation in the management of any Participation
Facility, there was no release of Hazardous Materials in, on, under or
affecting any such property or Participation Facility; and
(d) The following definition applies for purposes of
this Section 5.17: "Participation Facility" means any facility in which
CIT or any of its Subsidiaries participates in the management and, where
required by the context, said term means the owner or operator of such
facility.
5.18. Opinion. Prior to the execution of this Agreement, CIT
has received an opinion from each of J.P. Morgan Securities Inc. and
Donaldson Lufkin & Jenrette Securities Corporation to the effect that as of
the date thereof and based upon and subject to the matters set forth
therein, the Exchange Ratio pursuant to this Agreement is fair from a
financial point of view to CIT. Such opinion has not been amended or
rescinded as of the date of this Agreement.
5.19. Ownership of Newcourt Common Shares. Neither CIT nor, to
the knowledge of CIT, any of its affiliates or associates (as such terms
are defined under the Exchange Act) (a) beneficially owns, directly or
indirectly, or (b) is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
any shares of capital stock of Newcourt.
5.20. Property. Each of CIT and its Subsidiaries has good and
marketable title free and clear of all Encumbrances to all of the
Properties which are reflected on the consolidated statement of financial
condition of CIT as of December 31, 1998 or were acquired after such date,
except for (i) Permitted Encumbrances and (ii) dispositions of, and
Encumbrances on, such Properties in the ordinary course of business or as
otherwise permitted or required hereunder.
5.21. Year 2000 Compliance Plan. Section 5.21 of the CIT
Disclosure Schedule sets forth a true and complete copy of CIT's plan to
cause all of the Date-Sensitive Systems owned, leased for use by or used by
the CIT or any CIT Subsidiary intended and necessary for use after December
31, 1999, or licensed to the CIT or any CIT Subsidiary for use by CIT or
such CIT Subsidiary, and all of CIT's and each CIT Subsidiary's Date Data
to be Year 2000 Compliant (CIT's "Y2K Plan"). CIT believes that its Y2K
Plan can be substantially achieved on or before September 30, 1999.
5.22. Interested Party Transactions. Except as disclosed in the
CIT Reports filed prior to the date of this Agreement, no executive officer
of CIT has, either directly or indirectly, a material interest in (1) any
Person which purchases from or sells, licenses or furnishes to CIT or any
of the CIT Subsidiaries any material goods, property, technology or
intellectual or other material property rights or services or (2) any
material contract or agreement to which CIT or any of the CIT Subsidiaries
is a party or by which it may be bound or affected.
5.23. Insurance. CIT and each of the CIT Subsidiaries have
their respective assets insured against loss or damages as appropriate in
their businesses and assets in such amounts and against such risks as are
appropriate in their business, and such insurance coverage will be
continued in full force and effect to and including the Effective Time.
5.24. Board Approval. The Board of Directors of CIT has, as of
the date hereof, (i) approved this Agreement and the Arrangement, (ii)
determined that the Arrangement is in the best interests of CIT and the
shareholders of CIT and (iii) recommended the shareholders of CIT approve
the issuance of shares of CIT Common Stock pursuant to this Agreement and
the Plan of Arrangement and upon conversion of the Exchangeable Shares.
5.25. Intellectual Property. CIT and the CIT Subsidiaries own
or have a valid license to use all trademarks, service marks and trade
names (including any registrations or applications for registration of any
of the foregoing) (collectively, the "CIT Intellectual Property") necessary
to carry on its business substantially as currently conducted. Neither CIT
nor any such subsidiary has received any notice of infringement of or
conflict with, and, to CIT's knowledge, there are no infringements of or
conflicts with, the rights of others with respect to the use of any
material CIT Intellectual Property which have not been previously resolved.
5.26. DGCL Section 203. The provisions of Section 203 of the
Delaware General Corporation Law will not apply to Newcourt (by virtue of
the DKB Voting Agreement or otherwise), this Agreement or the Plan of
Arrangement or any of the transactions contemplated hereby or thereby.
5.27. CIT Knowledge. As of the date of this Agreement, CIT is
not aware of any matter, except as set forth on the Newcourt Disclosure
Schedule, as to which CIT believes that such matter would result in a Net
Worth Charge.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1. Covenants of CIT and Newcourt. During the period from the
date of this Agreement and continuing until the Effective Time, except as
expressly contemplated or permitted by this Agreement or with the prior
written consent of the other party, Newcourt, CIT and each of their
respective Subsidiaries shall (x) carry on their respective businesses in
the ordinary course consistent with past practice and (y) use reasonable
efforts to maintain and preserve intact its business organization and
advantageous business relationships and retain the services of its officers
and key employees. Without limiting the generality of the foregoing,
except as set forth in the Newcourt Disclosure Schedule or the CIT
Disclosure Schedule, and except as otherwise contemplated by this Agreement
or consented to in writing by the other party, neither Newcourt nor CIT
shall, and neither Newcourt nor CIT shall permit any of its Subsidiaries
to:
(a) solely in the case of Newcourt and CIT, declare or
pay any dividends on, or make other distributions in respect of, any of its
capital stock, other than quarterly dividends not in excess of (i) Cdn$0.06
per Newcourt Common Share, in the case of Newcourt, and (ii) US$0.10 per
share of CIT Common Stock, in the case of CIT;
(b) (i) repurchase, redeem or otherwise acquire any
shares of the capital stock of such party or any of its Subsidiaries, or
any securities convertible into or exercisable for any shares of the
capital stock of such party or any of its Subsidiaries, (ii) split, combine
or reclassify any shares of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or (iii) issue, deliver,
allocate, sell or pledge, or authorize or propose the issuance, delivery,
allocation, sale or pledge of, any shares of its capital stock or any stock
appreciation rights or securities convertible into or exercisable for, or
any rights, warrants or options to acquire, any such shares, or enter into
any agreement with respect to any of the foregoing except, in the case of
clauses (ii) and (iii), for (x) the issuance of such party's common shares
upon the exercise or fulfillment of rights or options issued or existing
pursuant to employee benefit plans, programs or arrangements, all to the
extent outstanding and in existence on the date of this Agreement and in
accordance with their present terms, (y) in the case of Newcourt, the
distribution or sale of outstanding Newcourt Common Shares currently held
for Newcourt's employees pursuant to Newcourt's employee share loan program
and (z) in the case of CIT, the grant of additional stock options to its
directors and employees, in the ordinary course consistent with past
practice as to both the timing of such grants and the amount of such
grants, pursuant to CIT's stock option and stock incentive plans for
employees and directors;
(c) amend its charter, by-laws or other similar
governing documents;
(d) solely in the case of Newcourt and the Newcourt
Subsidiaries, authorize or permit any of its officers, directors, employees
or agents to directly or indirectly solicit, initiate or encourage any
inquiries relating to, or the making of any proposal which constitutes, an
Acquisition Proposal, or participate in any discussions or negotiations, or
provide third parties with any nonpublic information, relating to any such
inquiry or proposal or otherwise facilitate any effort or attempt to make
or implement an Acquisition Proposal; provided, however, that (x) Newcourt
may, in response to an Acquisition Proposal that the Board of Directors of
Newcourt determines in good faith to be more favorable to its shareholders
than the transactions contemplated hereby, and for which financing is
committed or for which, in the good faith judgment of the Board of
Directors of Newcourt, financing is reasonably capable of being obtained by
such third party (a "Superior Proposal"), and subject to providing prior
written notice of such Superior Proposal to CIT, participate in any
discussions or negotiations regarding, or provide the party making such
Superior Proposal with any nonpublic information (pursuant to a customary
confidentiality agreement and provided Newcourt provides CIT with such
information, concurrently with or prior to providing it to such party) in
connection with, such Superior Proposal, or otherwise facilitate any effort
or attempt to implement such Superior Proposal, if the Board of Directors
of Newcourt determines in good faith, after consultation with outside
counsel, that it is necessary to do so in order to comply with its
fiduciary duties to Newcourt and to Newcourt's shareholders under
applicable law, (y) Newcourt may communicate information about any
Acquisition Proposal to its shareholders if, in the judgment of Newcourt's
Board of Directors, based upon the advice of outside counsel, such
communication is required under applicable law and (z) nothing contained in
this Agreement shall prevent Newcourt or its Board of Directors from
complying with Rule 14e-2 promulgated under the Exchange Act with regard to
an Acquisition Proposal, provided, however, that, except in connection with
a Superior Proposal, neither the Board of Directors of Newcourt nor any
committee thereof shall withdraw or modify, or propose publicly to withdraw
or modify, its position with respect to the Newcourt Shareholder Matters,
or approve or recommend, or propose publicly to approve or recommend, an
Acquisition Proposal. Newcourt will immediately cease and cause to be
terminated any existing activities, discussions or negotiations previously
conducted with any parties other than CIT with respect to any of the
foregoing and Newcourt will take all actions necessary or advisable to
inform the appropriate individuals or entities referred to in the first
sentence hereof of the obligations undertaken in this Section 6.1(d).
Newcourt will (A) notify CIT immediately if any such inquiries or
Acquisition Proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with, Newcourt and (B) promptly inform CIT in writing of all of
the relevant details and status with respect to the foregoing;
(e) make any capital expenditures in excess of the US$50
million budgeted for calendar year 1999;
(f) enter into any new line of business or, other than
in the ordinary course of its business, enter into any material
transaction, provided, however, that the negative covenants contained in
this clause (f) shall apply to CIT and its Subsidiaries only to the extent
that any of the actions contemplated would, or would reasonably be expected
to, delay or inhibit the receipt of any regulatory approvals required for
the consummation of the transactions contemplated hereby;
(g) acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business organization
or division thereof or otherwise acquire any assets, other than (i) in
connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructurings in the ordinary course of business
consistent with past practices and (ii) partnerships, joint ventures,
virtual joint ventures, investment funds and other similar arrangements as
part of the ordinary course business activities of such party, provided,
however, that the negative covenants contained in this clause (g) shall
apply to CIT and its Subsidiaries only to the extent that any of the
actions contemplated would, or would reasonably be expected to, delay or
inhibit the receipt of any regulatory approvals required for the
consummation of the transactions contemplated hereby;
(h) take any action that is intended or may reasonably
be expected to result in any of its representations and warranties set
forth in this Agreement being or becoming untrue, or in any of the
conditions to the Arrangement set forth in Article VIII not being
satisfied;
(i) change its methods of accounting in effect at
December 31, 1998, except as required by changes in (x) Canadian GAAP or
U.S. GAAP as concurred to by Newcourt's independent auditors, in the case
of Newcourt or (y) U.S. GAAP as concurred to by CIT's independent auditors,
in the case of CIT;
(j) solely in the case of Newcourt and the Newcourt
Subsidiaries (i) except as set forth in Section 7.7 hereof, as required by
applicable law or as required to maintain qualification pursuant to the
Code or the ITA, adopt, amend, or terminate any employee benefit plan or
any agreement, arrangement, plan or policy between such party or any of its
Subsidiaries and one or more of its current or former directors, officers
or employees, or any collective bargaining, bonus, profit sharing,
compensation, stock option, pension, retirement, employee stock ownership,
deferred compensation employment termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
directors, officers or employees or (ii) except for normal increases in the
ordinary course of business consistent with past practice and except as
required by applicable law, increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any employee benefit plan or agreement as in effect as of the
date of this Agreement (including, without limitation, the granting of
stock options, stock appreciation rights, restricted stock, restricted
stock units or performance units or shares); provided, however, that
nothing contained herein shall prohibit Newcourt from paying 1998 bonuses
which have been earned and accrued on its books; provided further, however,
that the aggregate amount of cash compensation paid in respect of fiscal
year 1999 to the nine executive officers of Newcourt listed on Section
6.1(j) of the Newcourt Disclosure Schedule (exclusive of the aggregate
amount of any severance payments and any retention or stay bonuses paid to
any of such officers) shall not exceed the aggregate amount of cash
compensation paid to such persons in respect of fiscal year 1998;
(k) solely in the case of Newcourt and the Newcourt
Subsidiaries, other than activities in the ordinary course of business
consistent with past practice (including financing, securitization,
syndication, pooling and other similar activities), sell, lease, encumber,
assign or otherwise dispose of, or agree to sell, lease, encumber, assign
or otherwise dispose of, any of its material assets, properties or other
rights or agreements; provided, however, that Newcourt and the Newcourt
Subsidiaries may not sell or otherwise dispose of any line of business, or
any material portion of any line of business or any of Newcourt's remaining
investment in KMC Telecom;
(l) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed money or
assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any unrelated individual, corporation or
other entity;
(m) other than in the ordinary course of business,
create, renew, amend or terminate or give notice of a proposed renewal,
amendment or termination of, any material contract, agreement or lease (as
lessee) for goods, services or office space to which such party or any of
its Subsidiaries is a party or by which such party or any of its
Subsidiaries or their respective properties is bound, other than any
amendment or renewal which does not materially reduce the benefits of any
such contract, agreement or lease to such party;
(n) solely in the case of Newcourt and the Newcourt
Subsidiaries, enter into any new joint ventures without the consent of CIT,
which shall not be unreasonably withheld, it being understood that the
withholding of such consent would be reasonable if the entering into such
joint venture would, in the good faith reasonable judgment of CIT,
reasonably be expected to jeopardize or delay the receipt of (or result in
the imposition of any conditions in connection with) any Primary Approval;
(o) solely in the case of Newcourt and the Newcourt
Subsidiaries, engage in any interest rate risk management or other
derivative transactions or arrangements other than for hedging purposes;
(p) solely in the case of Newcourt and the Newcourt
Subsidiaries, enter into any financing program agreements or arrangements
containing any exclusivity or non-competition provisions without the
consent of CIT, which consent shall not be unreasonably withheld; or
(q) agree to do any of the foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Regulatory Matters. (a) Newcourt and CIT shall promptly
prepare the Proxy Circular, and CIT shall use its reasonable best efforts
to file the Proxy Circular with the SEC not later than 20 days after the
date of this Agreement. Each of Newcourt and CIT shall thereafter mail the
Proxy Circular to its respective shareholders. CIT shall use its
reasonable best efforts to prepare and file with the SEC not later than 20
days after the date of this Agreement a registration statement on the
appropriate form with respect to the shares of CIT Common Stock to be
issued upon exchange of any Exchangeable Shares (the "Registration
Statement") and shall take all actions necessary to maintain such
Registration Statement current and effective for as long as shall be
required to enable the holders of Exchangeable Shares to sell the shares of
CIT Common Stock received upon exchange thereof. Each of Newcourt and CIT
shall use its reasonable best efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable
after such filing. CIT shall also use its reasonable best efforts to
obtain all necessary state securities law or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this
Agreement.
(b) Newcourt shall file the Proxy Circular in all
Canadian jurisdictions where the Proxy Circular is required to be filed and
with the SEC, the TSE and the ME in accordance with the applicable rules
and regulations thereof. The parties shall use all reasonable efforts to
obtain all orders required from the applicable Canadian securities
authorities to permit the issuance and first resale of (i) the Exchangeable
Shares and the shares of CIT Common Stock to be issued pursuant to the
Arrangement, (ii) the shares of CIT Common Stock to be issued upon exchange
of the Exchangeable Shares from time to time and (iii) the shares of CIT
Common Stock to be issued from time to time upon the exercise of the
Replacement Options, in each case without qualification with or approval of
or the filing of any document, including any prospectus or similar
document, or the taking of any proceeding with, or the obtaining of any
further order, ruling, or consent from, any Governmental Entity or
regulatory authority under any Canadian federal, provincial or territorial
securities laws or pursuant to the rules and regulations of any regulatory
authority administering such laws, or the fulfilment of any other legal
requirement in any such jurisdiction (other than, with respect to such
first resales, any restrictions on transfer by reason of, among other
things, a holder being a "control person" of Newcourt or CIT for purposes
of Canadian federal, provincial or territorial securities laws).
(c) The parties hereto shall cooperate with each other
and use their reasonable best efforts to prepare and file not later than 10
days after the date of this Agreement all necessary documentation
(including, with respect to applications, notices, and filings made by the
parties prior to the date of this Agreement, all updated and/or
supplemental information required in connection therewith), to effect all
applications, notices, petitions and filings, and to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all
third parties and Governmental Entities which are necessary or advisable to
consummate the transactions contemplated by this Agreement (including the
Arrangement) and for the parties and their Subsidiaries to conduct their
respective businesses after the Closing Date in substantially the same
manner as conducted currently, or which are required in order to maintain
in effect any governmental authorizations, licenses or approvals pursuant
to which either of the parties or their Subsidiaries carries on its
business as currently conducted. Newcourt and CIT each will furnish to the
other for review in advance, and to the extent practicable each will
consult the other on, in each case subject to applicable laws relating to
the exchange of information, all the information relating to Newcourt or
CIT, as the case may be, and any of their respective Subsidiaries, which
appears in any filing made with, or written materials submitted to, any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of
the parties hereto shall act reasonably and as promptly as practicable.
The parties hereto agree that they will consult with each other with
respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement
and, in each case subject to applicable law relating to the exchange of
information, each party will keep the other apprised of the status of
matters relating to completion of the transactions contemplated herein.
Promptly upon the reasonable request of CIT, Newcourt will provide, and
will use its reasonable efforts to cause each other Co-Venturer (and the
ultimate parent entity thereof) in a Joint Venture to provide promptly, to
CIT, to the extent reasonably available to Newcourt or such other party,
the information required in order to respond to any questions asked by the
Federal Reserve Board regarding any Co-Venturer or any joint venture. "Co-
Venturer" means any company that (i) owns an interest in a company in which
Newcourt has an interest or (ii) has entered into an agreement with
Newcourt for Newcourt or its affiliates to finance the sale of the
company's products.
(d) Newcourt and CIT shall, upon request, furnish each
other with all information concerning themselves, their Subsidiaries,
directors, officers and shareholders and such other matters as may be
reasonably necessary or advisable in connection with the Proxy Circular,
the Registration Statement or any other statement, filing, notice or
application made by or on behalf of Newcourt, CIT or any of their
respective Subsidiaries to any Governmental Entity in connection with the
Arrangement and the other transactions contemplated by this Agreement.
Without limiting the foregoing, Newcourt shall as promptly as practicable
provide to CIT upon its request all financial information pertaining to
Newcourt reasonably necessary or advisable in connection with the
foregoing, including the Canadian to U.S. GAAP reconciliation for the
period ended June 30, 1999 and the necessary information to conform
Newcourt's financial information to CIT's accounting policies and reporting
format.
(e) Newcourt and CIT shall, subject to applicable law,
promptly furnish each other with copies of written communications received
by Newcourt or CIT, as the case may be, or any of their respective
Subsidiaries, Affiliates or Associates (as such terms are defined in Rule
12b-2 under the Exchange Act as in effect on the date of this Agreement)
from, or delivered by any of the foregoing to, any Governmental Entity in
respect of the transactions contemplated hereby.
(f) Each party will give the other party a reasonable
opportunity to participate in the defense of any shareholder litigation
against such party and its directors relating to the transactions
contemplated hereby; provided, however, that (x) the foregoing shall not
require either party to take any such action which would be reasonably
likely to jeopardize such party's attorney-client privilege and (y) the
party to this Agreement that is the defendant in such litigation shall
control such litigation.
7.2. Access to Information. (a) Upon reasonable notice and
subject to applicable laws relating to the exchange of information, each
party shall, and shall cause each of its Subsidiaries to, afford to the
officers, employees, accountants, counsel and other representatives of the
other party, reasonable access, during normal business hours during the
period prior to the Effective Time, to all its properties, books,
contracts, commitments, records, officers, employees, accountants, counsel
and other representatives and, during such period, it shall, and shall
cause its Subsidiaries to, make available to the other party all
information concerning its business, properties and personnel as the other
party may reasonably request. Neither party nor any of its Subsidiaries
shall be required to provide access to or to disclose information where
such access or disclosure would violate the rights of its customers,
jeopardize any attorney-client privilege or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement
entered into prior to the date of this Agreement. The parties hereto will
use their reasonable best efforts to (x) mitigate any restrictions pursuant
to the preceding sentence and (y) make appropriate substitute disclosure
arrangements under circumstances in which such restrictions cannot be so
mitigated. The access described above shall include the right of CIT to
maintain on Newcourt's premises during all normal business hours one or
more representatives of CIT who shall be afforded access in the manner set
forth above.
(b) All information furnished to either party pursuant
to Section 7.2(a) shall be subject to, and such party shall hold all such
information in confidence in accordance with, the provisions of the
confidentiality agreement, dated February 24, 1999 (the "Confidentiality
Agreement"), between Newcourt and CIT.
(c) No investigation by either of the parties or their
respective representatives shall affect the representations, warranties,
covenants or agreements of the other set forth herein.
(d) Within twenty-one (21) days following the last day
of each month after the date of this Agreement, Newcourt shall provide CIT
with its consolidated balance sheet as of the end of such month and the
related consolidated statement of income, in each case prepared in
accordance with Canadian GAAP consistently applied, together with a
statement setting forth in reasonable detail a computation of Adjusted
Shareholders' Equity as of such month end.
7.3. Shareholder Meetings. Newcourt and CIT each shall take all
steps necessary to duly call, give notice of, convene and hold a meeting of
its respective shareholders to be held as soon as is reasonably practicable
after the issuance of the Interim Order for the purpose of voting upon the
approval of (a) the Plan of Arrangement and the consummation of the
transactions contemplated thereby (the "Newcourt Shareholder Matters"), in
the case of Newcourt, and (b) the issuance of shares of CIT Common Stock
pursuant to this Agreement and the Plan of Arrangement, upon exchange of
Exchangeable Shares and upon exercise of the Replacement Options, and the
CIT Transition Option Plan (collectively, the "CIT Shareholder Matters"),
in the case of CIT. CIT will and, subject to the penultimate sentence of
this Section 7.3, Newcourt will, through its respective Board of Directors,
recommend to its respective shareholders (x) approval of the Newcourt
Shareholder Matters, in the case of Newcourt, and (y) approval of the CIT
Shareholder Matters, in the case of CIT, and, in each case, such other
matters as may be submitted to its shareholders in connection with this
Agreement. Neither the Board of Directors of either party nor any
committee thereof shall withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to the other party, the approval or
recommendation by such Board of Directors or such committee of the Newcourt
Shareholder Matters, in the case of Newcourt, or the CIT Shareholder
Matters, in the case of CIT, and neither the Board of Directors of Newcourt
nor any committee thereof shall (i) approve or recommend, or propose
publicly to approve or recommend, any Acquisition Proposal, or (ii) cause
Newcourt to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, an "Acquisition
Agreement") related to any Acquisition Proposal. Notwithstanding the
foregoing, in the event that the Board of Directors of Newcourt determines
in good faith, after consultation with outside counsel, that in light of a
Superior Proposal it is necessary to do so in order to comply with its
fiduciary duties to Newcourt and to Newcourt's shareholders under
applicable law, the Board of Directors of Newcourt may terminate this
Agreement solely in order to concurrently enter into an Acquisition
Agreement with respect to a Superior Proposal, but only after the fifth day
following CIT's receipt of written notice advising CIT that the Board of
Directors of Newcourt is prepared to accept a Superior Proposal, and only
if, during such five-day period, if CIT so elects, Newcourt and its
advisors shall have negotiated in good faith with CIT to make such
adjustments in the terms and conditions of this Agreement as would enable
CIT to proceed with the transactions contemplated herein on such adjusted
terms. Newcourt and CIT shall coordinate and cooperate with respect to the
foregoing matters with a view toward, among other things, holding the
respective meetings of each party's shareholders on the same day.
7.4. Legal Conditions to Arrangement. (a) Each of Newcourt and
CIT shall, and shall cause its Subsidiaries (including, in the case of CIT,
Newco and Exchangeco) to, use their reasonable best efforts (i) to take, or
cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed on such party or
its Subsidiaries with respect to the Arrangement and, subject to the
conditions set forth in Article VIII hereof, to consummate the transactions
contemplated by this Agreement; (ii) to obtain (and to cooperate with the
other party to obtain) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity and any other third party which
is required to be obtained by Newcourt or CIT or any of their respective
Subsidiaries in connection with the Arrangement and the other transactions
contemplated by this Agreement, and to comply with the terms and conditions
of such consent, authorization, order or approval; and (iii) in the case of
CIT, to execute and deliver (and cause Newco and Exchangeco to execute and
deliver) the Arrangement Documents.
(b) Without limiting the generality of Section 7.4(a),
in the event that either party fails or expects to fail to obtain any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity because of the type or nature of any assets or the
activities of any business of either party or any of its Subsidiaries, such
party shall use its reasonable best efforts to take or cause to be taken
all actions necessary to either obtain the required approval or obviate the
need to obtain such approval, including, if necessary, discontinuing or
disposing of such business or assets or restructuring the conduct of such
business; provided, however, that no party shall be required to take any
such action if doing so would reasonably be expected to have a Material
Adverse Effect on Newcourt and CIT (on a combined basis).
7.5. Affiliates. Newcourt shall use its reasonable best efforts
to cause each director, executive officer and other person who is an
"affiliate" (for purposes of Rule 145 under the Securities Act) of Newcourt
to deliver to CIT, as soon as practicable after the date of this Agreement,
a written agreement, in the form of Exhibit 7.5(a) or Exhibit 7.5(b)
hereto, as applicable.
7.6. Stock Exchange Listings; Tax Status. Each of CIT and
Newcourt shall, to the extent applicable, use its reasonable best efforts
to (i) cause the Exchangeable Shares and the shares of CIT Common Stock to
be listed and posted for trading on the TSE by the Effective Time and, with
respect to the Exchangeable Shares, to maintain the listing as long as any
Exchangeable Shares are outstanding, (ii) cause the shares of CIT Common
Stock to be issued in the Arrangement or upon exchange of the Exchangeable
Shares and upon exercise of the Replacement Options from time to time to be
approved for listing on the NYSE, subject to official notice of issuance,
as of the Effective Time and (iii) ensure that Exchangeco remains a "public
corporation" within the meaning of the ITA until the earlier of (x) such
time as there are no Exchangeable Shares outstanding and (y) five years
after the Effective Time.
7.7. Employee Benefit Plans; Existing Agreements. (a) From and
after the Effective Time, the employees of Newcourt and the Newcourt
Subsidiaries as of the Effective Time (the "Newcourt Employees") shall
continue to participate in Newcourt's employee benefit and compensation
plans in which they currently participate or, at CIT's discretion, in CIT's
employee benefit and compensation plans or a combination thereof. Prior to
December 31, 2000, CIT shall not, and shall not permit any of its
Subsidiaries to, modify or amend the benefit programs applicable to
Newcourt Employees in any manner which would cause the benefits provided to
such employees under such plans in the aggregate, to be less favorable than
those provided to Newcourt Employees under such plans immediately prior to
the Effective Time except to the extent agreed to by Messrs. Gamper and
Banks of New CIT. The foregoing limitation on CIT's and its subsidiaries'
right to amend or modify the compensation plans does not apply to Newcourt
employees who have employee contracts with New CIT. Without limiting the
generality of the foregoing, from and after the Effective Time, CIT shall
continue to maintain Newcourt's share loan program (including the related
financial support thereof) with respect to participants in such program as
of the Effective Time for the sole purpose of permitting participants in
the program at the Effective Time to repay outstanding loans without
adverse amendment or adverse alteration in the administration thereof for
so long as any loans remain outstanding thereunder.
(b) Following December 31, 2000 (or such earlier date
that a Newcourt Employee commences participation in a plan), with respect
to each deferred compensation plan, incentive compensation plan, equity
compensation plan, "welfare" plan, fund or program, "pension" plan, fund or
program; each termination or severance plan or program; and each other
employee benefit plan, fund, program, agreement or arrangement, in each
case, in which Newcourt Employees participate (the "New CIT Plans"), for
purposes of determining eligibility to participate, vesting, and
entitlement to benefits, including for severance benefits and vacation
entitlement (but not for accrual of pension benefits or post-retirement
welfare benefits), service with Newcourt (or predecessor employers to the
extent Newcourt provides past service credit) shall be treated as service
with New CIT. Such service also shall apply for purposes of satisfying any
waiting periods, evidence of insurability requirements, or the application
of any preexisting condition limitations. Each New CIT Plan shall waive
pre-existing condition limitations to the same extent waived under the
applicable Newcourt Plan. Newcourt Employees shall be given credit for
amounts paid under a corresponding benefit plan during the same period for
purposes of applying deductibles, copayments and out-of-pocket maximums as
though such amounts had been paid in accordance with the terms and
conditions of the New CIT Plan.
(c) Not later than March 15, 2000 (the "1999 Bonus
Payment Date"), in addition to any amounts that the Newcourt Employees
shall have earned under CIT's incentive bonus plans in 1999, CIT shall, or
shall cause Newcourt to, pay to each Newcourt Employee who is employed on
the Bonus Payment Date a pro-rata 1999 bonus under Newcourt's incentive
bonus plans in respect of the period from January 1, 1999 through the
Closing Date based on Newcourt's annualized performance (without regard to
the effect (including the cost) of any actions taken by Newcourt or any of
the Newcourt Subsidiaries in contemplation of the Arrangement or at the
request of CIT) from January 1, 1999 through the end of the last full month
prior to consummation of the Arrangement; provided, however, that if, prior
to the 1999 Bonus Payment Date, any Newcourt Employee is terminated other
than for cause, CIT shall, or shall cause Newcourt to, pay to such Newcourt
Employee on the date of termination the pro-rata 1999 bonus that would have
otherwise been payable to such employee on the 1999 Bonus Payment Date.
The provisions of this Section 7.7(c) are intended to be for the benefit
of, and shall be enforceable by, each such director, officer or employee.
(d) As of the Effective Time, CIT shall assume and honor
and shall cause the appropriate Subsidiaries of CIT to assume and to honor
in accordance with their terms all employment, severance and other
compensation agreements and arrangements existing prior to or as of the
execution of this Agreement which are between Newcourt or any of its
Subsidiaries and any director, officer or employee thereof and whether or
not disclosed in the Newcourt Disclosure Schedule, including, without
limitation, the Separation Agreements and General Releases of even date
herewith between Newcourt and each of the parties thereto as listed in
Section 4.8(a)(x)(3) of the Newcourt Disclosure Schedule. CIT acknowledges
and agrees that the Arrangement constitutes a "Change in Control" for all
purposes pursuant to such agreements and arrangements, except that, with
respect to the AT&T Capital Member Severance Plan, the AT&T Capital 1995
Leadership Severance Plan and any AT&T Capital Annual Incentive Plan, the
existing Plan Administrators and Benefits Committee (as defined therein)
under each such plan will seek advice and make a determination as to
whether the Arrangement constitutes such a Change of Control, and the
acknowledgment of CIT in this sentence shall be deemed operative with
respect to any such plan only to the extent the Arrangement is so
determined by the Plan Administrators and the Benefits Committee for such
plan to constitute a Change of Control under and pursuant to such Plan.
The provisions of this Section 7.7(d) are intended to be for the benefit
of, and shall be enforceable by, each such director, officer or employee.
(e) Prior to the Effective Time, Newcourt shall amend or
cause to be amended the Newcourt Credit Group Inc. Savings and Investment
Plan (the "Savings Plan") so that, as of the Effective Time, participants
in the Savings Plan will not be permitted to transfer balances into, make
contributions to, or have contributions made to, the Newcourt Common Share
investment option under the Savings Plan.
(f) Newcourt and CIT shall take all such steps as may be
required to provide that, with respect to each Section 16 Affiliate (as
defined below), (i) the transactions contemplated by this Agreement and the
Plan of Arrangement, and (ii) any other acquisitions of CIT equity
securities (including derivative securities) in connection with this
Agreement or the Plan of Arrangement, shall be exempt under Rule 16b-3
promulgated under the Exchange Act, in accordance with the terms and
conditions set forth in that certain No-Action Letter, dated January 12,
1999, issued by the SEC to Skadden, Arps, Slate, Meagher & Flom LLP. For
purposes of this Agreement, "Section 16 Affiliate" shall mean each
individual who (x) immediately prior to the Effective Time is a director or
officer of Newcourt or (y) at the Effective Time will become a director or
officer of CIT.
7.8. Indemnification. (a) From and after the Effective Time,
CIT agrees to maintain, or cause to be maintained, all rights to
indemnification and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time now existing in favor of the
current or former directors or officers of Newcourt or any Newcourt
Subsidiary as provided in their respective articles of incorporation or by-
laws or similar governing documents, and CIT hereby assumes, effective at
the Effective Time, all such liability.
(b) In addition to the foregoing, in the event of any
threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, including, without limitation,
any such claim, action, suit, proceeding or investigation in which any
person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director, officer
or employee of Newcourt or any of its Subsidiaries, (the "Indemnified
Parties") is, or is threatened to be, made a party based in whole or in
part on, or arising in whole or in part out of, or pertaining to (i) the
fact that he is or was a director, officer or employee of Newcourt, any of
the Subsidiaries of Newcourt or any of their respective predecessors or
affiliates or (ii) this Agreement, the March Agreement or any of the
transactions contemplated hereby or thereby, whether in any case asserted
or arising before or after the Effective Time, the parties hereto agree to
cooperate and use their best efforts to defend against and respond thereto.
It is understood and agreed that after the Effective Time, CIT shall
indemnify and hold harmless each such Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including reasonable
attorney's fees and expenses in advance of the final disposition of any
claim, suit, proceeding or investigation to each Indemnified Party)
judgments, fines and amounts paid in settlement in connection with any such
threatened or actual claim, action, suit, proceeding or investigation, and
in the event of any such threatened or actual claim, action, suit,
proceeding or investigation (whether asserted or arising before or after
the Effective Time), the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with CIT; provided, however, that
(1) CIT shall have the right to assume the defense thereof and upon such
assumption CIT shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by
any Indemnified Party in connection with the defense thereof, except that
if CIT elects not to assume such defense or counsel for the Indemnified
Parties reasonably advises that there are issues which raise conflicts of
interest between CIT and the Indemnified Parties, the Indemnified Parties
may retain counsel reasonably satisfactory to them after consultation with
CIT, and CIT shall pay the reasonable fees and expenses of such counsel for
the Indemnified Parties, (2) CIT shall in all cases (other than cases
involving issues which raise conflicts of interest between or among two or
more Indemnified Parties, in which cases the limitation on CIT's
obligations contained in this clause (2) shall not apply) be obligated
pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, (3) CIT shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld) and (4) CIT shall have no obligation hereunder to
any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim Indemnification under this Section 7.8, upon learning of
any such claim, action, suit, proceeding or investigation, shall promptly
notify CIT thereof, provided that the failure to so notify shall not affect
the obligations of CIT under this Section 7.8 except to the extent such
failure to notify materially prejudices CIT. CIT's obligations under this
Section 7.8 shall continue in full force and effect without time limit from
and after the Effective Time.
(c) CIT shall cause the persons serving as officers and
directors of Newcourt immediately prior to the Effective Time to be covered
for a period of six years from the Effective Time by the directors' and
officers' liability insurance policy maintained by Newcourt (provided that
CIT may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are in the aggregate not less
advantageous than such policy) with respect to acts or omissions occurring
prior to the Effective Time which were committed by such officers and
directors in their capacity as such; provided, however, that in no event
shall CIT be required to expend on an annual basis more than 150% of the
current amount expended by Newcourt (the "Insurance Amount") to maintain or
procure insurance coverage, and further provided that if CIT is unable to
maintain or obtain the insurance called for by this Section 7.8(c), CIT
shall use all reasonable efforts to obtain as much comparable insurance as
is available for the Insurance Amount.
(d) In the event CIT or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of CIT assume the obligations set forth in this section.
(e) The provisions of this Section 7.8 are intended to
be for the benefit of, and shall be enforceable by, each such officer,
director and employee referred to in this Section 7.8.
7.9. Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out
the purposes of this Agreement, the proper officers and directors of each
party to this Agreement and their respective Subsidiaries shall take all
such necessary action as may be reasonably requested by either party.
7.10. Coordination of Dividends. After the date of this
Agreement each of CIT and Newcourt shall coordinate with the other
regarding the declaration and payment of any dividends in respect of the
CIT Common Stock and the Newcourt Common Shares and the record dates and
payment dates relating thereto, it being the intention of the parties that
any holder of Newcourt Common Shares shall not receive more than one
dividend, or fail to receive one dividend, for any single calendar quarter
with respect to such holder's Newcourt Common Shares and/or any shares of
CIT Common Stock or Exchangeable Shares any such holder receives pursuant
to the Arrangement.
7.11. [reserved]
7.12. [reserved]
7.13. Board of Directors. At the Effective Time, the total
number of persons serving on the Board of Directors of New CIT shall be
sixteen (16), twelve (12) of whom shall be selected by the Board of
Directors of CIT as provided below and four (4) of whom shall be selected
by the Board of Directors of Newcourt as provided below (such four
directors, the "Newcourt Directors"). Two of the twelve initial directors
selected by CIT shall be designated by DKB and shall be Hisao Kobayashi and
Keiji Torii. One of the four initial Newcourt Directors shall be David
Banks, who will serve as non-executive Vice Chairman of the Board of
Directors of New CIT, and two of the remaining initial Newcourt Directors
shall be a person designated by Hercules Holdings (Cayman) Limited
("Hercules") and a person designated by Canadian Imperial Bank of Commerce
("CIBC"), in each case, pursuant to the Amended and Restated Voting
Agreements entered into as of the date of this Agreement between each of
such parties, respectively, and CIT. If within two years after the
Effective Time, any Newcourt Director ceases to serve as a director of New
CIT, or either or both of CIBC and Hercules ceases to have the right to
nominate a director to serve on the Board of New CIT pursuant to the terms
of its Amended and Restated Voting Agreement with CIT, then the remaining
Newcourt Directors shall designate a successor director to serve on the
Board of New CIT, subject to the concurrence of CIT. The remaining person
to serve initially on the Board of Directors of New CIT as of the Effective
Time who is to be selected by Newcourt shall be selected by the Board of
Directors of Newcourt, subject to the concurrence of CIT, from among those
persons serving on the Board of Directors of Newcourt prior to the
Effective Time; and the remaining ten persons to serve on the Board of
Directors of New CIT as of the Effective Time who are to be selected by CIT
shall be selected solely by and at the absolute discretion of the Board of
Directors of CIT. In the event that, prior to the Effective Time, any
person named above or any other person so selected to serve on the Board of
Directors of New CIT after the Effective Time is unable or unwilling to
serve in such position, the Board of Directors or stockholders which
selected such person shall designate another of its members to serve in
such person's stead in accordance with the provisions of the immediately
preceding sentence, including in the case of Newcourt Directors the
concurrence of CIT.
7.14. Notification of Certain Matters. Each of Newcourt and CIT
will give prompt notice to the other party of (i) any change or event which
would cause any representation or warranty made by it to be untrue or
inaccurate as of the Effective Time, subject to Article III, or (ii) any
material failure by it to comply with or satisfy any covenant or agreement
to be complied with by it hereunder.
7.15. Comfort Letters. Each of Newcourt and CIT shall use its
reasonable efforts to cause to be delivered to the other party a letter of
its respective independent public accountants, substantially in the form
attached hereto as Exhibit E, dated (i) the date on which the Registration
Statement shall become effective, or, if there is no Registration
Statement, the date of mailing of the Proxy Circular, and (ii) a date
shortly prior to the Effective Time, and addressed to such other party.
7.16. Year 2000. Each Party shall use its reasonable best
efforts to implement its respective Y2K Plan. At the request of the other
party, each party shall periodically update the other party regarding its
process with respect to its Y2K Plan.
7.17. No Inconsistent Actions. Neither Newcourt nor CIT shall
effectuate any transaction or enter into any agreement the effect of which
would be to interfere with or otherwise impede consummation of the
transactions contemplated hereby.
7.18. [reserved]
7.19. Phase II Transactions. (a) From and after the date
of this Agreement, the parties hereto hereby agree to use their reasonable
best efforts to cause the transactions described in Section 7.19 of the
Newcourt Disclosure Schedule (such transactions, the "Phase II
Transactions") to occur as soon as practicable following the Effective
Time, and, in furtherance of the foregoing, from and after the date of this
Agreement, each of CIT and Newcourt shall cooperate with each other and use
their reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings,
and to obtain as promptly as practicable all permits, consents, approvals
and authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the Phase II Transactions, or which
are required as a result of the Phase II Transactions in order to maintain
in effect any governmental authorizations, licenses or approvals pursuant
to which either of the parties or their Subsidiaries carries on its
business as currently conducted (which, in the case of CIT, shall include,
without limitation, entering into, effective as of the effective time of
the Phase II Transactions, any and all such supplemental indentures,
assumption agreements, support agreements and guarantees with respect to
the existing debt obligations of Newcourt and its Subsidiaries as are
necessary or advisable to consummate the Phase II Transactions); provided,
however, that no party shall be required to take any action pursuant to
this Section 7.19(a) to the extent that doing so would jeopardize or delay
the consummation of any of the transactions contemplated hereby or the
satisfaction of any of the conditions contained in Article VIII.
(b) Newcourt and CIT each will furnish to the other for
review in advance, and to the extent practicable each will consult the
other on, in each case subject to applicable laws relating to the exchange
of information, all the information relating to Newcourt or CIT, as the
case may be, and any of their respective Subsidiaries, which appears in any
filing made with, or written materials submitted to, any third party or any
Governmental Entity in connection with the Phase II Transactions. In
exercising the foregoing right, each of the parties hereto shall act
reasonably and as promptly as practicable. The parties hereto agree that
they will consult with each other with respect to the obtaining of all
permits, consents, approvals and authorizations of all third parties and
Governmental Entities necessary or advisable to consummate the Phase II
Transactions and, in each case subject to applicable law relating to the
exchange of information, each party will keep the other apprised of the
status of matters relating to completion of the Phase II Transactions.
Newcourt and CIT shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers
and shareholders and such other matters as may be reasonably necessary or
advisable in connection with any statement, filing, notice or application
made by or on behalf of Newcourt, CIT or any of their respective
Subsidiaries to any Governmental Entity in connection with the Phase II
Transactions.
(c) Notwithstanding anything to the contrary contained
in this Agreement, the terms and phrases "transactions contemplated
hereby," "transactions contemplated by this Agreement" and "Arrangement,"
when used anywhere in this Agreement, shall not be deemed for any purpose
to include any of the Phase II Transactions. Without limiting the
foregoing or the covenants contained in the other paragraphs of this
Section 7.19, the parties expressly acknowledge that none of the conditions
contained in Article VIII of this Agreement (including those contained in
Sections 8.1(d), 8.2(g) and 8.3(e)), other than Section 8.2(e) shall
require for its satisfaction that the parties obtain any consent, permit,
approval or authorization of any third parties or Governmental Entity which
is necessary or advisable for the consummation of the Phase II Transactions
and not otherwise required for the consummation of the Arrangement.
7.20. Newcourt Allowance. Newcourt shall take such actions as
shall be necessary so that, as of the end of each month between the date of
this Agreement and the Effective Time, Newcourt's allowance for credit
losses reflected on its consolidated balance sheet for such month equals or
exceeds 1.7% of the aggregate net book value of Newcourt's "Finance Assets
Held for Investment" and "Equipment Under Operating Lease" reflected on its
consolidated balance sheet for such month.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1. Conditions to Each Party's Obligation To Effect the
Arrangement. The respective obligation of each party to effect the
Arrangement shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) Shareholder Approvals. (i) The Arrangement
Resolution shall have been approved and adopted by the requisite vote of
not less than two-thirds of the votes cast by the holders of Newcourt
Common Shares who are represented in person or by proxy at the meeting of
Newcourt's shareholders contemplated by Section 7.3 and in accordance with
any other conditions which may be imposed by the Interim Order and (ii) the
issuance of shares of CIT Common Stock pursuant to this Agreement and the
Plan of Arrangement and upon exchange of Exchangeable Shares and upon
issuance or exercise of Replacement Options shall have been approved and
adopted by the requisite vote of the holders of the outstanding shares of
CIT Common Stock under the rules of the NYSE.
(b) Interim and Final Orders. The Interim Order and the
Final Order shall each have been obtained in form and terms reasonably
satisfactory to each of Newcourt and CIT, and shall such orders not have
been set aside or modified on appeal or otherwise in a manner which is not
reasonably acceptable to such parties.
(c) Listing of Shares. The Exchangeable Shares and the
shares of CIT Common Stock shall have been conditionally approved for
listing on the TSE, subject to the usual conditions, and the shares of CIT
Common Stock which shall be issued to the shareholders of Newcourt upon
consummation of the Arrangement, upon exchange of the Exchangeable Shares
or upon exercise of the Replacement Options shall have been authorized for
listing on the NYSE, subject to official notice of issuance.
(d) Primary Approvals. The Primary Approvals shall have
been obtained and shall remain in full force and effect and all statutory
waiting periods in respect thereof shall have expired, provided that the
party asserting the failure of the condition set forth in this Section
8.1(d) shall have taken any and all actions that such party is required to
take under Section 7.4(b).
(e) 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.
(f) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Arrangement (an "Injunction") shall be in effect. No
statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of the Arrangement.
(g) Dissenting Shareholders. Newcourt shall not have
received from holders of more than 10% of the Newcourt Common Shares the
written objection to the Arrangement Resolution referred to in Section
185(6) of the OBCA where (i) such objections (x) shall have been made
timely under Section 3.1 of the Plan of Arrangement and (y) shall not have
been withdrawn and (ii) such shares are not voted in favor of the Plan of
Arrangement, unless within 30 days after the meeting of Newcourt's
shareholders held pursuant to Section 7.3 or, if earlier, immediately prior
to the Effective Time, any of Goldman Sachs, J.P. Morgan Securities Inc.,
Donaldson Lufkin & Jenrette Securities Corporation or any of their
respective affiliates, has provided Newcourt and CIT with a letter stating
that in the good faith reasonable judgment of such firm, such firm believes
that it can place a sufficient amount of permanent equity securities of New
CIT to fund the payments required to be made in respect of those shares in
excess of 10% of the Newcourt Common Shares for which Dissent Rights shall
have been perfected.
8.2. Conditions to Obligations of CIT. The obligation of CIT to
effect the Arrangement is also subject to the satisfaction or waiver by CIT
at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to
Section 3.2, the representations and warranties of Newcourt set forth in
this Agreement (other than those set forth in Sections 4.2, 4.3(a) and
4.3(b)(i), 4.7, 4.11(a) and 4.18) shall be true and correct as of the date
of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date; and (ii) the representations and
warranties of Newcourt set forth in Sections 4.2, 4.3(a) and 4.3(b)(i),
4.7, 4.11(a) and 4.18 of this Agreement shall be true and correct in all
material respects (without giving effect to Section 3.2 of this Agreement)
as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date. CIT shall have
received a certificate signed on behalf of Newcourt by the Chairman and the
Chief Financial Officer of Newcourt to the foregoing effect.
(b) Performance of Obligations of Newcourt. Newcourt
shall have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing Date,
and CIT shall have received a certificate signed on behalf of Newcourt by
the Chairman and the Chief Financial Officer of Newcourt to such effect.
(c) No Pending Governmental Actions. No proceeding
initiated by any Governmental Entity seeking an Injunction shall be
pending.
(d) Dell Contract. Any consent, approval or waiver
which may be required in order for the Dell Contract to remain in full
force and effect immediately after consummation of the Arrangement shall
have been obtained and the Dell Contract shall remain in full force and
effect, without any amendment or modification from the terms thereof as in
effect on the date of this Agreement, other than any such amendment or
modification which does not materially reduce the economic benefits of such
agreement to Newcourt.
(e) Lucent Contract. Any consent, approval or waiver
which may be required in order for the Lucent Contract to remain in full
force and effect immediately after consummation of the Arrangement and the
Phase II Transactions shall have been obtained and the Lucent Contract
shall remain in full force and effect, without any amendment or
modification from the terms thereof as in effect on the date of this
Agreement, other than any such amendment or modification which does not
materially reduce the economic benefits of such agreement to Newcourt.
(f) Availability of Executives. The persons listed on
Section 8.2(f) of the Newcourt Disclosure Schedule shall be serving as
officers of Newcourt immediately prior to the Effective Time.
(g) Third Party Consents. The consent, approval or
waiver of each Person (other than the Governmental Entities referred to in
Section 8.1(d)) whose consent to or approval of the Arrangement shall be
required under any note, bond, mortgage, indenture, deed of trust, license,
lease, loan or credit agreement or other agreement or other instrument or
obligation to which Newcourt or any of the Newcourt Subsidiaries is a
party, or by which they or any of their respective Properties may be bound
or affected (other than the Dell Contract and the Lucent Contract) shall
have been obtained and shall remain in full force and effect, except where
the failure to have obtained such consent, waiver or approval, or the
failure of any such consent, waiver or approval to be in full force and
effect, would not, individually or in the aggregate, have a Material
Adverse Effect on Newcourt.
(h) Comfort Letter. Ernst & Young LLP shall have
delivered to CIT a comfort letter with respect to the calculation of Final
Adjusted Shareholders' Equity in the form of Exhibit F.
(i) Litigation. As of the Closing Date, other than as
set forth on Section 4.9 of the Newcourt Disclosure Schedule, neither
Newcourt nor any of the Newcourt Subsidiaries shall be a party to any
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations against Newcourt or any of the
Newcourt Subsidiaries which has had or is reasonably expected to have a
Material Adverse Effect on Newcourt.
(j) Regulatory Conditions. No Primary Approval shall
have imposed any condition or restriction that would so materially
adversely affect the economic or business benefits of the transactions
contemplated by this Agreement so as to render inadvisable, in the
reasonable good faith judgment of CIT, the consummation of the transactions
contemplated hereby.
8.3. Conditions to Obligations of Newcourt. The obligation of
Newcourt to effect the Arrangement is also subject to the satisfaction or
waiver by Newcourt at or prior to the Effective Time of the following
conditions:
(a) Representations and Warranties. (i) Subject to
Section 3.2, the representations and warranties of CIT set forth in this
Agreement (other than those set forth in Sections 5.2, 5.3(a) and
5.3(b)(i), 5.7, 5.11(a) and 5.18) shall be true and correct as of the date
of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date; and (ii) the representations and
warranties of CIT set forth in Sections 5.2, 5.3(a) and 5.3(b)(i), 5.7,
5.11(a) and 5.18 of this Agreement shall be true and correct in all
material respects (without giving effect to Section 3.2 of this Agreement)
as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date. Newcourt shall
have received a certificate signed on behalf of CIT by the Chief Executive
Officer and the Chief Financial Officer of CIT to the foregoing effect.
(b) Performance of Obligations of CIT. CIT shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Newcourt
shall have received a certificate signed on behalf of CIT by the Chief
Executive Officer and the Chief Financial Officer of CIT to such effect.
(c) No Pending Governmental Actions. No proceeding
initiated by any Governmental Entity seeking an Injunction shall be
pending.
(d) Board of Directors. CIT shall have taken all such
actions as shall be necessary so that at the Effective Time, the
composition of New CIT's Board of Directors shall comply with Section 7.13
hereof (assuming Newcourt has designated the initial Directors of New CIT
that it is permitted to designate under Section 7.13 hereof).
(e) Third Party Consents. The consent, approval or
waiver of each Person (other than the Governmental Entities referred to in
Section 8.1(d)) whose consent to or approval of the Arrangement shall be
required under any note, bond, mortgage, indenture, deed of trust, license,
lease, loan or credit agreement or other agreement or other instrument or
obligation to which CIT or any of the CIT Subsidiaries is a party, or by
which they or any of their respective Properties may be bound or affected
shall have been obtained and shall remain in full force and effect, except
where the failure to have obtained such consent, waiver or approval, or the
failure of any such consent, waiver or approval to be in full force and
effect, would not, individually or in the aggregate, have a Material
Adverse Effect on CIT.
(f) Litigation. As of the Closing Date, other than as
set forth on Section 5.9 of the CIT Disclosure Schedule, neither CIT nor
any of the CIT Subsidiaries shall be a party to any legal, administrative,
arbitral or other proceedings, claims, actions or governmental or
regulatory investigations against CIT or any of the CIT Subsidiaries which
has had or is reasonably expected to have a Material Adverse Effect on CIT.
(g) Regulatory Conditions. No Primary Approval shall
have imposed any condition or restriction that would so materially
adversely affect the economic or business benefits of the transactions
contemplated by this Agreement so as to render inadvisable, in the
reasonable good faith judgment of Newcourt, the consummation of the
transactions contemplated hereby.
8.4. No Adverse DKB Regulatory Condition; No Adverse Amendment.
(a) In addition to the other conditions set forth in this Article VIII, if
any approval of the Federal Reserve Board, the OSFI, the Minister of
Finance of Canada or the Governor in Council of Canada required to
consummate the transactions contemplated hereby (including the Arrangement)
shall have imposed any condition or restriction on DKB or any of its
Subsidiaries, other than (x) any conditions or restrictions that relate to
the business, activities or investments of Newcourt or CIT or any of their
respective Subsidiaries but do not relate to the business, activities or
investments of DKB or any of its Subsidiaries (other than Newcourt, CIT or
any of their respective Subsidiaries), and (y) any existing requirement,
restriction or condition imposed by any such regulatory authority with
respect to DKB or any of its Subsidiaries on or prior to the date hereof,
the parties hereto shall not effect the Arrangement unless such condition
or restriction is satisfactory to DKB in its sole reasonable judgment.
(b) If the Ministry of Finance of Japan, the Financial
Supervisory Agency of Japan or any other Japanese regulatory authority
shall have imposed any requirement on DKB with respect to the transactions
contemplated hereby (including the Arrangement) that would reasonably be
expected to have a material adverse effect on the business or financial
condition of DKB and its Subsidiaries (other than CIT and its
Subsidiaries), taken as a whole, the parties hereto shall not effect the
Arrangement without the prior written consent of DKB.
(c) Newcourt and CIT shall not amend or modify this
Agreement in any manner that would (i) increase the Exchange Ratio or alter
the form of the consideration payable to the shareholders of Newcourt
hereunder, (ii) extend the Outside Termination Date, (iii) result in a
change in the structure of the transactions contemplated hereby, or (iv)
alter or amend Section 7.13 hereof, or otherwise enter into any agreements
addressing the composition of the Board of Directors of New CIT (other than
the Voting Agreements referred to in the Recitals to this Agreement) or any
current or future Chief Executive Officer of CIT (in each case other than
the agreements set forth herein) unless such amendment or modification is
satisfactory to DKB in its sole reasonable judgment.
(d) The provisions of this Section 8.4 may not be
amended or waived by the parties without the prior written consent of DKB.
(e) The provisions of this Section 8.4 are intended to
be for the benefit of, and shall be enforceable by, DKB.
8.5. Satisfaction of Conditions. The conditions precedent set
forth in Sections 8.1, 8.2, 8.3 and 8.4 shall be conclusively deemed to
have been satisfied or waived when, with the agreement of Newcourt and CIT
and absent a prior written objection from DKB under Section 8.4, a
certificate of arrangement in respect of the Arrangement is issued by the
Director.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Arrangement by the shareholders of
both Newcourt and CIT:
(a) by mutual consent of Newcourt and CIT in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either CIT or Newcourt upon written notice to the
other party (i) from and after the 30th day after the date on which any
request or application for a Primary Approval shall have been denied or
withdrawn at the request or recommendation of the Governmental Entity which
must grant such Primary Approval, unless within the 30-day period following
such denial or withdrawal a petition for rehearing or an amended
application has been filed with the applicable Governmental Entity;
provided, however, that no party shall have the right to terminate this
Agreement pursuant to this Section 9.1(b)(i) if the party seeking to
terminate this Agreement shall have failed to perform or observe the
covenants and agreements of such party set forth herein (including Section
7.4(b)); provided further, however, that in no event shall either party
have the right to terminate this Agreement pursuant to this Section 9.1(b)
at any time before December 31, 1999; or (ii) subject to Section 7.4(b), if
any Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Arrangement;
(c) by either CIT or Newcourt if the Arrangement shall
not have been consummated on or before January 31, 2000 (the "Outside
Termination Date"), unless the failure of the Closing to occur by such date
shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party
set forth herein;
(d) by either CIT or Newcourt (provided that the
terminating party shall not be in material breach of any of its obligations
under Section 7.3) if any approval of the shareholders of Newcourt required
for the consummation of the Arrangement shall not have been obtained by
reason of the failure to obtain the required vote at a duly held meeting of
such shareholders or at any adjournment or postponement thereof;
(e) by either CIT or Newcourt (provided that the
terminating party shall not be in material breach of any of its obligations
under Section 7.3) if any approval of the shareholders of CIT required for
the consummation of the Arrangement shall not have been obtained by reason
of the failure to obtain the required vote at a duly held meeting of such
shareholders or at any adjournment or postponement thereof;
(f) by either CIT or Newcourt (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have
been a material breach of any of the representations or warranties set
forth in this Agreement on the part of the other party, which breach is not
cured within thirty days following written notice to the party committing
such breach, or which breach, by its nature, cannot be cured prior to the
Closing; provided, however, that neither party shall have the right to
terminate this Agreement pursuant to this Section 9.1(f) unless the breach
of representation or warranty, together with all other such breaches, would
entitle the party receiving such representation not to consummate the
transactions contemplated hereby under Section 8.2(a) (in the case of a
breach of representation or warranty by Newcourt) or Section 8.3(a) (in the
case of a breach of representation or warranty by CIT);
(g) by either CIT or Newcourt (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have
been a material breach of any of the covenants or agreements set forth in
this Agreement on the part of the other party, which breach shall not have
been cured within thirty days following receipt by the breaching party of
written notice of such breach from the other party hereto, or which breach,
by its nature, cannot be cured prior to the Closing;
(h) by Newcourt, without any further action, if Newcourt
shall have entered into an Acquisition Agreement with any party other than
CIT as permitted by and in accordance with Section 7.3 hereof;
(i) by CIT, if either the Dell Contract or the Lucent
Contract shall have been terminated, or either of the conditions contained
in Sections 8.2(d) and 8.2(e) shall have otherwise become incapable of
being satisfied; or
(j) by CIT, if, at any time after the date of this
Agreement, any of the persons listed on Section 8.2(f) of the Newcourt
Disclosure Schedule shall not be serving as an officer of Newcourt.
9.2. Effect of Termination. (a) In the event of termination of
this Agreement by either CIT or Newcourt as provided in Section 9.1, this
Agreement shall forthwith become void and have no effect except (i)
Sections 7.2(b), 9.2 and 10.3 shall survive any termination of this
Agreement and (ii) that notwithstanding anything to the contrary contained
in this Agreement, no party shall be relieved or released from any
liabilities or damages arising out of its willful breach of any provision
of this Agreement.
(b) If Newcourt terminates this Agreement pursuant to
Section 9.1(h), Newcourt shall pay to CIT a termination fee equal to the
Newcourt Fee Amount by wire transfer of same day funds on the date of
termination. The "Newcourt Fee Amount" shall be $105 million; provided,
however, that if the Stock Option Agreement shall terminate pursuant to the
last sentence of Section 2(a) of the Stock Option Agreement, the Newcourt
Fee Amount shall be $120 million less any amounts paid by Newcourt to CIT
pursuant to the terms of the Stock Option Agreement.
(c) In the event that an Acquisition Proposal with
respect to Newcourt or any of its Subsidiaries shall have been made known
to Newcourt or any of its Subsidiaries and shall have been publicly
announced or otherwise become public, or shall have been made to the
shareholders of Newcourt generally, and thereafter (x) this Agreement is
terminated by either Newcourt or CIT pursuant to Section 9.1(d) of this
Agreement, and (y) within twelve months of such termination Newcourt or any
of its Subsidiaries enters into any Newcourt Acquisition Agreement (as
defined below) or consummates a Newcourt Takeover Proposal (as defined
below), then upon the first occurrence of any of the events contemplated by
clause (y) Newcourt shall pay CIT a termination fee equal to the Newcourt
Fee Amount by wire transfer of same day funds. "Newcourt Takeover
Proposal" shall mean any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of a business
that constitutes 50% or more of the net revenues, net income or the assets
of Newcourt and its subsidiaries taken as a whole, or 50% or more of the
outstanding voting securities of Newcourt, any tender offer or exchange
offer that if consummated would result in any person beneficially owning
50% or more of the outstanding voting securities of Newcourt, or any
merger, amalgamation, plan of arrangement, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving Newcourt or the Newcourt Common Shares (or any one or
more of Newcourt's Subsidiaries, if the business of such Subsidiary or all
of such Subsidiaries constitutes 50% or more of the net revenues, net
income or assets of Newcourt and its Subsidiaries taken as a whole), other
than the transactions contemplated by this Agreement. "Newcourt
Acquisition Agreement" shall mean any agreement, letter of intent or other
binding agreement relating to any transaction of the type described in the
definition of Newcourt Takeover Proposal.
(d) In the event that an Acquisition Proposal with
respect to CIT or any of its Subsidiaries shall have been made known to CIT
or any of its Subsidiaries and shall have been publicly announced or
otherwise become public, or shall have been made to the shareholders of CIT
generally, and thereafter (x) this Agreement is terminated by either
Newcourt or CIT pursuant to Section 9.1(e) of this Agreement, and (y)
within twelve months of such termination CIT or any of its Subsidiaries
enters into any CIT Acquisition Agreement (as defined below) or consummates
a CIT Takeover Proposal (as defined below), then upon the first occurrence
of any of the events contemplated by clause (y) CIT shall pay Newcourt a
termination fee equal to $120 million by wire transfer of same day funds.
"CIT Takeover Proposal" shall mean any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of a
business that constitutes 50% or more of the net revenues, net income or
the assets of CIT and its subsidiaries taken as a whole, or 50% or more of
the outstanding voting securities of CIT, any tender offer or exchange
offer that if consummated would result in any person beneficially owning
50% or more of the outstanding voting securities of CIT, or any merger,
amalgamation, plan of arrangement, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
CIT or the CIT Common Shares (or any one or more of CIT's Subsidiaries, if
the business of such Subsidiary or all of such Subsidiaries constitutes 50%
or more of the net revenues, net income or assets of CIT and its
Subsidiaries taken as a whole), other than the transactions contemplated by
this Agreement. "CIT Acquisition Agreement" shall mean any agreement,
letter of intent or other binding agreement relating to any transaction of
the type described in the definition of CIT Takeover Proposal.
(e) Newcourt and CIT agree that the agreements contained
in Sections 9.2(b), 9.2(c) and 9.2(d) above are integral parts of the
transactions contemplated by this Agreement and constitute liquidated
damages and not a penalty. If one party fails to promptly pay to the other
party any fee due under Section 9.2(b), 9.2(c) or 9.2(d), the defaulting
party shall pay the costs and expenses (including legal fees and expenses)
in connection with any action, including the filing of any lawsuit or other
legal action, taken to collect payment, together with interest on the
amount of any unpaid fee at the publicly announced prime rate of Citibank,
N.A. from the date such fee was required to be paid.
9.3. Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or
after approval of the matters presented in connection with the Arrangement
by the shareholders of either Newcourt or CIT; provided, however, that
after any approval of the transactions contemplated by this Agreement by
Newcourt's shareholders, there may not be, without further approval of such
shareholders, any amendment of this Agreement which reduces the amount or
changes the form of the consideration to be delivered to Newcourt
shareholders hereunder other than as contemplated by this Agreement. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
9.4. Extension; Waiver. At any time prior to the Effective
Time, each of the parties hereto, by action taken or authorized by its
Board of Directors, may, to the extent legally allowed, (a) extend the time
for the performance of any of the obligations or other acts of the other
party hereto, (b) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions of the other party contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
ARTICLE X
GENERAL PROVISIONS
10.1. Closing. Subject to the terms and conditions of this
Agreement, the closing of the Arrangement (the "Closing") will take place
at 10:00 a.m. on the third business day after the satisfaction or waiver
(subject to applicable law) of the latest to occur of the conditions set
forth in Article VIII hereof (other than those conditions which relate to
actions to be taken at the Closing)(the "Closing Date"), at the offices of
Schulte Roth & Zabel LLP unless another time, date or place is agreed to in
writing by the parties hereto, provided, however, that if such third
business day is the sixteenth day or later day of a month, then the Closing
Date shall be the last day of such month so as to permit the preparation
and delivery of the Final Net Worth Statement as of the end of the
immediately preceding month.
10.2. Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for those covenants and agreements
contained herein and therein which by their terms apply in whole or in part
after the Effective Time.
10.3. Expenses. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid
by the party incurring such costs and expenses, except that Newcourt shall
bear and pay 50% of, and CIT shall bear and pay 50% of, the costs and
expenses incurred in connection with the filing, printing and mailing of
the Registration Statement and the Proxy Circular (including SEC filing
fees).
10.4. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation), mailed by registered or certified mail
(return receipt requested) or delivered by an express courier (with
confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to CIT, to:
The CIT Group, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: Ernest Stein, Esq.
with copies to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attn: Marc Weingarten, Esq.
and
Goodman Phillips & Vineberg
1501 McGill College Avenue, 26th Floor
Montreal, Quebec
Attn: Sidney Horn, Esq.
and
(b) if to Newcourt, to:
Newcourt Credit Group Inc.
2 GateHall Center
Parsippany, New Jersey 07924
Attention: David F. Banks, Chairman
with copies to:
Skadden, Arps, Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Attn: William S. Rubenstein, Esq.
and
Blake, Cassels & Graydon
Box 25 Commerce Court West
Toronto, Canada M5L 1A9
Attn: Gordon Currie, Esq.
10.5. Interpretation. Unless otherwise explicitly indicated,
all references in this Agreement to "dollars," "$" or "US$" are intended to
refer to United States dollars. When a reference is made in this Agreement
to Sections, Exhibits or Schedules, such reference shall be to a Section of
or Exhibit or Schedule to this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes"
or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The phrases "the date of this
Agreement", "the date hereof" and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to August 5, 1999. No
provision of this Agreement shall be construed to require Newcourt, CIT or
any of their respective Subsidiaries or affiliates to take any action, or
refrain from taking any action, where taking or refraining from taking such
action would violate any applicable law (whether statutory or common), rule
or regulation.
10.6. Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
10.7. Entire Agreement. This Agreement (including the documents
and the instruments referred to herein or delivered in connection herewith)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof, other than the Confidentiality Agreement.
10.8. Governing Law. This Agreement and the other documents
delivered in connection herewith (including the Releases) shall be governed
and construed in accordance with the laws of the State of New York, without
regard to any applicable conflicts of law.
10.9. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that the provisions contained
in 7.2(b) of this Agreement were not performed in accordance with its
specific terms or was otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of Section 7.2(b) of this Agreement and to enforce specifically
the terms and provisions thereof in any court of competent jurisdiction,
this being in addition to any other remedy to which they are entitled at
law or in equity.
10.10. Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as
is enforceable.
10.11. Publicity. Except as otherwise required by law or the
rules of the ME, the TSE or the NYSE, so long as this Agreement is in
effect, neither CIT nor Newcourt shall, or shall permit any of its
Subsidiaries to, issue or cause the publication of any press release or
other public announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this Agreement
without the consent of the other party, which consent shall not be
unreasonably withheld.
10.12. Assignment; No Third Party Beneficiaries. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party. Subject
to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective
successors and assigns. Except as otherwise expressly provided herein,
this Agreement (including the documents and instruments referred to herein)
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
10.13. No Personal Liability. (a) No director or officer of
Newcourt shall have any personal liability whatsoever to CIT under this
Agreement, or any other document delivered in connection with the
Arrangement on behalf of Newcourt.
(b) No director or officer of CIT shall have any
personal liability whatsoever to Newcourt under this Agreement, or any
other document delivered in connection with the Arrangement on behalf of
CIT.
IN WITNESS WHEREOF, CIT and Newcourt have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of
the date first above written.
THE CIT GROUP, INC.
By /s/ Albert R. Gamper
-----------------------------
Name: Albert R. Gamper
Title: President and Chief Executive Officer
NEWCOURT CREDIT GROUP INC.
By /s/ David F. Banks
------------------------------
Name: David F. Banks
Title: Chairman
By /s/ David D. McKerroll
------------------------------------
Name: David D. McKerroll
Title: President, Corporation Finance
APPENDIX I
Executive Officers Signing Voting Agreement
Steven K. Hudson
Bradley D. Nullmeyer
David D. McKerroll
Daniel A. Jauernig
Scott J. Moore
David J. Sharpless
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT (ONTARIO) AND THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated August 5, 1999, between Newcourt
Credit Group Inc., an Ontario corporation ("Issuer"), and The CIT Group,
Inc., a Delaware corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Amended and
Restated Agreement and Plan of Reorganization of even date herewith (as the
same may be amended or supplemented, the"Reorganization Agreement"), which
agreement has been executed by the parties hereto immediately prior to the
execution of this Stock Option Agreement (this "Agreement") and provides
that Grantee shall combine with Issuer pursuant to a Plan of Arrangement in
the form attached to the Reorganization Agreement (the "Plan of
Arrangement"), upon the terms and subject to the conditions set forth in
the Reorganization Agreement; and
WHEREAS, as a condition to Grantee's entering into the
Reorganization 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 Reorganization
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
(including Section 2(a) hereof), up to 22,273,249 fully paid and
nonassessable common shares ("Common Shares") of Issuer at a price of
$15.6875 per share (the "Option Price"); provided, however, that in no
event shall the number of Common Shares for which this Option is
exercisable exceed 15% of the Issuer's issued and outstanding Common Shares
without giving effect to any shares subject to or issued pursuant to the
Option. The number of Common Shares 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 Common Shares are either
(i) issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Agreement) or (ii) redeemed, repurchased,
retired or otherwise cease to be outstanding after the date of this
Agreement, the number of Common Shares subject to the Option shall be
increased or decreased, as appropriate, so that, after such issuance, such
number equals 15% of the number of Common Shares then issued and
outstanding without giving effect to any shares subject to 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 Reorganization Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if, (A) 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) and
(B) approval for the grant of the Option and the issuance of the Common
Shares hereunder has been received from The Toronto Stock Exchange (the
"TSE") and the Montreal Stock Exchange (the "ME") (collectively, the
"Exchange Approvals"), provided, however, that the Holder shall have sent
the written notice of such exercise (as provided in subsection (e) of this
Section 2) within ninety (90) days following such Subsequent Triggering
Event (or such longer period as provided in Section 10). Each of the
following shall be an "Exercise Termination Event": (i) the Effective Time
(as defined in the Plan of Arrangement); (ii) termination of the
Reorganization Agreement in accordance with the provisions thereof, other
than a termination by either Issuer or Grantee pursuant to Section 9.1(d)
of the Reorganization Agreement following the occurrence of an Initial
Triggering Event (as defined below); or (iii) the passage of 12 months
after a termination of the Reorganization Agreement by either Issuer or
Grantee pursuant to Section 9.1(d) thereof if such termination follows the
occurrence of an Initial Triggering Event. The term "Holder" shall mean
the holder or holders of the Option. Issuer agrees to use its reasonable
best efforts to obtain the Exchange Approvals as expeditiously as possible
following the date of this Agreement. Notwithstanding anything to the
contrary contained in this Agreement, in the event that either of the
Exchange Approvals has not been obtained prior to the time that the
termination fee provided for in Section 9.2(b) or 9.2(c) of the
Reorganization Agreement becomes payable to the Grantee by Issuer, then
this Agreement and the Option granted hereunder shall terminate and shall
have no further force or effect.
(b) An "Initial Triggering Event" shall be deemed to have
occurred for purposes of this Agreement if, at any time following the date
of this Agreement, (i) an Acquisition Proposal (as defined in the
Reorganization Agreement) with respect to Issuer or any of its Subsidiaries
shall have been publicly announced or otherwise become public, or shall
have been made to the shareholders of Issuer generally, or (ii) a Newcourt
Acquisition Agreement is entered into concurrently with a termination by
Issuer of the Reorganization Agreement pursuant to Section 9.1(h) thereof.
(c) A "Subsequent Triggering Event" shall be deemed to
have occurred for purposes of this Agreement if, at any time following the
date of this Agreement, Issuer or any of its Subsidiaries enters into a
Newcourt Acquisition Agreement or consummates a Newcourt Takeover Proposal
(each as defined in the Reorganization Agreement), other than a Newcourt
Acquisition Agreement entered into concurrently with a termination of the
Reorganization Agreement by Issuer pursuant to Section 9.1(h) thereof.
(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 sixty
(60) business days from the Notice Date for the closing of such purchase
(the "Closing Date"); provided, however, that if prior notification to or
approval of the Federal Reserve Board, the applicable regulatory authority
under the Bank Act (Canada) or any other regulatory authority 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 Common Shares purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated
by Issuer, provided, however, 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 Common Shares purchased by the Holder and, if
the Option should be exercised in part only, a new Option evidencing the
rights of the Holder thereof to purchase the balance of the shares
purchasable hereunder, and the Holder shall deliver to Issuer this
Agreement and a letter agreeing that the Holder will not offer to sell or
otherwise dispose of such shares in violation of applicable law or the
provisions of this Agreement.
(h) Certificates for Common Shares 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 may be subject to certain provisions of a
stock option agreement between the registered holder
hereof and Issuer and to resale restrictions arising
under the Securities Act of 1933, as amended, the
Securities Act (Ontario) and other Canadian securities
legislation. 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 respective references to the
resale restrictions of the Securities Act of 1933, as amended (the "1933
Act"), the Securities Act (Ontario) (the "Ontario Act") and other Canadian
securities legislation 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 an opinion or opinions 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, the Ontario Act or any
other Canadian securities legislation; (ii) the reference to the provisions
to this Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares have been
sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference;
and (iii) the legend shall be removed in its entirety if the conditions in
the preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the
written notice of exercise of the Option provided for under subsection (e)
of this Section 2 and the tender of the applicable purchase price in
immediately available funds, the Holder shall be deemed to be the holder of
record of the Common Shares issuable upon such exercise, notwithstanding
that the stock transfer books of Issuer shall then be closed or that
certificates representing such Common Shares shall not then be actually
delivered to the Holder. Issuer shall pay all expenses and any and all
federal, provincial, state and local taxes and other charges that may be
payable in connection with the preparation, issue and delivery of share
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
Common Shares so that the Option may be exercised without additional
authorization of Common Shares after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common
Shares; (ii) that it will not, by amendment to its articles or by-laws or
through reorganization, consolidation, amalgamation, plan of arrangement,
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, if required, (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. section
18a and the Competition Act (Canada) and the respective regulations
promulgated thereunder and (y) in the event, under any Canadian and/or
United States federal, provincial or state banking or other law or
regulation prior approval of or notice to the Federal Reserve Board, the
applicable regulatory authority under the Bank Act (Canada), the
responsible minister under the Investment Canada Act or any other
government or 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, the
applicable regulatory authority under the Bank Act (Canada), the
responsible minister under the Investment Canada Act or such other federal,
provincial or state government or regulatory authority as they may require)
in order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue Common Shares 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 Common Shares 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
Common Shares that are purchasable upon exercise of the Option pursuant to
Section 1 of this Agreement, the number of Common Shares 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 Shares by
reason of stock dividends, split-ups, mergers, amalgamations,
recapitalizations, combinations, subdivisions, consolidations, conversions,
exchanges of shares, distributions on or in respect of the Common Shares,
or the like, the type and number of Common Shares purchasable upon exercise
hereof and the Option Price shall be appropriately adjusted in such manner
as shall fully preserve the economic benefits provided hereunder and proper
provision shall be made in any agreement or resolution governing any such
transaction or event 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 (whether on its own behalf or on behalf of any
subsequent holder of this Option (or part thereof) or any of the Common
Shares issued pursuant hereto) delivered within ninety (90) days of such
Subsequent Triggering Event (or such longer period as provided in Section
10), promptly prepare, file and keep current a registration statement under
the 1933 Act covering this Option and any Common Shares issued and issuable
pursuant to this Option and shall use its reasonable best efforts to cause
such registration statement to become effective and remain current in order
to permit the sale or other disposition of this Option and any Common
Shares 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. Issuer shall also, if required
under the Securities Act (Ontario) and other applicable Canadian provincial
securities legislation in connection with a sale by Grantee of Common
Shares issued pursuant hereto, file and obtain a receipt for a (final)
prospectus from the Ontario Securities Commission and other applicable
Canadian securities regulatory authorities. Grantee shall have the right
to demand up to two (2) registrations and/or prospectus filings pursuant to
this Section 6 (e.g., two registrations and no prospectus filings, two
prospectus filings and no registrations or one of each). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration
of the Option or Option Shares or the filing of a prospectus as provided
above, Issuer is in registration or has filed a prospectus with respect to
an underwritten public offering of Common Shares, 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 Common Shares offered by Issuer, the number of Option
Shares otherwise to be covered in the registration statement or prospectus
contemplated hereby may be reduced; provided, however, that after any such
required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Issuer in the
aggregate; and provided further, however, that if such reduction occurs,
then the Issuer shall file a registration statement and/or prospectus for
the balance as promptly as practicable and no reduction shall thereafter
occur. Each such Holder shall provide all information reasonably requested
by Issuer for inclusion in any registration statement and/or prospectus to
be filed hereunder. If requested by any such Holder in connection with
such registration and/or prospectus offering, Issuer shall become a party
to any underwriting agreement relating to the sale of such shares, but only
to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in
secondary offering underwriting agreements for the Issuer. Upon receiving
any request under this Section 6 from any Holder, Issuer agrees to send a
copy thereof to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by promptly mailing
the same, postage prepaid, to the address of record of the persons entitled
to receive such copies. Notwithstanding anything to the contrary contained
herein, in no event shall Issuer be obligated to effect more than two (2)
registrations and/or prospectus filings 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) Notwithstanding anything to the contrary
contained in this Agreement (but subject to applicable law and the last
sentence of Section 2(a) of this Agreement), at or at any time within the
30-day period immediately following such time as the termination fee
provided for in Section 9.2(b) or 9.2(c) of the Reorganization Agreement
becomes payable to Grantee by Issuer, and prior to any exercise of the
Option, upon two business days' prior written notice given by Grantee,
Issuer (or any successor thereto pursuant to Section 8 of this Agreement)
shall repurchase the Option from the Grantee, in whole but not in part, at
a price (the "Option Repurchase Price") equal to (i) $15 million.
(b) Grantee may exercise its right to require Issuer to
repurchase the Option pursuant to this Section 7 by surrendering for such
purpose to Issuer, at its principal office, this Agreement accompanied by a
written notice stating that Grantee elects to require Issuer to repurchase
this Option in accordance with the provisions of this Section 7. Within
two business days after the surrender of the Option and the receipt of such
notice relating thereto, Issuer shall deliver or cause to be delivered to
Grantee the Option Repurchase Price therefor or the portion thereof 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 in full, Issuer
shall immediately so notify Grantee and thereafter deliver or cause to be
delivered, from time to time, to Grantee the portion of the Option
Repurchase Price 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 Grantee
the Option Repurchase Price in full (and Issuer hereby undertakes to use
its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in
order to accomplish such repurchase), Grantee may revoke its notice of
repurchase of the Option, either in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to Grantee that portion of the Option Repurchase Price that Issuer
is not prohibited from delivering; and (ii) deliver to Grantee a new Stock
Option Agreement evidencing the right of Grantee to purchase that number of
Common Shares obtained by multiplying the number of Common Shares 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 Grantee and the denominator of which is the Option Repurchase
Price.
8. (a) In the event that prior to an Exercise
Termination Event, Issuer shall enter into an agreement (i) to amalgamate
or consolidate with or merge into any person, other than Grantee or one of
its Subsidiaries, and in the case of a consolidation or merger 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 amalgamate with or merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such amalgamation,
consolidation or merger, the then outstanding Common Shares shall be
changed into or exchanged for shares or other securities of any other
person or cash or any other property or the then outstanding Common Shares
shall after such amalgamation, consolidation or merger represent less than
50% of the outstanding voting shares and voting share equivalents of the
amalgamated or merged company, or (iii) to sell or otherwise transfer all
or a substantial portion 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:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation,
amalgamation or merger with Issuer (if other than Issuer),
(ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or
substantially all of Issuer's assets.
(2) "Substitute Common Shares" shall mean the
common shares issued by the issuer of the Substitute Option
upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the highest of
(i) the price per Common Share at which a tender offer or
exchange offer therefor has been made, (ii) the price per
Common Share to be paid by any third party pursuant to an
agreement with Issuer, (iii) the highest closing price for
Common Shares within the six-month period immediately
preceding the date of consummation of the transaction
contemplated by Section 8(a) hereof, 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
in Canada selected by Grantee and reasonably acceptable to
Issuer, divided by the number of Common Shares of Issuer
outstanding at the time of such sale. In determining the
Assigned Value, the value of consideration other than cash
shall be determined by a nationally recognized investment
banking firm in Canada selected by Grantee and reasonably
acceptable to Issuer.
(4) "Average Price" shall mean the average closing
price on the TSE of a share of the Substitute Common Shares
for the one-year period immediately preceding the
amalgamation, consolidation, merger or sale in question, but
in no event higher than the closing price of the shares of
Substitute Common Shares on the day preceding such
amalgamation, consolidation, merger or sale; provided,
however, that if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to a
common share issued by the person amalgamating with or
merging into Issuer or by any company which 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, however, that if the terms of the Substitute Option
cannot, for legal reasons, be the 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 Substitute Common Shares as is equal to the Assigned Value
multiplied by the number of Common Shares for which the Option is then
exercisable, divided by the Average Price. The exercise price of the
Substitute Option per Substitute Common Share shall then be equal to the
Option Price multiplied by a fraction, the numerator of which shall be the
number of Common Shares for which the Option is then exercisable and the
denominator of which shall be the number of Substitute Common Shares 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 15% of
the Substitute Common Shares outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be
exercisable for more than 15% of the Substitute Common Shares 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 in Canada selected by Grantee 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. [reserved]
10. The 30-day or 90-day period for exercise of certain
rights under Sections 2, 6, 7 and 14 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of such
rights, and for the expiration of all statutory waiting periods; and (ii)
to the extent necessary to avoid liability under Section 16(b) of the
Securities Exchange Act of 1934, as amended, by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer and no other
corporate proceedings on the part of Issuer are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the
date hereof through the termination of this Agreement in accordance with
its terms will have reserved for issuance upon the exercise of the Option,
that number of Common Shares equal to the maximum number of Common Shares
at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto, will be duly authorized and, subject to the
receipt of the Exchange Approvals and compliance with any conditions
contained therein, 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 full corporate power and authority to
enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Grantee. This Agreement has
been duly and validly executed and delivered by Grantee.
(b) The Option is not being, and any Common Shares 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 both the Ontario Act and the 1933 Act.
13. (a) Notwithstanding anything to the contrary
contained herein, in no event shall Grantee's Total Profit (as defined
below in Section 13(c) hereof) exceed $15 million.
(b) Notwithstanding anything to the contrary contained
herein, the Option may not be exercised for a number of shares as would, as
of the date of exercise, result in a Notional Total Profit (as defined
below in Section 13(d) hereof) of more than $15 million; provided, however,
that nothing in this sentence shall restrict any exercise of the Option
permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean
the aggregate amount (before taxes) of the following: (i) any amount
received by Grantee pursuant to Issuer's repurchase of the Option (or any
portion thereof) pursuant to Section 7 hereof, (ii) (x) the cash amounts
received by Grantee pursuant to the arm's-length sale of Option Shares (or
any other securities into which such Option Shares shall be converted or
exchanged) to any party not affiliated with Grantee, less (y) the aggregate
purchase price paid by Grantee with respect to such Option Shares, (iii)
any amounts received by Grantee pursuant to the transfer of the Option (or
any portion thereof) to any party not affiliated with Grantee, and (iv) any
equivalent amounts with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit"
with respect to any number of shares as to which Grantee may propose to
exercise the Option shall be the Total Profit determined as of the date of
such proposed exercise assuming that the Option were exercised on such date
for such number of shares and assuming that such shares, together with all
other Option Shares held by Grantee and its affiliates as of such date,
were sold for cash at the closing market price for the Common Shares on the
TSE as of the close of business on the preceding trading day (less
customary brokerage commissions).
14. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option created hereunder
to any other person, without the express written consent of the other
party, except that in the event a Subsequent Triggering Event shall have
occurred prior to an Exercise Termination Event, Grantee, subject to the
express provisions hereof and compliance with applicable securities laws,
may assign in whole or in part its rights and obligations hereunder within
ninety (90) days following such Subsequent Triggering Event (or such longer
period as provided in Section 10); provided, however, that until the date
15 days following the later of the dates on which the Federal Reserve Board
and the applicable regulatory authority under the Bank Act (Canada)
approves an application by Grantee to acquire the Common Shares 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 and the applicable regulatory
authority under the Bank Act (Canada).
15. Each of Grantee and Issuer will use its best
efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement, including without limitation
making application to list the Common Shares issuable hereunder on the TSE,
the ME and The New York Stock Exchange upon official notice of issuance and
applying to the Federal Reserve Board and the applicable regulatory
authority under the Bank Act (Canada) for approval to acquire the shares
issuable hereunder, but Grantee shall not be obligated to apply to any
United States state banking authorities for approval to acquire the Common
Shares issuable hereunder until such time, if ever, as it deems appropriate
to do so.
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 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 U.S. or Canadian
federal, state or provincial regulatory agency of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions
and covenants and restrictions contained in this Agreement shall remain in
full force and effect, and shall in no way be affected, impaired or
invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of Common Shares provided
in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5 hereof),
it is the express intention of Issuer to allow the Holder to acquire or to
require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
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 Reorganization
Agreement.
19. This Agreement shall be governed by and construed
in accordance with the laws of the Province of Ontario, regardless of the
laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
20. This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
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 Reorganization Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereunder
and supersedes all prior arrangements or understandings with respect
thereof, written or oral. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the
Reorganization Agreement. Unless otherwise explicitly indicated, all
references in this Agreement to "dollars," "$" or "US$" are intended to
refer to United States dollars.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf as of the date first above written.
NEWCOURT CREDIT GROUP INC.
By: /s/ David F. Banks
----------------------------
Name: David F. Banks
Title: Chairman
By: /s/ David D. McKerroll
------------------------------
Name: David D. McKerroll
Title: President, Corporation
Finance
THE CIT GROUP, INC.
By: /s/ Albert R. Gamper
------------------------------
Name: Albert R. Gamper
Title: President and Chief Executive
Officer
Analyst's Presentation
Certain of the following information, which was set forth in the
Analysts' Presentation made on August 5, 1999, including, without limitation,
that concerning the financial projections of the combined companies, the
business and operating strategy of the combined companies, CIT's prospective
liquidity, the adjustment to the combined companies' balance sheet, the combined
companies' business, the reduction in the combined companies' expenses, the
intent to reduce the combined companies' volume of securitizations and the
overall anticipated effect on CIT of the proposed business combination,
constitutes forward-looking statements concerning the combined companies'
operations, economic performance and financial condition. Because such
statements reflect risks and uncertainties, actual results may differ from those
expressed or implied by such forward-looking statements. Factors that could
cause such differences include but are not limited to risks of economic slowdown
or downturn, risks inherent in changes in the prevailing interest rates,
unanticipated difficulties in combining the management, operations or cultures
of CIT and Newcourt, cost savings that are not realized or are not realized
within the time anticipated, risks associated with the value and recoverability
of leased equipment, adequacy of credit reserves for credit losses, funding
opportunities and borrowing costs, changes in regulations governing the combined
companies' business and operations, competitive factors, issues associated with
year 2000 compliance and uncertainties associated with risk management,
including credit risk management, asset/liability management and interest rate
risk management.
Analysts' Presentation
CIT disclosed the following financial targets:
o GAAP accretive by 8% in 2001 and cash accretion of 5% in 2000 and 10%+ in
2001
o 15% EPS growth
o 15%+ return on tangible common equity
o 14% cash return on common equity
o Securitization gains reduced to less than 15% of net income by year 2000
o Synergies:
-- $150 million in cost savings identified
-- 70+ bps funding advantage for Newcourt on-balance sheet assets
CIT also disclosed the following financial statistics:
<PAGE>
Projected Combined Income Statement
- --------------------------------------------------------------------------------
Pro forma
1999E 2000E 2001E
- --------------------------------------------------------------------------------
Operating results
CIT-I/B/E/S 383 431 487
Newcourt-as adjusted 160(1) 180 220
-------------------------
Combined 543 611 707
After-tax impact of transaction
Cost savings(2) 65 75
Funding benefit 66 97
Change in securitization
levels (net)(3) (35) 4
Incremental goodwill
amortization(4) (8) (8)
-------------------------
Net transaction benefits/(costs) 88 168
Net income 699 875
Original GAAP EPS(5) $2.65 $3.00 Long-term
Pro forma GAAP EPS $2.63 $3.24 EPS growth
GAAP accretion(6) (1.0%) 7.9% target
-------------
EPS growth 12% 23% 15%
Pro forma cash EPS $2.87 $3.48
Cash EPS accretion 5.4% 13.2%
Return on tangible equity 15% 17%
Cash return on common equity 13% 14%
- -------------------
1 Excludes $56 million pre-tax hedge gain recorded by Newcourt in its first
quarter and $34 million pre-tax auto unit sale gain recorded by Newcourt in
its second quarter. Net income totals $209 million including these items.
($49 million combined after tax)
2 Total identified cost savings equal to $150 million, $50 million already
reflected in Newcourt expense line.
3 Reflects lowered securitization volumes (reduced by $1.8 billion in 2000 and
$1.5 billion in 2001 from Newcourt's stand-alone projection) and higher loan
provision due to higher levels of on-balance sheet finance receivables offset
by higher level of finance income due to increased on-balance sheet finance
receivables.
4 Calculated based on CIT share price of $26.00 and exchange ratio of .7,
subject to adjustment based on CIT share price fluctuation. Assumes 25-year
amortization schedule.
5 Analysts' pre-March transaction consensus EPS estimate of $2.65 for 2000 and
an assumed EPS for 2001 based on analysts' pre-March transaction consensus
13% long-term growth rate.
6 Analysts' pre-March transaction consensus EPS estimate of $2.65 for 2000 and
an assumed EPS for 2001 based on analysts' pre-March transaction consensus
13% long-term growth rate.
<PAGE>
Projected Year 2000 Transaction Impact
- --------------------------------------------------------------------------------
Estimated 2000
-------------------------------------
1st half 2nd half Full year
- --------------------------------------------------------------------------------
Operating results
CIT $210 $221 $431
Newcourt - as adjusted 80 100 180
-------------------------------------
Combined earnings 290 321 611
After-tax impact of transaction
Cost savings 26 39 65
Funding benefit 31 35 66
Change in securitization levels (net) (23) (12) (35)
Incremental goodwill amortization (4) (4) (8)
-------------------------------------
Total 30 58 88
Pro forma earnings 320 379 699
Original GAAP EPS $1.29 $1.36 $2.65
Pro forma EPS $1.20 $1.43 $2.63
GAAP accretion (7.0%) 5.1% (1.0%)
- -------------------------------------------------------------------------------
<PAGE>
Projected Capital Generation
- -------------------------------------------------------------------------------
$ millions
2000E 2001E
- -------------------------------------------------------------------------------
Beginning tangible equity(1) $4,433 $5,126
+ net income $699 $875
+ goodwill amortization $64 $64
- - dividend $(70) $(88)
Ending tangible equity(1) $5,126 $5,977
Internal capital generated $693 $851
Internal capital generation rate (%) 16% 17%
Total managed asset growth (%)(2) 12% 12%
Core managed asset growth 13+% 13+%
- --------------------------------------------------------------------------------
- -------------------
1 Tangible equity defined as common and preferred equity less goodwill
2 Net of dispositions of non-strategic business units and pruning of lower
profitability volumes
<PAGE>
Estimated Pro Forma Balance Sheet
Adjustment at June 30, 1999
- --------------------------------------------------------------------------------
$ millions
Estimated pro forma
adjustments(1)
--------------------
Fair value adjustments
Commercial loans $200(2)
Lease receivables 175(3)
Other assets 100(4)
Fixed rate senior notes 250(5)
--------------------
Pre-tax fair value adjustments 725
Tax effects on fair value adjustments (300)
--------------------
After-tax fair value adjustments $425
Restructuring charge $200(6)
Total net adjustments to net assets acquired $625
- ---------------
1 These estimates and the allocation of the purchase price have not been
finalized and the portion of the purchase price allocated to fair value
adjustments and goodwill is subject to change. The fair value of net assets
acquired will be determined as of the closing date and is subject to revision
as additional information becomes available
2 Adjustment reflects the estimated decrease in carrying value required in
connection with the acquisition to conform to CIT's credit policies and
practices, as well as post-acquisition strategies for problem loan resolution
3 Adjustment to reflect the future realizability of estimated lease residuals
4 Adjustment to fair value of other assets, including retained interest in
securitizations
5 Mark-to-market of fixed rate debt and debt-related hedges based upon current
market interest rates
6 Preliminary estimate
Pro Forma Capitalization
- --------------------------------------------------------------------------------
$ millions
June 1999
--------------------------------------- Leverage
CIT Newcourt Pro forma(1) targets
- --------------------------------------------------------------------------------
Managed finance assets $28,396 $22,388(2) $50,409
Market capitalization(3) 4,218 2,699 6,917
Total debt 19,835 11,846 31,931
Total equity(4) 3,096 3,103 5,700
Tangible equity 2,748 1,851 3,974
Tangible common equity 2,498 1,851 3,724
Debt/tangible equity 7.2x 6.4x 8.0x 7.50x-7.75x
Tangible equity/managed
finance assets 9.7% 8.3% 7.9% 8.5%-9.0%
- -------------------------------------------------------------------------------
- ---------------------
1 Transaction adjustments include a $625 million after-tax purchase accounting
adjustment
2 Managed finance assets exclude $2,075 million in Newcourt syndications
3 Based on CIT share price of $26, and Newcourt market capitalization based
upon transaction exchange ratio
4 Includes preferred equity
